Construction Program Guide
Value Engineering Change Proposals (VECPs)
Value Engineering (VE) is defined in 23 CFR Part 627.3 as "the systematic application of recognized techniques by a multi-disciplined team to identify the function of a product or service, establish a worth for that function, generate alternatives through the use of creative thinking, and provide the needed functions to accomplish the original purpose of the project, reliably, and at the lowest life-cycle cost without sacrificing safety, necessary quality, and environmental attributes of the project."
The VE technique can be used during either the pre-award or post-award phases of a project. The FHWA's Value Engineering web page contains details about the pre-award.
Value Engineering Change Proposals (VECP) are post-award value engineering proposals made by construction contractors during the course of construction under a value engineering clause in the contract. It is described in 23 CFR 627.3(g) as "A construction contract change proposal submitted by the construction contractor based on a VECP provision in the contract. These proposals may improve the project's performance, value and/or quality, lower construction costs, or shorten the delivery time, while considering their impacts on the project's overall life-cycle cost and other applicable factors."
Authority/Legal Basis for VECPs
Laws
The States' (also referred to as "SHA") requirements for conducting VE analyses at the preconstruction phase for projects are detailed in 23 USC 106 (e) and (g). It should be noted that the definition of VE found in this section, which specifically refers to design, is different than the definition referenced above from 23 CFR 627.3 which is not limited to design.
It should also be noted that, unlike the use of VE during design, there is no specific requirement in federal highway law for the use of value engineering clauses in construction contracts. The application of VE during construction is instead addressed by regulations and other means.
Regulatory Discussions
The regulations establishing the Value Engineering Program (23 CFR Part 627) contain several clauses relative to the use of VECPs:
- 23 CFR 627.5 (a) (4), Incentives - Allows VE clauses in contracts by stating: "The program may include a VE or cost reduction incentive clause in a SHA's standard specifications or project special provisions that allows construction contractors to submit change proposals and share the resulting cost savings with the SHA."
- 23 CFR 627.5 (a) (5), Monitoring - states: "The program may include procedures for monitoring the implementation of VE study team recommendations and VE change proposal recommendations submitted by construction contractors."
Orders
The Office of Management and Budget's Circular No. A-131 requires Federal Departments and Agencies to use VE as a management tool, where appropriate, to reduce program and acquisition costs. The Circular recognizes VECPs as a VE provision under the Federal Acquisition Regulations, and identifies VECPs as information that should be included in each agency's VE Program.
DOT Order 1395.1A, Department of Transportation Value Engineering Program, issued May 8, 1992, Paragraph 6.b(2), contains the following discussion: "Each DOT Operating Administration should strongly encourage the use of VE in its grant awards or Federally assisted programs for major transportation projects throughout the planning, design and/ or construction phases. This may include the use of VE proposals as a result of VE studies/analyses as well as VE incentive clauses in construction contracts."
FHWA Policy
Under FHWA Order 1311.1B FHWA Value Engineering (VE) Policy:
- Par. 9(a)(7): Division Offices should encourage STAs to include a VECP clause in their construction contracts;
- Par. 10 (a) & (b): The VE Program Manager will prepare an Annual VE Performance Report, which will include the results of all of the VE analyses and VECP that are conducted on projects that use FAHP funding or are administered by the Federal Lands Highway Divisions.
The States are strongly encouraged to include VECP clauses in construction contracts to encourage contractors to propose changes during construction which will result in a product of better value at the same or lesser cost with an appropriate sharing of costs with the State.
Administering VECPs
More information regarding the use of VECP clauses used in Federal-aid construction contracts is available by contacting the Departments of Transportation. The currently available VE web sites of some States may contain examples of clauses used.
The Federal Acquisition Regulation (FAR), Part 48 - Value Engineering (Subpart 48.10 and 48.202) is applicable to construction projects administered by the Federal Lands Highway offices.
Subsection 103.03 of the Standard Specifications for the Construction of Roads and Bridges on Federal Highway Projects (FP-14) contains the requirements for Value Engineering for Federal Lands Highway contracts, and references FAR Clause 52.248-3 Value Engineering - Construction
Training
The application of value engineering during construction is addressed both in the National Highway Institute's Value Engineering Workshop and the FHWA Contract Administration Core Curriculum (CACC) (Resource Center Workshop). The CACC Manual is a good resource as well.
Additional Information on VECPs
The FHWA's Annual VE Accomplishment Report contains data on the number, value of the savings achieved, and implementation rate of VECPs . The Fiscal Year 2008 edition of the report also includes a discussion of successful practices in the administration of VECPS.