Category:130 Value Engineering: Difference between revisions

130.1 Discussion

Value Engineering (VE) is a systematic method of examining performance to improve the value of projects or processes. Value is defined as the ratio of performance to cost and thus capable of being increased by either lowering the cost or improving the performance. MoDOT’s values and tangible results place increased importance on value-based, practical design. While VE, in the classic sense, tends to be somewhat more structured, VE and Practical Design are truly one and the same. The goal of VE is to build the right project at the right time, achieving delivery of project purpose and need with proper project scope.

MoDOT uses VE to ensure that the public receives full value for every tax dollar invested in Missouri’s transportation system. VE techniques are used to improve productivity in nearly every aspect of MoDOT’s operation, including practices, processes, and procedures. In highway construction, VE encourages contractors to submit proposals for modifying the plans, specifications or other requirements of the contract to deliver improved projects of the best possible value.

130.1.1 Study Timing

Although only a single study is generally required for a project’s design, VE studies can be performed any time prior to letting. It is even possible to perform multiple studies on an individual project. A study can be done at any stage during the design life of the project, however, priority is given to performing the study as early as feasible to maximize the opportunity to implement developed alternatives. During the study, all aspects of the project may be considered including, but not limited to, location, geometrics, final vertical and horizontal alignments, drainage, construction staging, traffic control, and signalization, pavement and structure details. In addition, studies in the later phase should consider what additional flexibility can be added and adjustments can be made to "fine tune" before the project letting.

VE studies are performed to add value to a project, not to simply reduce costs. VE studies should challenge project scoped that exceed the minimum necessary to deliver the project’s purpose and need. As stated in the law, VE studies are made "to provide suggestions for reducing the total cost of the project and providing a project of equal or better quality."

130.1.2 VE Organization

Value Engineering is a critical program and requires participation to accomplish program goals. The Innovations Engineer (IE) manages the overall operation of MoDOT’s VE program. The IE is responsible for tracking the VE program and reporting its progress to both management and the FHWA. The IE leads studies and may assist with the initial selection of teams for district VE studies, and provides training guidelines and facilitation. Each District Engineer selects a district value engineering coordinator (DVEC) to coordinate VE activities in that district. The DVEC is responsible for the district's VE program. The DVEC should be at a level consistent with the supervision and management responsibilities of the VE effort. The DVEC is responsible for scheduling the study and making appropriate accommodations for the participants. The DVEC serves as a team member on the VE study to become familiar with the process and leads VE studies as required to meet the demands of the program. The DVEC is also responsible for tracking the District led value engineering studies and ensuring the study results are forwarded to the IE and entered into the SIMS database for each specific project.

In any case, the facilitator of the study compiles recommendations from the VE study and submits them in VE report, for approval as follows:

• The lowest level decision maker as approved by the district can approve and implement VE recommendations that do not change policy, standards or the scope of the original project. A copy of the VE study and the Project Manager’s, District Design Engineer or District Engineers approval is retained by the district and the IE. The IE notifies the team members of the study results and tracks results of each study.

• The approval of a District Engineer or division engineer is required to approve and implement VE recommendations that change the scope of the original project. A copy of the VE study and the District Engineer or division engineers’ approval is retained by the district and the IE. The IE tracks results of each study.

• The approval of the Chief Engineer, or his representative, is required to approve and implement VE recommendations that affect more than one division/district or that change policy or standards. The IE notifies affected divisions, districts and the team members and tracks results of each study.

130.1.3 VE Workplan/Project Selection

Each year, a value engineering work plan for the federally required Value Engineering Studies is completed after approval of the MoDOT highway right of way and construction program. Projects which meet the minimum criteria for requirement are identified and submitted to FHWA for their concurrence, identifying those projects for which value analysis has been previously conducted and the date of that study. The DVECs will assist the IE in identifying the appropriate projects.

A district value engineering workplan will be created by each DVEC to identify the district’s projects which will be the priority on which to conduct a Value Engineering effort. The DVEC may use the VE project selection criteria to aid in determine which projects have the greatest potential for study. The DVEC sends the district’s annual study schedule to the IE for retention and to supplement the MoDOT VE work plan.

Divisions or districts may also request VE studies at any point throughout the year. Project VE studies are generally done at the district level. VE studies on procedures, processes, specifications, standard plans and details of statewide impact are generally done at the division level.

The VE study report and recommendations are conveyed to the appropriate staff upon completion of the study. Affected districts and divisions will receive copies of the study as soon as practical after its completion. The DVEC works with project managers to evaluate the recommendations of the VE team. The project managers submit responses to the study recommendations to the IE.

130.1.4 VE Study Process

The formal VE process entails a systematic process of review and analysis of a project during its design/project development phase, resulting in recommendations to improve value while addressing the project’s purpose and need. A VE study has 3 distinct phases outlined below:

• Pre-Study Phase: The IE works with the TPM and DVEC to set up the study (see the Project Manager's Guide for additional information).

• Study Phase: A multidisciplinary team conducts the VE review by investigating and analyzing the planning, design, and constructability of a project;

• identifying project functions and costs and worth;

• creatively speculating on alternate ways to perform the various functions;
• evaluating the best and/or least life-cycle alternatives;
• developing acceptable alternatives into supported recommendations; and
• presenting the team’s recommendations to the appropriate staff.

• Post Study Phase: Approval and implementation of VE recommendations and finalizes the VE Report. The VE Report should consist of:

• The names and contact information for the participants
• A description of the project
• A summary of the functional determination or consideration given for the project.
• A listing of the generated alternative solutions
• The anticipated savings costs associated with each alternative
• A copy of the district’s or division’s response indicating accepted alternatives and anticipated savings.
• Any additional pertinent information associated with the study.

130.1.5 VE Study Types

There are several types of VE studies:

130.1.5.1 Traditional Studies

Concept Stage VE (CSVE). The focus is on coming up with many alternates, the goal being to choose the best alternate to accomplish project P&N. It works best for the CSVE to be conducted prior to signing DEIS or before conceptual submittal if a CE. (3 to 5 day study). A full VE report is prepared.

Preliminary Stage VE (PSVE). The traditional VE study conducted prior to preliminary plan submittal. The focus here is usually on improving the existing design, often, by this stage, the footprint is usually set and it may be too late for major functional enhancements. (3 to 5 day study). Afull VE report is prepared.

Final Design Stage VE (FDVE). A traditional VE study conducted near the end of the design process. The focus here is on improving the design, providing flexibility and considering alternatives that meet the purpose and need. This is likely the least effective phase to conduct the study as most of design features will have been committed to and significant changes may be required to implement new alternatives, however project improvement is still possible. A full VE report is prepared.

130.1.5.2 Non-Traditional Studies

Because of the value of minimizing unnecessary effort being spent on design work which would be later changed, there is a real benefit to conducting Concept Stage VE studies which help develop multiple alternates to best identify the right solution. However, often the VE/Practical Design Review’s conducted during the final design build consensus through collaboration and ensures the most practical solution, reducing last minute scrutiny of projects. Project managers can use VE as a proven problem-solving system and can realize secondary benefits including better project scope definition and increased value by optimizing the ratio of project performance and project cost.

Compressed Value Engineering Study. An abbreviated, yet thorough, analysis which follows the standard VE Job Plan but is conducted in a compressed time frame using techniques designed to reduce the required time frame to fully consider the project and alternatives. It may take anywhere from 4 hours to 3 days and is commensurate with the complexity of the project. The study may be conducted at any stage from conceptual to final plans.

• Use technology to maximize time for functional analysis and solution development.
• May use a Pre-Develop functional analysis, which is expanded in study to meet any unique project features.
• After ranking, the alternative solutions are developed just far enough to validate and generate costs. Additional design effort necessary to address acceptance and implementation decisions questions or concerns and the full design is accomplished by the project design staff.

Alternative Value Analysis (AVA) (A Practical Design Review with functional analysis). An abbreviated, yet thorough, analysis conducted quickly (anywhere from 2 hours to 3 days, commensurate with the complexity of the project) at any stage from conceptual to final plans, which is led by the PM, the Design Liaison Engineer or the DVEC. An abbreviated VE report is prepared. The report should contain at a minimum, the participants, all identified alternatives, the accepted alternatives and an estimate of any cost savings associated with the alternatives.

• Team composition- Consists of Central Office and district staff. Teams may be small, only 3 to 5 persons, or large, mirroring project core teams.
• May follow either the traditional or compressed Value Engineering study process.
• Findings may be reported in a simple letter format

Combined Project Type Value Studies.

• Multiple projects of the similar scope and size are grouped together for the study. A composite analysis is conducted with unique features of each project discussed and considered accordingly, however the focus should remain on the individual project traits and not on the program guidelines.

• The compressed study process may also be used.

Constructability Review. This type of VE study that concentrates on constructability, traffic management, "bidability", innovative contracting, etc. Can be done at any stage from conceptual to final plans. The study length can be anywhere from 2 hours to 5 days.

• It generally consists of or coincides with a meeting of MoDOT personnel and interested contractors to discuss their perspective on construction aspects associated with the draft plans.

• If a meeting with the industry is conducted during this process, the preliminary plans should be posted with the meeting notice at least one week prior to provide opportunity to schedule attendance and review the proposed plans.

• The meeting should not be mandatory, to avoid unnecessary impacts to the bidding environment for the project.

Programmatic Value Engineering Studies. This programmatic study type is used when studying entire programs for consideration of process and program value improvement. The functional perspective and associated alternatives are considered in the development or review of the guidelines in order to have projects within the program that are of the greatest value. The emphasis is placed on the improving the guidance that will be subsequently used for project development. The high level study should focus on the function of the program more than the individual projects. The study could be conducted in a traditional manner or based upon the compressed study type. The study length will likely be less than 1 day.

Process Value Analysis. This type of VE study concentrates on process improvement. The goal is to take an innovative and practical look at any process. Subjects could include anything, for example, maintenance operations, construction standards or purchasing specifications. The study length can be 2 to 5 days.

130.1.6 NEPA Considerations

Given the potential for impacts to resources outside the NEPA study area or changes to previously approved designs, the environmental and historic preservation sections will have a stake in most VE studies; however, decisions and/or agreements from environmental studies and public hearings can be questioned. Members from one or both sections can provide the team with needed information to help in the process.

When VE studies are conducted post-NEPA, caution must be exercised to ensure when VE decisions contradict any commitments that are made in a standing, approved NEPA document. This would also apply to assumptions made for post-NEPA approvals, such as Section 404 permits, approvals from the U.S. Fish and Wildlife Service, as well as others. Although VE decisions may negatively impact environmental or public hearing agreements, these decisions may be made provided the time, cost and effort for the supplemental studies or hearings should be considered. All valid suggestions should be included in the study report for management’s consideration.

130.1.7 Value Engineering Study Numbering Convention

In order to properly track all value engineering effort, a numbering convention for tracking both Central Office and district Value Engineering efforts is provided.

130.1.7.1 District Value Engineering Efforts

The DVEC shall ensure that each value engineering effort performed by the district is properly documented under the appropriate VE number. The district value engineering number will consist of the District Designation followed by the year followed by the study number to three digits, starting with one. For example, Central District's first district led value engineering effort of 2012 would be numbered CD 2012-001.

130.1.7.2 Central Office Value Engineering Efforts

The IE shall ensure that each value engineering effort performed by the Central Office is properly documented under the appropriate VE number. The Central Office value engineering number will consist of the year followed by the study number to three digits, starting with one. For example, the first Central Office-led value engineering effort of 2012 would be numbered 2012-001.

130.1.8 Additional Information

The FHWA's Value Engineering for Highways provides further details on the VE technique and its applicability to highway projects and functions. Copies may be obtained from the FHWA VE coordinator. in addition, AASHTO’s Guidelines for Value Engineering, 2nd Edition provides an excellent description of VE and the process steps.

MoDOT’s Value Engineering Team Leader Guide and Project Manager’s Guide offer specific, in-depth information for those involved in these respective capacities.

130.2 Contractor initiated VECPs

Contractor initiated Value Engineering Change Proposals (VECPs) and Practical Design Value Engineering Change Proposals (PDVECPs) are handled in accordance with Sec 104.6 of the Missouri Standard Specifications for Highway Construction. The process used to evaluate the change proposal is presented in EPG 104.13 Construction Inspection Guidance for Sec 104.

VECPs provide a product of equal or improved quality by reducing the project’s total cost, improving the project’s safety, or decreasing the time required to complete the project. This proposal is initiated by the contractor (using the VE Change Proposal) who receives 50% of the savings associated with the proposal should it be approved by MoDOT.

A PDVECP may provide a product of lesser value; use an existing item in place or underrun contract items. The PDVECP shall not adversely affect safety or function of the final product. This proposal is initiated by the contractor, using the VE change proposal who receives 25% of the savings associated with the proposal should it be approved by MoDOT.

All reasonable documented engineering costs incurred by the contractor to design and develop a value engineering proposal shall be reimbursed and subtracted from the savings of the construction costs. All costs incurred by MoDOT to review and implement the VECP will be at the Commission’s expense.

For example, a contractor submits a VECP with a reduction in construction costs of $100,000. The documented engineering costs for the proposal total $20,000. The actual net savings are determined by subtracting the engineering costs ($20,000) from the reduced construction cost ($100,000). In this example, the net savings is $80,000 that is split between MoDOT and the contractor using either the 50/50 or 75/25 ratio dependent upon the type of VE approved.

Examples of Value Engineering Proposals can be found on the Value Engineering Web Page.