The Value Engineering (VE) Process

Federal, State and local highway agencies are responsible for getting the best overall project value for the taxpayer. Applying the VE process to suitable projects will help you achieve this purpose. Simply stated, VE is an organized application of common sense and technical knowledge directed at finding and eliminating unnecessary costs in a project.

The most frequently heard first response to a presentation on VE is "we do it all the time, but we don't use that name!" However, it is highly unlikely that you do it all of the time. Value Engineering has many elements, such as, team work, functional analysis, creativity, cost-worth, and the systematic application of a recognized technique. Unless all of these elements are used, it isn't VE and it will not yield the results that a VE study will yield.

Value engineering studies are guided by a specific job plan. This is a blueprint, if you will, of how the study will proceed. The VE job plan which we use in the Federal Highway Administration has the following eight phases.

1. Selection: Project selection is outside the control of the value study team. In general, the criteria used to select projects includes:
   • high cost projects,
   • projects which "are just not worth the expenditure necessary to complete them,"
   • important, but low priority projects that fail to meet the budget cut-off,
   • and problem projects.

2. Investigation: The Investigation Phase is where the value study team first becomes involved. In this phase, the team determines what they know about the project from readily available information and what they must know in order to really define and / or solve the problem. It is in this phase of the VE study that we identify the elements that have the greatest potential for value improvement.

   The Investigation Phase immediately brings the three fundamental concepts of VE (function, cost, and worth) to bear on the problem. It is these concepts that make the VE process different from all other management and cost control techniques. This phase requires the team to ask and answer the following basic questions:

   • What is it?
   • What does it do? (what is the function?)
   • What must it do? (is its function basic?)
   • What is it worth?
   • What does it cost?

   Most of the information required in this phase is readily available. The length of the project, its cost estimate, traffic projections, design speeds, and the major elements designed into the project can be easily identified from a review of the plans and other documentation. Sometimes the VE team must dig harder for other information to adequately complete the investigation phase.

   Applying Pareto's Law of Distribution will give you an idea of where to start looking for potential savings. It states that 80% of a project's cost will be in 20% of the work. Preparing a project cost model will begin to identify your targets of opportunity.

   Identifying the functions your project and its elements perform is the next step in the Investigation Phase. Function denotes the specific accomplishment to be achieved by an element or combination of elements in the overall design. The value methodology requires that we describe a function by the use of two words - an action verb and a measurable noun (that is acted upon).

   For example, the function of a bridge is to "cross obstacle." The bridge doesn't care (nor do we) whether that obstacle is a ditch, river, creek, railroad, another highway or a building. Its basic function is to provide a means to cross that obstacle. If it does not accomplish that function, we wouldn't buy it, therefore the cross obstacle function is basic. We want to be as non-specific as possible to leave us many options to perform the generalized problem or function that we have before us.

   By the end of the Investigation Phase we have identified our high-cost elements, functionally analyzed them, and assessed their cost / worth relationships. This phase of the VE job plan identifies the areas of a project that are ripe for further value study.

3. Speculation: The Speculation or Creativity Phase is next. This is where the power of the VE technique manifests itself. The team applies brainstorming techniques to develop good alternatives to the way the project is currently designed. Brainstorming forces people to be creative. The mechanism that produces this phenomena is called synergism - which means that one idea triggers other ideas or thoughts through: similarities or like ideas; contiguous or adjoining ideas; contrasting or opposite ideas; and sound alikes.

   The value study team applies creativity to its functional statements which it has selected from the cost/worth estimates. It uses the generic format of the function to speculate on all possible solutions to the problem presented in that functional statement.

   The team uses brainstorming to generate a large list of potential solutions to the problem described by the two-word function and then in the next phase are able to rapidly pare the universe down to a manageable few ideas through the feasibility analysis.

4. Evaluation: Evaluation of the best alternatives is next. The advantages and disadvantages of each remaining alternative are listed. Of course, if the disadvantages far outweigh the advantages of any alternative, it is dropped at this point.

   Each advantage and disadvantage is described in general terms. The team can perform a weighted matrix analysis to determine which alternative is best based upon the relative importance of each of the desirable criteria which must be addressed. This analysis satisfies the VE objective--to achieve the best blend of performance, cost, and schedule. The objective is not to gain perfection.

5. Development: Once the team selects the best alternative, it is fully developed through sketches, cost estimates, validation of test data, and other technical work to determine if any assumptions made during the study are in fact valid. The final step before presenting the teams recommendations to management is to formulate an implementation plan which describes the process that the agency must follow to implement any recommendations.

   The final product of a value study is the formal VE report and the presentation of the team's recommendations.

6. Presentation: In this phase, the VE team must present their findings to the decision makers and convince them that their ideas should be implemented.

7. Implementation: No recommendation for a savings is a savings until it has been implemented. The decision makers must take the appropriate action to insure that the suggestions are accomplished.

8. Audits: This phase determines the amount of savings generated by the Value Engineering study based on the amount of recommendations implemented in the construction project.

   Value Engineering can be applied at any point in the highway development process, but to obtain maximum effectiveness, VE studies should be undertaken as early as possible when the impact of decisions (on life-cycle costs) is the greatest.

   A team of 5 to 8 persons with diverse backgrounds seems to work best. The length of time required for a study varies and is dependent upon the complexity of the project. It shouldn't take more than a week. We recommend that the VE team effort be done at one time rather than spreading it over several weeks or months. By doing this the team members do not have to become reacquainted with the project and momentum is maintained.