Value Engineering
Web Site
http://www.seattleve.com
Events
SEATTLE CHAPTER Meetings (2nd Wed of Month,
The SAVE Chapter Newsletter for Sept will be
posted on the Chapter's web site
http://www.seattleve.com.
The Newsletter includes dates
and locations for meetings throughout the year.
Our Chapter holds dinner meetings on the 2nd
Wednesday of each month, September through June, bringing in an outside guest
speaker presentation. Presentations
include a broad array of topics such as the:
The
Project Risk New Contracting Method for the GSA's
new Seattle Federal Courthouse project
Association Effectiveness Case Study -
PMI (Project Management Institute)
Wetland Restoration at the
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Wash DOT Value Engineering (from
Value Engineering (VE) is a proven,
effective tool for both continuous improvement and design enhancement.
VE optimizes the allocation of limited funds without reducing the
quality of a project.
WSDOT is a Nationally
Recognized Leader in Value Engineering
A value engineering team with diverse backgrounds is assembled and the 5 phases of VE -
Investigation, Speculation, Evaluation,
Development,
and Presentation - are
used to guide the team through the
process.
The VE process breaks components of a
project into functions. The team of experts then identifies solutions that will satisfy the
functions. The VE team formulates the
solutions into recommendations and the design team implements the valid
recommendations into the design.
Value Engineering Phases (per
Selection (pre-study) Selection
of the right projects, processes, or elements
Investigation
Background information,
function analysis, team focus
Speculation Creative,
brainstorming,
alternative proposals
Evaluation Analysis
of alternatives, lifecycle costs
Development Develop
technical and economic supporting data
Presentation Present
recommendations and team findings
Performance Measures
Traditionally, value engineering only tracked
cost avoidance. However, for FHWA FY 2001, WSDOT instituted
performance measures to track additional benefits of our Value Engineering
program.
The project manager tasked with reviewing and
implementing the value engineering recommendations for each project
developed a report that indicated the performance of each recommendation. The performance was tracked in the following
categories:
Recommendations implemented
Minimized right of way and/or environmental impacts
Enhanced operational performance
Improved constructability
Compressed development or construction schedule
Developed partners and/or consensus building
WSDOT Value Engineering Objectives
Build
consensus with WSDOT partners to encourage positive impacts on project
delivery.
Innovative
cost avoidance ideas become standard on future projects.
Reduce
life cycle cost of items to lower future maintenance costs
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Value Engineering Improves Quality, Cuts Costs
Using a process known as value engineering
(VE), States are saving hundreds of millions of dollars each year on highway
infrastructure projects. This process
means that when a State is developing a highway project, the transportation agency and the
contractor reviews the project's features and looks for ways to improve
quality, foster innovation, and control costs.
In fiscal year (FY) 2000, States collectively saved approximately a
billion dollars as a result of performing VE studies, up from $880 million in
FY 1999.
"Value engineering
fosters teamwork by involving construction, design, and maintenance
staff," says Donald Jackson, Federal Highway Administration's (FHWA) VE
Coordinator. "It allows States to build highway projects at the lowest cost while
still maintaining the desired function and keeping or improving the
quality." A VE job plan typically includes a number of different phases, including:
Selecting and investigating a project;
Analyzing the project's function and cost;
Brainstorming and developing alternatives to
the existing design plan;
Presenting and implementing the alternatives
when they are
considered advantageous; and
Auditing the results.
While value engineering has
been around for decades, its use by the highway industry has greatly increased
in recent years. Much of this upswing
came from a 1995 Congressional regulation mandating the use of VE on all
Federal-aid highway projects of $25 million or more. FHWA has also increased the
amount of VE training and technical assistance it provides to States and more and more States have
established their own VE programs.
Three
A value analysis procedure manual and concept
manual are also currently in the works.
