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Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery (2017)

Chapter: Chapter 2 - Value Engineering Research Results

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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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Suggested Citation:"Chapter 2 - Value Engineering Research Results." National Academies of Sciences, Engineering, and Medicine. 2017. Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/24851.
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54 This report includes the research results related to VE performed as follows: • Value Engineering Literature Review • Review of Value Engineering Study Reports • Analysis of FHWA Value Engineering Program Results • Value Engineering Surveys • Summary and Conclusions Value Engineering Literature Review The research team reviewed 26 documents related to VE as a part of its initial research effort (see Table 3). This includes the VE policies and procedures from approximately 23 state DOTs and the Office of Federal Lands Highway (FLH). In addition, NCHRP Synthesis 352: Value Engineering Applications in Transportation: A Synthesis of Highway Practice was also reviewed. The findings from this literature review point to the following conclusions: • Most agencies follow the standard VE Job Plan. This consists of the following phases: Infor- mation, Function Analysis, Creative, Evaluation, Development, and Presentation Phases. • Most agencies recommend executing a VE study around the 30 to 35% design stage. Many recommend that studies be held as early as possible. VE studies are generally isolated events that occur only once, if at all, during a project’s life cycle. • Most agencies follow the current FHWA thresholds for conducting VE (per the Final Rule), with a few notable exceptions. The Value Engineering Final Rule was published on September 5, 2014 (Docket No. FHWA-2013-0039). This Final Rule modifies federal regulation, Title 23 Code of Federal Regulation (CFR) part 627, to reflect the revisions made in federal law (Sec- tion 1503(a)(3) of Moving Ahead for Progress in the 21st Century Act, MAP-21). The changes to the regulation are as follows: – Increases the project thresholds for required VE analyses to include the following: b Projects on the National Highway System (NHS) receiving federal assistance with an estimated total cost of $50,000,000 or more and b Bridge projects on the NHS receiving federal assistance with an estimated total cost of $40,000,000 or more – Removes the VE analysis requirement for projects delivered using the design-build method of construction and – Provides VE analysis guidance for projects delivered using the CMGC method of project delivery • The VECP process is typically decoupled from the design-related VE efforts for most agencies. This is generally administered through the construction division and not the design or project C h a p t e r 2 Value Engineering Research Results

Value engineering research results 55 No. State/Publisher Title of the Literature/Report Date 1. Federal Lands Highway Federal Lands Highway Manual Chapter 2-E, Value Engineering January 24, 2012 2. Alaska Policy and Procedure, 05.01.030 Value Engineering Program April 12, 2013 3. Wisconsin Facilities Development Manual Chapter 1, Section 15 Value Engineering December 20, 2013 4. New York Project Development Manual Appendix 9 – Value Engineering in Design January 2015 5. Washington Design Manual Chapter 310: Value Engineering—M 22-01.10 July 2013 6. Montana Value Analysis Program Manual Updated April 2015 7. NCHRP Synthesis 352 Value Engineering Applications in Transportation: A Synthesis of Highway Practice July 2005 8. New Hampshire Value Engineering Program Policies and Procedures December 2012 9. Virginia Value Engineering Program Administration Manual October 2014 10. Oregon Value Engineering Program for TransportationProjects, Policy March 2014 11. Utah Value Engineering Program for TransportationProjects, Policy Revised: June 16, 2015 12. Connecticut Value Engineering Program for TransportationProjects, Policy & Guidelines Updated February 2013 13. Kentucky Value Engineering Program Guidance Manual Guidance Manual July 2011 14. Arkansas Value Engineering Manual Guidelines and Procedures October 2010 15. Maine Value Engineering for TransportationProjects September 2014 16. North Carolina Value Management Program Policy and Guidelines (Version 5.0) March 2015 17. Ohio Design Value Engineering Policy April 2014 18. New Jersey Value Engineering Coordination FHWA – Design ---- 19. Missouri Value Engineering Policy FHWA – Design ---- 20. California Value Engineering Process Review October 2010 21. New York Value Engineering in Design Appendix 9 January 2015 22. West Virginia Value Engineering Manual January 2004 with revisions to June 2014 23. Arizona VE Program Guidelines Updated June 2014 24. Georgia VE Policies & Procedures Last Reviewed: December 2014 25. Alabama VE Regulation ---- 26. Florida VE Program Policy and Process Flow Charts February 18, 2015 Table 3. VE documents reviewed.

