Attachment J-10 TEAMS ITMA - VECP.pdf

HQ0147-18-R-0004

Attachment J-10 VECP

MISSILE DEFENSE AGENCY

ATTACHMENT J-10

TECHNICAL, ENGINEERING, ADVISORY, AND

MANAGEMENT SUPPORT (TEAMS)

Information Technology

Management and Analysis

VALUE ENGINEERING PROGRAM

Office of Primary Responsibility: CS

HQ0147-17-R-0028

TABLE OF CONTENTS

PURPOSE

APPLICABILITY AND SCOPE

POLICY

RESPONSIBILITIES

PROCEDURES

ACRONYMS

DEFINITIONS

TABLE

1. VECP Process Description

FIGURE

1. VECP Process

References: (a) Office of Management and Budget Circular No. A-131, “Value Engineering”

(b) DoD Instruction 4245.14, “DoD Value Engineering (VE) Program,” October

26, 201

(c) FAR 48.201

(d) FAR 52.248-1 Value Engineering

(e) FAR 52.243-6 Change Order Accounting

1. PURPOSE. Provide guidance for identifying, establishing, managing, and approving Value

Engineering Change Proposals (VECP) against the Missile Defense Agency (MDA) Information

Technology, Management and Analysis (ITMA) contract. Similar to hardware contracts, most

MDA/CS contracts are product based and can benefit from effective value engineering efforts to include reduced cost, increased efficiency, quality, and effectiveness. A VECP modification will only be implemented where there are significant benefits to MDA as approved by a VECP board

(to include the affected Functional Organization) that results in a total reduction to the contract ceiling. VECPs are only authorized on “performance based” service contracts or scopes of work.

Evaluations and justification of VECP cost/benefits against Level of Effort activities are not anticipated but may be proposed for approval by the Director, Missile Defense Agency, when a clear and concise methodology for identifying and validating cost savings are presented.

2. APPLICABILITY AND SCOPE. This contract attachment implements Value Engineering incompliance with References (a) through (d) throughout this contract.

3. POLICY. The MDA/CS Value Engineering program under the direction of the Program

Manager for MDA/CS consists of a systematic approach for encouraging contractors to provide innovative ideas to reduce contract costs and /or improve performance through a Value

Engineering Change Proposal (VECP); engaging Agency stakeholders to evaluate contractor

VECPs; and expediting contractual modifications to maximize savings when stakeholders agree to the VECP. Federal Acquisition Regulation (FAR) Parts 48.201 and 52.248-1 define the terms used in Value Engineering (inclusive of the provision when used in Service Contracts), the criteria for VECP acceptance, and cost savings sharing arrangements and state, in part:

48.201 Clauses for supply or service contracts.

General. The contracting officer shall insert a value engineering clause in solicitations and contracts when the contract amount is expected to exceed the simplified acquisition threshold.

Value engineering incentive. To provide a voluntary incentive program, the value engineering incentive will be in accordance with clause FAR 52.248-1, Value Engineering, of this contract.

4. RESPONSIBILITIES

a. The MDA Director for Acquisition will:

(1) Provide VECB Board oversight

(2) Serve as a Standing Member of the VECB Board

b. The CS Program Manager will:

(1) Execute the VECB Board inclusive of administrative duties and execution of

VECP decisions.

http://www.acquisition.gov/far/current/html/52_248_253.html#wp1119382

c. The CS Director of Contracting (DACM) will:

(1) Incorporate a Value Engineering contract clause in MDA/CS task orders in accordance with References (c) and (d)

(2) Certify the savings generated by the VECP

(3) Provide notification to the contractor on Government acceptance or rejection of a submitted VECP.

d. MDA/IC will:

(1) Serve as rotating members of the VECP Board with mandatory attendance from the Functional Manager(s) whose performance work statement is impacted by the

Contractor recommended VECP.

