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Value Engineering Applications in Transportation (2005)

Chapter: Chapter Three - Current Practices in Value Engineering

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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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Suggested Citation:"Chapter Three - Current Practices in Value Engineering." National Academies of Sciences, Engineering, and Medicine. 2005. Value Engineering Applications in Transportation. Washington, DC: The National Academies Press. doi: 10.17226/13869.
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13 This section presents an overview of the current practices in VE in transportation in the United States and Canada. The overview is primarily based on observed activities and dis- cussions with practitioners during the literature search and the survey responses from the agencies. CHARACTERISTICS OF VALUE ENGINEERING PROGRAMS As discussed earlier, all STAs are required to develop and maintain a VE program in accordance with the FHWA regu- lation. That said, there is a wide range of VE activity across the United States. This is the result, in part, of the wide range of projects, size of the STA capital construction program, and the relative complexity of the projects. However, some vari- ation may be related to how the individual VE programs func- tion and where the program responsibility is assigned, as well. In the article, “Measuring Performance of a VM Program” (12), Bethany suggested that value programs need to provide three functions: corporate level leadership for implementa- tion, a cohesive approach to VE initiation and integration, and centralized accountability. This requires • Preparing policies and procedures, • Training staff, • Creating program visibility and awareness, • Developing proposals for identified project opportunities, • Reporting the efforts of the program, • Quantifying the results and benefits, and • Recognizing successes. To achieve this, the VE program must be capable of preparing for, promoting, implementing, and documenting its activities. This is necessary not only to meet mandated requirements but to sustain corporate interest in the pro- gram. Corporate commitment is an essential element required for a successful VE program. The VE program needs to be 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, but in implementing its solutions (13). An essential ingredient for program success is the VE champion. This is typically an individual or team of individ- uals that can bridge the technical and management aspects of the program, and who can enthusiastically promote, individu- ally or collectively, the use and successes of the VE program. The functional elements of the VE program and their inter- relationships are illustrated in Figure 3. Level of Activity The annual federal-aid program VE study reports prepared by FHWA (11) highlight the wide range of VE activity, mea- sured in studies performed per year, for the 53 STAs. For example, during the period from 1997 to 2003, California, Florida, and Virginia (6% of the total number of STAs) col- lectively performed more than 40% of all federal-aid VE studies (937 of 2,303). During this same period, an average of 16 STAs (31% of the total) did not perform any of the studies on federal-aid projects. There is no universal benchmark to define what constitutes an active program at this time. In his article, Borkenhagan (5) suggested that STAs performing five or more VE studies per year should be considered as active agencies. This is likely a good starting point. However, states with more modest trans- portation programs will likely have fewer opportunities than larger states. This would suggest that a sliding scale or ratio- based benchmark might be more appropriate. Although FHWA has been successful in promoting the use of VE, more can be achieved. In his presentation, “Improving the Effectiveness of Value Engineering Programs Within State DOTs” (14), Robinson compared the results of federal- aid VE studies with typical results achieved in other sectors and by other public agencies. The benchmark data were obtained from SAVE and various government agencies. Applying the same review approach to more recent informa- tion presented in Table 1 suggests that additional opportuni- ties to improve performance and to lower expenditures should be expected. This comparison is presented in Table 3. Organizational Structure and Mandate The VE program focus and thresholds are also influenced by how the program is integrated into the agency. In most cases, the VE program is associated with the design branch, as either a quality assurance or design enhancement function. CHAPTER THREE CURRENT PRACTICES IN VALUE ENGINEERING

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

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

Strengths Strengths of VE programs included the following: • There are a number of good VE team leaders avail- able to lead VE studies—both internally and externally (consultants), • VE procedures processes are well-established and well-understood, • Performing VE early in the development of a project can significantly influence the project scope, • There is upper management support for VE, and • There is the ability to bring the best talent to the project. Weaknesses Weaknesses of VE programs cited were: • Lack of training or trained staff, • Finding VE team members in-house, • Sharing knowledge gained or results derived during VE studies, • Buying into the VE process or even the need to perform VE studies, • Need for better follow-up (implementation), • Length of time to complete a VE study, • Agency reluctance to conduct VE studies on non-NHS projects, • A threshold of $25 million is not suitable for all STAs, • Scheduling of VE studies is often disrupted by the avail- ability of information, • Lack of full-time resources, and • Measuring and reporting the success of the program. Opportunities Opportunities for VE programs included the following: • Focus on non-NHS projects; • Promote public confidence that agencies are providing best value; • Acceptance of alternative methods and products; • Expand beyond the traditional planning, design, and construction areas to other business streams; • Improve integration of VE with other initiatives such as road safety, context-sensitive solutions, and asset man- agement; and • Improve working relationships with other agencies or internal departments. Threats Threats to VE programs cited were: • Inadequate training (funding and time); • Lack of understanding of, or apathy toward, VE by tech- nical staff; 16 • Funding of transportation programs in general; • Maintaining a VE champion; • Program would be weakened without the federal mandate; • Lack of dedicated staff resources; and • Threats from other initiatives, including asset manage- ment, road safety, accelerated construction techniques, and context-sensitive solutions. Future Needs of VE Programs The responding agencies indicated that, from their perspec- tive, the value community will be able to deliver the VE ser- vices needed. This is an important consideration that proba- bly warrants monitoring, given the changing demographics in the value community. The number of experienced VE team leaders will likely be affected over the next few years, owing to retirements, promotions, and the influx of new but inexperienced value practitioners. In addition, one agency indicated that value consultants needed to continue to develop their skills. It was suggested that Module I and II training courses also receive regular updating to reflect current training approaches. Other future needs identified were: • Consider a revised mandate, which could revisit the $25 million threshold or expand to non-NHS projects; • Define best practices in VE, including the best time to undertake a VE study; • Consider shorter training sessions; • Develop project performance measures; • Consider ways to confirm compliance with OMB Cir- cular A-131; • Consider how user costs and road safety could be incor- porated; and • Determine what types of studies best benefit from VE. POLICIES AND PROCEDURES Policies and procedures for several STAs were reviewed dur- ing the literature search activity. In general, the two primary applications of VE in transportation, at the planning and design and construction phases, are dealt with separately and uniquely. Many of these policies and procedures were simi- lar, suggesting that STAs have freely shared and/or adopted approaches to leverage the success of others. The federal VE regulation and policy also served as primary building blocks for the state agencies. In the United States, the FHWA VE regulation mandates the use of VE on major NHS projects. Approximately two- thirds of the responding agencies reported that VE policy was provided by the federal government (FHWA). In addition, many reported that the transportation agency had developed

17 accompanying policies and procedures to augment the fed- eral policies. About half of the responding agencies indicated that VE guidelines are also sourced from the federal level. The respondent agencies identified the following three basic policy and guideline development sources: • Adopt federal policies and guidelines, • Adopt other agency’s policies and guidelines, and • Develop policies and guidelines internally. FHWA has prepared policy, guidelines, and procedures to support the VE programs at the STAs (19–22). AASHTO has also produced similar guideline documents. The FHWA and AASHTO documents have been adopted directly and/or mod- ified as required by many STAs to serve as state policy and procedures. In some cases, STAs have developed policies and pro- cesses to control their VE activities. For example, Florida has recently prepared a number of process control system charts to help manage their business units at the corporate and department levels (23). An example process control system chart used to select VE projects is presented in Figure 4. Florida’s process control system establishes the interrela- tionships of the state and district value engineers, identifies key activities, and defines the quality assurance and quality control responsibilities. At the time of the survey, Nevada was just finalizing its draft VE policy (24). The draft policy, using a decision chart that establishes the functions and responsibilities of staff associated with the VE program, is presented in Figure 5. A number of transportation agencies have also developed VE manuals or procedures. Several manuals were reviewed as part of the literature work, including submissions from California, Florida, New Mexico, New York, Ontario, and Washington State. The documents prepared by Florida, New Mexico, New York, Ontario, and Washington State are gen- erally similarly sized and provide selective VE background and concepts, in addition to their respective VE procedures, reporting formats, and anticipated meeting and scheduling expectations. The New York State DOT provides VE pro- gram guidance in their design manual. To date, of all STAs contacted, Caltrans has developed the most extensive suite of VA documents. It has prepared a broad range of VA policy and guideline documents for use in its VA program, similar to those discussed earlier, including a draft VA chapter included in the Project Development Procedures Manual. However, what sets Caltrans apart from the other STAs is its companion VA team and report guides (25,26). In the paper, “Lessons Learned from the California Depart- ment of Transportation’s Value Engineering Experience in the Transportation Sector” (27), Hunter acknowledged that the two manuals were written to create a consistent set of operating instructions to conduct and document VE studies. Experience has proven this to be a worthwhile investment, because Caltrans has been able to establish a minimum study performance standard and reduce the learning curve for new participants. The manuals have also been used to showcase the Caltrans-developed project performance measurements approach. The agency’s website makes these documents readily available. This has motivated other agencies to incor- porate elements of the Caltrans VA process. Most transportation projects in the United States are sub- ject to the requirements of the National Environmental Pol- icy Act (NEPA) and/or other state-based environmental legislation. Similar environmental acts exist in Canada and govern transportation projects there. In most cases, the VE procedures for the STAs identify optimal times during proj- ect development when VE studies should be done. This may vary with project complexity and/or project value (28,29). STAs typically present the project planning and design process separately from the VE process and show the poten- tial linkage points between the two work streams. Smith (29) suggested in his presentation, “Using Value Analysis to Scope Projects,” that the VE process could be integrated into the NEPA process. Ohio took this a step further. In 2003, the Ohio DOT (ODOT) developed its “Strategic Initiative Six: ODOT Will Improve the Quality of Its Construction Plans” (30). It accomplished this by merging the nine-step NEPA process with the five-step planning process, design process, VE, and constructability reviews into a unified/integrated project development process (31). ODOT’s project develop- ment process for major projects is presented in Figure 6. SELECTING SUITABLE PROJECTS Most transportation VE studies done in the United States are being undertaken because the projects under review are on the NHS or cost more than $25 million, as required by regu- lation. The $25 million project cost threshold was identified most often as a key statutory trigger to warrant a study. Of the responding agencies, 66% identified the statutory require- ment as the primary motive to complete the study. Nevada reported that they plan to lower the threshold from $25 mil- lion to $10 million when their draft VE policy is enacted. Florida, Pennsylvania, and Ohio reported cost thresholds of $20 million. New Hampshire indicated that their cost thresh- old was $50 million, whereas Virginia and Alaska use $5 mil- lion and $4 million thresholds, respectively. In her thesis, Value Engineering for Small Projects (32), Clarke presented a selection methodology for VE studies of small transportation projects. She defines small projects as being federally or state funded, non-transit projects with costs of less that $10 million. Suggested factors include cost, complexity, and impacts.

