SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Systematic Application of Value 
Engineering Act of 1995''.

SEC. 2. VALUE ENGINEERING REQUIREMENTS FOR FEDERAL AGENCIES.

    (a) In General.--Federal agencies shall apply value engineering 
consistent with subsection (b)(2) to, at a minimum, identify and 
implement opportunities to reduce capital and operation costs and 
improve and maintain optimum quality of construction, administrative, 
program, acquisition, and grant projects. The head of each Federal 
agency shall require senior management personnel to establish and 
maintain value engineering procedures and processes. Such procedures 
and processes shall, at a minimum--
            (1) utilize qualified value engineering personnel 
        consistent with paragraphs (1) and (4) of subsection (b);
            (2) provide for the aggressive and systematic development 
        and maintenance of the most effective, efficient, and 
        economical arrangement for conducting the work of the agency; 
        and
            (3) provide a sound basis for the reporting of 
        accomplishments to the Office of Management and Budget, the 
        President, the Congress, and the public.
    (b) Agency Responsibilities.--To ensure that systemic value 
engineering improvements are achieved, each Federal agency shall, at a 
minimum, carry out the following:
            (1) Designate a senior management official with a 
        significant, well-documented background in value engineering as 
        the value engineering manager within the agency, to oversee and 
        monitor value engineering efforts and to coordinate the 
        development of criteria and guidelines referred to in paragraph 
        (2).
            (2) Develop criteria and guidelines for both agency 
        employees and contractor employees to identify programs, 
        projects, systems, and products with the greatest potential to 
        yield savings and benefits from the application of value 
        engineering methodology. The criteria and guidelines should 
        recognize that the potential savings are greatest during the 
        planning, design, and other early phases of program, project, 
        system, and product development. The criteria and guidelines 
        shall include the following:
                    (A) Consideration of return on the Government's 
                investment in value engineering, determined by dividing 
                the Government's cost of performing the value 
                engineering function by the savings generated by the 
                function.
                    (B) A dollar amount threshold for requiring the 
                application of value engineering. The threshold shall 
                be designed to ensure that value engineering is applied 
                to--
                            (i) each program, project, system, and 
                        product of the agency that has a dollar value 
                        greater than the threshold; and
                            (ii) those programs, projects, systems, and 
                        products that, in a ranking of all programs, 
                        projects, systems, and products of the agency 
                        according to greatest dollar value, are within 
                        the highest 20th percentile.
                For purposes of applying such a threshold, the dollar 
                values of various programs, projects, systems, and 
                products of an agency that have individual values below 
                the threshold shall be aggregated if they utilize 
                equivalent planning or design elements, are jointly 
                administered, or are functionally equivalent.
                    (C) Criteria under which the value engineering 
                manager of the agency may, on a case-by-case basis, 
                waive the requirement of this Act to conduct value 
                engineering studies, and procedures and requirements 
                for documenting and maintaining records of the 
                justification for each such waiver.
            (3) Provide training (including practical experience) in 
        established value engineering methodology to agency staff 
        responsible for coordinating and monitoring value engineering 
        efforts and to staff responsible for developing, reviewing, 
        analyzing, carrying out, changing, and evaluating value 
        engineering proposals.
            (4) Ensure that funds necessary for conducting agency value 
        engineering efforts are included in annual budget requests to 
        the Office of Management and Budget.
            (5) Document and maintain records of--
                    (A) programs, projects, systems, and products that 
                meet agency criteria for requiring the use of value 
                engineering techniques; and
                    (B) determinations (including the reasons therefor) 
                that the recommendations resulting from a value 
                engineering review should not be implemented.
            (6) Except when inconsistent with this Act, adhere to the 
        acquisition requirements of the Federal Acquisition Regulation, 
        including the use of value engineering clauses in parts 48 and 
        52 for both prime and subcontractors.
            (7) In the case of discretionary grants awarded by the 
        agency, establish value engineering requirements, such as 
        requiring grant applications to include a clause requiring the 
        use of value engineering methodology by qualified value 
        engineering personnel in the performance of the grant.
            (8) Develop annual plans for using value engineering in the 
        agency, which, at a minimum, identify--
                    (A) the agency and contractor projects, programs, 
                systems, and products to which value engineering 
                techniques will be applied in the next fiscal year; and
                    (B) the estimated costs of such projects, programs, 
                systems, and products.
