1. Value Engineering (VE)
Presented by
Gene Layne, CCM

2. Common Names for VE Value Engineering Value Management
Value Methodology
Value Analysis VE

3. What is Value Engineering?
“ … an organized effort directed at analyzing the functions of systems, equipment, facilities, services, and supplies for the purpose of achieving the essential functions at the lowest life cycle cost consistent with the required performance, reliability, quality, and safety.”
Source: Office of Management and Budget
“Price is what you pay. Value is what you get.”
~ Warren Buffet

4. History of Value Engineering
Evolved during World War II
General Electric took lead after WW II
Expanded to design & construction in 1960’s
Government and private sector by 1970’s
Numerous VE programs active today

5. the FHWA VE Summary Reports.
Facts about VE
Summary Of Past VE Savings Federal-Aid and Federal Lands Highway Programs
the FHWA VE Summary Reports.
FY 2009
FY 2008
FY 2007
FY 2006
FY 2005
Number of VE Studies
427
388
316
251
300
Cost of VE Studies Plus Administrative Costs
$17.08 M
$12.47 M
$12.54 M
$8.15 M
$9.80 M
Estimated Construction Cost of Projects Studied
$29.16 B
$29.93 B
$24.81 B
$21.53 B
$31.58 B
Total No. of Proposed Recommendations
3297
3022
2861
1924
2427
Total Value of Proposed Recommendations
$4.16 B
$6.58 B
$4.60 B
$3.06 B
$6.76 B
No. of Approved Recommendations
1460
1323
1233
996
1077
Value of Approved Recommendations
$1.70 B
$2.53 B
$1.97 B
$1.78 B
$3.19 B
Return on Investment
99:1
203:1
157:1
219:1
325:1
the FHWA VE Summary Reports.

6. Approach to VE Study 3 Phases of a VE Study Value Engineering Study
Pre-Workshop: preparation & organization
VE Workshop: intensive & focused team during a 3-5 day dedicated effort
Post-Workshop: Follow-up, assessment, report, meetings if needed, implementation
VE Workshop
Pre- Workshop
Post- Workshop
Value Engineering Study
Defined: A Value Engineering (VE) workshop is an organized effort during the design conducted by an independent peer group to assure the design incorporates the necessary functions and essential project characteristics in the most cost effective manner without sacrificing quality, reliability, construction, and long term maintenance and operating costs.
Team: Led by a CVS and composed of registered/ experienced peers. Team typically consists of an: architect, structural, civil, mechanical, electrical engineers and perhaps a cost estimator.
Required by DGS on projects over $5 million.

7. VE Program VE Workshop typically takes place near the site
VE Workshop - 40 hour, 5-day workshop
Agenda by day
Open issues

8. Establishing the VE Team
A most critical action!
Good experienced team = successful VE
Three choices:
Select team from people involved in project
Select independent team not involved in project. “COLD TEAM”
Hybrid: i.e. some insiders/some outsiders

9. VE Team Composition
A VE specialist facilitates the study using the existing design team, owner personnel, and other owner consultants
A VE specialist facilitates the study using an independent “cold team” working with the design firm, owner personnel, and other owner consultants
A VE team is established without a specialist. The design team and owner conduct the VE Study.

10. The VE Work Plan Information & Objectives Owner and Designer Interview
Study Design
Perform Functional Analysis
Owner and Designer Interview
Presentation
Q&A
Speculation
Creative Suggestion ( Keeping an Open Mind)

11. The VE Work Plan (cont’d)
Evaluation
Performance against Criteria
Goals & Objectives
Development
Original first costs
Operating Costs
Life Cycle Costs

12. The VE Work Plan (cont’d)
Final Report
Considerations and Opportunities
Final Presentation

13. Time Line Day 1 Day 2 Interview/Study project
Perform Functional Analysis
Opportunity suggestion
Day 2
Continue functional Analysis
Continue studying Drawings and develop more opportunities.

14. Time Line (cont’d) Day 3 Day 4 Day 5
Cost Estimating and value comparison
Develop information for final report
Day 4
Finalize Cost comparisons for final report
Complete Value Analysis
Day 5
Present findings to Owner and Design Team

15. Functional Analysis Two word abridgement Example Action Verb
What is being done?
Measurable Noun
What is it being done to?
Example
Screw Driver+ Paint
Action Verb = Stir Measurable Noun = Paint
VE Analysis in basic terms = Blend liquid
VE opportunity = Paint Stick

16. Functional Analysis (cont’d)
Thought Process
Paint Stick <$ Screwdriver
Screwdriver can perform multiple functions
Open paint can
Stir paint
Scrape surface
Remove hardware

17. Functional Analysis (cont’d)
Cable Tray
Action Verb = Holds
Measurable Noun = Cable
Basic Terms = Organizes Cable
Alternative product = J Hooks
J Hooks are significantly less expensive and mounting every 10 feet reduces labor costs by half.

