BCN 6785-ADVANCED CONSTRUCTION ESTIMATING Term Paper Value Engineering

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Shivam Phadtare Panther ID-3338165

1|Value Engineering

Table of Contents

1) Abstract 2) Introduction 3) Value Engineering Applications 4) Steps in Value Engineering Process...... 5) Advantages of Value Engineering... 6) Disadvantages of Value Engineering.. 7) Value Engineering Principles 8) Data Required for Value Engineering.. 9) Selection Phase Checklist. 10) Workshop Phase. 11) Case Study 12) Examples.. 13) Conclusion and References...

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Value Engineering

Abstract Value engineering (VE) is one way to improve efficiency and seek the best balance between the cost, reliability and performance of a product or service. It is encouraging seeing that value engineering has been applied to public and private construction projects, but there is no sign that it is widely used in other industries. There are occasional advertisements in newspapers for industrial engineers who can perform the value engineering function for certain manufacturing or industrial engineering firms, usually subsidiaries of American- based companies. VE is an organized/systematic approach directed at analyzing the function of systems, equipment, facilities, services, and supplies for the purpose of achieving their essential functions at the lowest life-cycle cost consistent with required performance, reliability, quality, and safety. The implementation of the VE process on a problem typically increases performance, reliability, quality, safety, durability, effectiveness, or other desirable characteristics. The terms Value Engineering (VE), Value Analysis (VA) and Value Management (VM) are used synonymously and interchanged by some people. The approach is sometimes also referred to as Value Control, Value Improvement or Value Assurance. It is conducted by a multidisciplinary team composed of experienced and specialized professionals. The VE team is independent of the design team, but its members must have experience in the particular field of the project in question. Working as an extension of the design team, the VE team analyses the project from a function/cost standpoint, providing alternative design suggestions that may improve performance, construction and life-cycle costs. They may also improve construction methods or schedules, and may introduce flexibility into operating or maintaining the project.

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Introduction Value Engineering may be defined in other ways, as long as the definition contains the following three basic precepts: An organized review to improve value by using multi-disciplined teams of specialists knowing various aspects of the problem being studied A function oriented approach to identify the essential functions of the system, product, or service being studied, and the cost associated with those functions. Creative thinking using recognized techniques to explore alternative ways of performing the functions at a lower cost, or to otherwise improve the design. Owners interest in Value Engineering About 45% said that they would not pay for the service. 32% of them said they would, and the rest gave a qualified response , saying that they would pay for the study if: When The size of the project warranted it; A reasonable fee was charged for carrying out the study; There were capable professionals to carry out the study. they were asked whether they were interested in learning more about value

engineering and its application in the construct ion industry, 80% gave a positive response. The majority of owners believed that they could learn about this technique through

publications, courses, seminars, and workshops. VE Terminology The term Value Engineering is synonymous with value management, value analysis, and value control. Some of these terms were coined to minimize confusion about the word engineering. You do not have to be an engineer to apply VE. The following terms are used throughout this paper: Value Engineering Project: A preplanned effort to study a specific area or task, the primary objective being to improve value using VE methodology while maintaining required functions.

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Function: The purpose or use of an item or process. The VE approach first concerns itself with what the item or process is supposed to do. The consideration of function is the fundamental basis of the VE method.

Value: The relationship between the worth or utility of an item (expressed in monetary terms) and the actual monetary cost of the item. The highest value is represented by an item with the essential quality available at the lowest possible overall cost that will reliably perform the required function at the desired time and place.

Worth: The lowest cost to reliably achieve the required function. Worth is established by comparing various alternatives to accomplish that function and selecting the lowest cost alternative.

Value Engineering Proposal: A specific proposal developed internally by DoD personnel for total value improvement from the use of VE techniques. Since Value Engineering Proposals are developed and implemented by Government personnel, all resulting savings accrue to the Government. A Value Engineering Proposal can also be the result of a technical support contractor effort if it is funded by the Government specifically to conduct a VE study on a contract to which it is not a party.

Value Engineering Change Proposal (VECP): A proposal submitted to the Government by the contractor in accordance with the VE clause in the contract. A VECP proposes a change that, if accepted and implemented, provides an eventual, overall cost savings to the Government and a substantial share in the savings accrued as a result of implementation of the change for the contractor. It provides a vehicle through which acquisition and operating costs can be reduced while the contractors rate of return is increased.

