WSDOT Guide to Value Engineering, Study notes of Engineering

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The Methodology for Maximizing

Project Value

Table of Contents

• Chapter 1 – Value
• Introduction
• What is Value Engineering?
• History
• Value Study
• Job Plan
• Value Engineering Principals.......................................................................................................
• Reasons for Poor Value
• Chapter 2 – Preparation and Pre-Workshop Activities
• Introduction
• Definitions.....................................................................................................................................
• Common Activities
• Pre-Study Meeting
• Specific VE Project Plan Features
• Value Study Team Structuring...................................................................................................
  • Team Operation......................................................................................................................
• Performance Attributes
  • Attributes and Requirements.
• Value Study Agenda
  • Typical 5-day Value Study Agenda
• Data Required for a Value Study
  • Pareto's Law.............................................................................................................................
  • Cost Model
• Pre-Workshop Checklist
• Chapter 3 – Teamwork
• Introduction
• Content & Dynamics..................................................................................................................
  • Relationships
  • Communication is a two-way street
• Team Member Participation Expectations
• Value Study Ground Rules.........................................................................................................
• Team Members' Responsibilities
• The Role of the Value Study Leader
  • Principles of Social Behavior
  • Promoting Cooperation
  • Team Building
    • Communication Exercises
    • Problem Solving/Decision Making Exercises
    • Planning/Adaptability Exercises
    • Trust Exercise
  • Conflict
    • Set goals and ground rules in advance...........................................................................
    • Look for warning signs.........................................................................................................
    • Remain neutral and defuse the emotions
• Conclusion
• Chapter 4 – Workshop Activities Information Phase
• Introduction
• Definitions.....................................................................................................................................
• Common Activities
  • Obtain project data
  • Confirm the most current project concept
  • Project Overview.....................................................................................................................
    • Constraints and Controlling Decisions
    • Gather All Types of Information.........................................................................................
  • Obtain Information
    • Obtain Complete, Pertinent Information
    • Work with Specifics/Facts
    • Get all Available Costs
• Information Phase Checklist......................................................................................................
  • General
  • Specifications
  • Engineering and Design
  • Methods and Processes
  • Materials and Procurement
  • Maintenance...........................................................................................................................
• Chapter 5 – Workshop Activities Function Analysis Phase
• Introduction
• Definitions.....................................................................................................................................
• Common Activities
• Determine the Functions
  • Defining Functions
  • Purpose and Need
    • Review the Purpose and Need Requirements
  • Identifying Functions
  • Classifying Functions
    • Basic Functions
    • Secondary Functions
    • Higher Order Functions
    • Lower Order Functions........................................................................................................
    • Organize Functions
• FAST Diagramming
  • How FAST works
    • Critical Function Logic Path
    • How and Why
    • Supporting Functions
  • Scope of the Study in the FAST
  • Focus on the Function
• Constructing a FAST Diagram
• Assigning Cost to Functions
• Function Worth & Cost
• Function Analysis Phase Checklist
• Chapter 6 - Workshop Activities Creative Phase
• Introduction
  • Challenge the present method of performing a function................................................
• Definitions.....................................................................................................................................
• Common Activities
• Positive and Negative Factors
  • Habitual Blocks
  • Perceptual Blocks
  • Cultural Blocks
  • Emotional Blocks
• Use Creative Techniques
  • Creative Thinking Techniques
    • Brainstorming
    • Brain Writing
• Creative Phase Checklist