5. PROCEDURES

a. The MDA/CS VECP process (Figure 1) is designed to fulfill DoD policy to incorporate value engineering to significantly contribute to efficiency in acquiring services to achieve mission effectiveness. Four basic steps are involved in the VECP process: (1) Contractor development and presentation of the VECP to the MDA/CS PCO, (2) VECP validation, (3)

MDA VECP Board approval/rejection, and (4) Implementation. In order to qualify as a VECP and to ensure that savings can be shared, the proposed change must meet three primary requirements:

(1) It must require a change to the contract under which it is submitted to incorporate an efficiency, change in product delivery, or product requirement

(2) It must reduce cost to the Agency after being accepted and implemented

(3) Savings must be clearly identified and validated

b. Step 1: Develop and Submit VECP. During this step, the contractor prepares the VECP submission to include terms, conditions, and appropriate rationale for VECP acceptance; share period; savings share; and any required government investment. The VECP must contain the following elements to allow for proper evaluation and determination of appropriate cost share:

(1) Verifiable description of the current performance work statement, cost, and schedule to be impacted by the initiative along with supporting documentation to include how the initiative will be implemented

(2) Rationale/justification for cost savings implemented

(3) Description and evaluation of the proposed initiative and benefits, risks, and impacts of implementation

(4) Discussion of the impact of the VECP on requirements, cost, schedule, and performance of other work

(5) Discussion of the impact to any sub-contract agreements, work share, or performance requirements.

Step 1 is comprised of two phases:

Phase I: The Contractor shall submit an initial point paper, maximum 5 pages, that describes the scope of work, other contract adjustments, and the estimated savings.

This Phase I point paper will be reviewed by MDA/IC and MDA/CS for applicability and suitability.

Phase II: With Government concurrence, the contractor will prepare a formal

VECP and submit it to the PCO to include all applicable contract changes necessary to implement the VECP. Additionally, the Contractor shall provide a determination of subcontractor impacts and a description of the methodology the contractor wishes to use to track any future over runs against the VECP.

c. Step 2: VECP Validation. After the contractor submission of the VECP, MDA/CS will perform (with MDA/IC support) a cost/benefit analysis and recommendation for the

VECP Board to accept or reject the proposal inclusive of any external impacts of accepting the VECP.

d. Step 3: MDA VECP Board. MDA/DA will convene a VECP Board to make a decision as to whether to accept or reject the proposal. MDA/CS will present the cost/benefit analysis and the Contractor proposed VECP for consideration. The VECP Board will consist of two standing and three rotating members. The Standing Members of the VECP Board include:

(1) Director of Acquisition (MDA/DA)

(2) Functional Manager impacted by the VECP recommendations

The Rotating Members of the VECP Board will include:

(1) A minimum of two equivalent grade functional and/or program element members selected by MDA/DA

The VECP Board will approve or reject submitted VECPs by consensus. Once the VECP Board has rendered their decisions, the appropriate MDA/CS PCO will notify the contractor of the government decision

e. Step 4: Implement VECP. If the VECP has been approved, the MDA/CS contract will be modified to implement the VECP. Contractor’s share of VECP savings will be moved to a

VECP CLIN on the contract and the Contractor will not be authorized to invoice this CLIN until the end of the Period of Performance in order to ensure that the structure of the contract is not unintentionally manipulated to allow for a cost overrun as a result of the VECP implementation

(i.e., cost overruns will be negotiated with concomitant reductions in the VECP shared savings for that scope of work).

Figure 1: VECP Process

Table 1: VECP Process Description

Step Lead Action Outputs

1 Contractor Develop and Submit VECP Contractor VECP Submission

2 MDA/CS Analysis and Recommendation to

MDA VECP Board

Cost/Benefit Analysis and

Recommendation to MDA VECP Board

3 MDA VECP

Board

Determine Acceptability of VECP Approval or Rejection of VECP

4 MDA/CS

PCO

Implement VECP if Approved VECP Recommendation Complete

6. ACRONYMS

FAR

FM

MDA

Federal Acquisition Regulation

Functional Manager

Missile Defense Agency

PCO Procuring Contracting Officer

STK

VE

VECP

Stakeholder

Value Engineering

Value Engineering Change Proposal

7. DEFINITIONS

Value Engineering (VE). An organized/systematic approach directed at analyzing the function of systems, equipment, facilities, services, and supplies for the purpose of achieving the essential functions at the lowest life cycle cost consistent with required performance, reliability, quality, and safety.

Value Engineering Change Proposal (VECP). A proposal submitted by a contractor under the

Value Engineering provisions of the Federal Acquisition Regulation that would lower the project’s life-cycle cost to DoD. This contract change requirement can be the addition of the

VECP to the contract, with associated savings. VECPs are applicable to all contract types, including performance based contracts.