Value for Europe Improved cost efficiency and effectiveness Value Engineering Árpád Fodor Certified Value Specialist-Life, Professional in Value Management High Level Meeting on the Future of Cohesion Policy 31 March – 1 April 2011, Budapest, Hungary

2 Goals of Presentation 1 Highlight the Importance of Value Engineering 2 Regulation of Value Engineering 3 Prevent Unnecessary Expenditures of € Billions / Years

3 Agenda 1 Value Engineering Approach Through Examples and Results 2 Value Engineering in Hungary and Europe 3 Next Steps

4 Agenda 1 Value Engineering Approach Through Examples and Results 2 Value Engineering in Hungary and Europe 3 Next Steps

5 Focus on the function and not on existing solution on existing solution ‘Functional Thinking’

6 We capitalise the functions!

7 Paks Nuclear Power Plant – Water Recuperation power plant

8

9 Paks NPP - Water Recuperation power plant – Original idea €24 million

10 Paks NPP - Value Engineering proposal

11 Paks NPP - Value Engineering proposal (cont)

12 Result of Value Engineering: Cost savings of €3.5 million and the project has commenced Paks NPP - Visualisation – November 2009

13 The visit of Pope John Paul II in Hungary – Gyõr, 1996 Parameters: ,000 believers, 15,000 cars, 3,000 buses, 1 night and a half day Original cost (before VE): €1.6 million

14 What are the functions? Provide area – €0.4 million Parking (bus, car) Provide podium – €0.1 million Illuminate area – €0.3 million …. 12 VE Proposal – Total cost savings: €1.4 million (87%) The visit of Pope John Paul II in Hungary – Gyõr, 1996 Coordinate traffic

15 Dual 2-lane motorway + emergency lane 60 km, €357 million Motorway - Planning permission

16 Motorway - Planning permission K11 Canal Track – Original Idea

17 Parameters of the object  Length: 13.2 metre  Width: metre  Surface: 447 m²  Net unit cost €1,830 / m² Cost estimate: €0.85 million Motorway - Planning permission K11 Canal Track – crossroads object

18 1 m Motorway - Planning permission K11 Canal Track (continued) Is there room for increasing efficiency?

19 What is the function? 1 m  From perspective of the designer: ‘to cross waterway’  Interpretation of VE team: ‘to ensure water supply of the area’ Motorway - Planning permission K11 Canal Track (continued)

20 Motorway - Planning permission VE Proposal – Modification of K11 Canal Track €125,000 Cost saving of €725,000

21 Motorway - Planning permission Dirt Road Flyover

22 60km - 12 dirt road objects Track width of the objects: 7.5m; Track structure size: 8.63m Motorway - Planning permission Dirt Road Flyover

23 Motorway - Planning permission Munich Ring, North (E52) - Dirt Road Flyover

24 Width of dirt road 3.5m Existing asphalt road 4m Width of track structures 4.5m Motorway - Planning permission Munich Ring, North (E52) - Dirt Road Flyover

25 Current (track width 7.5m) Proposal A (track width 6m) Proposal B (track width 5m) €9.2 million€7.6 million€6.6 million Cost Saving:€1.6 million (17%)€2.6 million (28%) Impact of Value Engineering Proposal …only 60-km motorway track! VE proposal: Modify the width of the objects Motorway - Planning permission Dirt Road Flyover

26 Original cost estimate: €357 million Result of Value Engineering Study (20 proposals): Cost savings of €43 million (12%) Motorway - Planning permission

27 Agenda 1 Value Engineering Approach Through Examples and Results 2 Value Engineering in Hungary and Europe 3 Next Steps

28 Public Procurement Act – from 1996 In the invitation to tender, the company or the government body can require the tenderer to apply Value Engineering methodology Value Engineering in Hungary

29 Value Engineering in Hungary

30  Strategies  National Autism Strategy – Preparation of Government Decree  Drafting Laws, Professional documents  Sign Language Interpreter Service  Employment Act  Projects  Public Procurement action plan (National Development Agency)  Balance of Payments – preparation of computer software (Hungarian National Bank)  Process Management System (Paks Nuclear Power Plant) Original version: 155 Processes; VE Proposal: 57 Processes  etc. …and not only for Investment Projects

31 Since 1999 VE review of 85 Motorway Investment plans in Hungary Total Estimated Construction Costs: €2.9 billion Cost Savings: €393 million (13%) Additional Costs: €39 million (1%) … and at higher quality! Results of VE Studies in Motorway Investments, Hungary

32 European Transportation Market in :  Ten-T: €9 billion;  Structural and Cohesion Funds: €43 billion;  The Member States from their own Budget: €196 billion;  European Investment Bank: €65 billion loan. „The available funds of €300 billion will not cover all necessary investments.” Zoltán Kalocsai: Through the common prosperity Roads and Transportation, XX. 1. Issue Februar 2011 European Data

33 10% cost efficiency Return of Investment at least 100:1 Would I spend my money this way?

34 1 More projects from the same budget Investments and projects at higher quality Higher standard of living in Europe Quicker developments and reduced risk of delays Reduction of risk management in decision making Increased efficiency and competitiveness of the European Union How can the European Union gain from the application of Value Engineering?

35 Agenda 1 Value Engineering Approach Through Examples and Results 2 Value Engineering in Hungary and Europe 3 Next Steps

36 Next steps  Analyze development methodologies (i.e. Value Engineering)  Provide training and promote ‘functional thinking’  Develop pilot scheme  Mainstream implementation

37 Thank you for your attention!

38 Contact Details Árpád Fodor Certified Value Specialist-Life, Professional in Value Management Phone / Fax: Mobile: