الهندسة القيمية VALUE ENGINEERING PREPARED BY: KHALED HAMZEH Jeddah 21 Feb. 2016

OUTLINE  INTRODUCTION  VE APPLICATION  VE PROCESS  VE APPLICATION EXAMPLES  VE DETAILED CASE STUDY  CONCLUSIONS AND RECOMMENDATIONS  ROADBLOCKS TOWARDS SUCCESS VE OUTLINE

 Value engineering (VE) definition  The use of systematic techniques by multi-disciplined team (s) that identifies the function of product and service, establish the worth of that function and generate alternatives by using multiple techniques that provide the needed function and reliably with lowest overall cost (Utah Department of transportation). Overall cost include construction cost and running/operation cost.  طريقة علمية ممنهجة تعتمد على عمل فريق مكون من عدة تخصصات, يقوم بتحديد الوظائف المنشودة من المنتج او النظام و تحديد الجدوى من هذه الوظائف, ثم القيام بطرح بدائل بعدة طرق ( العصف الذهني ) بحيث تستطيع هذه البدائل القيام بنفس وظائف المنتج او النظام الاساسي لكن بتكلفة اجمالية اقل و دون التقليل من الجودة.  التكلفة الاجمالية تشمل تكلفة الانشاء و تكلفة التشغيل و الصيانة INTRODUCTION 1. INTRODUCTION

o History  VE was developed in 1947 just after World War II by Lawrence Miles at the General Electric Company when a shortage of material and labors affected GE production and he worked to explore why this occurred, and how cost reduction and performance improvement could be achieved.  نشأت الهندسة القيمية بعد الحرب العالمية الثانية في شركة جينيرال اليكتريك على يد لورانس مايلز حيث تعرضت الشركة لشح الموارد مما اثر على انتاج الشركة, حيث قام مايلز بدراسة اسباب خفض الانتاج و كيفية زيادة الانتاج و تطوير المنتجات مع تقليل التكلفة, حيث قام بتحليل الوظيقة للمنتج و دراسة البدائل لتحقيق نفس الوظيفة بتكلفة اقل حيث اطلق على هذا الاسلوب التحليل القيمي او الهندسة القيمية INTRODUCTION

o History  In the past the designers were reduce the project size or sacrifice the quality to reduce the cost (Redfern 2004)  But VE reduces the cost through generating alternative solutions which perform the same intended function without reducing project size or quality (Utah Department of transportation).  تعتمد الهندسة القيمية في الاساس على تحديد و تحليل الوظيفة (Function analysis) المنشودة من المنتج او من كل عنصر من عناصر النظام و من ثم ايجاد بدائل مبتكرة تؤدي نفس الوظائف بنفس مستوى الاداء او افضل لكن بتكلفة اجمالية اقل, على النقيض من الطرق التقليدية التي تعمل على تخفيض التكاليف عن طريق التضحية بالجودة او بالحجم. INTRODUCTION

VE APPLICATIONS  VE can be applied in many fields and areas such as engineering science, medical science, business, management, etc… to select the best value alternative based on desired functions and needs.  تطبيقات الهندسة القيمية ليست مقتصرة على العلوم الهندسية فقط, بل يمكن تطبيقها في مختلف مجالات العلوم كالطب و الادارة و يمكن ايضا تطبيقها في مجالات الحياة اليومية لتحديد الاختيار المناسب من البدائل المطروحة كاختيار شراء سيارة او عقار 2. VE APPLICATIONS

VE PROCESS  VE job plan  VE job plan is an organized framework that is used to guide the analysis of the case under VE study, in order to develop economical and functional alternatives that meet the VE study target (Abdul Lateef A 2013) 3. VE PROCESS

 VE job plan phases Consist of 8 phases as per (Utah Department of transportation)  Selection phase ( الاختيار )  Information (Investigation) phase ( جمع المعلومات )  Speculation (creative) phase ( طرح الافكار و البدائل )  Evaluation (Judgment) phase ( تقييم البدائل )  Development phase ( تطوير البديل المختار )  Presentation phase ( عرض نتائج الدراسة )  Implementation phase ( تطبيق النتائج )  Audit phase ( التدقيق و المتابعة ) VE PROCESS

