Value Engineering Proposals (VECPs) Guide 2025: Save Costs, Share Savings
Learn how to develop successful Value Engineering Change Proposals. Understand VECP requirements, savings sharing, and how to propose changes that benefit both contractor and owner.
Quick Answer: What is a VECP?
A Value Engineering Change Proposal (VECP) is a contractor- initiated proposal to modify the contract in a way that reduces costs without degrading quality or performance. When approved, savings are shared between the contractor and government — typically 50/50 for construction contracts.
What is a VECP?
VECPs allow contractors to profit from cost-saving innovations:
VECP Elements
What Makes a Valid VECP
- • Requires contract change
- • Reduces cost to the government
- • Maintains or improves function
- • Does not degrade quality
- • Not already required by contract
What Is NOT a VECP
- • Changes you were going to make anyway
- • Scope reductions degrading function
- • Ideas already in your bid
- • Standard practice improvements
- • Safety compromises
The Value Engineering Mindset
VECPs ask: Is there a better way to achieve the same function at lower cost? Focus on function (what it does) rather than product (what it is). The best VECPs maintain or improve performance while reducing cost.
Savings Sharing Arrangements
How savings are split depends on contract type and timing:
Typical Sharing Rates
Construction Contracts (FAR 48)
Instant contract savings: 50% contractor / 50% government
Collateral savings: 20% contractor / 80% government
Non-Construction Contracts
Rates vary by contract type. Fixed-price typically more favorable to contractor than cost-reimbursement contracts.
Future Contract Savings
If the VECP is applied to future contracts or options, additional sharing may apply for a specified period.
Calculate Your Share
Example: VECP saves $200,000. Under 50/50 sharing: Contractor receives $100,000 reduction in contract price but keeps the savings, netting $100,000 additional profit.
VECP Requirements
A complete VECP must include specific information:
Required VECP Content
Developing Successful VECPs
Good VECP Candidates
- ✓ Material substitutions
- ✓ System redesigns
- ✓ Construction method changes
- ✓ Equipment alternatives
- ✓ Specification relaxations
- ✓ Phasing optimization
Poor VECP Candidates
- ✗ Quality reductions
- ✗ Life cycle cost increases
- ✗ Safety compromises
- ✗ Ideas requiring major redesign
- ✗ Changes with minimal savings
- ✗ Proposals after work is done
VECP Development Process
- 1. Identify opportunity during estimating or construction
- 2. Analyze function — what does it need to accomplish?
- 3. Develop alternatives that achieve the same function
- 4. Calculate savings with detailed cost analysis
- 5. Document impacts on quality, safety, schedule
- 6. Submit early while time remains to implement
Submission and Approval Process
Process Timeline
Step 1: Submit VECP
Formal submission to Contracting Officer with all required elements. Submit as early as possible to allow implementation time.
Step 2: Government Review
Technical review by engineers/architects. Cost analysis review. Typically 30-60 days for decision depending on complexity.
Step 3: Negotiation
If approved, negotiate savings amount and sharing. May involve adjustments to your original calculations.
Step 4: Contract Modification
Execute modification reflecting the VECP and sharing arrangement. Implement the change as approved.
Common VECP Examples
Structural
- • Steel to precast concrete
- • Foundation system alternatives
- • Column grid optimization
- • Floor system changes
Mechanical
- • HVAC system alternatives
- • Piping material substitutions
- • Equipment consolidation
- • Controls optimization
Electrical
- • Lighting system alternatives
- • Conduit/wiring substitutions
- • Panel consolidation
- • Energy efficiency improvements
Sitework
- • Earthwork balancing
- • Paving alternatives
- • Drainage system changes
- • Utility routing optimization
Frequently Asked Questions
Can the government reject my VECP?
Yes. The government is not obligated to accept any VECP. Common rejection reasons include inadequate documentation, unacceptable impacts on function or quality, or determination that savings are overstated.
What if the government uses my idea without paying?
If you formally submitted a VECP and the government implements your idea, they must share savings per the contract. Document your submissions carefully. Informal suggestions are not protected.
When is it too late to submit a VECP?
Technically until contract completion, but practically VECPs must be submitted early enough to implement. Once work is complete, there is nothing to change. Submit ideas as soon as identified.
Do all contracts include VE clauses?
No. Check your contract for FAR 52.248-1 (supplies/services) or 52.248-3 (construction). Without a VE clause, there is no sharing mechanism, though you might still propose changes.
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