18 FIGURE 4 Florida DOT VE project selection process (23).

19 The selection criteria are presented in Table 4 and are sim- ilar to criteria used by New Jersey. Clarke developed this cri- teria based on suggestions from a variety of sources. A review of 51 VE studies in Hungary by Fodor (33) revealed a some- what similar list of possible value targets. Robinson (14) noted that one way for STAs to increase the number of VE studies performed was to focus on projects that do not receive federal-aid or have costs of less than $25 million. However, currently, the agencies rarely embrace this strategy. According to many of the agencies responding to the sur- vey, the application of VE on small projects is rarely or never done. Although there is nothing precluding VE on small proj- ects, transportation agency resources are likely limited or might be better deployed on large projects. Not only are they usually mandated to do so, it also might be a better use of skilled resources. This is because larger projects typically have more potential for improvement owing to the larger scope and expenditure threshold. However, in some cases, it may be appropriate to apply VE to a smaller project when the agency is unsure of the scope or to build consensus with stakeholders. The situation is much different for the Ontario Ministry of Transportation (MTO). In Canada, transportation funding is generally dealt with at the provincial level. As such, the FIGURE 5 Value analysis policy development in Nevada (24).

20 FIGURE 6 Example project development process integrating VE (31).

21 federal–state relationship between FHWA and the DOTs that governs the technical and financial aspects of most projects simply does not exist. MTO does not have a mandatory ex- ternally imposed VE program requirement. Nevertheless, MTO’s VE program is viewed as being successful by many transportation agencies: SAVE, CSVA, and AASHTO. MTO implements a flexible policy to support its noncompulsory VE program: Value Engineering is to be applied to suitable projects to the maximum extent that time and resources will allow. Regions should provide an annual plan that outlines which projects are suitable for VE studies in their Region based on [defined] selec- tion criteria and their project specific knowledge (34). It is generally desirable to perform VE studies as early as possible and this is often cited in value-oriented documents. This is because “the [planning and] design phase accounts for 80% to 90% of the impact on [project] quality and cost” (35). This is illustrated in Figure 7. The rationale for this relates to how design decisions are made throughout a project. Typi- cally, an initial concept is developed, or emerges as a modi- fication of a previous design, to satisfy what the designer ini- tially believes to be the expectations of the stakeholders (this usually includes the owner). Resistance to the initial design concept is generally overcome in time by introducing incre- mental changes that address individual stakeholder concerns throughout the design phase. Each modification accepted increases the design team’s resistance to changing (or revert- ing to earlier) designs. Consequently, the opportunity to change the project diminishes rapidly as the project is developed through the policy and standards, planning and design, con- struction, and operations phases (see Figure 8). Other aspects of a project may trigger an STA to initiate a VE study. For example, reducing or avoiding cost and improving safety were often cited as key reasons to initiate a VE study. Improving project performance, which was inter- preted to mean improving transportation operations, reducing impacts, increasing durability, or other measures, was also highly rated. Le ve l o f I nf lu en ce Project Phase (Life Cycle) Design Const. Operations 100% 0% Le ve l o f I nf lu en ce O pp or tu ni ty fo r C ha ng e Project Phase (Life Cycle) Planning & Design Standards and Policy Mtce. and Ops. Construction FIGURE 7 Level of influence on cost throughout project development (35). FIGURE 8 Opportunity to implement change throughout project development. Factor Criteria Roadway work over 25% of total project cost Bridge work over 25% of total project cost Right-of-way impacts over 10% of total project cost Utility cost over 10% of total project cost Cost Project costs that exceed the budget Major changes to existing structures such as new alignment of roadway, bridge(s), or by-pass sections; widening existing highways for capacity improvements; adding or altering interchanges on multilane facilities; or major reconstruction of existing highways Expensive solutions such as a component or material that is critical, exotic, hard-to-get, or expensive; overly long material haul (excessive borrowing, excessive waste); long foundation piles; excessive reinforcement; cofferdam de-watering; architectural embellishment; curbs, gutters, and sidewalks (rural); non- standard items; sole-source materials or equipment; highly skilled or time- consuming labor; or difficult materials requirements or inferior material sources Accelerated design (tight design schedule) Expensive construction traffic control Multiple construction stages Complexity Night work construction required Statewide or districtwide impact Wetland mitigation Hazardous waste cleanup Impacts Extensive/expensive environmental or geotechnical requirements TABLE 4 SUGGESTED SELECTION CRITERIA FOR SMALL PROJECTS (32)