56 applying risk analysis, Value engineering, and Other Innovative Solutions for project Delivery management division where most agencies’ VE programs typically reside. Virginia DOT is a notable exception—there the VE program resides within its Construction Division. • The agencies reviewed are split on the requirement of professional certification for VE facili- tators. Some require Certified Value Specialists, others require some level of formal training, and a few make no mention of certification requirements. Review of Value Engineering Study Reports Numerous VE study reports were reviewed to select public transportation agencies. The research team was looking for trends, practices, and unique techniques and applications related to the practice of VE. Forty VE studies sponsored by 18 different public agencies were reviewed and are included in Table 4. The following observations were made based on this review: • There was a distinct difference between VE studies conducted in-house (8) compared with those that were consultant-led (32). – VE studies performed by consultants were almost all professionally certified under SAVE International as Certified Value Specialists. Studies performed in-house were led by individuals without professional VE certifications. – VE studies performed by consultants were typically 5 days long. VE studies performed in- house were 1 to 2 days long. – VE studies performed by consultants generally performed function analysis and did it cor- rectly or at least partially correctly. VE studies performed in-house did not apply function analysis techniques correctly if they applied them at all. Many consultant studies, however, did not leverage function analysis properly to help generate creative ideas. Per Figure 39, approxi- mately 63% of the VE studies examined either did not correctly utilize function analy sis or did not actively apply it during creativity. Cost-function analysis was rarely applied. – VE studies performed by consultants typically averaged over 60 ideas. VE studies performed in-house typically averaged fewer than 25 ideas. – VE studies performed by consultants almost always provided technically well-developed VE alternatives. VE studies performed in-house typically included very poor technical development (see Figure 40). • Where function analysis was used, there are numerous examples where the concept of “func- tion” is confused with “activities.” This fundamental misunderstanding creates a cognitive problem when it comes to developing a clear understanding of why various project elements exist and what they do. This in turn inhibits creative problem solving. • There were several examples of VE studies that were integrated in some meaningful way with RA. Almost all were performed by consultants. • There were several examples of VE studies that used some form of value or performance mea- surement system. All of them were performed by consultants. Analysis of FHWA Value Engineering Program Results The research team reviewed the results provided by the FHWA. The FHWA annually col- lects information on VE accomplishments achieved within the Federal-Aid Highway Program, including the projects administered by Federal Lands Highway. For VE studies conducted during the pre-construction phase of projects, the FHWA tracks (a) the number of studies conducted, (b) the proposed and implemented recommendations, and (c) the value of the implemented recommendations. Additionally, similar information is compiled for the VE change proposals (VECP) that are submitted by contractors during the construction of the projects. The research team organized, compiled, and analyzed this data from the last 5 reported years, 2009 through 2013. The intent of this analysis is to identify trends in the data and to highlight those states that