18. Interviewing the Owner and Designer
Be courteous
Never be suggestive
Never critique design or offer criticism
Listen intently to learn the thought process
Never reveal VE opportunity at this stage
Always show appreciation for their participation

19. Cost verses Value (The Analysis)
First Costs
Budget costs prior to VE study
Alternative Costs from VE opportunity
R.S. Means
Vendor
Sub Contractor Quote
Considerations
Escalation
First costs mark-ups

20. VE Case Study NSU – Classroom and Nursing Building
New building on campus
4-story
140,290 SF building
Construction budget $36.5 million
Likely to be built using the CM at-risk concept.

21. Project Summary - Electrical

22. Original Design Budget - Electrical

23. Alternate Budget - Electrical

24. Example of Cost Savings by Increasing Wire Size
Example 1. A three-phase circuit feeding a 125 H.P. 460 V motor, operating at 75% load, 250 ft. from the load center, running 8,000 hours per year. Draw is assumed to be 75% of 156 full-load amps (FLA).
3/0 wire
4/0 wire
Conduit Size
2 in.
Estimated Loss (at 75% load and 44°C and 40°C,respective conductor temps.)
708 W
554 W
Wire Cost
$991
$1232
Conduit Cost
$365
Incremental Cost
$241
Energy Savings: at 75% load
1,237 kWh/year
Dollar Savings: at $0.07 per kWh Payback
$86.59/year 2 years, 9 months
Dollar Savings: at $0.10 per kWh Payback
$123.70/year 1 year, 11 months
In this example, the payback is under 3 years, and the savings continue indefinitely into the future.

25. Project Summary - Architectural

26. Original Design - Architectural

27. Alternative Design - Architectural

28. Original Design Budget - Architectural

29. Alternative Budget - Architectural

30. VE Workshop Results

31. MBP Services related to VE
Cost Estimating
CPM Scheduling
Constructibility Review
Claims & Dispute Resolution
Commissioning
Lessons Learned
Earned Value Management
Facilities Assessment

32. Cost Estimating Evaluating Budget Costs Determining Alternative Costs
Cost Comparison
Realizing Value

33. CPM Scheduling Understand Projects start to completion dates.
Determine new alternates impact on time.
Opportunity to offer time savings to the project

34. Constructibility Review
Determine current Design’s Constructibiltiy
Opportunity to better Means & Methods
Accepted proposals assist with Design correction

35. Claims
Use of past experience on a claim to foresee potential design flaws
Risk Mitigation

36. Commissioning
Solid recommendation to enhance the project’s performance
Opportunity to make recommendations that enhance the projects Life Cycle

37. Lessons Learned Propose items from previous Lessons Learned studies
Implement this service with new Technology

38. Earned Value Management
Embedded in BIM 4D
Ability to see progress through modeling
Schedule can be cost loaded

39. Facilities Condition Assessment
Rehabilitation Projects
Tax Credit Calculations
Tax Credit Verification

40. MBP and Value Engineering
MBP offers Value Engineering Services
Advantages
Various Discipline Expertise and Certifications
Industry Cost Estimating Expertise
Industry Time Impact Expertise
Disadvantages
No Certified Value Specialist (CVS)
New Technology

41. MBP and Value Engineering
Future Opportunities
TM’s become CVS certified
Participate on Design Build Teams in a CM role during Pre-construction
Stay up with Technology
Incorporate our Lessons Learned Program with vendors.

42. Technology and Value Engineering
BIM Building Information Modeling
4D Technology
Energy and Environmental Analysis
Cost Estimate
Interim estimates are performed
Alternative methods can be applied real time during design quickly and efficiently.
CPM Schedule
Time impact can be identified early in the design process.

43. The owner and design team determine which VE items get incorporated.
Conclusion
The owner and design team determine which VE items get incorporated.

44. Questions & Discussion
Thank You!
Questions & Discussion
Gene Layne, CCM
MBP
Project Manager