Arizona and Ontario suggested in their responses that VE studies are often undertaken to build consensus among stakeholders. Arizona noted the use of VE with external stakeholders, whereas Ontario has had experience building consensus between internal department organizations. Wash- ington State and Ontario also advised that VE is used to resolve or validate scope issues. In 1981, NCHRP Synthesis of Highway Practice 78 (1) reported that most of the initial VE programs at the STAs were focused on standard drawings and specifications. In 2004, it would appear that many agencies have shifted to focus more on specific construction projects. More than 70% of the responding transportation agencies indicated that they rarely or never apply VE to technical standards, specifica- tions, and drawings. As indicated in Figures 7 and 8, how- ever, the broadest influence on a project occurs when the VE team focuses on its design standards. As an example, two recent VE studies for the Ontario MTO (36,37) focused on the development of new typical cross-section standards. These studies tackled the cross- section topic in two separate components—lane and shoulder widths and the roadside—using very large multidisciplinary specialist teams. In both cases, the VE teams brought together a unique blend of traditional practitioner (road design, drain- age, construction, traffic, and environment) and academic expertise, including road safety and human factors special- ists. The study of the design standards had far-reaching con- sequences and prompted an update of geometric and roadside design requirements to embrace new cost-effective design approaches. MTO will realize the benefits of these updated design standards, when implemented, on many projects. ENGAGING STAKEHOLDERS VE, from its earliest applications in transportation, has been used by transportation agencies to control cost. After all, VE was originally introduced to government agencies as a man- agement tool for project and program expenditures. Although cost continues to be the primary motivation for its use (this includes the federal mandate), several transportation agen- cies have started to pursue the broader benefits of VE. VE is being used to engage stakeholders to: • Establish project scope, • Fast track project development, • Improve interagency communications, • Bridge institutional borders, • Define a better balance between the needs of road users and those of the community or the environment, and • Reach consensus on difficult issues. VM is often referred to as a powerful decision-making process. This is because the suite of activities that make up the Job Plan guides the team to supportable decisions. However, 22 VM is effective because the language of functions enables the multidisciplinary team to communicate more effectively. Transportation projects are subject to extensive public scrutiny during the course of their development. NEPA and other similar laws require STAs to fully engage the public and stakeholders in the project. In many instances, the traditional approach to transportation planning is used. This approach requires that the public and stakeholders review plans and concepts and share their reactions with STA staff. In the past few years, a greater emphasis has been placed on involving the public and stakeholders earlier in the proj- ect development cycle. VE can be used to enhance commu- nications between the STA, the public, and stakeholders. In addition, VE tools can be used to define project team actions to ensure compliance with federal requirements (38). The application of VE very early in project development also streamlines the development of alternatives and selec- tion of the right project, instead of trying to optimize the design later on. Using VE at an initial stage permits the proj- ect team to quickly define the project concept. In addition, the team can take advantage of having the stakeholders actively involved from the start to promote early buy in, which will reduce the overall time to reach an optimal solu- tion (39). VM can also be used directly with agencies to improve interdepartmental communications or to bridge institutional borders. For example, a new concept standard for commer- cial vehicle inspection facilities was recently being consid- ered to replace 25-year-old designs (40). The VE team used VE and business process modeling to define the operational expectations for the new sites, working directly with the stakeholders in the workshop. Although the key stakeholders had no real previous experience working together, they had well-defined expectations. As Holmes noted (41), “the staff involved in the study seldom have opportunities to collabo- rate. The VE process [resulted in] exceedingly functional and innovative concepts.” The opportunity to include knowledgeable and engaged participants on a VE team should be encouraged. Recalling his early experiences with the Caltrans VE program, Spartz (18) observed that: A unique aspect of the team makeup was the participation of one or more outsiders, which could include a city or county engineer, a member of the U.S. Coast Guard, an individual from the U.S. Forest Service, the mayor of a city, or a private party who has an active interest in the project. In some cases, it might be better to take the workshop results to the stakeholders. A Florida DOT (FDOT) VE study (42) recently included the use of virtual reality software to present and demonstrate the VE alternative. What made this so interesting was that the VE team developed an interactive

23 Function Analysis System Technique (FAST) diagram. This permitted the stakeholders to visually observe how the VE team had delivered the various functions of the project. JOB PLAN The Job Plan is the defined sequence of study activities that sets VE apart from other improvement programs. Many of the VE workshop activities, such as gathering information, brainstorming, evaluating and selecting ideas, refining or developing concepts, and making presentations, are also per- formed on other types of reviews. However, the study of functions is unique to VE. The concept of the Job Plan has existed for almost 60 years. It is reasonable to expect that some minor variations might have emerged over time. However, with the exception of the naming convention, the job plans reviewed during this liter- ature search were essentially consistent. The SAVE Job Plan consists of three work streams that are performed sequentially: • Pre-workshop stage, • Workshop stage, and • Post-workshop stage. The workshop stage has six sequential phases (note that the phases are named in accordance with the SAVE Value Methodology Standard and may differ slightly from those used by some agencies) (3). • Information phase—review of project information to gain an appreciation of the issues, concerns, and oppor- tunities. This typically includes developing data mod- els that will highlight high-cost or poor-performing aspects of the project. • Function analysis phase—determination and classifica- tion of functions that the project, product, or process being studied must deliver. • Creativity phase—generation of a broad range of ideas to achieve functional performance. This is typically com- pleted using brainstorming techniques. • Evaluation phase—review and selection of the best VE ideas by the VE team. • Development phase—preparation of VE proposals based on one or more ideas. Each proposal provides an overview of how the idea is anticipated to work, a balanced assessment of its characteristics, and usually includes some measure of cost impacts (first or life- cycle costs). • Presentation phase—VE team’s presentation of its rec- ommendations to the key decision makers. Some agencies use a five-phase workshop, with the func- tion analysis phase incorporated into the information phase. California has enhanced its Job Plan to include additional phases during the workshop (43). The six basic workshop phases are augmented to include the following (occurring between the development and presentation phases): • Critique alternatives—VE team reviews the VE pro- posals and groups them into VE alternatives. The team confirms technical viability. • Resolve alternatives—review of how the decision mak- ers have decided to proceed with the VE alternatives (i.e., accept, accept with modifications, reject). Additional phases are also included for team presentations and external review assessment activities. The Caltrans Value Analysis Activity Chart is presented in Figure 9. WORKSHOP DURATION The Job Plan defines how much time will be allocated to each phase during the workshop stage. In the early days of VE, studies were scheduled that lasted 2 to 3 weeks, especially where dedicated teams were used. However, VE workshops for construction projects have traditionally been much shorter, with 3- to 5-day durations being the most common. VM is essentially a recipe for success that requires mini- mum time durations for specific activities. The multidiscipli- nary team must quickly develop synergy to truly be effective and this takes time. The team has to first understand the prob- lem or opportunity, and then generate and evaluate ideas to permit the development of the preferred ideas. However, the VE team rarely has the luxury of an extensive development or evaluation process owing to time constraints. The challenge with longer studies is getting the commit- ment of senior staff. The challenge with compressed study times is trying to successfully get through all of the VE activ- ities (14). It is important to recognize the potential conse- quences of trying to schedule shorter studies, because study duration can often influence the quality of the VE study results. This is because the VE team has less time to develop cohesively, has limited opportunity to perform in-depth proj- ect analyses, and has less time to develop and/or document the ideas. On occasion, VE studies are undertaken in two or more parts to work around scheduling conflicts or to improve access to senior staff. However, segmenting the Job Plan may affect the VE team’s ability to develop the needed synergy and possibly its effectiveness and/or might introduce unnec- essary delay into the study schedule. Evaluation processes can consist of quantitative or quali- tative processes, or even a combination of the two. The sur- vey revealed a reliance on both types of evaluation processes by the responding transportation agencies. However, given

