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13 CHAPTER THREE CURRENT PRACTICES IN VALUE ENGINEERING This section presents an overview of the current practices in the program, and who can enthusiastically promote, individu- VE in transportation in the United States and Canada. The ally or collectively, the use and successes of the VE program. overview is primarily based on observed activities and dis- cussions with practitioners during the literature search and The functional elements of the VE program and their inter- the survey responses from the agencies. relationships are illustrated in Figure 3. CHARACTERISTICS OF VALUE ENGINEERING Level of Activity PROGRAMS The annual federal-aid program VE study reports prepared As discussed earlier, all STAs are required to develop and by FHWA (11) highlight the wide range of VE activity, mea- maintain a VE program in accordance with the FHWA regu- sured in studies performed per year, for the 53 STAs. For lation. That said, there is a wide range of VE activity across example, during the period from 1997 to 2003, California, the United States. This is the result, in part, of the wide range Florida, and Virginia (6% of the total number of STAs) col- of projects, size of the STA capital construction program, and lectively performed more than 40% of all federal-aid VE the relative complexity of the projects. However, some vari- studies (937 of 2,303). During this same period, an average ation may be related to how the individual VE programs func- of 16 STAs (31% of the total) did not perform any of the tion and where the program responsibility is assigned, as well. studies on federal-aid projects. In the article, "Measuring Performance of a VM Program" There is no universal benchmark to define what constitutes (12), Bethany suggested that value programs need to provide an active program at this time. In his article, Borkenhagan (5) three functions: corporate level leadership for implementa- suggested that STAs performing five or more VE studies per tion, a cohesive approach to VE initiation and integration, year should be considered as active agencies. This is likely a and centralized accountability. This requires good starting point. However, states with more modest trans- portation programs will likely have fewer opportunities than Preparing policies and procedures, larger states. This would suggest that a sliding scale or ratio- Training staff, based benchmark might be more appropriate. Creating program visibility and awareness, Developing proposals for identified project opportunities, Although FHWA has been successful in promoting the use Reporting the efforts of the program, of VE, more can be achieved. In his presentation, "Improving Quantifying the results and benefits, and the Effectiveness of Value Engineering Programs Within Recognizing successes. State DOTs" (14), Robinson compared the results of federal- aid VE studies with typical results achieved in other sectors To achieve this, the VE program must be capable of and by other public agencies. The benchmark data were preparing for, promoting, implementing, and documenting obtained from SAVE and various government agencies. its activities. This is necessary not only to meet mandated Applying the same review approach to more recent informa- requirements but to sustain corporate interest in the pro- tion presented in Table 1 suggests that additional opportuni- gram. Corporate commitment is an essential element required ties to improve performance and to lower expenditures for a successful VE program. The VE program needs to be should be expected. This comparison is presented in Table 3. able to confirm to the key decision makers that it is worth the effort (12). Senior management must be involved and fully engaged in the VE program, not only in its initiation, Organizational Structure and Mandate but in implementing its solutions (13). The VE program focus and thresholds are also influenced by An essential ingredient for program success is the VE how the program is integrated into the agency. In most cases, champion. This is typically an individual or team of individ- the VE program is associated with the design branch, as uals that can bridge the technical and management aspects of either a quality assurance or design enhancement function.

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14 To assist VDOT [Virginia DOT] management in obtaining opti- mum value from transportation funds through the VE process by Preparation Visi Promotion improving project quality, eliminating unnecessary costs, and bili reducing overall life-cycle costs (15). ty an s d e Aw ur ng ed However, not all agencies share this broader interpretation are ni c nes Pro ia ampion Tr Ch of VE. Consider the following definition of VE presented in s Policy and E V an agency's consultant reporting form: Corporate Recognition Commitment VE is a cost savings tool that, per federal requirements, is to be used on design projects that have a total estimated cost of $25 Develop million or more as defined in the environmental document. Proj- fo t Proposals ects estimated at less than $25 million can use VE, but it is not Ef por rt fy ts Re required (16). Quanti Benefi Variations in how agencies view VE should be expected, Documentation Implementation considering the variation in maturity of VE programs across the FIGURE 3 Functional elements of a VE program. country. The AASHTO VE Technical Committee observed that agencies with more mature VE programs tended to apply VE earlier in the development of the project (17). Typically, Examples where the VE program reported to the design func- this means that relatively more emphasis would be placed on tion include Colorado, Connecticut, Kentucky, Louisiana, defining the project scope than if the VE study had been Michigan, and Ontario. In Arizona, the VE functional activity undertaken later in the development cycle. is attached to the construction branch. A third reporting rela- tionship observed the financial or audit function being respon- Virginia's VE program benefits from a VE Advisory Com- sible for the VE group. The organizational separation of mittee. This committee, which includes field and engineering the VE and design functions increases the level of autonomy division senior managers, provides oversight, guidance, and for the VE program. This third reporting relationship was direction for the VE program. The committee provides key observed in New Hampshire, New York City, and Virginia. input into the VE strategic plan, training needs, advice related to the needs for special studies, and the operations of the VE Several VE programs are now focused on improving the program (15). quality and cost-effectiveness of the STA's projects and are reflected in the program's mandate. For example, Virginia's VE program mission is Promoting Interest TABLE 3 The earliest interest in applying VE in transportation came in COMPARISON OF FEDERAL-AID VALUE the form of Value Engineering Change Proposals (VECP) in ENGINEERING PROGRAMS TO INDUSTRY the mid-1960s (1) as knowledge of VM