Table 4. Summary of review of VE study reports. # Project Name Agency Year Consultant/ In-house Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 1 Knik Arm Crossing AKDOT (Alaska) 2007 Consultant CVS $305 22 / 0 $01 5 99 Correct use. FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. 2 Fairway Drive Grade Separation Caltrans (California) 2012 Consultant CVS $121 10 / 4 $13 5 44 Correct use. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Value metrics applied. 15-month schedule savings. 40% performance improvement. 69% value improvement. 3 High Desert Corridor Caltrans (California) 2014 Consultant CVS $2,800 32 / 17 $875 5 87 Correct use. Cost function analysis performed. No FAST diagram developed. Brainstorming by function. Well-developed alternatives. Value metrics applied. 10% performance improvement. 59% value improvement. Included evaluation of 6 high speed rail highway cross- sections and related options analysis. 4 Northwest SR-138 Corridor Improvement Project Caltrans (California) 2015 Consultant CVS $862 13 / 10 $143 10 57 Correct use. FAST diagram developed. Cost function analysis performed. Brainstorming by function. Well-developed alternatives. Value metrics applied. 5.5-month schedule improvement. 2% performance improvement. 22% value improvement. Included analysis of phasing options. VE Study preceded by a quantitative RA workshop. 5 Johnson Street Bridge Replacement City of Victoria, BC 2012 Consultant AVS $64 82 / ? ? 2 116 No evidence of function analysis. VE proposals were not developed in any significant way – more a list of ideas with some cost figures attached. This makes sense since the workshop was only 2 days long. 6 Grand Ave. Bridge CDOT (Colorado) 2013 Consultant None $56 22 / 5 $1 5 58 No evidence of function analysis. Well-developed alternatives. Included 22 Design Considerations. Study led by a PE, but no SAVE International certification. 7 Interstate 25 Managed Lanes CDOT (Colorado) 2013 Consultant CVS $62 14 / 8 $4 4 44 Correct use. FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. Included 16 Design Suggestions. 8 U-6 Wadsworth Interchange CDOT (Colorado) 2013 Consultant CVS $68 13 / 4 $1 5 41 Partially correct use. No cost function analysis. FAST developed. Functions not explicitly used in brainstorming. Well-developed alternatives. Additional ideas that were not proposed were still detailed and included for future consideration. 9 Interstate 4, SR15 to SR472 FDOT (Florida) 2014 Consultant CVS $383 10 / 5 $12 5 26 Correct use. No cost function analysis. FAST diagram developed. Brainstorming by function. Well-developed alternatives. 1 $14 mill ion in potential savings that required further study. Actual savings unknown. (continued on next page)

15 Brent Spence Bridge Replacement KYTC (Kentucky) 2009 Consultant CVS $2,281 11 / unknown unknown 3 28 Correct use. No cost function analysis. No FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. For a project worth $2.2 billion, a 3-day VE study seems insufficient. 16 Ohio River Bridges, East End Bridge KYTC (Kentucky) 2008 Consultant CVS $258 20 / unknown unknown 5 26 There is no evidence of correct application of function analysis in this report—a significant shortcoming. Well-developed alternatives. 17 I-35W Transit/Access & Chapter 152 Bridges MNDOT (Minnesota) 2013 Consultant CVS $193 12 / unknown unknown 5 75 Correct use. Cost function analysis performed. Level of function analysis high level (only 7 functions identified). Brainstorming by function. Well-developed alternatives. Part of an integrated VE and RA effort. Use of Value Metrics (misapplication of pairwise comparisons to develop ratio scales). # Project Name Agency Year Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 10 NW 47th Ave. FDOT (Florida) 2013 Consultant CVS $36 14 / 3 $1 5 35 Correct use. Cost function analysis performed. Functions not explicitly used in brainstorming. Well-developed alternatives. 11 Palmetto Expressway FDOT (Florida) 2012 Consultant CVS $291 6 / 2 ($2.5) 5 31 Correct use. No cost function analysis. FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. Many of the alternatives increased costs but improved performance. 12 Flint River Bridge Replacement GDOT (Georgia) 2009 Consultant CVS $19 18 / unknown unknown 4 22 Correct use. No cost function analysis. No FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. 13 I-20 EB from I-285 to Panola Rd. GDOT (Georgia) 2010 Consultant CVS $65 9 / unknown unknown 4 40 Correct use. No cost function analysis. FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. 14 Redbud Rd. GDOT (Georgia) 2007 Consultant CVS $34 8 / unknown unknown 4 15 Correct use. Cost function analysis performed. No FAST diagram developed. Functions not explicitly used in brainstorming. Well-developed alternatives. Consultant/ In-house Table 4. (Continued).

