1. © 2011 HDR All rights Reserved. Value Engineering Ken L. Smith, PE, CVS (360) 451-2527 Ken.l.smith@hdrinc.com April 27 th, 2011

2. CURRENT LEGISLATION Section 106(e) of Title 23, United States Code, requiring Value Engineering analyses for each project on the Federal- aid system with an estimated total cost of $25,000,000 or more, or a bridge project with an estimated total cost of $20,000,000

3. Value Engineering is a tool used in project development Formal process that breaks components of a project into functions A multi-disciplined team of experts then identifies solutions that will satisfy the function Solutions must not sacrifice performance, reliability, quality or safety. What Is Value Engineering? “Price is what you pay. Value is what you get.” ~Warren Buffet

4. Value Engineering has traditionally been perceived as an effective means for reducing project costs. WHAT IS VALUE? This paradigm only addresses one part of the value equation, often times at the expense of overlooking the role that VE can play with regard to improving project performance.

5. Establishing the Goals and Objectives of VE Study is critical to its outcome. Defining “Performance Attributes” will give the VE Team a better understanding of the project’s purpose and need. Typical Highway Performance Attributes Mainline Operations Local Operations Maintainability Construction Impacts Environmental Impacts Project Schedule Reduce Risk PERFORMANCE ATTRIBUTES

6. ALTERNATIVE ANALYSIS OVERALL PERFORMANCE Perfor mance (P) % Change Perfor mance Cost (C) % Change Cost Value Index (P/C) % Value Improve ment Baseline500 $235.7 2.12 1Reduce Risk 5296%$235.70.0%2.246% 2Cost Estimate5000%$165.729.7%3.0242% 3Construction staging 56212%$165.729.7%3.3960% 4TH 14/15 I/C 61222%$235.30.2%2.6023% 5Median Barrier 60621%$236.3-0.2%2.5621% 6 Roadway between TH 15 & CSAH 3756212%$232.81.2%2.4114% 7Courtland I/C 5041%$233.01.2%2.162% 8Nicollet I/C 5031%$234.80.4%2.141% 9561st Intersection 59920%$235.50.1%2.5420% 10 Project phasing limits5112%$234.90.4%2.183% Total 54910%$158.033.0%3.4764%

7. WHAT TYPES OF VE STUDIES?  VE studies can be tailored to the needs of your project.  Typically 3-5 days long  A study can look at the entire project or just a specific design element or a portion of the project

8. WHAT IS THE BEST TIME?  VE can be applied at any time  Planning/Scoping  Start of Design (0%)  30% - 60%  90% (Constructability)  Design-Build

9. DURING PLANNING  Objective:  Review and improve upon the proposed alternatives  Develop alternatives to be further evaluated throughout the project development process  Assist in the environmental process

10.  Objective:  Conduct a thorough review and analysis of the key project issues using a multidiscipline, cross- functional team  Review and improve the proposed design by focusing on all or part of the project as defined by the project manager 0% – 60% DESIGN

11.  Objective:  Review project constraints to ensure they are adequately expressed in the plans and specifications.  Develop recommendations that will clarify intent and reduce risk and cost to the Owner. CONSTRUCTABILITY REVIEWS

12. DESIGN-BUILD u Objective: –Review performance specifications and project specific special provisions –Develop recommendations to minimize risk to the owner

13. Hercules Intermodal Transit Center Hercules, CA

14. I-15, West Mesquite Interchange Mesquite, NV CRAVE™

15. SR 193 Extension (CRAVE) Davis County, UT

16. Alternative Stormwater Quality

17. Recommendation #4 Filterra Stormwater Quality

18. Small street improvement project

19. SR 520, Floating Bridge & HOV Seattle, WA

20. Critter Crossings

22. Military Working Dog Kennel Joint Base Lewis-McChord, WA

23. CRAVE™ Award winning process CRAVE™ has won National Awards from the Society of Professional Engineers, ACEC, and AASHTO 23

24.  CRAVE™ is used to assist project delivery as well as minimize and mitigate quantified risks  CRAVE™ - innovative unique process  Cost Risk Analysis + Value Engineering  Combines these two tools to assist with project delivery  Outputs are:  Risk management plan  Value Engineering recommendations What is CRAVE™

25. 25 Why we Created CRAVE™  Risk assessment workshops would provide valuable information about what could go wrong with my project but would fall short of providing solutions on what to do about it  Great ideas would come up during risk assessment workshops and would be set aside as potential VE ideas and not recorded  Value Engineering could add risk to delivering a project  The same team members are required for both process

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27. 27 Current Estimate = $179.17M Example Post-Mitigation + VE Recommendations

28. USING TORNADOS TO FOCUS VE

29. Traditional Vs. Risk-Based Approach Project Deterministic Estimate Fixed Contingency % Geotech 20% Enviro 40% ROW 30% 10% Unknown Project Base Cost

30. 30 Assessment of Baseline Cost 30% Design 100% Design Construction Completion Percentage of Project Cost Project Development (Time) Unrecognized Cost Known but Not Quantified Known and Quantifiable (can include small uncertainty) Total Cost at Construction Completion Deterministic Estimate (with Allowance) Contingency Estimate at any point in time Project Plan & Concept PS&E > Ad

31. 31 What is it about this project that keeps you awake at night? Risk 1 2 3 Elicit Risks

32. 32 Quantitative Risk

33. Goal of Risk Management  Risk Assessment’s aim is to assess potential impact of various scope, event, and budget risks on the project’s cost and schedule.  Risk Management’s aim is to identify opportunities and mitigation strategies to reduce both the likelihood of an event occurrence and the potential effect if it occurs. Probability of Occurrence Impact Initial Risk MANAGED RISK

34. 34 QUESTIONS?