spread through U.S. BENCHMARKS government agencies. The opportunity to realize potential VE Program Metrics Federal-Aid Benchmarka cost savings during construction was apparent to the STAs, % Savings 5% +10%b and these proposals were subsequently incorporated into their (value of approved recommendations/ contracts. However, it was not until VM was applied to proj- estimated capital cost ects at the planning and design level that it became apparent of projects studied) that VE could significantly influence the cost and perfor- Acceptance of VE 44% mance of projects, products, and processes. Proposals 60%80% (no. of approved recommendations) In 1969, Caltrans became aware of VE through its deal- Acceptance of VE 31% ings with the U.S. Army Corps of Engineers. As such, the Proposals (value of approved Corps served as an early promoter and supporter of VE in recommendations) transportation (18). This interest spread to other STAs on an No. of Approved 5.3 2040 informal basis. Recommendations per VE Study Average VE Study $20,000 $40,000 FHWA's increasing involvement with VE during the Costs 80,000c 1970s was premised on promoting interest. For 20 years, a Industry benchmarks are taken from Robinson's paper FHWA encouraged STAs to use VE before the formal intro- b presented in 1999 (14). duction of federal legislation (5). AASHTO has worked with Some agencies involved in capital projects realize up to 20% (14). FHWA to promote VE at the national level through the spon- c Some complex VE studies can exceed $100,000 (14). sorship of biannual AASHTO VE conferences. The AASHTO

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15 VE Technical Committee also actively promotes VE inter- These wide variations in trained personnel reflect the size nationally. For example, AASHTO has recently invited rep- and makeup of the transportation organizations. More than resentatives from one Canadian province to participate on the 40% of the respondents reported that VE-trained staff con- VE Technical Committee. AASHTO also works closely with stituted up to 10% of their entire complement. This training SAVE to promote VE in transportation during SAVE's annual has not typically resulted in extensive numbers of certified conference. In 1997, FHWA and AASHTO initiated an award staff (Certified Value Specialists, Associate Value Special- program to recognize agency achievements in VE. ists, and Value Methodology Practitioners) at the agencies. Many of the agencies noted that they did not have any certi- There are now four regularly scheduled value industry con- fied staff. ferences held in North America. SAVE's annual, AASHTO's biannual, and the CSVA's annual conferences provide excel- The approach to training varies and this may partially lent opportunities to exchange ideas, concepts, and successes explain why so few STA staff have been certified. However, in VE. A separate one-day government VE conference is a more likely reason for the limited number of value-certified held annually in association with the SAVE conference. staff is that employment duties and experience may actually be a barrier to certification. Certification candidates need to As Bethany noted (12), VE programs also need internal be in a position where performing VE represents a large per- promotion and recognition. This is necessary to generate more centage of their daily activities. VE coordinators have the interest in applying VE (i.e., create a broader customer base most potential to become certification candidates simply for the VE program) and to confirm to senior management because they are typically the most involved in VE within the the benefits of applying VE. In addition, many STAs use STA. However, many VE coordinators have other duties internal staff as their technical specialists. Promoting VE also beyond those associated with the VE program. As such, they helps to attract potential team members. may not have sufficient opportunity to develop to the certi- fication level. Potential limitations, financial or otherwise, Several transportation agencies have recently worked regarding access to advanced training courses or having the together to promote VE beyond their borders, drawing on time to regularly participate in VE studies may also contribute personal (staff) and corporate level contacts to develop a to the situation. unique working bond. For example, VDOT has worked with several other states, including Colorado, Indiana, Maine, and Training programs based on SAVE International's Mod- New Jersey, to undertake VE studies and promote awareness ule I course and FHWA/National Highway Institute's simi- of the methodology. California and Ontario have also col- lar course were the most frequently mentioned when respon- laborated on out-of-state training sessions. dents were asked how training was provided. Several states, including California and Virginia, use in-house training pro- grams. Caltrans' training program is a Module I course cer- tified by SAVE. Both Washington State and Florida training Education and Awareness programs use SAVE's Module I and Module II courses. Team members in Minnesota receive a brief introduction to VE by Training in VE is available from private consultants, at SAVE the VE team leader. Ontario noted that training beyond the annual conferences, and through the National Highway Insti- Module I/II level, such as risk management and project per- tute. Many of the policy documents reviewed cited some formance measurement, is sought at conferences. Project form of training requirement. However, 72% of the respond- managers and technical staff often receive the VE training at ing agencies do not have a formal policy on training for their the transportation agencies. In some cases, agency training organizations. Alaska noted that extensive training had been initiatives may include consultants, staff from other agencies, completed in the early 1990s, but current budget constraints and municipalities. have limited training initiatives in recent years. Training budgets varied between agencies, with 40% report- Twenty-two agencies with training programs in place ing that VE training costs were less than $25,000 per year. reported that the programs had operated more than 5 years. Caltrans has trained 1,200 staff since the early 1980s. Vir- ginia has trained more than 2,300 staff (approximately 1,500 Strengths, Weaknesses, Opportunities, are still working at VDOT), whereas Florida has trained and Threats almost 500 people. New Jersey, Ontario, and Washington State have trained approximately 350 staff each. Other VE The survey included a number of questions that focused on programs have focused on selected training of VE managers the strengths, weaknesses, opportunities, and threats (SWOT) and senior project personnel. Examples include Arizona, of VE programs. The responses highlighted below provide a Michigan, New York City, and North Carolina, where fewer good cross section of how the STAs view their programs. In than 20 individuals have been trained. some cases, issues were cited in more than one category.