Usage of Value Engineering Applications Engineering: Design, product improvement Manufacturing: Material Handling, tool design and production Purchasing: Manufacturers vendor alternative proposals Sales: Slow selling products Systems and Procedures: Paperwork, forms processing, reproduction services Maintenance: Procedures, material, work scheduling Energy Conversion: Procedures, life cycle costing analysis Construction: Planning, scheduling, labor, consumables

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Value Engineering for Highways: The history of highway development is full of instances where inspiration has produced noteworthy contributions to the financial and operational betterment of highway transportation. The state of our national and State economy, with rising costs and unemployment, provides an opportunity to encourage such inspiration. Value Engineering is one tool that can make things happen. It is an engineer's means to force the development of, and use of, "bright ideas." Value Engineering is predicated on the fact that people spend their money to accomplish functions rather than simply to obtain ownership. With today's well-established concern for our environment, energy, and rising costs, the functional needs of safe and efficient accommodation of vehicular and pedestrian traffic must be carefully and independently analyzed, so that we may obtain these functions in the most economical manner, with minimal disturbance to the environment. Steps in Value Engineering Process Information Phase: This phase involves defining of the problem to be solved, evaluating the feasibility of implementing the VE study for the problem, gather information about the problem, and allocate the required resources and team to execute the study. Speculative Phase: This phase aims to develop alternative approaches of providing the required functions at lower cost. The functional analysis is developed by the Function Analysis Systems Technique (FAST), which is a diagramming procedure that demonstrates the logical relations among the functions of building, system, or component. Upon creating the FAST diagram, the VE team shall start generating a wide variety of ideas. This helps to optimize the solution of a value improvement problem by increasing the probability of selecting the best idea through brainstorming or other idea generation techniques. Analytical phase: The purpose of this phase is to apply cost comparisons and define the optimum alternative of those ideas generated in the previous phase. The Life Cycle Costing (LCC) is applied to study the lower cost of the final selected alternatives. Proposal Phase: The purpose of this phase is to present results of the VE study to the stakeholders, to obtain approval from the client and to define concurrence and a commitment from the designer, project sponsor, and other management to proceed with implementation of the recommendation.

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Strengths of Value Engineering (Benefits) Optimizes Quality/ Performance Reduces Total Life Cycle Costs of Projects or Processes Minimizes waster in Manufacturing and Design Process by Eliminating Wasteful Practices Simplifies and Improves Functional Reliability and Systems Performance. Identifies Potential Risks and Generates Solutions to mitigate. Experience in the United States shows that a typical VE study may realize savings of over 5% of the capital cost of a project, and achieve a return of over ten dollars per dollar expended. Recent experience in British Columbia demonstrates similar results. VE study costs are about 0.4 percent of total construction costs, which is relatively low compared to potential benefit. Upon completion of a VE study the owner will have confidence that a cost-effective, quality design has been achieved. 7|Value Engineering

Limitations of Value Engineering (Disadvantages) VE should be performed as early as possible before commitment of funds. According to Pareto law 80% of the problem count represents 20% of the amounts to be paid. Therefore the optimum timing for VE study is during the design phase The approach depends on team work, creativity concepts

What comprises a successful VE study? The following elements are required: Top level commitment and support from the owner A qualified VE team leader and experienced members A well-managed VE program An appropriate project approach based on function analysis and proven VE methodology Cooperation between the owner, the VE team and the designer, along with empathy for the designers position How is a Value Engineering Study Conducted? VE methodology is based on three specific phases: 1 The Pre study Preparation phase often commences with a meeting between the owner, designer and VE team leader to promote a common level of understanding on the objectives of the study, to confirm the schedule of events of the study and to review the required information. Project data provided by the owner and designer are distributed to the team for review prior to a formal workshop in order to develop relevant questions. Models of appropriate capital costs, energy costs and life cycle costs are prepared by the team leader. 2 The Project Study Workshop phase is conducted at a location convenient to the owner and designer, frequently at the owners premises near the project site. It lasts for a minimum of three days to a maximum of five, with an agenda for the first meeting including: Introduction Briefing on Value Engineering Presentation of project design by project designer

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 Outline of project constraints Questions by VE team members for the designer Applicability of Value Engineering The design effort verses the total project costs as expended over the life cycle of a typical project are the smallest expenditure. Usually, all of the initial costs of a project add up to less than 50% of the total life cycle cost. Total Project Costs = Design Cost + Construction Cost + Operation & Maintenance Cost Influence on Cost, shows which decision-makers have the most influence over the total cost of ownership during the life cycle of a project. Operations and maintenance personnel, although often responsible for the majority of the projects total costs, have very little influence on decisions that add to life cycle costs. Two things can be observed here: 1) The earlier VE is performed, the greater its potential savings 2) The design process should take life cycle costs into account. All phases of VE involve the search for answers to the question, "what else will accomplish the function of a system, process, product, or component at a reduced cost?" Obviously, cost savings diminish as time progresses from inception to completion of a project, leaving few, if any, identifiable cost savings for operation and maintenance without compromise. Value Engineering Principles Value Engineering principles consist of key questions, techniques, and procedural tasks used in pursuing the objective of the VE Job Plan. The objective is to achieve design excellence. These principles are explained in subsequent chapters, where each phase of the Job Plan is discussed. Certain VE techniques are applicable throughout the formal VE study. They are of significant importance in the area of decision-making and problem-solving.

