Transcript Achieving Value: The How and Why of Value Engineering
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
Cost Reduction Potential Break Point Cost of Change Time
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