21 Highway 7/8 MTO (Ontario, Canada) 2011 Consultant CVS unknown 43 / unknown unknown 5 234 Partially correct use. FAST diagram developed but most functions are activities. Functions not explicitly used in brainstorming. Study held early during project development and used to help develop project design options. The appendix containing the alternative development was not available for review. A form of value measurement was applied that considers performance over cost. The methodology employed was unclear and appeared to utilize a prioritization scheme based on gross approximations of criteria importance. Criteria were well defined and the analysis looks fairly thorough. 22 Highway 403/QEW Improvements MTO (Ontario, Canada) 2012 Consultant CVS $366 18 / 9 $43 5 109 Correct use. Cost function analysis included in FAST diagram. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Value metrics applied. 12-month schedule improvement. –3% performance improvement. 18% value improvement. VE Study preceded by a quantitative risk assessment workshop. 23 QEW Credit River Bridge MTO (Ontario, Canada) 2013 Consultant CVS $128 13 / 4 ($4) 5 91 Partially correct use. Cost function analysis performed separately and included in FAST diagram. FAST diagram developed but many functions are activities. Brainstorming by function. Well-developed alternatives. Value metrics applied. 3-month schedule improvement. 6% performance improvement. 9% value improvement. VE Study was combined with a risk assessment workshop. # Project Name Agency Year Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 18 Robert St. Improvements MNDOT (Minnesota) 2013 Consultant CVS $22 4 / unknown unknown 4 33 Correct use. Cost function analysis performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Use of Value Metrics (misapplication of pairwise comparisons to develop ratio scales). 19 TH7 at Louisiana Ave. Interchange MNDOT (Minnesota) 2010 Consultant CVS $20 8 / unknown unknown 4 48 Correct use. No cost function analysis performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Use of Value Metrics (misapplication of pairwise comparisons to develop ratio scales). 20 427 Transitway from Highway 407 to Highway 7 Class Environmental Assessment MTO (Canada) 2012 Consultant CVS $230 16 / 5 $14 5 122 Correct use. No cost function analysis. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Value metrics applied. 12-month schedule improvement. 40% performance improvement. 49% value improvement. VE Study preceded by a quantitative risk assessment workshop. Consultant/ In-house (continued on next page)

# Project Name Agency Year Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 24 Bicycle & Pedestrian Greenway Design Guidelines NCDOT (North Carolina) 2013 In-house None unknown 18 / unknown unknown 1 18 There was no evidence of the proper use of function analysis in the report. This is an example of a process study and was included for the NCHRP Panel’s review. Alternatives were not well developed. 25 IO914 BA and BB NCDOT (North Carolina) 2014 In-house None $136 12 / 7 $10 1 18 There was no evidence of the proper use of function analysis in the report. The alternatives were not well developed. A 1-day study on a project exceeding $100 million is not a sufficient length of time to follow the VE process in a meaningful way. 26 Raleigh Union Station NCDOT (North Carolina) 2014 In-House None $73 66 / unknown unknown 1 80 A high-level, basic, random function identification was performed. Many of the functions identified were not correctly defined. Ideas were not brainstormed by function. This was a large study broken into four teams that focused on different areas of the project. It was a large, complex project that was facilitated in 1 day. A high level, qualitative risk assessment was also included as part of the report. The alternatives were not well developed. 27 U-2809A NCDOT (North Carolina) 2012 In-House None $9 9 / 5 $1 1 10 There was no evidence of the proper use of function analysis in the report. Functions not explicitly used in brainstorming. The alternatives were not well developed. 28 USA Parkway NDOT (Nevada) 2013 Consultant CVS $59 12 / unknown unknown 4 unknown There was no evidence of the proper use of function analysis in the report. Functions not explicitly used in brainstorming. The alternatives were not well developed. A form of value measurement was applied that considers performance and cost. The methodology employed was flawed however. Criteria were not well defined and the analysis was very cursory. Idea lists were not included. 29 I-5 at Beltline Interchange ODOT (Oregon) 2014 In-house None $40 7 / unknown unknown 3 11 There was no evidence of the proper use of function analysis in the report. Functions not explicitly used in brainstorming. Well-developed alternatives. 30 Portsmouth Bypass ODOT (Ohio) 2011 Consultant None $75 3 / unknown unknown unknown unknown There was no evidence of the proper use of function analysis in the report. Functions not explicitly used in brainstorming. Although explicitly identified as a VE study, this was not a VE study and did not follow any formal structure. The alternatives were not well developed. Idea lists were not included. Consultant/ In-house Table 4. (Continued).

