Achieving Value: The How and Why of Value Engineering Paul Johnson, CH2M HILL Presented at the PNWS – AWWA 2008 Annual Conference Vancouver, Washington May 1, 2008

What is Value Engineering? A systematic problem-solving method Multidisciplinary VE team Structured process: 5-day (40-hour) study Conducted on capital improvement projects to save money without compromising function And to enhance function within the Owner’s budget VE usually pays for itself on projects over $5 million Requirement to conduct VE on projects over $25 million involving federal funding

The Value Equation V = F/C Where V = Value from the Owner’s Eyes F = Function C = Cost

History of VE Larry Miles, Father of Value Analysis, GE, WWII DoD adopted VE in 1954 for US Navy Bureau of Ships Got the Job done Faster, with Limited Resources Charles Bytheway introduced “Functional Analysis” to the VE Process VE is Huge in Manufacturing VE Process is applied to Capital Improvement Projects: Water, Wastewater, Transportation, Public Sector Buildings SAVE International – The Value Society

Why Use Value Engineering? Focuses on essential functions, not systems or procedures Embraces creativity and out-of-the-box thinking Uses life-cycle cost analysis for decision-making Provides and organized, multi-disciplinary framework for creative alternative development Consistently achieves desirable results: ROI from 5:1 to 50:1 and higher; or savings >5% of estimated project cost

Opportunities for Savings Facility Costs 10% Design Completion 25% Design CompletionAward of Contract Construction Complete Time Cost Reduction Potential Break Point Cost of Change

Value Engineering Employs Six Steps Information Creative Analysis Development Presentation Implementation

When to Use Value Engineering At Concept-Level to select a preferred design approach if several alternatives are envisioned to meet the project requirements High Opportunity for cost savings or functional enhancement at the early-to-mid design phase Too late to incorporate VE at the late design phase (VE is not a Constructability Review)

VE Examples Example VE Proposal Narrative discussing current design vs. VE alternative Supporting Calculations Supporting Sketch Summary Table

Achieving Value Tupelo, MS WWTP –Suggested VE Savings: $1 million –Accepted VE Savings: $500,000 NDOT Boulder City Bypass –Concept Level VE with 5 highway alignment alternatives –VE team selected and refined a sixth alternative for functional enhancement and $35 million savings on a $170 million project ROI typically in excess of 5:1 Accepted savings as % of construction usually greater than 5%

Summary History of VE What VE is and isn’t When to do VE and on what projects How VE is implemented Why VE is conducted Value Achieved from VE Q/A