1-SELECTION PHASE VE PROCESS 1- مرحلة الاختيار

1- SELECTION PHASE VE PROCESS o Select VE team members, the team should be multi-discipline team consist of expert members in the subjects under study. o Identify areas which have potential for higher cost saving o Identify the general scope of the study and restrictions (i.e. project duration, budget limitations, etc…)

2- INFORMATION PHASE VE PROCESS 2- جمع المعلومات

2- INFORMATION PHASE VE PROCESS The target of this phase is to gather the information related to the case under VE study, includes but not limited to: o Functions  Identify the functions of each cost object  Classify the functions. (Basic, secondary) by using FAST (Function Analysis System Technique) diagram o Value  Determine the value of each function by calculating value coefficient (Cost/Worth)  Choose the functions with high value coefficient to be studied

3- CREATIVE PHASE VE PROCESS 3- طرح الافكار و البدائل

3- CREATIVE PHASE VE PROCESS o The purpose of this phase is to generate alternatives for the original design/proposal o The alternatives shall fulfill the functions of the original design. o Conducting creative session such as brainstorming techniques to list the alternatives. o At this stage no evaluation for the alternatives, just listing.

4- EVALUATION PHASE VE PROCESS 4- تقييم البدائل

4- EVALUATION PHASE VE PROCESS o The objective of this phase is to evaluate and analyze the proposed alternatives from creative phase, and then compare the alternatives to select most value ones. o The alternatives that show the highest potential for cost saving and function improvement are selected for the next step to make further study

4- EVALUATION PHASE VE PROCESS To achieve fair evaluation follow the below steps: 1.Preliminary screening (drop some alternatives based on experience). 2.List the criteria/functions for comparison. 3.Feasibility ranking: assign score (i.e. out of 10) for each function under each alternative. 4.Drop the alternative which has the lowest score. 5.Weighted evaluation: assign weight for each function by making weighted comparison between the functions, then multiply the function weight by the feasibility score. 6.Rank alternatives based on total score. 7.Choose the highest ranked alternatives for the development phase.

5- DEVELOPMENT PHASE VE PROCESS 5- تطوير البديل المختار

5- DEVELOPMENT PHASE VE PROCESS The objective of the Development Phase o To collect additional data, to thoroughly analyze those best alternatives selected during the evaluation phase o Prepare life cycle costing (Initial cost + Running cost ), and initial designs for each alternative. o Based on life cycle costing results one alternative shall be selected for presentation and implementation phase

6- PRESENTATION PHASE VE PROCESS 6- عرض نتائج الدراسة

6- PRESENTATION PHASE VE PROCESS o The objective of the Presentation is to put the recommended alternative before the decision- makers in such convincing terms that they will accept them.

7- IMPLEMENTATION PHASE VE PROCESS 7- تطبيق النتائج

7- IMPLEMENTATION PHASE VE PROCESS o The objective of the Implementation is to assure that approved proposals are rapidly and properly translated into action, to achieve the savings or project improvements that were proposed. o The earliest the proposed alternative implemented the highest cost saving achieved.

8- AUDIT PHASE VE PROCESS 8- التدقيق و المتابعة

8- AUDIT PHASE VE PROCESS o The objective of the Audit is to assure the desired results have been attained, properly documented, and reported. o AUDIT PHASE OUTLINE o Perform an audit o Evaluate results o Prepare final project report o Distribute information to interested parties

VE APPLICATIONS Car selection example 2. VE APPLICATIONS EXAMPLES

VE APPLICATIONS 1- Selection phase The objective of the study is to select car that suites specific user needs. The user needs shall be specified in this stage, for example: - Car for food delivery - Off-road car - Small family car - Large family car - Etc… We will select small family car (2 Adult, 2 Children) Car selection

VE APPLICATIONS 2- Information phase List down the desired functions of the car, and identify the basic (B) and secondary functions (S) We will assume the following functions - Cost (B) - Appearance (S) - Options (S) - After sale service (B) - Re-sell chances (B) Car selection

