An Investigation of Profit Potential under Contractual Value Engineering.

摘要

In 1959, the Department of Defense (DOD) adopted the Value Engineering (VE) program as one of several programs aimed at overall cost reduction. The purpose of VE is to achieve the essential functions of DOD requirements at the lowest total cost, consistent with the needed performance, reliability, quality, and maintainability. The DOD's VE program for contractors is implemented through the inclusion of value engineering clauses in contracts prescribed by the Armed Services Procurement Regulation (ASPR). Of the VE clauses available in ASPR, only the Value Engineering Incentive (VEI) clause authorizes the sharing of savings under two methods: a VE sharing rate, or the original negotiated contract cost sharing rate. Since the DOD seeks to motivate defense contractors through its profit policy, this research investigates the alternate VE sharing methods to determine which sharing method provides the greater profit potential for the defense contractor. This research incorporates the ASPR VE computation instructions into contract pricing models for the fixed-price-incentive and cost-plus-incentive fee type contracts. Simulated profit levels are generated for each VE sharing method through the application of a hypothetical VE change proposal in the models. Conclusions and recommendations are drawn from the simulations. (Author)