Value Engineering(VE)

Overview

Value Engineering (VE) is a structured methodology for improving the value of a product, process, or system by analyzing its functions and finding ways to achieve the same or better performance at lower cost. Federal contracts often include VE clauses that allow — or require — contractors to propose changes that save money while meeting requirements. Contractors may share in the savings.

Why It Matters in GovCon

VE clauses create opportunities for contractors to propose cost-saving modifications during contract performance. Approved VE changes can extend contract profitability and demonstrate innovation to the customer. Some contracts mandate VE studies at certain milestones. Understanding how to develop and submit VE proposals can differentiate high-performing contractors.

Key Details

• VE Clause: FAR 52.248-1 (Value Engineering) and 52.248-2 (Value Engineering—Construction) define contractor obligations and incentive arrangements.
• Savings Share: Contractors typically receive a percentage of net savings from approved VE changes (often 50% for FFP contracts).
• Process: Functional analysis, idea generation, evaluation, and proposal to the CO.
• Approval: The CO must approve VE proposals before implementation.
• Mandatory: Some contracts require VE studies at specified contract value or milestone thresholds.

Related Terms

• Contract Modification
• Cost Plus Fixed Fee (CPFF)
• Performance-Based Acquisition (PBA)
• Statement of Work (SOW)