VE APPLICATIONS 3- Creative phase List down the proposed car based on market search: - Toyota Camry - Toyota Corolla - Hyundai Sonata - Hyundai Elantra - Toyota Yaris - Hyundai Accent - Ford Fusion - Ford explorer Car selection

VE APPLICATIONS 4- Evaluation phase The evaluation has been done considering the following criteria - A- Cost (B) - B- Appearance (S) - C- Options (S) - D- After sale service (B) - E- Re-sell chances (B) Car selection

VE APPLICATIONS 4- Evaluation phase Car selection  FEASIBILITY RANKING  From feasibility ranking results we decided to delete alternative number 8 which the lowest rank.

VE APPLICATIONS Car selection  WEIGHTED EVALUATION

VE APPLICATIONS Car selection  WEIGHTED EVALUATION

VE APPLICATIONS Car selection  WEIGHTED EVALUATION  From evaluation matrix we decided to carry the best two options to next phase (i.e. development) 1- Hyundai Accent 2- Hyundai Elantra

VE APPLICATIONS 5- Development phase Life cost estimation considering the following items for 5 years: - Initial cost - Fuel consumption cost - Maintenance cost - Re-sale value Car selection

VE APPLICATIONS 5- Development phase After performing the life time cost, Hyundai Accent was the option with lowest life time cost. This results shall be presented to the customer to help him select the suitable car as per his needs Car selection

VE APPLICATIONS 6- Presentation phase This results shall be presented to the customer to help him select the suitable car as per his needs Car selection

CASE STUDY – ACTUAL VE STUDY

CASE STUDY  The case study is a VE study which was performed to reduce the cost of electricity and to improve the reliability of power supply for the temporary facilities of a mega project at Kingdome of Saudi Arabia.  The project was a construction of power plants located 100 km south of Al-Khobar city.

 The temporary facilities were consist of:  Accommodation  Restaurant  Recreation area  Offices.  Water treatment plant  Workshop Project Description CASE STUDY

 The temporary facilities inside the project was powered by diesel generators which:  Consume huge amount of diesel  Require frequent maintenance  Provide unreliable power especially during summer  Therefore the project management had decided to find alternative way to secure the electricity with less cost and better reliability through performing VE study Project Description CASE STUDY

SELECTION PHASE

 The high cost element in the electrical network is the diesel generators, so the study will be concentrated to find alternative method to provide the electrical power with less cost and more reliability and safety.  VE team member  One senior Electrical engineer (team leader  One Electrical  One Mechanical maintenance engineer.  One Civil engineer.  The value engineering study duration set to be one week. SELECTION PHASE

INFORMATION PHASE

 The required data has been collected from several departments, such as Generator fuel consumption, maintenance cost, electrical distribution network. INFORMATION PHASE

 Any alternative shall meet the following conditions:  Less cost.  Reliable, no frequent power trip.  High safety.  Any alternate should consider that it is only for 4 years  Functional analysis: FunctionsClassification VerbNounB=Basic, S=Secondary ReduceCostB IncreaseReliabilityB IncreaseSafetyB ReduceNoiseS INFORMATION PHASE

 FAST diagram INFORMATION PHASE Major functionsSecondary functions

CREATIVE (SPECULATION) PHASE CREATIVE PHASE

 In this phase a creative session has been conducted between the team members by using brainstorming.  The following alternatives have been listed: 1. Keep the existing arrangement. 2. Take low voltage supply from the existing plant. 3. Take medium voltage power supply directly from the existing 34.5kV overhead transmission line. 4. Take medium voltage power supply by tapping cable from the 13.8kV switchgear inside the existing plant. 5. Combine the zones to have three main zones and replace the small size generators by larger size. 6. Take the diesel from the existing diesel tanks inside the existing power plant and keep existing generator arrangement CREATIVE PHASE

EVALUATION PHASE

 The alternatives which have been produced from the creative phase have been subjected to the evaluation in this phase  The evaluation has been done considering the following criteria:  A- Power reliability.  B- Initial cost to develop.  C- Cost saving potential.  D- Time to implement.  E- Safety. EVALUATION PHASE

