Value Engineering Council Act of 1986 - Defines "value engineering" as any scientific method used to analyze and redesign programs, products, and services to maximize productivity and minimize costs. Establishes the Value Engineering Council in the Office of Management and Budget. Directs the Council to: (1) conduct research to determine programs, products, or services of, or acquisitions by executive agencies, where cost reduction and increased productivity would result from the application of value engineering, particularly with regard to defense procurement matters; (2) advise executive agencies and private industries concerning the feasibility and cost benefits of value engineering; (3) provide study materials and technical assistance regarding value engineering to educational institutions; and (4) promote the use of incentives to encourage value engineering and the formulation of awards for value engineers who either propose accepted value engineering change proposals or effectively administer value engineering programs. Requires the Council to report annually to the Director of the Office of Management and Budget and the Congress. Terminates the Council three years after it is first established unless the Director renews the Council. Authorizes appropriations for FY 1987.