some of the comments received, it is possible that the ques- tion was not clear enough to the agencies. The challenge of the VE team is to find a balance between the time required for due diligence and the time needed to prepare an effective communication strategy. VE teams rarely have the time to do both. The use of computers in the work- shop is becoming more common for engineering work, cal- culations, and visualization of the solution. The use of hand sketches and manual calculations is still prevalent with most 24 agencies, even though they represent a less precise approach to confirming the details. However, sketches and hand cal- culations are typically faster and VE teams may willingly trade off future refinements in favor of extra time during the workshop. Hunter and Kelly’s “Is One Day Enough? The Argument for Shorter VM/VE Studies” (44) summarized a study of workshop durations, including the results of an international survey of the value community. They noted that VE work- FIGURE 9 Caltrans Value Analysis Activity Chart (43).

25 shops in the United Kingdom were typically one day long, whereas workshops in the United Stated tended to be longer— in the 3- to 5-day range. Responses to their survey suggest that this may highlight differences in how VE has evolved in the two countries. In the United Kingdom, all team members are involved in workshopping each issue. In the United States, certain activities in the workshop, specifically the develop- ment phase, are primarily performed in an individual setting. A similar suggestion that VE studies could be shortened was also discussed by Meyers in “Getting Value Engineer- ing Out of the Box” (45). Shorter workshops make senior management and unique or specialized expertise more acces- sible. Shorter workshops force VE team leaders and owners to quickly narrow the scope of the problem. Meyers also sug- gests that there may be less reluctance to conduct VE studies if the net scheduling impact is reduced. One way to reduce the workshop time is to segregate out study components. For example, Meyers suggests that short- duration workshops only focus on the information, function analysis, and creativity phases (i.e., the first three phases of the traditional workshop). Hunter and Kelly noted that the city of New York requires the VE team to prepare Issue Memos following the site meeting (held in advance of the workshop) to identify potential VE workshop targets. VALUE ENGINEERING TEAM The success of any VE study is influenced by the qualities of the VE team, including the VE team leader, and the techni- cal specialists. Team Leaders Approximately half of the responding agencies indicated that the VE team leaders were required to be Certified Value Spe- cialists. The other team leaders with credentials, an Associ- ate Value Specialist and the Value Method Practitioners, are generally not permitted to lead VE studies. The majority of respondents indicated that the VE team leader was required to be a professional engineer (PE). It is interesting to note that selected agencies made it clear that VE team leaders do not perform engineering work, when facilitating. Nevada includes the phrase “post use of the term ‘Value Engineering’ has resulted in an impression that VE is an engineering discipline only and that a team of engineers is required to conduct the studies . . . NDOT now uses the term ‘Value Analysis’” in its draft policy to address the VE/VA issue (9). It is preferable that the VE team leader have the appropri- ate technical expertise, beyond the required team facilitator skills. In addition, many responding agencies noted that the VE team leader has had similar VE project experience. These attributes appear to be most sought after, beyond the Certi- fied Value Specialist and PE designations. Technical Specialists The survey did not explicitly explore the qualifications of the technical specialists. However, some insight can be gained from the literature search work. For example, the survey undertaken during the preparation of NCHRP Report 349: Maintenance Considerations in Highway Design (46) noted that half of the responding agencies indicated that mainte- nance staff was routinely included in VE teams. For the remaining agencies, it was noted that maintenance staff was being consulted regularly on VE studies. This is interesting, given that the survey was conducted in 1991, 2 years before OMB Circular A-131 came into effect. Many STAs use either consultant or in-house VE teams, depending on the project. Virginia exclusively uses in-house team members, whereas California primarily uses consul- tants. FDOT’s experiences with hybrid VE team strategies were highlighted in “Mixing Consultant Value Engineering Services with In-House Services—A Value Added Combi- nation” (47). It was suggested that the mix of in-house staff and consultants ensured that new ideas were being intro- duced into FDOT. In addition, in-house staff continued to develop as a result of their exposure to external technical expertise. Finally, the insight into the inner workings and expectations of FDOT gained by the consultants helped to streamline activities and to develop a better working rela- tionship with each other. WORKSHOP TOOLS AND TECHNIQUES VM is a process of defined phases. However, when working in a specific phase, the VE team leader generally has a great deal of flexibility in selecting the “tools” that will be used. The selection of a particular tool is influenced by the nature of the product, project, or process under study. The most pop- ular tools identified by the survey respondents included: • Cost model—typically a tabulated matrix of project costs. In some cases, this information may be further analyzed to identify high-cost elements of the project, unnecessary costs, and high-worth components. • Evaluation matrix—a numerical model usually incor- porating factors, criteria, weightings, and rating scores. • FAST diagram—a graphic model that details the inter- relationships between project functions. More that three-quarters of the responding agencies con- firmed that they “always” or “often” use cost models. Sev- enty percent of the respondents reported using evaluation matrices during the workshop. Fifty-six percent indicated