Florida DOT started its VE
program in the mid-1970s and now has the largest program of any State highway
agency. From 1994 to 1999, the
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Value Engineering
1. Information
* Get all facts * Establish value criteria * Organize data * Organize study
2
Function Analysis
* Analyze functions * Allocate cost to function * Determine worth
3 Idea Generation * Brainstorm alternatives * No judgment
4. Evaluation * Sort out good ideas * Measure against criteria
5. Development
6 Implementation
7 Presentation
8 Audit
List of
Value Engineering Projects for one Architect-Engineering company (Doshi Associates, Inc,
For the Ford Assembly Plant
in
For the
Ford T & C Van Dyke Plant, instead of extending a 10.3 lbs. per sq.ft. structural system, as it was done on a previous 2 bay
expansion, the DAI value engineering approach to the structural design for a
48,000 sq. ft. addition using 8.91 lbs. per sq.ft.,
reducing steel by 96,000 lbs. DAI's structural design resulted in a net savings of
$130,000.00.
Ford
Design of a
sprinkler system for the
For the General Motors
Prototype Shop Relocation at the
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Engineering Focus : Value
Engineering An Alternative to Cost
Cutting
Introduction Value engineering is the structured
application of proven techniques at various design phases with the primary aim of
cost avoidance, without sacrificing scope and quality. The principle involves evaluating the
function of the process and/or equipment and focusing on poor value
items/functions. This approach requires
extensive team interaction and creativity.
What is VALUE?
Value is the ratio of functionality to
cost. The function is the specific task
required to satisfy a customer need and the cost is the resource consumed in
achieving the function.
Applications
Used on new construction of new facilities
and remodels of existing facilities
clarifies
scope encourages
focus on poor value
encourages
alternatives basis for cost
reduction
Used on existing facilities:
highlights poor
value operations encourages
alternative operations compares
costs of operation with benefits
There are Structured Steps or Phases for
Value Engineering
(Pilat Comment: there is not universal agreement on these
phases or on the number of phases or steps)
The following steps or phases are
required to build and develop the value engineering exercise:
1 Information
gathering
2 Function analysis
3 Creative phase
4 Evaluation
5 Development
6 Implementation
Summary The main
differences between value engineering and cost cutting are summarized as
follows:
|
|
Value Engineering |
Cost Cutting |
|
It is |
Function based |
Equipment/material based |
|
Focus |
poor value functions |
Big cost items |
|
Results |
Increased value |
Scope reduction |
|
Optimizes |
Overall design |
Local design |
|
Clarifies |
Client requirements |
Nothing |
Value Engineering is a technique that is used
to identify poor value functions and identify ideas for lower cost, higher
value alternatives. It allows the creative generation of solutions to specific
functionality problems,
without reducing the scope of the process.
__________________________________________________________________________________________
from
http://www.vecourse.com/course-lectures-t.htm
References/Text for this VE course: "Value Engineering: Practical Applications"
by A. Dell’Isola
OVERVIEW VALUE ENGINEERING
PROCEDURES
I. GENERAL
Value engineering (VE) is a creative,
organized approach with the objective of optimizing life cycle costs and of the
performance of a system, facility, or building. Value
is defined in four kinds; use, exchange, cost and esteem. The
construction industry has seen significant cost increases-remember
doubling of construction costs from 1970 to 1980;
materials price increases (with little subsequent reduction)
from Hurricane Andrew in
current escalating labor and material costs. Owners and Designers were left with little
choice but to increase budgets for
new construction to accommodate these trends. The cost of the construction basics rose
reducing discretionary expenditures. All of this against a backdrop of the impact of the loss of cheap,
affordable energy during the "energy crisis" from 1975.
Value Engineering offers project stakeholders an
opportunity to maximize the most important elements of a project while
evaluating value, lessening project life-cycle costs, addressing financial
issues, and reducing waste and or unnecessary costs.
A key element in the
procedures is the use of a multi-disciplined team to analyze the project
utilizing Value Engineering methods. It
is the team’s objective to use the VE methodology to evaluate the project to
find instances of poor value and high costs, recommend alternatives, and estimate
initial and life-cycle costs whenever significant for the original system and
for all proposed alternate systems (or components, practices, etc.).
Other criteria are also used
to assure the proposed recommendations did not sacrifice essential project
quality and functions and timely project completion. All activities are based
on improving value, which is defined to be the sum of performance and quality
divided by cost.
The Value Engineering effort
produces the best results when each party to the study has a clear
understanding of how and why a VE study is conducted. Also, a clear understanding is required of
the input needed from the Owner, Designer, Construction manager, and the VE
study team. Whenever possible, a
coordination meeting is held before the VE study effort to coordinate schedules
and to outline information needed from project team members to perform the
study. On large projects (greater than $10,000,000) VE team members must study
the project background material prior to the workshop session.
