Allegations of Insufficient Reimbursement Under the Value Engineering Program

GAO was asked if a firm which had developed a modification kit that increased the life of certain Navy equipment was entitled to a monetary award under the Value Engineering Program. The program was developed to encourage contractors to propose cost-saving changes to contracts. Contractors are awarded a share of the savings that result from their change proposals. An award can only be made under an existing written contract containing a value engineering clause.

The firm in question was not entitled to a monetary award for value engineering, because no contractual relationship existed under which such an award could be made. The contractor did receive compensation for 150 modification kits, including an amount for engineering, quality assurance, and administrative expenses, and the contractor in turn paid the developing firm for the kits.