 FEASIBILITY RANKING  From feasibility ranking results the VE team decided to delete alternative number 6 which the lowest rank. EVALUATION PHASE

 IDEA COMPARISON IDEA COMPARISON Idea (alternative)AdvantagesDisadvantagesRank 1-Keep the exiting arrangement-No initial cost -No design needed. -Not related to existing plant. -No time needed to implement. -High running cost. -Not reliable, tripping frequently. -Noisy. -Harmful to the environment Take low voltage supply from the existing plant. - Low running cost. - reasonable safe. - Reliable supply. - Less maintenance required. - Not noisy. _Very High initial cost, specially the LV cables cost, and installation cost - Requires new design. - Long time to implement. - Approval from existing plant to use LV supply is Very difficult. - Affecting the operation of the existing plant. - Too many modifications to be done inside the existing plant - new electrical equipment shall be purchased Take medium voltage power supply directly from the existing 34.5kV overhead transmission line. - Low running cost. - Safe. - Reliable supply. - Less maintenance required. - Not noisy. - Not affecting the operation of the existing power plant. - Very high initial cost, need new switchgear room. - Requires new design. - Long time to implement. - Approval from existing plant to tap from the overhead line is difficult. - New equipment shall be purchased Take medium voltage power supply by tapping cable from the 13.8kV switchgear inside the existing plant. - Low running cost. - Safe. - Reliable supply. - Less maintenance required. - Not noisy. - Not affecting the operation of the existing power plant. - only small construction modifications needed inside the existing plant. - Reasonable initial cost. - Approval from the existing plant is possible - Requires new design. - Takes time to implement. - New equipment shall be purchased Combine the zones to have three main zones and replace the small size generators by larger size. -Not related to existing plant. - Reduce generator rental cost -high initial cost -High running cost. -New design needed. -Not reliable, tripping frequently. -Noisy. -Harmful to the environment. 5 EVALUATION PHASE

 IDEA COMPARISON IDEA COMPARISON Idea (alternative)AdvantagesDisadvantagesRank 1-Keep the exiting arrangement-No initial cost -No design needed. -Not related to existing plant. -No time needed to implement. -High running cost. -Not reliable, tripping frequently. -Noisy. -Harmful to the environment Take low voltage supply from the existing plant. - Low running cost. - reasonable safe. - Reliable supply. - Less maintenance required. - Not noisy. _Very High initial cost, specially the LV cables cost, and installation cost - Requires new design. - Long time to implement. - Approval from existing plant to use LV supply is Very difficult. - Affecting the operation of the existing plant. - Too many modifications to be done inside the existing plant - new electrical equipment shall be purchased Take medium voltage power supply directly from the existing 34.5kV overhead transmission line. - Low running cost. - Safe. - Reliable supply. - Less maintenance required. - Not noisy. - Not affecting the operation of the existing power plant. - Very high initial cost, need new switchgear room. - Requires new design. - Long time to implement. - Approval from existing plant to tap from the overhead line is difficult. - New equipment shall be purchased Take medium voltage power supply by tapping cable from the 13.8kV switchgear inside the existing plant. - Low running cost. - Safe. - Reliable supply. - Less maintenance required. - Not noisy. - Not affecting the operation of the existing power plant. - only small construction modifications needed inside the existing plant. - Reasonable initial cost. - Approval from the existing plant is possible - Requires new design. - Takes time to implement. - New equipment shall be purchased Combine the zones to have three main zones and replace the small size generators by larger size. -Not related to existing plant. - Reduce generator rental cost -high initial cost -High running cost. -New design needed. -Not reliable, tripping frequently. -Noisy. -Harmful to the environment. 5 EVALUATION PHASE

 WEIGHTED EVALUATION EVALUATION PHASE

 WEIGHTED EVALUATION EVALUATION PHASE

 From the weighted evaluation the highest score was for alternative #4  The alternatives have been proposed to the existing power plant management for their approval, but they have refused alternative # 3 since it is affecting the operation of the plant would cause unstable load  After this input, the VE team deleted alternative # 3 and decided to carry alternative # 1 and #4 to the next phase (Development phase) EVALUATION PHASE