Coordination with the design
team prior to the study allows the VE team members to review all available
information including engineering studies and reports; final design concepts,
calculations, and specifications; important correspondence; cost data; design
criteria; regulatory constraints or influences; and scheduling for the project.
It is advisable that each team member documents a list of first ideas and
questions requiring Owner/Designer responses.
When evaluating an existing
facility or proposed site, a site visit is extremely valuable and should be
done by selected VE team members, as appropriate to the specific study. Existing facilities are observed and an
assessment of the surrounding local area for the impact of the proposed project
is made. The site visit offers an
excellent opportunity to assess operating conditions, costs of current systems
or facilities, site layout, construction issues and site usage concerns.
Economic Factors During the Value Engineering study, construction cost
and life cycle cost summaries are performed on elements of the project having
significant follow-on cost impact. Often
cost comparisons between planned and proposed alternatives are made on a present
worth basis. The selection of such
important economic factors such as life-cycle duration (years), and interest
rate need to be agreed upon at this time.
Cost Data Cost
information for the Value Engineering study is typically prepared by the design
firm and validated by the VE team. Increasingly, as Construction Managers are
involved they prepare the project cost estimates. This information needs to be
as detailed and descriptive as possible and becomes the foundation for the
entire Value Engineering study effort function analyses.
The cost data should be
presented to the Value Engineering team members in advance of the actual
workshop effort. Project designers or Construction Managers presents cost data to the team on the
first day of the actual workshop with accompanying justification and
methodology. In practice it has been found that cost validation efforts by the
VE team are quite worthwhile and have greatly improved subsequent cost-based
decisions.
4
Cost Modeling
The VE team then analyzes the
costs and distributes the cost data in a cost model by project components
(structures,
processes, construction element, materials, schedule, etc.) as appropriate for the purpose of the study. The cost
estimate and cost model reflect current costs. The cost model assists the VE
team in identifying areas of potential savings and to proportion costs by
function. It is absolutely imperative that this cost model be accurate and
descriptive of the entire project as it is the economic basis of all further VE
work. Costs, quantities, unit costs, and all other economic factors must be accurate
and appropriate to the project under study.
Target costs are derived from historical data; experience of the VE team
members’; and application of functional cost/worth determinations within the VE
study methodology.
Energy Modeling Whenever it is deemed significant, an energy usage
model is also prepared for large projects prior to the VE workshop. On smaller
projects the energy model is prepared as part of the workshop activities. The
energy model brings together
information relating to the consumption of electric energy, fuel
oil, natural gas, and from other sources. Energy model data is typically taken
from information contained in the contact specifications and plans or from
design studies. The energy model shows
plant processes or project components by their intended use of energy by amount
and type. All connected motors are to be
evaluated based on operating time, horsepower draw, and number of units
operating. Fuel requirements are included for other equipment. Total energy costs are then derived from
estimated usage applied to appropriate energy unit costs.
The life cycle cost model is
prepared for the project under study by combining the information in both the
cost and energy models and including other related costs such as staffing,
security, overhead, etc., to develop life cycle costs. These costs are prepared
using the techniques of engineering economy. It is very important that there be
agreement with the Owner as to the specific economic factors used in this
analysis such as interest rate, expected life of the project, and on projected
staffing and related follow-on costs.
Life cycle costs include all economic aspects of developing, designing,
constructing, operating and maintaining the facility over its intended life
span.
II. VE
WORKSHOP PHASE
During the actual workshop
portion of the VE study, the Job Plan is followed. The Job Plan is an organized
approach for searching out the instances of poor value or high costs in the
design (or existing facilities) and developing alternatives for consideration.
The workshop session uses a multidiscipline team following the Job Plan to
arrive ultimately at recommendations for implementation.
The Value Engineering Job Plan follows five (5) key
steps or phases:
Information Phase
Creative Phase
Judgement
Phase
Development Phase
Recommendation Phase
Value Engineering
Information Phase At the beginning of the VE study it is important to
understand the background and decisions that have influenced the development of
the project design. Because of this, the Owner and Designer present an oral
overview of the design. This presentation usually includes: the history of the
project; the rationale for the design; project constraints; site conditions;
factors influencing decision making; and the reasons for selecting the process
equipment or major materials or systems for the project. Also, project costs and schedule data are
discussed.
