Department of Defense Value Engineering Program Needs Top Management Support

PSAD-78-5: Published: Nov 16, 1977. Publicly Released: Nov 16, 1977.

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The Department of Defense (DOD) value engineering program for contractors was set up to stimulate contractors to develop and propose cost saving changes to contracts requiring unnecessary expense. Although savings on some major programs have been impressive and show that costs for major Defense weapon systems can be cut down considerably, few systems have active value engineering programs.

The program has already saved over $700 million, but savings have declined sharply since 1971, and the program has fallen far short of its potential. Savings for 1975 and 1976 were the lowest since 1967. Most major programs being developed and produced during 1976 had no savings at all, including many with very high price tags. The lack of Defense management acceptance and support has been the basic and most critical factor impeding the performance of the value evaluation program, and correction of this weakness is the most essential need of the program. The lack of management support has been the most pronounced in the Navy and the Air Force. Savings of $1 billion in the next 4 years can be achieved if DOD's assessment of the program's minimum savings potential is realized.

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