Use Teamwork: A fundamental principal of VE is to employ teamwork. In a complex design, with many different functions and people contributing to project cost, costeffectiveness is enhanced when the team blends their talents toward that common objective.

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Although Value Engineering can be accomplished, minimally, through concentrated individual effort, the results can be magnified several times with teamwork Overcome Roadblocks: Roadblocks are obstacles in the path of progress, often occurring whenever a change is proposed. Some roadblocks are real (those of others), and some are imaginary (those of your own). Roadblocks are an expression of resistance to change

Value Engineering techniques are designed to help "overcome roadblocks," therefore; existence of roadblocks should be recognized. Be prepared to refute roadblocks when encountered.

Use Good Human Relations: Because VE is concerned with creating change, concern is with human relations. In VE, there is a high degree of dependence on cooperation with other people. Therefore, good or poor human relations can relate directly to success or failure of the project.

The effectiveness of a VE study may depend upon the amount of cooperation the engineer is able to obtain from managers, engineers, designers, etc. If engineers are sensitive in their approach, diplomatic when resolving opposing viewpoints, and tactful in questioning a design requirement or specification, they will minimize the problem of obtaining the cooperation needed to perform effectively. Convince the people with whom you work that you are asking, not demanding; suggesting, not criticizing; helping, not hindering; and interested, not bored with them. Some of the areas where good human relations must be employed are: In Fact-Finding: getting good information from people requires their cooperation.1-10 In Creativity: good ideas come from people who are properly motivated. Get all team members involved. Don't let anyone dominate the team. In Implementation: receptivity to ideas has to be generated. Be a Good Listener: Listen attentively when explanations are made concerning problems that arise. The explanations almost always provide clues that otherwise would require hours of investigation and research. The experience of the team members might enable them to detect the true problem if the person making the explanation is given every opportunity to express their ideas. Also, the person who objects to a proposal may give an indication as to how it may be improved or modified to enable approval.

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Use Key Questions: The Value Engineering approach is a QUESTIONING approach. In order to get answers, questions must be asked. Use Checklists: As an aid to the practicing VE - Team, the key questions of the VE Job Plan have been incorporated into checklists found in the chapters describing each phase. The checklists are not all-inclusive. The lists do, however, provide a good minimum of questions to ask.

Record Everything: Don't trust your memory. During all phases of the study, record the information you have gained through interview; write down your ideas, the questions that need to be answered, and the details of your developed ideas. You will need this data in each succeeding step of the VE Job Plan and in preparing the workbook, the study summary, and your recommendations.

Data required for VE study It is important to any VE study to have certain data available for the team prior to commencement of the study. The VE study team leader will be responsible to gather the appropriate data. The following data are required for a VE Study, much of which is available from research done during the Selection Phase: Complete graphic data, including drawings, sketches, photographs and standards pertinent to the study. Specifications and technical manuals. Up-to-date cost estimates for the project. Historical data, status of design, schedules, public requirements. Design engineer(s) and approval authority names and contact points

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Selection Phase Checklist The following areas or causes of high cost, that may indicate poor value, should receive the majority of the VE effort: Generally, the more complex the design, the more opportunity there is to improve value and performance. Those aspects of design that reach beyond the state-of-the-art will usually offer potential VE savings. A project having an accelerated design program will usually contain elements of over design. A component or material that is critical, exotic, hard-to-get or expensive. Intricate shapes, deep excavations, high embankments, steep slopes, etc. Components that appear to be difficult to construct Overly long material haul: Excessive borrow; excessive waste. Expensive construction traffic control Long foundation piles Excessive reinforcement Cofferdam dewatering Architectural embellishment Record seeking designs (longest span, highest piers, deepest cut, etc.) Large safety factors Curb, gutter and sidewalk (rural) Specially designed components that appear to be similar to low-cost off-the - shelf items Components that include non-standard fasteners, bearings, grades and sizes Sole-source materials or equipment Processes or components that require highly-skilled or time-consuming labor Items that have maintenance and field operation problems Project costs that exceed the amount budgeted Standard plans in use more than 3 or 4 years

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VA Workshop Phase

During the actual workshop portion of the VA 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 Job Plan follows five (5) key steps or phases: Information Phase Creative Phase Judgment Phase Development Phase Recommendation Phase

Information Phase At the beginning of the VA 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 Designers presentation. The VA team then reorganizes the cost data if appropriate and then sets target savings based on in-depth group (VA 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 VA approach. The procedures used in the Information Phase are vital to the VA 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 13 | V a l u e E n g i n e e r i n g

developed by the VA team. 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 function s. This forces the VA team to speculate on alternative solutions to the proposed design.