that FAST diagrams were used “always” or “often” during the workshop. It should be noted that just under half of the agencies responding indicated that they were using performance mea- sures “always” or “often” during VE studies. However, based on conversations with AASHTO VE Technical Committee members, this level of usage appears to be overrepresented in the survey. This may reflect a misunderstanding on the part of some of the respondents regarding the meaning of perfor- mance measures. Traffic models were reported being used “often” by only about one-third of the agencies. There was no elaboration of the format and content of the traffic models. Economic analysis of the baseline project and VE alter- natives has traditionally been limited to first (capital) costs. In some cases, annual operating costs have been calculated. Several have suggested that user costs, consisting of opera- tional, work zone, maintenance, and delay costs should also be considered (46,48). Until recently, many of these costs could not be determined appropriately. However, New Jer- sey has recently developed an approach to determine delay and work zone cost impacts for road users (48). In the paper, “Economic Analyses—How to Choose What to Use During Evaluations” (49), it was suggested that it was 26 inappropriate for many public agencies to use life-cycle cost in VE studies, because STAs are not permitted to bank deferred expenditures. Banking deferred expenditures is the basis for life-cycle cost. The use of risk registers in the United Kingdom is fairly prevalent. However, although the register documents all potential challenges, the majority of respondents “rarely” use it at this time. The risk register defines areas of concern, the probability of the risk occurring, and the consequences if the situation does develop. The VE (or a separate risk) team typ- ically works interactively to create the risk register, taking advantage of multiple perspectives to flush out the details. A sample risk register for a highway project in the United King- dom is presented in Figure 10. In recent years there has been a great deal of interest in project performance measures (PPMs) (50,51). PPMs were developed in California from 1995 to 2000 to • Identify key project (scope and delivery) performance criteria for the project, • Establish the hierarchy and impact of these criteria on the project, • Determine the baseline performance of the original concept, • Determine the performance of one or more competing VE alternatives, and FIGURE 10 Risk register for a transportation project (Courtesy: M. Thompson).

27 • Measure the aggregate difference in performance between the baseline and competitive VE alternatives. Performance measures are being used to illustrate to deci- sion makers the effect that the VE alternatives are expected to have on the project in terms of key functionality and cost. This has helped VE teams respond to management inquiries such as “How much better will it work?” and “What trade- offs must we accept to realize the project savings identified?” The selection and definition of the performance criteria is completed by the stakeholders. Caltrans typically targets for four to eight criteria. A key aspect of the PPM process is the level of discussion with the stakeholders to ensure that the criteria definitions are well understood up front. A weighting exercise confirms the relative importance of the criteria in terms of the project being studied. A sample PPM summary matrix (25) is presented in Figure 11. Other STAs, associations, and international agencies have become aware of the PPM approach (17), including: • AASHTO VE Technical Committee, • Brazilian Ministry of Transportation, • Korean Construction Industry, • CSVA, • Hungarian Society of Value Analysis, • Japanese Society of Value Engineers, • Missouri DOT, and • Ontario MTO. Other STAs, including New Mexico, Virginia, and Washing- ton State have developed other forms of performance mea- sure assessment (17). Interest in performance measures is expected to grow as the AASHTO VE Technical Committee continues to revise it (17,52). FIGURE 11 Sample Caltrans performance rating matrix (25).

