What is Value Engineering?
This doesn't do what I want it to do! What is this item supposed to do? You know, it seems like this could be better for what we paid! What now - we're out of money and not done?
Do any of these expressions sound familiar to you? They are all indicators of questionable value. How does one avoid this condition? Excellent question! Read on to see how you may avoid aggravation by taking advantage of the Value Engineering program of Baltimore District.
To answer the question "What is Value Engineering?", we must consider the concept of FUNCTION.
FUNCTION is what something can do. Value Engineering thinks in terms of basic and secondary functions.
1. The basic function is what something must do so that it will satisfy your need. Consider the example of requiring something to hold mineral water for drinking. Whatever you get must be able to perform the basic function - dispense water. So, we should all use plain, clear glasses for drinking water. Right? That sounds awfully stark. Most things we see that dispense water are colorful, made of different materials, have lids, logos, etc. Are those a waste of money?
2. Enter the concept of secondary function. These are things that attract you to THAT thing among many choices. They are functions beyond the basic function that provide convenience, dependability, attraction, and satisfaction. In most circumstances, some of those functions are desirable and some of them may be included whether you want them or not.
The challenge of Value Engineering, then, is to identify what functions must be done. Next is to identify what can best perform that function. The expense of this best item is what the function is "worth". Last is to identify the difference between what is proposed for the purpose (cost) and what can best perform the function (worth). In this way, Value Engineering identifies the cost and worth of a function for informed decision-making.
So, what is Value Engineering? It is the analysis of the functions of a program, project, system, product, item of equipment, building, facility, service, or supply to improve performance, reliability, quality, safety, and life-cycle cost. Note the broad range of analysis. Much more than just design! This great process works on just about anything! And, notice that the emphasis is not on cost-reduction. Cost is a measure of resource expenditure. It's good to spend just what you must for what you need. Oftentimes we spend more and wonder why we did.
How does Value Engineering work?
We use the Value Engineering Job Plan, a systematic approach in five phases that analyzes a project in terms of its functions. The five phases are:
1. Information Phase in which we study documents, learn background, identify functions, and identify cost/worth of functions
2. Speculation Phase in which we identify what else can do what must be done. Free use of imagination with no judgment is essential
3. Analysis Phase where we rank alternative solutions in terms of quality with realistic judgment
4. Development Phase where we develop the details of best alternatives into written proposals
5. Implementation Phase where we try to sell proposals to the client and include accepted proposals in the project.
What are the Value Engineering formats in the government?
The formats are defined in terms of origin, i.e., whether initiated by the government or contractor:
1. Value Engineering Proposal (VEP) - Government-initiated, multidisciplinary product, usually the result of a team study. The government realizes all the savings from VEPs. These may include proposals developed by individual employees. Awards are available through the incentive awards program for individual initiative.
2. Value Engineering Change Proposal (VECP) - Contractor-initiated, feature-specific product during contract performance. The government shares in VECP savings with construction contractors in the ratio of 45:55%.
Isn't Value Engineering really just a way to charge more to fix bad designs?
No! Many factors result in a serviceable design that can be improved:
1. Product and methodology improvements are not always recognized by mandatory design standards that can be waived for good cause
2. Customer insistence without full knowledge of the impact on value
3. Lack of time or funding for better design
4. Good design is not perfect design
Compromise designs result from these circumstances. Value engineering identifies cost/worth mismatches to facilitate informed decisions.
Why SHOULD we do Value Engineering?
Simply, no one ever has enough money to do all the things that need to be done. And, no one wants to spend more time and money to do something over that did not include essential functions the first time. Value Engineering offers the opportunity to get best value the first time. Some savings statistics in Baltimore since Fiscal Year 1990:
1. $167.4M saved for projects awarded for construction
2. 10.8% of construction value saved prior to construction award
3. For team studies, the ratio of savings implemented-to cost of studies is 41:1
Why MUST we do Value Engineering?
1. Public Law 104-106, National Defense Authorization Act, FY 1996 amended the Office of Federal Procurement Policy Act to state:
"Each executive agency shall establish and maintain cost-effective value engineering procedures and processes."
2. Federal Executive Agency Policy OMB Circular A-131, May 93, states:
"Federal agencies shall use VE as a management tool, where appropriate, to ensure realistic budgets, identify and remove nonessential capital and operating costs, and improve and maintain optimum quality of program and acquisition functions."
3. Corps Policy states:
a. "A formal VE study (defined as a team study) shall be performed on all construction and remediation projects with a current working estimate of $2,000,000 and greater and on supply, service and operation & maintenance projects with CWE exceeding $1,000,000… " and
b. "All Corps of Engineers customers and sponsors are to be offered Value Engineering services along with the opportunity to directly participate as part of the Value Engineering team."
4. Engineer Regulation 11-1-321, Value Engineering, latest edition
5. District Regulation 11-1-3, Value Engineering, latest edition
I have really tight design schedules. How long does this take?
On average, the process is complete within one calendar month of delivery of study documents. The best project stage is when approach and cost are known, e.g., design definition, approved feasibility study, early remedial design, concept design. Once documents are available, the schedule proceeds as follows:
1. Study preparation takes one week
2. The study is done within one week
3. The formal study report is available in one week
4. The study report is reviewed within one week
5. The report is presented to designer and client for consensus actions in one-half day
Can you give me some examples of projects that benefited from Value Engineering?
Interested in more information? Have a study to schedule? If you have any questions or require additional information on Value Engineering, please contact:
Value Engineer
U.S. Engineer District, Baltimore
P.O. Box 1715
Baltimore, MD 21203-1715
410-962-4408
FAX: 410-962-0916
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