• Chapter 7 – Workshop Activities Evaluation Phase
• Introduction
• Definitions.....................................................................................................................................
• Common Activities
• Key Questions
• Evaluation Techniques
  • Comparison
  • Advantages vs. Disadvantages
  • Ranking.....................................................................................................................................
  • Idea/Criteria Method
  • Idea/Objective Method
  • Paired Comparison Analysis
• Performance Measures
• Life Cycle Costing.......................................................................................................................
  • Definitions
  • Time Value of Money
  • Life Cycle Cost Example
• Evaluation Phase Checklist
• Chapter 8 – Workshop Activities Development Phase
• Introduction
• Definitions.....................................................................................................................................
• Common Activities
• Reference Materials
• Procedures
  • Develop Specific Alternates..................................................................................................
    • Testing
  • Reasons for Rejecting VE Recommendations
  • Develop Implementation Plans
• Recommendation Examples
• Development Phase Checklist
• Chapter 9 – Presentation Phase
• Introduction
• Definitions...................................................................................................................................
• Common Activities
• VE Recommendation or Proposal
• Value Study Report
  • Written Reports
  • Oral Presentation
• Effective Oral Presentations
  • Presentation Structure
  • Giving the Presentation
  • Visual Aids
• Gaining VE Recommendation Acceptance
• Presentation Checklist
• Chapter 10 – Implementation
• Introduction
• Definitions...................................................................................................................................
• Common Activities
• Implementation Investment
• Expediting Implementation.....................................................................................................
• Post-Study Checklist
• Appendix
• Appendix A
  • Active Verb/ Measurable Noun
• Appendix B
  • Being a Good Team Member
    • Guidelines for a Virtual Workshop
• Appendix C
  • Value Engineering Job Plan
• Appendix D
  • FAST Diagram Examples
    • Widening Project
    • Interchange Project
    • Fish Passage
• Appendix E – Agenda Templates for use in Value Engineering Workshops
  • 1 Day Project Element Focused VE
  • 3 – Day Agenda
  • 3 ½ – 4 Day Agenda
  • Typical Prep Session Agenda
  • Example VE Invite to Team Members
• Appendix F – Other Tools and Templates
  • T-Chart
  • Paired Comparison
  • FAST Diagram Template
  • Recommendation Development Template
• Appendix G
  • Glossary of Terms...................................................................................................................
• Figure 1 Value Formula Figures
• Figure 2 Value Engineering Milestones
• Figure 3 Value Engineering Job Plan
• Figure 4 Point of Decision Table
• Figure 5 Typical Performance Attributes
• Figure 6 Example Categories of Work (items 1 thru 4 represent 87% of the costs
• Figure 7 Example Pareto
• Figure 8 Active Verb / Measurable Noun
• Figure 9 Functions of a Hammer..............................................................................................
• Figure 10 Function Classification
• Figure 11 FAST Diagram Elements.............................................................................................
• Figure 12 Example - FAST Diagram – Grade Separated Railroad........................................
• Figure 13 Constructing a FAST Diagram
• Figure 14 "AND" & "OR" in the Logic Path of FAST Diagrams
• Figure 15 FAST Diagram – Hammer
• Figure 16 Function Value Resource Matrix
• Figure 17 FAST Diagram Grade Separated Railroad
• Figure 18 Evaluation - Advantages / Disadvantages............................................................
• Figure 19 Idea Evaluation Worksheet
• Figure 20 Rating Alternatives against Criteria
• Figure 21 Performance Attribute Matrix - Options
• Figure 22 Performance Attribute Matrix
• Figure 23 Weighted Performance worksheet
• Figure 24 Time Value of Money
• Figure 25 Time Value of Money
• Figure 26 Life Cycle Calculation Example
• Figure 27 Example Recommendation
• Figure 28 Example Recommendation
• Figure 29 VE Job Plan Steps
• Figure 30 Example FAST Diagram - Widening
• Figure 31 Example FAST Diagram - Interchange
• Figure 32 Example FAST Diagram - Fish Passage
• Figure 33 1 day agenda
• Figure 34 3 day agenda
• Figure 35 4 day agenda
• Figure 36 T chart template
• Figure 37 Paired Comparison Template
• Figure 38 FAST Diagram Template..........................................................................................
• Figure 39 Recommendation Form Template
• Figure 40 Glossary of Terms