Choosing by Advantages (CBA) was developed by the U.S. Forest Service in the early 1980s to assist decision makers in making informed choices on program expenditures (53). CBA differs from other decision-making systems, such as weigh- ing advantages and disadvantages, pros and cons, weighting/ rating/calculating, and even PPM, because it concentrates only on the differences between advantages of alternatives being compared. In the CBA vocabulary: • Factor—has two definitions: (1) it is an element or a component of a decision and (2) it is a container for cri- teria, attributes, advantages, and other types of data; • Attribute—is a characteristic or consequence of one alternative; and • Advantage—is a difference between two alternatives. The CBA approach involves summarizing the attributes of each alternative, deciding the advantages of each alterna- tive, deciding the relative importance of each advantage, and developing incremental costs and incremental advantages. In recent years, value practitioners have developed an interest in CBA. In support of the interests of its membership, SAVE has arranged for CBA training at its annual conference since 2003. It is expected that interest in CBA will continue to grow as more in the value community become aware of it. SELECTING SHORT-LISTED IDEAS The selection of ideas for development must be accomplished in a relatively short period of time. Several approaches were identified in the survey responses, such as the use of evalua- tion matrices, performance criteria, and paired-comparison. Ninety percent of the responding agencies indicated that reaching group consensus through an open discussion during the VE workshops was used “always” or “often.” Consider- ing the ability to sell the ideas to upper management was also cited. Several key issues typically require consideration dur- ing the VE workshop, including: • Project cost, • Right-of-way acquisition, • Constructability, • Road safety, • Traffic staging, and • Schedule impacts. In many cases, the responding agencies reported that these issues served as evaluation criteria when assessing ideas. Future flexibility, stakeholder expectations, and aesthetics are also routinely considered. New Hampshire noted that its agency also reviews the VE ideas against its standards. Although Ontario typically develops collision costs, where possible, the agency does not routinely develop user and travel delay costs for its studies. 28 VALUE ENGINEERING REPORTS The format of the VE report appears to be very important to some of the responding agencies, whereas others expressed less interest. Several agencies have established report tem- plates to control the level of variance between VE teams, whereas others rely on the format that a VE consultant may use. Agencies in Arizona, California, Florida, Ontario, Texas, Virginia, Washington State, and West Virginia out- lined their VE report content expectations. In addition, Vir- ginia uses a unique database format to control the report format and enhance its VE idea retrieval capabilities. The study data are entered by the regional VE manager to auto- matically produce the report in the standard format. INTEGRATING WITH OTHER INITIATIVES Transportation agencies are focused on several design-related initiatives that can be integrated with VE. Road safety and context-sensitive solutions are two such initiatives. Road Safety The relationship between VE and road safety has long been questioned, and possibly been misunderstood, by transporta- tion agency decision makers. This is likely because of pre- vious suggestions that VE can diminish road safety or that VE and road safety initiatives cannot coexist. Although these suggestions might hold true in specific situations, there is enough recent experience to counter these arguments (54). In the mid-1990s, a confrontational battle between the police and the government regarding a new highway (High- way 407) in Ontario ultimately led to a detailed safety review of the yet unopened highway. At issue was the inference that a VE review, and other subsequent design choices, had dimin- ished safety (55). The VE review, as it was later observed, was a scoping exercise to meet budget targets. The approach taken by the D/B proponents did not follow VM. Although no substantial geometric design changes were subsequently implemented before the opening of the highway, a key message emerged—using standards does not guarantee safety. In the words Arthur Scott, one of the Highway 407 Safety Review panel members, “It’s false security to say that if you’ve met the standard you know it will be a safe feature. In many cases, it is not. This is not the fault of the standards per se, but the application of them” (56). The Highway 407 Safety Review suggests that road safety be considered explicitly. Road safety research performed in the United States and other countries during the last four decades has resulted in a much better understanding of how to predict road safety impacts associated with geometric design or other changes. Prediction models now exist for many geometric conditions. An example is FHWA’s Inter-

29 active Highway Safety Design Model—IHSDM (57), which is currently under development. The Roadside Safety Analy- sis Program (58) has been used to assess the safety benefits associated with changes in roadside geometrics during VE studies (37). Road Safety Audits Transportation agencies in the United Kingdom first began to perform road safety audits (RSAs) more than 20 years ago. RSAs are independent safety performance reviews of a road transportation project. The use of RSAs has spread to other countries and has recently been introduced in North Amer- ica. The Canadian Road Safety Audit Guide (59) highlights several ways for VE and RSA initiatives to integrate: • Include road safety specialists on VE teams (this could also include human factors specialists if appropriate), • Conduct the VE study and RSA concurrently and ensure interactive linkages between the two workstreams, or • Conduct the RSA after the VE study to assess the VE proposals. A recent pilot study (60) suggested that RSAs and VE could be integrated. Context-Sensitive Design Another key initiative in transportation is context-sensitive design (CSD). Neuman et al. (61) wrote that “CSD is among the most significant concepts to emerge in highway planning, design, and construction in recent years.” This is because project development, under CSD, fully considers not only the needs of the road users, but also the needs of the community. VE can align well with the principles of CSD, provided that the right perspective is considered. As with road safety, there is the potential for VE and CSD to be at odds. NCHRP Report 480 cautioned that: It is common practice in many agencies to perform value engi- neering (VE) studies prior to construction or bidding. Such prac- tices, although well-intentioned, can lead to unforeseen adverse decisions. In [one state], it was noted that an unintended result of VE studies was the removal of items from the project that rep- resented commitments to stakeholders in the effort to maintain economy (61). This situation appears to reflect more of a breakdown in the application of VE than of the inability to integrate VE and CSD. VE can be used to identify the needed functions of the project during the VE study. Typically, the functions identified for a CSD-focused project can be organized into two primary groups: functions related to the road user and functions related to stakeholder expectations and needs. The evaluation criteria used for the VE proposals should consider stakeholder inter- ests. To accomplish this, VE teams should include members of, or those who can speak for, key stakeholders. These stake- holders might include community groups, elected officials, environmental agencies, and other government agencies. An example of a FAST diagram for a recent CSD-focused value planning study is presented in Figure 12. VALUE OPPORTUNITIES DURING CONSTRUCTION VE was originally introduced into construction projects in the form of VECPs in the 1960s. The intent of the VECP process is to encourage innovation with the hope that cost savings will be realized. The VECP remains an element of construction contracts and most states use a similar form. The VECP process rarely uses the formal VE. The basic process for VECPs follows: • Contractor must submit a VECP for ideas to reduce the project cost (note that some states also permit time savings). • Agency reviews the merit of the VECP to determine its feasibility to support the agency’s decision-making process. • Agency makes decision on acceptance or rejection. • If accepted, the contractor and the STA will split the identified savings to the contract 50%/50%. The impact of VECPs on the overall cost of the federal- aid projects is very small when compared with the approved project savings associated with the VE proposals developed during the planning and design phases of project develop- ment. For fiscal years 1997 to 2003, total accepted VECPs averaged $46.7 million per year compared with $900 million per year for VE proposals (11). On average, VECPs account for approximately 5% of the total federal-aid project cost savings generated by VE. ALTERNATIVE DELIVERY METHODS Several alternative and innovative project delivery and/or contracting methods have emerged in North America within the last two decades, including D/B, Accelerated Construc- tion, and Best Value Contracting. Design–Build VE in D/B has been applied for some time. One of the key benefits to the STA is the level of innovation inherent in the D/B proposal development process. D/B proponents may or may not use the formal VM when developing their alterna- tive approaches to the compliant (base) bid. The motivation to use VE is typically twofold. First, cost is a major consideration in the selection process and con-

