Practical Application of Value Engineering in Capital Projects
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The document discusses the application of value engineering on capital projects. It provides an overview of the value engineering job plan and function analysis system technique. It then presents a case study of value engineering applied to Florida's State Road 826 project. The value engineering study for this project identified 31 creative ideas to improve the $291.95 million project, 11 of which were further evaluated. Recommendations developed from this process aimed to improve the project's value in terms of capital cost, constructability, and meeting functional requirements within the constraints of no additional right-of-way.
Practical Application of Value Engineering in Capital Projects
- 1. Practical Application of Value Engineering in Capital Projects Francisco Cruz, PE, VMA, VDC, RMP Senior Director PMA Consultants LLC One of the major challenges faced by owners, designers and contractors is the right application of value engineering on their projects. This presentation will provide an overview of the value engineering job plan, function analysis system technique, and will discuss a case study so participants can apply value engineering on their projects
- 2. EXPOSITOR Mr. Francisco Cruz of PMA Consultants LLC is a senior director with over 16 years of experience in cost control, cost estimating, scheduling management, risk management, value engineering, project inspection, and supervisory management. His project experience includes infrastructure, pharmaceutical, mixed-use, corporate office buildings, and municipal projects. He has worked on projects in USA, Europe, South America, Asia and the Caribbean. 10+ year Membership at AACE International AACE Dominican Republic – Current VP Communications SAVE International – Current Florida Chapter’s Secretary Certified as Value Management Associate (VMA) from SAVE Int’l Licensed Professional Engineer (PE), PMP, RMP, VDC ALGO QUE NO SABEN DE MÍ: Mr. Cruz has performed cost and schedule risk analyses and value engineering studies on more than 110 pharmaceutical and infrastructure projects, including tunnels, airports, bridges, roads, and ports totaling more than US$47B
- 3. CONTENT • Principles and Purpose of Value Engineering • Implementing the Value Engineering Job Plan • Case Study – Florida’s State Road 826 (Palmetto Expressway) • Conclusion
- 4. Principles and Purpose of Value Engineering
- 5. Value Engineering (VE) • Value Engineering is the systematic application of function- oriented techniques by a multi-disciplined team to analyze and improve the value of a product, process or service, and it is designed to eliminate or prevent unnecessary cost. • VE often realizes over 10 to 1 return and 30 percent savings • Also known as Value Analysis (VA) or Value Management (VM) • VE is not a cost reduction, decrease resources or scope deletion exercise! • Common standards include ASTM E1699-14(2020) and ASTM E2013-20
- 6. Value Engineering History • 1947 VE Methodology Established at GE during WWII • 1954 Adopted by US Navy • 1959 SAVE International Formed • 1969 NASA Incorporates VE • 1993 OMB circular requires VE • 1995 National Highway Systems Act • 1997 FHWA Federal Regulation (23 CFR 627) • 2014 Updated Federal Regulation
- 7. Savings Achieved with VE - FHWA Source: https://www.fhwa.dot.gov/ve/ (2021)
- 8. Purpose of VE (Why) • Improve Constructability • Mitigate Risks • Reduce Stakeholder Issues • Improve the Project Schedule • Reduce Overall Project Costs • Reduce Operating Costs Source: Fun-tion Analysis, SAVE Int’l FL Chapter (2021)
- 9. Projects Best Suited for VE (What) • 23 CFR 627 • $50M Projects • $40M Bridge Projects • Not Design Build • Any project FHWA determines appropriate • Some DOT’s Have Their Own Thresholds • >$25M Projects • Major Bridges • Complex Projects • Based on Project Manager Requests
- 10. Application of VE (When) Overall Project Duration: Concept to Fully Operational Concept Definition Design Develop or Build Application (Testing) Post- Completion Generic Life- Cycle Phases VE Studies are recommended between Concept and 60% Design Plan Identify Assess Mitigate (actions may occur over entire duration of project) Respond (actions may occur over entire duration of project) First comprehensive risk evaluation for project Emphasis is on qualitative analysis Risk Register (updated routinely over course of project) Plan Identify Assess Mitigate (actions may occur over entire duration of project) Respond (actions may occur over entire duration of project) Second comprehensive risk evaluation for project, often done in conjunction with evaluation of project options Qualitative + Quantitative analyses Plan Identify Assess Review s/evaluation can be “ad hoc” or performed on regular frequency Qualitative + Quantitative analyses Mitigate (actions may occur over entire duration ) Respond (actions may occur over entire duration) Risk Management During Execution of Project
- 11. Project Team Selection (Who) • Team Leaders • Consultant or In-house • Team Members • Civil/Structural • Mech./Electrical • Estimator, Scheduler, Claims • Value Specialists • Users/Operations/Maintenance • Specialized Expertise Core team has 5-8 Participants
- 12. VE Study Location (Where) • Key Items to Consider • Who is the audience? • What needs to be addressed? • Is the location a familiar place? • Is the meeting area accessible? • Is the space the right size? • Establish Ground Rules • Nominate Referee: with “Red Card” just like soccer match • Nominate a Timekeeper • Use of Scribes
- 13. Implementing the Value Engineering Job Plan
- 14. Value Engineering Job Plan Function Analysis Investigation Independent Speculation Presentation of Findings Evaluation Development
- 15. VE Job Plan - Information • Kickoff Meeting • Project Overview • Questions for the Design Team and Stakeholders’ Input • Constraints, Issues, Risks, Exclusions • Requirements and Performance Attributes • Site Visit • Record any Observations and Take Pictures • Post Site Visit Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 16. VE Job Plan – Function Analysis • Define Functions • Express in 2 words: active verb and measurable noun • Classify the Functions • Basic and Secondary Functions; High Order and Low Order Functions • Estimate the Cost to Perform the Function • Refine the Scope to Show Enhancements Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 17. VE Job Plan – Function Analysis Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n Function Analysis System Technique (FAST) Higher Order Function Secondary Function Secondary Function Secondary Function Secondary Function Lower Order Function Project Objective All-the-Time Functions One-Time Functions Basic Function Secondary Function SUBJECT SCOPE Critical Function Logic Path How? Why?
