Value Engineering:  Searching for the “Second” Right Answer

By Kathy Chamlee, Editor, Parsons Brinckerhoff Construction Services

Value engineering (VE) is an effective tool in PB’s toolbox that saves money, adds value, increases quality, helps create satisfied customers and, surprisingly, is often underused at PB.

Many people think VE is just cost cutting. But VE is a disciplined approach that examines alternatives to search for “the second right answer,” rather than indiscriminately cutting costs. Value engineering is a formal, logical and analytical process by which multi-disciplined teams seek the best balance between a project’s required functions and its life-cycle cost. It is a powerful, problem-solving tool that most often reduces costs, but also seeks to maintain or improve performance and quality.

As PB’s Construction Services company continues to advance in the program management arena, it is increasingly important for program managers to understand the merits of value engineering and know when to call upon PB’s VE resources. PB’s program management professionals want to offer total project solutions that exceed the expectations of clients, and an increasing number of clients are requesting VE. As for those who are not, it is up to us, the professionals of PB, to bring to the table this value-enhancing tool.

Formal Value Engineering

PB is actively involved in two types of value engineering. The first is formal value engineering—the methodology that uses multi-disciplined teams of peers to analyze projects, enhance their value and improve their technical standards, specifications, processes and products.

Value engineering studies are performed at the requests of clients—usually at either the conception phase or the preliminary engineering phase. VE can, however, be effectively used through out the life of a project—during the planning, conceptualization, design, construction, or operations and maintenance (O&M) phases—to save costs by analyzing and improving the technical standards and work processes. VE studies are sometimes performed in conjunction with constructibility reviews, especially on complex projects that receive higher than expected bids, to find alternatives that cut costs while increasing value.

VE studies typically require three to five days to complete and consist of five phases:  Identification of Potential, Analysis of Functions, Generation of Ideas, Evaluation of Ideas, and Development of Recommendations.

At the end of each study, PB gives the owner several recommendations that are likely to result in value enhancements. Owners usually implement at least some of the alternatives, and the benefits gained by those alternatives more than prove the value of the study.

Value Engineering Change Proposal

Most construction professionals at PB are familiar with the second type of value engineering—the value engineering change proposal (VECP). The most obvious difference between VE during design and VECP during construction is that VECP is proposed by the contractor.

Less systematic than formal value engineering, VECP involves a contractor’s proposing a change that will likely improve the project’s value. The contractor typically sends a VECP to the owner and, if the owner accepts it, the owner and the contractor split the construction cost savings 50 percent. VECP performs especially well when it is combined with contractor incentives and partnering on construction projects, and PB’s role is usually to review the proposals on behalf of clients.

Value Engineering at PB

Some public sector laws and regulations require formal value analyses. For example, the Federal Highway Administration requires formal VE studies during the design of all construction projects on the national highway system that cost more than $25 million. All of PB’s clients, however, stand to gain from the practice—whether or not they are mandated to use it.

PB has completed more than 100 VE studies and value training workshops during the past ten years—saving clients millions in construction and O&M dollars and positively impacting scopes and schedules. A few recent examples might begin to illustrate the effectiveness of VE:

I-75, Flint, Michigan. PB furnished the value team on this study for the Michigan Department of Transportation (MDOT). Five separate projects—in various stages of development, spread out along the I-75 Corridor and totaling over $100 million in cost—were the subject of this single study. The client accepted for further study six of the team’s eight recommendations—a common outcome on complex projects. Potential construction cost savings could total $30 million or more, depending upon the combination of VE recommendations ultimately selected by MDOT.

Interstate 40, Flagstaff, Arizona. PB provided the VE team leader on this project to construct a single-point urban interchange (SPUI) to improve a complex, three-way interchange. The VE team, made up of Arizona Department of Transportation, City of Flagstaff, County of Coconino and design team representatives, conducted the study during the project’s conceptual stage. The team recommended two alternate scopes for the entire project, neither of which included the SPUI, which the local team members felt was out of character for the Flagstaff area. Either of the alternate scopes could result in several million dollars in construction cost savings for the $14 million project.

State Road 436, Altamonte Springs, Florida. On a highly “incentive-ized” project to accelerate reconstruction of a portion of a highway, the contractor submitted a VECP that saved PB’s client, the Florida Department of Transportation, PB’s CE&I consultant salary costs and the costs of traffic control devices that were not required for the final three months of the project. The project, which was already six months ahead of schedule when the VECP was submitted, finished nine months early.

PB still has room to grow and expand its VE services. In offering total project solutions to clients, we can maximize our client outreach and marketing of VE as a tool in our toolbox.

The key to maximizing the benefits of VE is for PB’s professionals to know when and how to call upon PB’s VE resources. PB has three Certified Value Engineering Specialists, Rod Curtis, PE, who is dedicated full time to the VE process, Susana Florian, PE and Geza Kmetty, PE. A fourth professional, Joseph Bouchedid, is in the process of completing his VE Certification.

Rod Curtis, who operates out of PB’s Tempe, Arizona, office, is available to lead VE studies anywhere in the world, or will enthusiastically coordinate and establish VE teams on behalf of clients or PB managers. Curtis would enjoy hearing from any PB professional who has questions about the VE process, is aware of a potential VE opportunity or who just wants to add to his growing bank of information about VE activities at the firm.