Article 21 — Value engineering
In brief
This article requires public buyers to include value engineering clauses in higher-value R&D procurement contracts, inviting or requiring contractors to propose changes that improve value or reduce cost. It sets out mandatory value thresholds that decrease over several years, what a change proposal must contain, which proposals cannot be accepted, and how any resulting savings are shared between buyer and contractor.
Key points
- A value engineering clause is mandatory above estimated contract values (net of VAT) that step down over time, from EUR 10 million to EUR 5 million on dates to be set relative to the Regulation’s entry into force; buyers may also use such clauses below those values.
- Clauses may be voluntary (encouraging proposals) or mandatory (requiring proposals at regular intervals), for the whole contract or parts of it, and equivalent clauses must be passed into qualifying subcontracts.
- Change proposals must set out the proposed changes, their impact on the parties’ rights, obligations and price, an evidence-based cost-benefit analysis, and any necessary subcontractor proposals.
- Buyers must reject proposals that alter the subject matter, impair essential functions or characteristics, or merely change deliverable or test quantities in defined ways.
- Procurement documents must set incentive-sharing rates for net cost savings and price-change limits; amendments applying a proposal follow Article 20, and the contractor’s paid share must not equal or exceed the cost of the R&D services performed.
What it means in practice
Public buyers running larger R&D contracts will need to build value engineering mechanisms, sharing rates and price limits into their documents from the outset, and to document reasons when rejecting a proposal. Contractors, and their subcontractors above the thresholds, gain a defined route to propose improvements and to share in verified savings, while continuing to perform under the existing contract until any amendment is agreed. Buyers may accept or reject proposals unilaterally, in whole or in part, and contractors may withdraw a proposal before acceptance.
Official text — Article 21 (COM(2026) 567)
1. Public buyers shall insert a value engineering clause in all R&D procurement
contracts subject to this Regulation with an estimated value net of VAT exceeding:
(a) EUR 10 million from… [OP please insert date 1 year from the date of entry
into force of this Regulation];
(b) EUR 9 million from… [OP please insert date 2 years from the date of entry
into force of this Regulation];
(c) EUR 8 million from… [OP please insert date 3 ye ars from the date of entry
into force of this Regulation];
(d) EUR 7 million from… [OP please insert date 3 years from the date of entry
into force of this Regulation];
(e) EUR 6 million from… [OP please insert date 4 years from the date of entry
into force of this Regulation];
(f) EUR 5 million from… [OP please insert date 5 years from the date of entry
into force of this Regulation].
Public buyers may include a value engineering clause in R&D procurement contracts
with a lower estimated value.
2. Public buyers shall include in the R&D procurement contract:
(a) value engineering clauses that encourage contractors to submit value
engineering change proposals throughout the performance of the R&D
procurement contract (‘voluntary value engineering clauses’); or
(b) value engineering clauses that require contractors to submit to the public buyer
value engineering change proposals at regular intervals throughout the
performance of the R&D procurement contract (‘mandatory value engineering
clauses’).
Public buyers may use the mandatory value engineering referred to in the first
subparagraph, point (b), for the entire R&D procurement contract or only for parts of
the R&D procurement contract.
Where public buyers use mandatory value engineering for parts of t he R&D
procurement contract, they shall formulate, in the procurement documents, the
requirements related to those parts as functional or performance requirements.
Contractors shall include corresponding mandatory or voluntary value engineering
clauses in any subcontracting agreement exceeding the values referred to in
paragraph 1 on the date of conclusion of the subcontracting agreement. They may
include corresponding mandatory or voluntary value engineering clauses in
subcontracting agreements below those values.
3. Where contractors submit value engineering change proposals as referred to in the
first subparagraph of paragraph 2, they shall include in those proposals:
(a) all the proposed changes to any of the research and development services
procured as a part of the R&D procurement
(b) a description of any impacts that the proposed changes referred to in point (a) of
this paragraph may have on the rights and obligations of the parties to the R&D
procurement contract, including on the price of different parts of the R&D
procurement contract as referred to in paragraph 2, second subparagraph, or on
the tasks of the contractor;
(c) an evidence -based analysis of the expect ed cost and benefit of the proposed
changes;
(d) in the case of subcontracting, any value engineering change proposals from their
subcontractors, which are necessary for implementing the contractor’s value
engineering change proposal
4. Public buyers shall not accept value engineering change proposals that:
(a) alter the subject matter of the R&D procurement contract;
(b) impair essential functions or characteristics of the R&D services procured or
their intended results as described in the functional or performance
requirements;
(c) involve a change in deliverable quantities of the procured R&D services and
their intended results only;
(d) involve a change in research and development end items or research and
development test quantities that result so lely from previous testing under the
R&D procurement contract.
5. Public buyers shall specify in the procurement documents that they may approve
amendments that may decrease or increase the price of the R&D procurement
contract following a value engineerin g change proposal from the contractor. The
procurement documents shall specify the limits of allowed increases in the price of
the R&D procurement contract due to contract amendments applying a value
engineering change proposal. Any such contract amendment s for value engineering
shall be carried out in accordance with Article 20.
6. Public buyers shall set out in the procurement documents incentive sharing rates that
share between public buyers and contractors any net cost savings realised for public
buyers from accepted value engineering change proposals on the ongoing R&D
procurement contract. Where a value engineering change proposal creates net cost
savings for public buyers on potential future R&D procurement contracts, the
procurement documents shall s pecify whether the public buyer will pay the
contractor’s share of contract savings as a single payment or as a series of payments
over time as future R&D procurement contracts are awarded. Public buyers shall
ensure that the contractor’s share of cost sav ings that it pays to the contractor as part
of the R&D procurement does not equal to or exceed the cost of research and
development services performed as part of the R&D procurement contract.
7. Public buyers may unilaterally accept or reject any value e ngineering change
proposal, in whole or in part. If the public buyer does not accept a value engineering
change proposal, the public buyer shall notify the contractor in writing, explaining
the reasons for the rejection. The contractor may withdraw any val ue engineering
change proposal, in whole or in part, at any time before it is accepted by the public
buyer. Until a contract amendment applies a value engineering change proposal to
the ongoing R&D procurement contract, the contractor shall continue perfor ming in
accordance with the existing R&D procurement contract.
Source: European Commission, proposal for a Regulation establishing the European Innovation Act, COM(2026) 567 final, 9 September 2026. Read the official proposal (PDF). Text may change during the legislative process.
Anthony Bochon’s analysis
Value engineering is one of the more unfamiliar imports here for the European procurement lawyer, drawing openly on defence-acquisition practice, and I think it is a genuinely interesting attempt to keep long R&D contracts efficient rather than frozen. The descending value thresholds phased in over five years, the choice between voluntary and mandatory clauses, and the flow-down to subcontractors show a legislator trying to institutionalise continuous cost-and-benefit improvement without reopening competition. The guardrails in paragraph 4 — no change to subject matter, no impairment of essential functions — are what keep this compatible with the equal-treatment principle, since a value-engineering change must never become a backdoor to a different contract.
The clause practitioners should study most closely is paragraph 6 on incentive sharing, including the sharing of savings on future contracts and the express cap preventing the contractor’s share from equalling or exceeding the cost of the R&D services performed. Coupled with the buyer’s unilateral right to accept or reject proposals in paragraph 7 and the routing of any resulting amendment through Article 20, this creates a live negotiation channel throughout performance; my advice to contractors is to model the incentive-sharing rates carefully at tender stage, because that is where the real value of these clauses is won or lost.