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What is Value Engineering?

Value Engineering is a systematic process used by a multidisciplinary team to improve the value of a project through the analysis of its functions. Value is defined as a fair return or equivalent in goods, services, or money for something exchanged. Value is commonly represented by the relationship: Where function is measured by the performance requirements of the customer and resources are measured in materials, labor, price, time, etc. required to accomplish that function. Value methodology focuses on improving value by identifying alternate ways to reliably accomplish a function that meets the performance expectations of the customer. Value Engineering may be defined in other ways, as long as the definition contains the following three (3) basic precepts: 1. An organized review to improve value by using multi-disciplined teams of specialists knowing various aspects of the problem being studied. 2. A function oriented approach to identify the essential functions of the Project, product, or process being studied and the costs associated with those functions. 3. Creative thinking which uses recognized techniques to explore alternate ways of performing the functions at a lower cost or to otherwise improve the project, product, or process. Value methodology is applied using a process known as the "Job Plan". The purpose of the Job Plan is to guide the Value Study Team through the process of identifying and focusing on key project functions in order to create new alternates that will result in value improvements. Figure 1 Value Formula

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History

During World War II, product innovation was required because of material shortages. The Value Engineering concept evolved from the work of Lawrence Miles who, in the 1940's was a purchase engineer with the General Electric Company (GEC). At that time, manufacturing industry in the United States was running at a maximum capacity to supply the allies with arms. There were shortages in steel, copper, bronze, nickel, bearings electrical resistors, and many other materials and components. GEC wished to expand its production of turbo supercharger for 824 bombers from 50 to 1000 per week. Mr. Miles was assigned the task of purchasing the materials to permit this. Often he was unable to obtain the specific material or component specified by the designer, so Miles reasoned, 'if I cannot obtain the product, I must obtain an alternative which performs the same function'. Where alternatives were found they were tested and approved by the designer. In 1947, Mr. Miles and his associates performed many analyses of product costs and function and developed a step by step system, which was named Value Analysis (VA). The new methodology of VA was developed, tested, and proven to be highly effective. However, it was not until 1952 that VA began its growth throughout industry. In that year Mr. Miles conducted his first workshop in Value Analysis. Some 60 people from various General Electric plants and business activities obtained 160 hours of basic training in VA techniques. In 1954, the U.S. Navy Bureau of Ships (BUSHIPS) was looking for a method to reduce the cost of ships and equipment. BUSHIPS had heard of the General Electric VA program and obtained the training for its personnel. The Navy directed its effort at cost avoidance during the design stage and called its program Value Engineering, though it used the same techniques as the General Electric Value Analysis program. Since the middle 1950's, when BUSHIPS became active in the Value Analysis program and established its own Value Engineering Branch, the Federal government's interest in this field has grown. As the value methodology gained in popularity, a group of practitioners formed a learning society to share insights and advance their innovative capabilities. Thus, in 1959, the "Society of American Value Engineers" was incorporated in Washington, DC. Soon, the value methodology was used to improve the value of projects in government, the private sector, and the manufacturing the construction industries and value concepts spread worldwide.

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Value Study

In order to qualify as a Value Study, the following conditions must be satisfied. A. The Value Study Team follows an organized Job Plan that includes, at a minimum, the six phases identified in this standard. Function Analysis, as defined in this document, is performed on the project. B. The Value Study Team is a multidisciplinary group of experienced professionals and project stakeholders. Team members are chosen based on their expertise and experience with the project. Project team members may be on the VE team, but to provide an unbiased view of the project, it is important for the VE team to be mainly comprised of individuals who have relevant expertise; but are not directly involved with the project. C. The Value Team Leader is trained in value methodology techniques and is qualified to lead a study team using the Job Plan. The SAVE International Certification Board certifies, with the designation Certified Value Specialists (CVS), those individuals who have met specified training requirements and have demonstrated competency in the application of the Job Plan. The Team Facilitator shall be a CVS as recognized by SAVE International.

Job Plan

The value methodology is a systematic process that follows the Job Plan. A value methodology is applied by a multidisciplinary team to improve the value of a project through the analysis of functions. The Job Plan consists of the following sequential phases:

1. Information Phase - The Value Study Team reviews and defines the current conditions of the project and identifies the goals of the study. 2. Function Analysis Phase - The Value Study Team defines the project functions using a two-word active verb/ measurable noun context. The team reviews and analyzes these functions to determine which need improvement, elimination, or creation to meet the project's goals. 3. Creative Phase - The Value Study Team employs creative techniques to identify other ways to perform the project's function(s).

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4. Evaluation Phase - The Value Study Team follows a structured evaluation process to select those alternates that offer the potential for value improvement while delivering the project's function(s) and considering performance requirements and resource limits. 5. Development Phase - The Value Study Team develops the selected ideas into alternatives (or proposals) with a sufficient level of documentation to allow decision makers to determine if the alternative should be implemented. 5. Presentation Phase - The Value Team Leader develops a report and/or presentation that documents and conveys the adequacy of the alternative(s) developed by the team and the associated value improvement opportunity. Figure 3 Value Engineering Job Plan

Chapter 1 - Value 8 | P a g e The following table illustrates the actions required, decisions to be made, and the responsible decision-maker at key points in the Value Study. POINT OF DECISION

ACTION /

CONSIDERATION

DECISION

WHO MAKES THE

DECISION

Selection of Project Select projects for the study. Estimate the potential of the study candidates Decide to proceed with a study for the project Management After the Information Phase Select specific elements within the project for study Decide to proceed with study for the project Value Study Team After the Evaluation Phase Select Ideas likely to be successful. Estimate the potential of the Ideas Decide to proceed with the Development of the best Ideas Value Study Team After the Presentation Phase Consider the impact of the proposed Recommendations Decide to Implement the proposed Recommendations Management Upon Completion of the Job Plan Review the results Decide further program action Management Job Plan Points of Decision Figure 4 Point of Decision Table To apply the Job Plan, two important factors must be recognized:

1. An effective VE effort must include all phases of the Job Plan. Omissions of any one of the phases will hamper accomplishment of the objectives. The amount of attention given to each phase, however, may differ from one project to another.
2. Execution of the Job Plan requires a team effort. The cooperation and active participation of several people produces the most effective results. Group dynamics play an important role, and illustrate that the results of a team of five professionals is greater than the sum of five individual efforts. The Job Plan is a systematic approach that has been used, tested, and proven to work. Experience has shown that the application of this plan produces startling results in reducing costs and simplifying designs. During normal cost reduction, one is inclined to analyze an item from the standpoint of how to reduce the cost of the elements which make up the item. One "cheapens" the parts until quality and performance are sacrificed. An early step in the Job Plan requires those making the study to clearly define the functions performed by the item under study. Adherence to the Job Plan ensures that

Chapter 1 - Value 9 | P a g e time is available for essential creative work and the necessary evaluation to select the best design alternative for further development. Finally, the Job Plan concludes with specific recommendations, the necessary data supporting them, the required implementing actions, and a proposed implementation schedule.

Value Engineering Principals

The Pursuit of Value

• What is it?
• What does it do?
• What must it do?
• What does it cost?
• What else will do the job?
• What does that cost?

Use Teamwork

A fundamental principle of VE is to employ teamwork. In a complex design, with many different functions and people contributing to project cost, cost-effectiveness is enhanced when they blend their talents toward that common objective.

Overcome Roadblocks

Roadblocks are obstacles in the path of progress, often occurring whenever a change is proposed. Some roadblocks are real (those of others), and some are imaginary (those of our own). They are both an expression of resistance to change. Value Engineering techniques are designed to help "overcome roadblocks;" therefore, their existence should be recognized and one should be prepared to refute them when they are encountered.

Use Good Human Relations

Because VE is concerned with creating change, it is concerned with human relations. In VE, there is a high degree of dependence on cooperation with other people. Therefore, good or poor human relations can relate directly to success or failure of the project.

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Use Checklists

As an aid to the practicing Value Team Leader, the key questions of the Job Plan have been incorporated into check lists found in the chapters describing each phase. The checklists are not all-inclusive. The lists do, however, provide a good start for the questions to ask.

Record Everything

Don't trust your memory. During all phases of the study, record the information you have gained through interview; write down your ideas, the questions that need to be answered, and the details of your developed ideas; You will need to use this data in each succeeding step of the Job Plan and in preparing the workbook, the study summary, and your recommendations.

Use Good Judgment

Everyone has been endowed with the capability to apply common sense and good judgment. Often, however, the environment influences one's ability in this area. Studies made in industry have shown that 70 percent of people do things the way they think they should be done in less than half the time. In VE we should employ the philosophy "if it doesn't seem right, it probably isn't" or "if I wouldn't spend my money for it, it's probably not good value, and I shouldn't spend public funds for it." Value Team Leaders should have the courage of their convictions and take action to change things that their good judgment tells them are wrong.

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Reasons for Poor Value

Lack of Information

Failure to get sufficient relevant facts. This can be caused by lack of knowledge or misunderstanding of the full requirements of the original project plan, and is one of the most common reasons to conduct a Value Study. If one hasn't sufficient information to make a decision, they are "guessing". Too many of today's decisions are based on feelings rather than facts.

Honest Wrong Beliefs

Some decisions are based on erroneous beliefs rather than on true facts. For example, planners who make decisions on what a design should accomplish, may not properly sense the public's needs. Design decisions can also be based on wrong beliefs. Because of one unfortunate experience (personal or through hearsay) where a poor choice of material was made, a designer could become biased against the use of that material for any project.

Habitual Thinking

Thinking and doing things in the same way is a frequent cause of poor value. Most people have a tendency to re-use what worked the last time, or to copy the standard set by others. This is a defensive measure designed to minimize risk, and is promoted by management through rigid use of standard designs, procedures, customs and tradition without consideration of changing needs or technology. Keeping up with the state-of- the-art is essential in today's complex world.

Risk of Personal Loss

Any good engineer or manager knows that nothing is "for sure". They also know that anything that is done over and over again contains less risk than something new. Failure of a new approach could cause personal loss to the decision-maker. Decisions, therefore, are generally based on past experience of "nearly-related" data rather than on something new or unfamiliar.

Reluctance to Seek Advice

Designers and planners are often very reluctant to seek advice from others; to admit that maybe they don't know the answer. Architects, planners and engineers should seek the advice of competent experts if maximum design value is to be achieved.