- 18. VE Job Plan – Function Analysis Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n Source: FDOT Value Engineering Overview
- 19. VE Job Plan – Function Analysis Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 20. VE Job Plan – Creative • Generate Ideas for Alternatives Ways to Perform Identified Functions • Involve All Team Members • Brainstorming • Checklists • Attribute Listing • There Are No Bad Ideas! Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 21. VE Job Plan – Evaluation • Remove Ideas with Low Potential • Group and Combine Similar Ideas • List and Evaluate Ideas including their Advantages & Disadvantages • Criteria includes Costs, Constructability, Operations, Maintenance • Rank Ideas • Team Consensus; Weighted Matrix; Multi-Voting • Select Ideas for Further Development Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 22. VE Job Plan – Develop Recommendations • Determine How Each New Idea Would Work • Prove feasibility of each idea and test the initial assumptions • Demonstrate That New Ideas Add Value and Meet the Basic Function • Perform Life Cycle Cost Analysis • Prepare Idea Write-Ups • Develop Implementation Plan • Add description of the concept, sketches, diagrams, assumptions, cost Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 23. VE Job Plan – Presentation • Determine How the VE Team will Present the Ideas • Consider your Audience and Ensure Decision Makers are Present • Reheard the Presentation and Anticipate Questions • Base Design versus New Ideas/Alternatives • Project Cost Analysis; Value-Added; Summary of Benefits • Outline Implementation Plan Informatio n Function Analysis Creative Evaluation Develop Recommendation s Presentatio n
- 24. Case Study Florida’s State Road 826 (Palmetto Expressway)
- 25. Case Study – SR826 Managed Lanes • Project length is six (6) miles • Two (2) 11-ft managed lanes and four (4) 11-ft general lanes • Project cost: US$291.95M • Objective • Increase capacity • Enhance emergency response times • Improve connectivity in the region • Add two additional managed lanes in each direction in the center corridor • Goals • Improve value in terms of capital cost, constructability, maintenance of traffic, and basic functional requirements
- 26. Information Phase • Constraints • No additional right-of-way • Natural Gas mains • No improvements to the interchanges • Several flyovers along the corridor • Aggressive schedule • Reviewed Documents Included • Design reports and drawings • Cost estimate and economic data • Right-of-way maps and estimates
- 27. Function Analysis Phase Cost Estimate Excerpt showing quantities, unit prices, cost line items and the functions determined by the VE Team
- 28. Function Analysis Phase A FAST diagram was developed to identify and display the critical functions path for the overall project. The basic and supporting secondary functions are also illustrated
- 29. Creative and Evaluation Phases There were 31 creative ideas and 11 that were evaluated and scored. The table is an excerpt of the complete ideas' matrix During the evaluation process the VE team redefined some of the creative ideas as questions for the designers or design suggestions.
- 30. Develop Recommendations Phase Example of the development of a recommendation, which shows the design intent versus the VE alternative Recommendation No. 22:
- 31. Develop Recommendations Phase (Con’t) Example of the development of a recommendation, which shows the design intent versus the VE alternative Some ideas may require life cycle cost analysis
- 32. Presentation
- 33. Conclusion
- 34. Take Away • Apply VE early in the design to maximize value • Implement the VE Job Plan and FAST Diagrams • Use a Multi-disciplinary team and encourage any type of ideas • Review Value Added recommendations • Value Engineering is not a cost-cutting or scope reduction exercise
- 35. PMA VE Study Efficiencies by Client and/or Discipline (1998-2019)