5-9.6 Value Engineering

Value engineering is a method of encouraging suppliers to independently develop and propose changes to improve an end item, the way it is produced, or the way a contract is performed. The change must reduce the contract’s cost and not impair the essential characteristics or functions of the product or service. Savings are shared by both parties, and the supplier is paid allowable development and implementation costs.

A value-engineering change proposal (VECP) is a proposal that:


If the Postal Service accepts a VECP, the supplier shares in the contract savings based on the negotiated agreement contained in the contract. The contract savings are calculated by subtracting the sum of the estimated cost of performing the contract with the VECP, Postal Service costs, and the supplier’s allowable development and implementation costs from the estimated cost of performing the contract without the VECP. If priced options are included in the contract, those prices will be adjusted in accordance with the above calculation. Profit is excluded when calculating contract savings.

5-9.6.1 Noncompetitive Purchases

The contracting officer may negotiate a noncompetitive contract or contract modification for an additional quantity incorporating a change proposal when:

When a supplier who does not have a current contract submits an unsolicited proposal in the form of a VECP, the purchase/SCM team may decide to have the contracting officer negotiate a noncompetitive contract incorporating the VECP.

5-9.6.2 Evaluation

Generally the purchase/SCM team will evaluate a VECP and either accept it or reject it, in whole or in part, within 45 days of its submission to the contracting officer. To expedite the evaluation, suppliers may give oral presentations to the appropriate parties. If evaluating the proposal will take more than 45 days, the contracting officer must notify the proposer of the expected decision date. If a proposal is rejected, the contracting officer must notify the proposer and explain the rejection.

The supplier may withdraw all or part of a VECP any time before it is accepted by the Postal Service.

5-9.6.3 Acceptance

Acceptance of all or part of a VECP and determination of the savings requires the agreement of both parties. Acceptance is accomplished by a supplemental agreement to the contract. If agreement on price is reserved for a later supplemental agreement, but agreement cannot be reached, the matter must be treated as a dispute under Clause B-9: Claims and Disputes.

The supplier must perform according to the existing contract until a VECP is accepted. The contracting officer’s decision to accept or reject all or part of a VECP is final and not subject to Clause B-9: Claims and Disputes.

If the purchase/SCM team foresees a potential cost reduction through value engineering under subcontracts, additional paragraph j should be added to Clause 2-22: Value Engineering Incentive. If there is a potential for savings through value engineering, Clause 2-22: Value Engineering Incentive, should be included in firm fixed-price contracts of $100,000 or more, at any time during the term of the contract. However, the clause may not be used in: