Value Engineering (VE) Presented by Gene Layne, CCM

Common Names for VE Value Engineering Value Management Value Methodology Value Analysis VE

What is Value Engineering? “ … an organized effort directed at analyzing the functions of systems, equipment, facilities, services, and supplies for the purpose of achieving the essential functions at the lowest life cycle cost consistent with the required performance, reliability, quality, and safety.” Source: Office of Management and Budget “Price is what you pay. Value is what you get.” ~ Warren Buffet

History of Value Engineering Evolved during World War II General Electric took lead after WW II Expanded to design & construction in 1960’s Government and private sector by 1970’s Numerous VE programs active today

the FHWA VE Summary Reports. Facts about VE Summary Of Past VE Savings Federal-Aid and Federal Lands Highway Programs the FHWA VE Summary Reports.   FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 Number of VE Studies 427 388 316 251 300 Cost of VE Studies Plus Administrative Costs $17.08 M $12.47 M $12.54 M $8.15 M $9.80 M Estimated Construction Cost of Projects Studied $29.16 B $29.93 B $24.81 B $21.53 B $31.58 B Total No. of Proposed Recommendations 3297 3022 2861 1924 2427 Total Value of Proposed Recommendations $4.16 B $6.58 B $4.60 B $3.06 B $6.76 B No. of Approved Recommendations 1460 1323 1233 996 1077 Value of Approved Recommendations $1.70 B $2.53 B $1.97 B $1.78 B $3.19 B Return on Investment 99:1 203:1 157:1 219:1 325:1 the FHWA VE Summary Reports.

Approach to VE Study 3 Phases of a VE Study Value Engineering Study Pre-Workshop: preparation & organization VE Workshop: intensive & focused team during a 3-5 day dedicated effort Post-Workshop: Follow-up, assessment, report, meetings if needed, implementation VE Workshop Pre- Workshop Post- Workshop Value Engineering Study Defined: A Value Engineering (VE) workshop is an organized effort during the design conducted by an independent peer group to assure the design incorporates the necessary functions and essential project characteristics in the most cost effective manner without sacrificing quality, reliability, construction, and long term maintenance and operating costs. Team: Led by a CVS and composed of registered/ experienced peers. Team typically consists of an: architect, structural, civil, mechanical, electrical engineers and perhaps a cost estimator. Required by DGS on projects over $5 million.

VE Program VE Workshop typically takes place near the site VE Workshop - 40 hour, 5-day workshop Agenda by day Open issues

Establishing the VE Team A most critical action! Good experienced team = successful VE Three choices: Select team from people involved in project Select independent team not involved in project. “COLD TEAM” Hybrid: i.e. some insiders/some outsiders

VE Team Composition A VE specialist facilitates the study using the existing design team, owner personnel, and other owner consultants A VE specialist facilitates the study using an independent “cold team” working with the design firm, owner personnel, and other owner consultants A VE team is established without a specialist. The design team and owner conduct the VE Study.

The VE Work Plan Information & Objectives Owner and Designer Interview Study Design Perform Functional Analysis Owner and Designer Interview Presentation Q&A Speculation Creative Suggestion ( Keeping an Open Mind)

The VE Work Plan (cont’d) Evaluation Performance against Criteria Goals & Objectives Development Original first costs Operating Costs Life Cycle Costs

The VE Work Plan (cont’d) Final Report Considerations and Opportunities Final Presentation

Time Line Day 1 Day 2 Interview/Study project Perform Functional Analysis Opportunity suggestion Day 2 Continue functional Analysis Continue studying Drawings and develop more opportunities.

Time Line (cont’d) Day 3 Day 4 Day 5 Cost Estimating and value comparison Develop information for final report Day 4 Finalize Cost comparisons for final report Complete Value Analysis Day 5 Present findings to Owner and Design Team

Functional Analysis Two word abridgement Example Action Verb What is being done? Measurable Noun What is it being done to? Example Screw Driver+ Paint Action Verb = Stir Measurable Noun = Paint VE Analysis in basic terms = Blend liquid VE opportunity = Paint Stick

Functional Analysis (cont’d) Thought Process Paint Stick <$ Screwdriver Screwdriver can perform multiple functions Open paint can Stir paint Scrape surface Remove hardware

Functional Analysis (cont’d) Cable Tray Action Verb = Holds Measurable Noun = Cable Basic Terms = Organizes Cable Alternative product = J Hooks J Hooks are significantly less expensive and mounting every 10 feet reduces labor costs by half.

Interviewing the Owner and Designer Be courteous Never be suggestive Never critique design or offer criticism Listen intently to learn the thought process Never reveal VE opportunity at this stage Always show appreciation for their participation

Cost verses Value (The Analysis) First Costs Budget costs prior to VE study Alternative Costs from VE opportunity R.S. Means Vendor Sub Contractor Quote Considerations Escalation First costs mark-ups

VE Case Study NSU – Classroom and Nursing Building New building on campus 4-story 140,290 SF building Construction budget $36.5 million Likely to be built using the CM at-risk concept.

Project Summary - Electrical

Original Design Budget - Electrical

Alternate Budget - Electrical

Example of Cost Savings by Increasing Wire Size Example 1. A three-phase circuit feeding a 125 H.P. 460 V motor, operating at 75% load, 250 ft. from the load center, running 8,000 hours per year. Draw is assumed to be 75% of 156 full-load amps (FLA). 3/0 wire 4/0 wire Conduit Size 2 in. Estimated Loss (at 75% load and 44°C and 40°C,respective conductor temps.) 708 W 554 W Wire Cost $991 $1232 Conduit Cost $365 Incremental Cost $241 Energy Savings: at 75% load 1,237 kWh/year Dollar Savings: at $0.07 per kWh Payback $86.59/year 2 years, 9 months Dollar Savings: at $0.10 per kWh Payback $123.70/year 1 year, 11 months In this example, the payback is under 3 years, and the savings continue indefinitely into the future.

Project Summary - Architectural

Original Design - Architectural

Alternative Design - Architectural

Original Design Budget - Architectural

Alternative Budget - Architectural

VE Workshop Results

MBP Services related to VE Cost Estimating CPM Scheduling Constructibility Review Claims & Dispute Resolution Commissioning Lessons Learned Earned Value Management Facilities Assessment

Cost Estimating Evaluating Budget Costs Determining Alternative Costs Cost Comparison Realizing Value

CPM Scheduling Understand Projects start to completion dates. Determine new alternates impact on time. Opportunity to offer time savings to the project

Constructibility Review Determine current Design’s Constructibiltiy Opportunity to better Means & Methods Accepted proposals assist with Design correction

Claims Use of past experience on a claim to foresee potential design flaws Risk Mitigation

Commissioning Solid recommendation to enhance the project’s performance Opportunity to make recommendations that enhance the projects Life Cycle

Lessons Learned Propose items from previous Lessons Learned studies Implement this service with new Technology

Earned Value Management Embedded in BIM 4D Ability to see progress through modeling Schedule can be cost loaded

Facilities Condition Assessment Rehabilitation Projects Tax Credit Calculations Tax Credit Verification

MBP and Value Engineering MBP offers Value Engineering Services Advantages Various Discipline Expertise and Certifications Industry Cost Estimating Expertise Industry Time Impact Expertise Disadvantages No Certified Value Specialist (CVS) New Technology

MBP and Value Engineering Future Opportunities TM’s become CVS certified Participate on Design Build Teams in a CM role during Pre-construction Stay up with Technology Incorporate our Lessons Learned Program with vendors.

Technology and Value Engineering BIM Building Information Modeling 4D Technology Energy and Environmental Analysis Cost Estimate Interim estimates are performed Alternative methods can be applied real time during design quickly and efficiently. CPM Schedule Time impact can be identified early in the design process.

The owner and design team determine which VE items get incorporated. Conclusion The owner and design team determine which VE items get incorporated.

Questions & Discussion Thank You! Questions & Discussion Gene Layne, CCM MBP Project Manager 804-330-4875 glayne@mbpce.com