DEVELOPMENT PHASE

 Alternative # 1 sketch Keep existing arrangement DEVELOPMENT PHASE

 Alternative # 4 sketch Take 13.8kV supply from existing power plant DEVELOPMENT PHASE

LIFE CYCLE COSTING  Alternative # 1 Keep existing arrangement DEVELOPMENT PHASE Cost itemInitial cost Running cost per year (PW) Life cycle Runnig cost with 10% discount rate Salvage value (PW) Salvage value with 10% discount rate 4 Nos. 600kW Rental Diesel Generators 01,394,0004,418, Nos. 500kW RentalDiesel Generators 05,882,00018,645, Nos. 245kW Rental Diesel Generators 0359,6001,139,89600 Total 24,204,088 Life cycle cost (SR) =24,204,088

LIFE CYCLE COSTING  Alternative # 4 Take 13.8kV supply from existing power plant DEVELOPMENT PHASE Cost itemInitial cost Running cost per year (UAW) Life cycle Running cost with 10% discount rate Salvage value (PW) Salvage value with 10% discount rate 2 Nos. 13.8kV MV Switchgear 465,35510,00031,699300,000204,900 Cable tray 8, Armoured 15kV MV cables 1,556,5915,00015,850500,000341,500 7 Nos. 13.8kV RMU 201,3187,00022,189100,00068,300 Oil filled transformer 13.8/0.380 kV 621,36515,00047,549300,000204,900 Metering CT for MV Switchgear 7, ,000 1,366 MV Termination kits and joints 52, Electricity cost 02,302,652 7,299, Total 2,913,280 7,416, ,966 Life cycle costing (SR) =9,508,777

LIFE CYCLE COSTING  Comparison table Alternative # 1 Existing arrangement Alternative # 4 From existing plant 13.8kV network Saving Saving % Life cycle cost (SR) 24,204,0889,508,777 14,695, %  The results showed magnificent cost saving reach up to 60.71% of life cycle cost if alternative-4 is implemented instead of alternative-1 (existing arrangement), hence the VE team has recommended implementing alternative-4. DEVELOPMENT PHASE

PRESENTATION PHASE PRESENATION PHASE

 The project was presented to project management by the VE team.  The Project manager was worried about the high initial cost of alternative #4 – compared to zero initial cost of Alt. # 1- which recommended by VE team.  VE team has emphasized that their recommendation was based on lowest life cycle cost.  PM has been convinced and he decided to proceed with VE recommendation based on company CEO instructions. PRESENATION PHASE

IMPLEMENTATION PHASE

 The VE team with the planning department has prepared the implementation plan and required resources to complete the project within five months.  The project has been executed and completed within 6 months and running since 2012 up to now. IMPLEMENTATION PHASE

AUDIT PHASE

 The VE team has audited the implementation of the project and closely followed the activities to ensure the correct implementation of their recommendations and design to achieve the maximum saving.  After two years of project implementation the VE team calculated the actual saving for implementing their recommendation, it is around SR 7,000,000, which is approximately in line with VE study results. AUDIT PHASE

STUDY CONCLUSIONS  The VE study results have proved the importance of the study, by which the cost of electricity has been reduced by 60% CONCLUSIONS

For successful VE study, the followings conditions are required:  Complete information about the case under study, which should be collected in order to achieve accurate and correct results.  Project management support, which creates suitable environment inside the organization that acceptable to the changes which come from the VE study results  VE job plan, which provides systematic process for VE study that makes it easy and acceptable by wide range of organizations.  The VE study should be performed during early design stage.  Life cycle cost estimation, which provides the best evaluation of the total cost for each alternative RECOMMENDATIONS

ROADBLOCKS TO SUCCESS VE  Missing information and time limitation.  Habitual thinking ( التفكير التقليدي )and reluctance to change and adopt new solutions.  Personal benefits: fear from personal losses due to change the old solutions.  Reluctance to seek advice from experienced people.  Over specify the product/system ROADBLOCKS TO SUCCESS VE

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