tractors will look extensively into ways in which their costs can be lowered. Second, STAs typically have elaborate eval- uation processes for D/B projects. The evaluation criteria usually include consideration of innovative procedures and designs. As such, proponents are also motivated to achieve the highest proposal ratings. 30 The STAs do not directly share in any cost savings with the contractor derived from alternatives developed during the proposal stage. However, the agency will be able to benefit from generally lower costs and risk with D/B. The agency must still decide on the merits of accepting any alternative concepts proposed by the D/B proponent. FIGURE 12 Sample CSD-type FAST diagram (62).

31 Recent experience in the city of New York on a D/B project suggests that STAs can benefit from incorporating VE into the D/B procurement and project development processes. The New York State DOT requested that New York City’s OMB manage two VE studies of the Belt Park- way Bridge Over Ocean Parkway project that was being delivered using D/B. The first VE study was undertaken after the preferred D/B proponent had been selected, but before finalizing the contract and issuing the Notice to Pro- ceed. The initial VE study identified construction staging modifications that could reduce the overall cost and schedule of the project. The city was able to renegotiate the contract to take advantage of these benefits. The second VE study, per- formed during the design phase, identified additional modifi- cations to improve project performance by reducing the dis- ruption of the community and road users (J. Woller, New York City Office of Management and Budget, personal com- munication, May 2, 2005). In 2002, a final rule regarding VE on D/B projects was published in the Federal Register (10). The final rule requires STAs to undertake a VE study on D/B projects before the release of the RFP document. This is considered the mini- mum requirement for VE on federal-aid NHS D/B projects costing $25 million or more. However, the rule does not pre- clude additional VE studies if desired at other milestones in project development. Accelerated Construction Highway projects are becoming increasingly complex and expensive in many corridors across the country. Impacts to road users are often severe or protracted because of the lim- ited space available to create usable and safe work zones. These impacts influence the mobility and safety needs of the traveling public and the economy. This is especially true for urban highway renewal projects in highly congested corri- dors (63). One initiative, Accelerated Construction, is geared to advancing the pace of construction to reduce the impact on the traveling public. TRB’s Task Force on Accelerating Innovation in the Highway Industry (Committee A5T60) sponsored a series of three workshops in late 2000 and again twice in early 2002. The focus of the workshops was to identify ways to acceler- ate construction on the nation’s highways (35). Several sug- gestions pertinent to VE were reported: • DOTs should consider increasing the contractor’s share of the approved VECP; • DOTs should also permit time-saving VECPs; • Consideration should be given to educating contractors on how VE can contribute to time savings; and • Consideration should be given developing a process to collect and disseminate the creative techniques used by the DOTs and contractors. Best Value Contracting Best Value Contracting considers both cost and technical merit (64) and is used by agencies to reduce project risk. The contractor is required to submit an extensive technical pro- posal that elaborates on: • Methodology and approach, • Management capability, • Past performance, and • Team qualifications. The Best Value Contracting approach requires both the STA and the contractor to do more work up front. The agency needs to clearly define its expectations (scope and require- ments). The contractor will need to invest more effort to pre- pare the submission bid. However, like the D/B process, it is anticipated that the contractor will be motivated to focus more on improved constructability and reliability.

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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 352: Value Engineering Applications in Transportation examines the current value engineering (VE) practices of highway transportation agencies in the United States and Canada. Value engineering (VE) is the systematic review of a project, product, or process to improve performance, quality, and/or life-cycle cost by an independent multidisciplinary team of specialists. The report identifies the reported best practices, key strengths, and challenges of current VE study processes and agency programs, and offers guidance on applying and improving the effectiveness of VE in projects and programs.

NCHRP Synthesis 352 was published on December 8, 2005. An incorrect version of Figure 14 was included on page 33. This has been corrected in the on-line version of the report.

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