            (9) Report annually to the Office of Management and Budget 
        on value engineering activities in accordance with subsection 
        (c).
    (c) Reports to Office of Management and Budget.--
            (1) In general.--The head of each Federal agency shall 
        submit to the Office of Management and Budget an annual report 
        on the results of using value engineering in the agency. The 
        report shall be submitted by February 15 of each year.
            (2) Contents.--The report required by this subsection shall 
        include the following:
                    (A) The name, job title, address, telephone number, 
                and any additional job titles of the agency's current 
                value engineering manager.
                    (B) The Government's return on investment in value 
                engineering achieved through actual implementation by 
                the agency of recommendations adopted as a result of 
                value engineering, calculated by dividing the amount of 
                savings achieved through such implementation by the 
                cost of performing value engineering reviews.
                    (C) The Government's potential return on investment 
                achievable through value engineering, calculated by 
                dividing the amount of savings achievable through the 
                adoption of recommendations as a result of value 
                engineering by the cost of performing value engineering 
                reviews to produce those recommendations.
                    (D) A description of the application of value 
                engineering to the agency's programs, projects, 
                systems, and products, including the net savings and 
                quality improvements achieved through use of value 
                engineering in those programs, projects, systems, and 
                products.
                    (E) A listing of the criteria adopted by the agency 
                pursuant to subsection (b)(2)(C) for waiving the 
                application of the value engineering requirements of 
                this Act, and documentation of any waivers granted 
                under the criteria.
    (d) Inspector General Audits.--The Inspector General of each 
Federal agency shall audit the savings reported by the agency in the 
second annual report submitted under subsection (c). Thereafter, the 
Inspector General of each Federal agency shall audit the reported 
savings every second year.
    (e) Use of Savings.--Of amounts available to a Federal agency for a 
fiscal year for a program, project, or system or development of a 
product that are unobligated at the end of the fiscal year as a result 
of the application of value engineering in accordance with this Act--
            (1) 50 percent shall be available to the agency for--
                    (A) use in the next fiscal year for that program, 
                project, system, or development; and
                    (B) use for programs in effect on the date of the 
                enactment of this Act under which incentives are 
                provided to employees of the agency to identify and 
                implement methods for achieving savings in programs, 
                projects, systems, and product development of the 
                agency; and
            (2) 50 percent shall be deposited in the general fund of 
        the Treasury and used to reduce the Federal debt.
    (f) Review.--The Director of Management and Budget shall review the 
policies contained in this Act 5 years after the date of the enactment 
of this Act and shall report the results of such review to Congress.
    (g) Definitions.--For purposes of this Act, the following 
definitions apply:
            (1) The term ``Federal agency'' has the meaning the term 
        ``agency'' has under section 551(1) of title 5, United States 
        Code.
            (2) The term ``savings'' means a reduction in, or avoidance 
        of, expenditures that would be incurred if programs, projects, 
        systems, and products were not evaluated using value 
        engineering techniques.
            (3) The term ``value engineering'' means a team effort, 
        performed by qualified agency or contractor personnel, directed 
        at analyzing the functions of a program, project, system, 
        product, item of equipment, building, facility, service, or 
        supply for the purpose of achieving the essential functions at 
        the lowest life-cycle cost that is consistent with required or 
        improved performance, reliability, quality, and safety.
            (4) The term ``life-cycle cost'' means the total cost of a 
        program, project, system, product, item of equipment, building, 
        facility, service, or supply, computed over its useful life. 
        The term includes all relevant costs involved in acquiring, 
        owning, operating, maintaining, and disposing of the program, 
        project, system, product, item of equipment, building, 
        facility, service, or supply over a specified period of time.
Systematic Application of Value Engineering Act of 1995 - Requires Federal agencies to apply value engineering, at a minimum, to identify and implement opportunities to reduce capital and operation costs and improve and maintain optimum quality of construction, administrative, program, acquisition, and grant projects.  Requires Inspector General audits of reported agency savings attributable to such value engineering. Earmarks half of any such savings for Federal debt reduction, with the other half going back to the program, project, system, or development for use in the next fiscal year.
Systematic Application of Value Engineering Act of 1995