Contractual Value Engineering. Charles Cell Value Engineering Program Manager Headquarters, U.S. Army Field Support Command AMSFS-RMP DSN 793-4132 Charles.Cell@us.army.mil. Value Engineering: A proven tool to reduce costs and increase the value of products and operations.
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Value Engineering Program Manager
Headquarters, U.S. Army Field Support Command
A proven tool
to reduce costs and increase the value of products and operations.
- Collect user/ customer attitudes
Complete data files
Determine evaluation factors
Scope the study
Build data models
Determine team composition
What is to be included in the study?
Who is best able to study the problem?
What are the current and future requirements of the subject under study?
What type of impediments will the team come against?
Did the new way work?
How much did it cost/save?
Did the change meet customer’s expectations?
Property of OSC VE Office
Value Engineering Study
I love a good book!
Contractor can pursue studies using their own funds
Contractor receives a large share of savings
Greater Contractor Risk
Greater Contractor Return
Government funds study effort
Contractor receives small share of savings
52.248-1 Alternate 1
Greater Government Risk
Greater Government ReturnMajor VE Incentive Approaches
Benefits of VECPs
For an approved VECP, the contractor receives :
negotiated sharing rates and period
Benefits of VECPs
Contract Cost $1,000,000
profit @ 10% 100,000
Contract Price $1,100,000
After 20% VECP Cost Reduction:
Original Contract Cost $1,000,000
VECP Net Cost Savings - 200,000
New Contact Cost $800,000
Original Contract Profit $100,000
50% Share of VECP Savings $100,000
Total Profit $200,000
New Contract Price $1,000,000
New Profit = $200K/$800K = 25%