Creative Phase This phase of the VA process involves the generation and listing of creative ideas. During this time, the VA 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 VA team members and coordinator/leader are included in the VA 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 VA 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 VA 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 p re study efforts.

Judgment Phase In this phase of the workshop, the VA team judges the ideas developed during the creative phase. The VA 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 VA 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 VA 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 VA team 14 | V a l u e E n g i n e e r i n g

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

Recommendation Phase The last phase of the VA study is the presentation of recommendations. The VA recommendations are typically screened by all VA 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. The VA 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 VA results are given to the Owner or Designer at this time in draft format. This begins the evaluation by the Owner and the De signer of recommendations. the VA report

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Case Study

Value Analysis was carried out at Lewis and Clark State Office Building, Jefferson City, Montana in March 2001

In this building design, there were 41 items that were identified in the Value Engineering Process. These items were ultimately eliminated, reduced or changed during June 2001 to bring the schematic design in under the original budgeted amount Some of those items were: Downsizing the atrium Eliminating once Column bay from the building design Downsizing the cistern Eliminating certain exterior structural items, not necessary as a part of the building structure, such as brick amphitheater northwest of the building designed to reus e brick from the demolished womens prison building Reducing interior equipment items such as Plumbing and Kitchen Equipment Reducing Landscaping Allowances Changing the parking lot material to Asphalt

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Some other Examples of Value Engineering

Russian liquid-fuel rocket motors are intentionally designed to permit ugly (though leak-free) welding. This reduces costs by eliminating grinding and finishing operations that do not help the motor function better.

Some Japanese disk brakes have parts tolerance to three millimeters, an easyto-meet precision. When combined with crude statistical process controls, this assures that less than one in a million parts will fail to fit.

Many vehicle manufacturers have active programs to reduce the numbers and types of fasteners in their product, to reduce inventory, tooling and assembly costs.

Often a premium forming process (like "near net shape" forming) can eliminate hundreds of low-precision machining or drilling steps. Precision transfer stamping can quickly produce hundreds of high quality parts from generic rolls of steel and aluminum. Die casting is used to produce metal parts from aluminum or sturdy tin alloys (they're often about as strong as mild steels). Plastic injection molding is a powerful technique, espec ially if the part's special properties are supplemented with inserts of brass or steel.

When a product incorporates a computer, it replaces many parts with software that fits into a single light-weight, low-power memory part or microcontroller. As computers grow faster, digital signal processing software is beginning to replace many analog electronic circuits for audio and sometimes radio frequency processing.

On some printed circuit boards, the conductors are intentionally sized to act as delay lines, resistors and inductors to reduce the parts count. An important recent innovation was to eliminate the leads of "surface mounted" components. At one stroke, this eliminated the need to drill most holes in a printed circuit board, as well as clip off the leads after soldering.

In Japan (the land where manufacturing engineers are most valued), it is a standard process to design printed circuit boards of inexpensive phenolic resin and paper, and reduce the number of copper layers to one or two to lower cos ts without harming specifications

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Conclusion In the final analysis, Value Engineering is not only beneficial, but essential because: The functionality of the project is often improved as well as producing tremendous savings, both initial and Life-Cycle Cost. A "second look" at the design produced by the architect and engineers gives the assurance that all reasonable alternatives have been explored. Cost estimates and scope statements are checked thoroughly assuring that nothing has been omitted or underestimated. Assures that the best value will be obtained over the life of the building.

References

Techniques of Value Analysis and Engineering, 3rd ed. by L.D. Miles. New York, NY: McGraw-Hill, 1972.

"The Dread of VE: Understanding Why It's Not Used More" in Value World by Scot McClintock. Vol. 11, No. 4

Value

Engineering:

Practical

Applications

for

Design,

Construction,

Maintenance, & Operations by Alphonse J. Dell'Isola. Kingsto n, MA: R.S. Means Company, 1999.

Value Engineering Theory, Revised Edition by Donald E. Parker. Washington, DC: The Lawrence D. Miles Value Foundation, 1995.

Value: Its Measurement, Design, and Management by M. Larry Shillito and David J. De Marle. New York, NY: John Wiley & Sons, 1992.

Value Management Practice by Michel Thiry. Sylva, NC: Project Management Institute, 1997

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