[Federal Register Volume 77, Number 111 (Friday, June 8, 2012)]
[Notices]
[Pages 34073-34074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-13903]
=======================================================================
-----------------------------------------------------------------------
OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
Value Engineering
AGENCY: Office of Federal Procurement Policy, Office of Management and
Budget.
ACTION: Proposed revision to Office of Management and Budget Circular
No. A-131, ``Value Engineering''.
-----------------------------------------------------------------------
SUMMARY: The Office of Federal Procurement Policy (OFPP) in the Office
of Management and Budget (OMB) is proposing to revise OMB Circular A-
131, Value Engineering, to update and reinforce policies associated
with the consideration and use of Value Engineering (VE). VE is an
effective technique for cutting waste and inefficiency--helping Federal
agencies save billions of dollars in program and acquisition costs,
improve performance, enhance quality, and foster the use of innovation.
The proposed revisions are designed to ensure that the Federal
Government has the capabilities and tools to consider and apply VE
techniques to the maximum extent appropriate.
DATES: Interested parties should submit comments in writing to the
address below on or before August 7, 2012.
ADDRESSES: Comments may be submitted by any of the following methods:
Online at: http://www.regulations.gov.
Facsimile: 202-395-5105.
Mail: Office of Federal Procurement Policy, ATTN: Curtina
Smith, New Executive Office Building, Room 9013, 725 17th Street NW.,
Washington, DC 20503.
Instructions: Please submit comments only and cite ``Proposed
Revision to OMB Circular A-131'' in all correspondence. All comments
received will be posted, without change or redaction, to
www.regulations.gov, so commenters should not include information that
they do not wish to be posted (for example because they consider it
personal or business confidential).
FOR FURTHER INFORMATION CONTACT: Curtina Smith, OFPP,
[email protected]. Availability: Copies of the proposed revision to
OMB Circular A-131 are available on OMB's Web site at http://www.whitehouse.gov/omb/circulars_default/.
SUPPLEMENTARY INFORMATION:
[[Page 34074]]
A. Overview
Value Engineering (VE) refers to an organized effort to analyze
functions of systems, equipment, facilities, services, and supplies for
the purpose of achieving the essential functions at the lowest life-
cycle cost consistent with required levels of performance, reliability,
quality, and safety. Industry first developed VE during World War II as
a means of continuing production despite shortages of critical
materials by analyzing functions to generate alternative materials or
systems to accomplish the required tasksat a lower cost. The Federal
Government subsequently adopted this tool as a mechanism to incentivize
contractors to continually think of ways to drive greater efficiency in
their production methodologies by allowing them to share with the
Government in the savings generated by their value engineering change
proposals. VE can reduce program costs and optimize performance.
Currently, several Federal agencies have reported life-cycle
savings through the use of VE in a broad range of acquisition programs,
such as those involving defense systems, transportation, construction,
engineering, environmental, and manufacturing projects. According to
annual reports of VE activities submitted by Federal agencies to OMB,
value engineering generates billions of dollars in savings and cost
avoidance annually for the Federal Government. For example, the
Department of Defense (DOD) reported savings of nearly $2 billion in
fiscal year (FY) 2009 and $3.4 billion in FY 2010. The Department of
Transportation's Federal Highway Administration reports that annual
savings for Federally-funded state construction projects have ranged
from $1.8 to $3.2 billion between 2005 and 2009. The Department of
State reports that it has used VE to identify hundreds of millions of
dollars in total life cycle savings since FY 2008--saving an average of
$46 for every one dollar invested in VE studies. Opportunities for
savings exist at other agencies.
OMB Circular A-131 requires agencies to establish VE programs so
that the agencies will realize the benefits of using VE techniques to
reduce nonessential contract and program costs. OMB first issued the
Circular in January 1988 (53 FR 3140), and the Circular was last
revised in May 1993 (58 FR 31056). The Circular specifically requires
agencies to: (1) Identify a focal point within each agency to monitor,
manage and maintain data on agency VE programs; (2) establish criteria
and guidelines for screening programs and projects which might benefit
from the application of VE techniques; (3) develop guidelines to
evaluate VE proposals; (4) actively solicit VE ideas from contractors;
and (5) emphasize, through training and other means, the potential of
VE to reduce unnecessary costs. Since issuing the Circular in 1988, OMB
has issued three memoranda in April 1995, October 1996, and February
1997 emphasizing the importance and benefits of VE and reminding
agencies of their responsibilities under the program. As a result of
proposed revisions in this notice, the previously-issued OMB memoranda
have been overtaken by events and are hereby formally rescinded.
In this notice, OFPP is proposing to revise Circular A-131 to
reflect present-day buying strategies and practices, such as
performance-based service contracting, to ensure that the Federal
Government is effectively considering and taking full advantage of VE,
whenever appropriate, to cut waste and inefficiency and promote greater
fiscal responsibility. The revisions that are proposed in this notice
would:
Reinforce the importance of giving meaningful
consideration to VE to save money and improve performance. The proposal
states that VE should be considered for all appropriate agency program
management activities and capital assets (as defined in OMB Circular A-
11 and the Capital Programming Guide), as well as to appropriate
supply, service, architect-engineering, and construction contracts.
Through the use of VE, agencies successfully identify and remove
nonessential functions and associated costs, ensure realistic budgets,
and improve and maintain acceptable levels of quality.
Explain that VE can be used with various contract types
and methods of contracting. The proposal explains that VE can be
incorporated into the acquisition strategy to improve results achieved
from contracts. VE can be used when contracting for services, when
using various contract delivery methods, such as design-build, or when
using performance-based specifications.
Explain that VE can be used with other management tools.
The proposal explains that VE can be used with other management tools
designed to improve processes, such as lean six sigma.
Increase the threshold for the application of VE. The
proposal would raise the threshold from $1 million to $2 million,
primarily to take into account inflation since the $1 million level was
adopted. Agencies would have the discretion to set lower thresholds for
those projects that have a significant impact on agency operations.
Strengthen training. The proposal states that agencies
should provide training to appropriate program and contract staff in
the application and implementation of VE on contracts. OFPP will work
with the Federal Acquisition Institute and the Defense Acquisition
University on appropriate training materials for the acquisition
workforce.
Reduce reporting requirements. The proposal would reduce
from 20 to 5 the number of projects to be reported annually to OMB and
would update the reporting format to include a description of the
methodology used to calculate savings. The proposal would also
eliminate Part III of the Circular in its entirety; Part III has
required a detailed cost summary of program results from inception to
date.
Remove outdated terminology and update references. The
proposal would remove outdated terminology and update references to
include currently prevalent methodologies and techniques such as
performance-based acquisition, the design/build project delivery
process, and integrated product/project/process teams.
Remove automatic Inspector General (IG) review. The
proposal would remove the provision requiring agency IGs to conduct an
automatic audit of VE programs every two years. We expect management
review of agency VE programs to be considered over time through
internal control assessments of acquisition functions conducted in
connection with OMB Circular A-123, Management Accountability and
Control. Agency management should also work with their IGs, as
appropriate, to consider when IG review of VE activities may be
warranted.
OMB requests comments on these proposals as well as on other
aspects of the Circular.
Joseph G. Jordan,
Administrator for Federal Procurement Policy.
[FR Doc. 2012-13903 Filed 6-7-12; 8:45 am]
BILLING CODE P