Subsequently, each team
member familiarizes himself with the project documents. The information phase
also includes preparation of the cost and energy models from cost data
assembled before the workshop began. These models are updated based on
information received during the Designer’s presentation. The VE team then reorganizes the cost data if
appropriate and then sets target savings based on in-depth group (VE team
members) functionally oriented discussions.
The next step in the
information phase is to perform the function analysis. The functions of the system/project are the
controlling elements in the overall VE approach.
The procedures used in the
Information Phase are vital to the VE team because it forces the team to think
in terms of functions and the costs related to each of the functions. Preparing the function analysis helps to
generate many of the ideas that eventually result in recommendations for
project improvement and/or cost savings. To attempt to isolate the high cost
areas, the project is analyzed with cost/worth ratios developed by the VE
team. The higher the
cost/worth ratio, the greater the potential for discovering and developing cost
savings. Worth is applied based
on the premise of finding the least cost to provide the required functions. This forces the VE team to speculate on
alternative solutions to the proposed design.
Creative Phase of value engineering (VE)
This phase of the VE process involves the
generation and listing of creative ideas. During this time, the VE team thinks
of as many ways as possible to provide the necessary functions within the
project. The creative idea listing for
the team(s) and notes from discussions among the VE team members and
coordinator/leader are included in the VE workshop report. Separate teams typically have separate
creative phase report sections. During the creative phase, judgment of the
ideas being developed
is restricted, and ideally is not present at all. The VE team is looking for the greatest
quantity of ideas, which will
subsequently be screened, in the next phase of the study. This issue is one of the most challenging for
VE team members and
participants. Many of the
ideas brought forth in the creative phase are a result of work done in the
function analysis and prestudy efforts.
Judgment Phase
In this phase of the workshop, the VE team
judges the ideas developed during the creative phase. The VE team ranks the
ideas. Ideas found to be irrelevant or not worthy of additional study are
disregarded; those ideas that represent the greatest potential for cost savings
and improvements are selected for development. A weighted evaluation is applied
in some cases to account for project impacts other than costs (both capital and
life cycle).
Ideally, the VE team would
like to evaluate all attractive ideas but time constraints often limit the
number of ideas that can be developed during the workshop. As a result, the
team focuses on the higher ranked ideas. This phase is designed so that the
most significant ideas are isolated and prioritized.
Development Phase
During the development phase
of the VE study each designated idea is expanded into a workable solution. The
development consists of the recommended design, capital and life cycle cost
comparisons and a descriptive evaluation of the advantages and disadvantages of
the proposed recommendations. It is important that the VE team be able to
communicate the concepts for their recommendation(s) to the workshop audience,
for if the proposal is not understood it will not likely be accepted. Therefore, each recommendation is presented
with a brief narrative to compare the original design to the proposed
change. Sketches and design
calculations, where appropriate, are also presented.
Recommendation Phase
The last phase of the VE study is the
presentation of recommendations. The VE recommendations are typically screened
by all VE members before presentation to the workshop personnel. That audience
typically consists of the Owner/User, Designer, Regulatory staff, and
increasingly the Construction Manager and sometimes the public. Final recommendations are presented orally
during the workshop and in the written report.
The VE team leader and/or
team members describe the recommendations and the rationale that went into the
development of each proposal. Value engineering worksheets and a summary of the
VE results are given to the Owner or Designer at this time in draft format.
This begins the evaluation by the Owner and the Designer of the VE report
recommendations.
III.
Value Engineering POST-STUDY PROCEDURES
The post-study portion of a
VE study includes preparation of the Value
Engineering Report incorporating the recommendations developed during the
workshop. The Designer then responds by
accepting and incorporating the proposals into the project design, rejecting
the proposals, or recommending further study.
Usually the Designer puts these decisions in writing to the Owner as a
VE Report addendum with justification for proposal responses. A summary of the cost savings resulting from
the study and the required redesign costs are also included in the Designer’s
response.
There follows a final report and VE study closure after the Owner and Designer have
responded to the draft recommendations and these comments are addressed and
included in the VE final report.
The final VE report is then
prepared in finished form by the VE team and subsequently submitted to the
Owner.