United States Department of Energy Value Engineering CONTRACTOR PERSPECTIVES Bruce Lenzer, CVSL, FSAVE Richard Harrington, CVSL, CH2MHill

HISTORICAL PERSPECTIVE  1980 – 1987 Programs started at Field Office Levels, little or no central coordination or reporting  Some contractor initiated VE due to VE Clauses in contracts  1987 – 1992 Program expanded with HQ coordination and support  1990 Some Field Offices implemented VE policy, procedures, and requirements with their prime contracts  1992 High visibility at the Superconducting Super Collider, invigorated focus of VE use in Scientific R&D

HISTORICAL PERSPECTIVE  1993 – 1996 Office of Field Management, (now Office of Engineering and Construction Management) issues DOE Orders:  413.3B “Program and Project Management for Acquisition of Capital Assets” (includes requirement to perform VE as part of Stage Gate Process at Critical Decision 2)  DOE O 430.1A “Life Cycle Asset Management”  DOE P “Value Engineering Policy”  For implementing PL

HISTORICAL PERSPECTIVE  1996 – 2000  Energy Facilities Contractors Group (EFCOG) published Value Management guide  HQ VE website developed for DOE Office of Engineering and Construction Management  Website included links of project reports and cost savings or avoidance summary data  A DOE HQ Champion utilized CVS VE Specialist to gather historical reports from 5 – 7 years  ~ $750M Savings & ~ $2B in LLC cost avoidance  Several high visibility and successful VE studies  Al Gore Golden Hammer Award  Customer Partnering Awards from Deputy Secretary for Facility Management

HISTORICAL SUCCESS  Hanford Nuclear Reservation:  1990 – 1996  Average 48:1 ROI  Completed VE Projects contributed to ~$30M additional contractor award fees  1996 – 2002  Completed VE Projects contributed to ~$1B additional contractor award fees

HISTORICAL SUCCESS  VE Applications:  Design and Construction  New and Existing Facility & Systems Renovations/Upgrades  Scientific Equipment, Decision Analysis, R&D

HISTORICAL SUCCESS  VE Applications – Continued -:  Processes (Soft VE) including:  Contract Requirements  Supply Chain  Configuration Management  QA – Corrective Action Management  Calibration Program  Engineering & Design Processes & Standards  Information Systems  Project Delivery Systems  Work Management  Maintenance  Fabrication  Materials Management  Telecommunications

8 SOFT VE – BUSINESS PROCESS RESULTS  Supply Chain Optimization 2000$ 58M (5yr)  Supply Chain Validation 2001$ 14M/Year  Integrated:  Materials & Supply Chain Mgmt.$ 100M/(5yr)  Work Management & Work Control $ 10M (5 yr)  Predictive, Preventive Maint. & Calibrations $ 30M (5yr)  Quality Corrective Action Mgmt. $ 20M (5yr)  Contract Requirements Value Analysis$ 53M (18yr)  Contract Cost Avoidance ALL RIGHTS RESERVED  2004 Synergy Value Solutions, LLC

HISTORICAL SUCCESS  VE Applications – Continued -:  Hybrid Function Diagram:  FH MATERIALS MGMT COMBINED.pdf FH MATERIALS MGMT COMBINED.pdf

PROGRESSIVE STATUS  1996 – Present  Decline in VE contract requirements and reporting & use except:  …..for use on projects subject to DOE O 413.3B “Program and Project Management for Acquisition of Capital Assets”  VE Process watered down to punch the ticket  Example….one project used VE on Civil & Facility Engineering, but not technical components. Tech. components comprised 80% of project cost  Required by some contracts, but not as much  Few if any voluntary uses

PROGRESSIVE STATUS  Perception of Project Managers that projects will lose budgets if VE used  Fewer VE professionals around the complex  1996 Sunset of OMB Circular  OMB Auditing stops  Diminished HQ support  Untrained, unqualified, uncertifed personnel have allowed VE to become synonymous with cost cutting  1997 – 2011 VE became synonymous with other improvement techniques  Non-certified consultants are performing similar processes, but not VE….Some titled the work as VE

PROGRESSIVE STATUS  Focus on using flavor of the month e.g. SixSigma  Cases where certified VE consultants not using function analysis  Performing 1 and 2 day studies doing brainstorming and evaluation only ….. Not true VE Studies  DOE Office of Engineering and Construction Management eliminated VE Website  Loss of champion at DOE HQ and Field Offices…. No succession planning to continue VE program

FUTURE OF DOE VE/VM PROGRAM  2006 EFCOG Executive & DOE Management awarded DOE Complex Best in Class VE Study & Results  2012 recent VE success in DOE Department of Environmental Management has drawn attention to the need re-educate DOE Complex on how VE can make a difference to reduce schedule risk, reduce worker exposure, and saving $millions  Re-issuing VE expectations in Public Law  Re-establishment of OMB A-131  Leverage Federal Acquisition Regulation  Part 48 & 52

FUTURE OF DOE VE/VM PROGRAM  Federal Budgets are tight, and expected to be tight, for the foreseeable future  These facts give impetus for resurrecting a complex wide DOE VE program  Timing is good for DOE to reestablish an effective program

FUTURE OF DOE VE/VM PROGRAM  Lawrence D. Miles Value Foundation  New Website   DOE Process Example