1. (Additional materials)
Value Engineering
(Additional materials)

2. What is value engineering?
A systematic evaluation of project design to obtain the most value for money
The comparison and economic evaluation of alternative construction methods to produce a required result
An effort that is aimed at a careful analysis of each function and elimination or modification anything that adds to the project cost without adding to its functional capabilities

3. Fundamental of value engineering
Function
Specific purpose or use intended for a specific item (e.g. structural support, prevention of corrosion, conduction of current, etc.)
Worth
Least cost required to provide the functions intended by the user of the finished product
Cost
Amount of money required to obtain and use the functions that have been specified
Value
Relationship of worth to cost (thereby utility to cost)
May be increased by
Improving utility with no change in cost
Retaining same utility for less cost
Combining improved utility at less cost

4. Value engineering recommendations
Value Engineering Proposal (VEP)
Relates to changes that are within the terms of the contract and specifications
Does not require a change order to implement
May either be originated by the owner or the contractor
Value Engineering Change Proposal (VECP)
Applies to any change that would require a change in the contract, specifications, the scope of work, or similar limits previously established by contract
Originates from the contractor
Requires owner approval and execution change order

5. Value engineering by contractor
Study the project before bidding and determine the effect of:
Topography
Geology
Climate
Sources of material
Access to the project
Housing facilities, if required
Storage facilities for materials and equipment
Labor supply
Local services

6. Value engineering by contractor
The use of substitute equipment that has greater capacities, higher efficiencies, higher speeds, more maneuverability, and lower operating costs
Payment of bonus to key personnel for production in excess of a specified rate
The practice of holding periodic conferences with key personnel to discuss plans, procedures, and results
The adoption of realistic safety practices on a project as a means of reducing accidents and lost time
Consideration of the desirability of subcontracting specialized operations to other contractors who can do the work more economically than the general contractor
Consideration of the desirability of improving shop and servicing facilities for better maintenance of construction equipment
Consideration of the desirability of improvements in specified construction methods

7. Methodology in generating value engineering change proposals
Develop a job plan that answers
What is the item?
What does it do?
What must it do?
What does it cost?
What is it worth?
What else might to the job?
What does the alternative cost?
What will satisfy all of the owner’s needs?
What is required to put the VE change into effect?

8. Phases of a VE job plan Information Objectives
Understand the item or product specified
Determine the essential functions
Estimate the potential value improvement
Both the item itself and general technical area that it represents must be studied to understand the subject of the VE effort
Data accumulated should include
Predicted total cost of ownership
Present configuration
Quality, reliability, and maintainability attributes
Quantity involved
Supporting documentation

10. Phases of a VE job plan Speculation Analysis Objective
To formulate alternative ways to accomplish the essential functions
Analysis
To select the most promising alternatives for further refinement
Functional comparison

11. Phases of a VE job plan Development Objective
To develop selected alternatives into firm recommendations
Develop detailed economic and technical data for the proposal
Establish that the alternatives meet
Performance requirements
Quality requirements
Reliability requirements
Systems requirements
Safety requirements
Maintenance considerations

12. Phases of a VE job plan Presentation and follow-up Objective
To obtain approval
Should include
Item/Project identification
“Before” and “After” descriptions
Original cost
Cost of proposed change
Quantity basis for costs
Cost to put VE proposal into effect
Expected savings to the owner
Actions that are necessary to put the change into effect
Suggested schedule to put change into effect

13. Assurances
VE proposals should contain sufficient information to assure the owner that:
The performance of the overall project is not adversely affected
Supporting technical information is complete and accurate
Potential savings are based upon valid cost analysis
Feasibility of proposed change is adequately demonstrated

14. Precepts of Estimating
(Additional information)

15. Purpose
To make a profit by obtaining and performing a work by the most efficient means
To plan and control the work by using information from the estimate
Estimates are not made solely for the purpose of bidding, but also as a means of efficient execution of the work

16. Veracity All costs of the work should be properly accounted for
Allocate all foreseeable costs to proper items of work, or to overhead items, or to specified contingencies
An estimate should represent the best possible effort to calculate probable costs and to come as close as the possible to the actual costs (not known until the completion of the work)
Must be true to the facts at all times
Assumptions that are substituted for facts should be made clear in the estimate

17. Verification
Estimated costs must be compared to actual costs and data obtained during the course of the work
Enables the estimate and information to be verified and corrected, if necessary
Useful for planning and scheduling the work, controlling costs, and predicting future costs

18. Measurement
All work should be measured as installed according to the contract
Waste should be allowed for in the unit prices of the estimate
Waste should not be confused with laps
Laps are additional materials required by and incorporated into work because of particular needs
Laps should not be measured and included in quantities
No item of work should be measured in place of another work
All work should be measured in an estimate so as to make pricing and its subsequent verification as practical and as accurate as possible

19. Accuracy
All work should be measured and priced as accurately as is practically possible, commensurate with the type of work and units of measurement used
Delusions of accuracy should be avoided by using an appropriate degree of accuracy in estimating and cost accounting