37 Aurora Ave. Corridor Improvements WSDOT (Washington) 2008 Consultant CVS $40 32 / 17 $1 4 66 Correct use. Basic random function identification applied. Cost function analysis not used. FAST diagram not developed. Brainstorming by function. Well-developed alternatives. # Project Name Agency Year Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 31 I-73 Southern Section, Right-of-Way Plans SCDOT (South Carolina) 2009 Consultant None $1,000 9 / 4 $45 2 unknown There was no evidence of the proper use of function analysis in the report. Functions not explicitly used in brainstorming. This effort focused explicitly on the right-of-way plans for a large project. The alternatives were not well developed. Idea lists were not included. 32 I-35E Managed Lanes TXDOT (Texas) 2010 Consultant CVS $4,000 20 / unknown unknown 6 110 Correct use. Cost function analysis not performed. FAST diagram not developed. Functions not explicitly used in brainstorming. Well-developed alternatives. 40 Design Suggestions identified. An early form of value metrics was applied that considers performance over cost. Weighting methods were flawed. 33 SR 108 UDOT (Utah) 2010 Consultant CVS $197 10 / unknown unknown 4 50 Correct use. Cost function analysis performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Part of an integrated VE and RA effort. Use of Value Metrics (misapplication of pairwise comparisons to develop ratio scales). 34 City Signals System South of James River VDOT (Virginia) 2014 In-house None $10 2 / unknown unknown 1 9 Although three functions were identified, there really was no discernible function analysis. Functions not explicitly used in brainstorming. The alternatives were not well developed. 35 Midtown Tunnel Corridor VDOT (Virginia) 2007 In-house None $1,500 14 / unknown unknown 2 50 Although three functions were identified, there really was no discernible function analysis. Functions not explicitly used in brainstorming. The alternatives were not well developed. A 2-day VE study for a complex, $1.5 billion project is inadequate. 36 US Route 460 Corridor VDOT (Virginia) 2007 In-house None $1,200 12 / unknown unknown 2 32 Although two functions were identified, there really was no discernible function analysis. Functions not explicitly used in brainstorming. The alternatives were not well developed. A 2-day VE study for a complex, $1.2 billion project is inadequate. Consultant/ In-house (continued on next page)

# Project Name Agency Year Team Leader Quals. Project Value ($M) No. of VE Proposals / Accepted Accepted Savings ($M) Study Days Creative Ideas Function Analysis Comments 38 I-5 / Blaine Exit Interchange Improvements WSDOT (Washington) 2006 Consultant CVS $17 10 / unknown unknown 5 83 Correct use. Cost function analysis performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. Early integration of quantitative risk assessment with VE. Use of WSDOT RBES risk estimating tool. Early application of value metrics—flawed technique used for prioritization of criteria. 39 SR-531 43rd to 67th Widening Project WSDOT (Washington) 2014 Consultant CVS $52 4 / unknown unknown 3 34 Correct use. Cost function analysis not performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. 8 Design Considerations identified. Value metrics applied. 3-month schedule improvement. 9% performance improvement. 20% value improvement. VE Study integrated with Practical Design. 40 WYO 310 Hightower Rd Pavement Rehabilitation WYDOT (Wyoming) 2012 Consultant CVS $4 15 / unknown unknown 4 85 Correct use. Cost function analysis not performed. FAST diagram developed. Brainstorming by function. Well-developed alternatives. 8 Design Considerations identified. Value metrics applied. 3-month schedule improvement. 9% performance improvement. 55% value improvement. Qualitative risk assessment included. Consultant/ In-house Table 4. (Continued).

Value engineering research results 63 have had the greatest levels of reported success, specifically focusing on effective VE practices. Based on the results of this analysis, the following conclusions can be made: • Agencies fall into three basic categories in terms of the volume of VE studies conducted annually: – Agencies averaging more than 20 VE studies per year (5) – Agencies averaging 5 to 20 VE studies per year (17) – Agencies averaging fewer than 5 VE studies per year (33) • There has been a steep drop in the total number of VE studies performed nationwide during this period. This can be attributed to a few states that had very active programs, but had significant decreases in the number of studies performed. • Approximately 59% of all VE studies performed during the period were facilitated by consul- tants while 41% were performed in-house. • The average return on investment has been $106 in implemented cost savings for every $1 spent on VE. Correct - Tied to Creativity 37% Correct - Not tied to Creativity 30% Not Used 33% Use of Function Analysis Figure 39. Level of VE alternative development. Well Developed 72% Not Well Developed 28% Level of VE Alternative Development Figure 40. Utilization of function analysis on VE studies.

64 applying risk analysis, Value engineering, and Other Innovative Solutions for project Delivery • 1,613 VECPs were submitted for approximately $228,708,505 in accepted cost savings. • 14,582 VE alternatives were proposed and 6,201 were accepted for a 43% implementation rate. In total, $6,990,518,523 in implemented VE alternatives and $228,708,505 in approved VECPs resulted in a total of $7,219,227,028 in project cost savings. • An average of 5% of total project costs was saved. One indicator of VE program effectiveness is the return on investment of VE studies com- paring accepted cost savings relative to VE study costs. Agencies that had higher numbers of VE studies were selected for inclusion in Table 5. Value Engineering Surveys A formal VE Survey was distributed to agency VE coordinators—a total of 84 survey requests were distributed. As of August 13, 2015, the research team collected 36 responses, of which 33 were complete. The survey was sent to individuals in various state DOTs, as well as state FHWA liaisons, and individuals from other transportation agencies. Key observations from the survey are as follows: • Most VE programs reside with the “design” function. • Most VECP Programs are managed separately from pre-construction VE programs. • Many respondents indicated that VE is considered on projects for reasons related to technical challenges, phasing complexity, and staging complexity. • Most VE programs have adopted the more recent higher federal dollar value thresholds. • Most agencies are not using VE for programmatic reviews, business process improvement, design/construction standards, or organization development efforts. • Most respondents indicated that they perform VE studies during preliminary design. Nearly one-half said that VE studies are being conducted during final engineering and one-quarter are being conducted during project planning or feasibility. • Respondents indicated an even split between consultant-led and in-house VE studies and the use of internal versus external technical team members. • There were a number of questions related to the existence of feedback loops for lessons learned. Responses were evenly split about the existence of feedback loops. However, there Agency Value of Approved Savings Cost of VE Studies Return on Investment Study Type Predominance Georgia $320,484,966 $910,342 352.0 Consultant Texas $186,999,856 $756,496 247.2 Consultant New York $345,300,110 $1,767,003 195.4 Consultant California $411,763,668 $2,664,007 154.6 Consultant Florida $298,700,566 $2,400,003 124.5 Consultant DOT Average $41,791,331 $395,655 105.6 N/A North Carolina $38,225,736 $417,501 91.6 In-House Minnesota $88,852,180 $978,016 90.8 Consultant Pennsylvania $44,500,050 $580,001 76.7 In-House Eastern Federal Lands $19,480,042 $312,700 62.3 In-House Virginia $33,017,632 $737,917 44.7 In-House Table 5. Return on investment for VE programs.

Value engineering research results 65 appears to be an issue with obtaining construction-related feedback on the implementation of VE recommendations. • Only 1 in 10 respondents indicated that they did anything unique with respect to the appli- cation of VE within their agency. • Most respondents indicated that they do not regularly provide VE training. There were several notable comments collected in the survey that are worth sharing: • “We believe that an effective risk management program is far more effective at optimizing projects than VE. We perform risk analysis on every project we deliver. The type and level of Risk Analysis is commensurate with the size and type of project.” • “We schedule all VE studies one year before the projects are scheduled to begin design. That way all the Project Managers can schedule the VE study at the proper time (30% or conceptual phase).” • “It’s important to recognize that VECP is not Value Engineering. It is important for an organiza- tion to apply the VE process at the best time and not too late during project development because that will destroy the credibility of VE and perceptions matter in organization.” • “Employ a lessons learned database for VE, Constructability, and Post Construction Review efforts to eventually share with KYTC designers and consultants.” • “When it seems appropriate, NCDOT will combine the VE process and the Risk Assessment pro- cess to conduct a VE/RA.” Summary and Conclusions The research related to VE Performance indicates there are many opportunities to improve the quality of basic VE techniques and their application, while introducing guidance on effective practices and procedures. The research team incorporated the following into a VE tool: • The review of VE study reports indicated that consultant-led VE studies were typically superior to in-house VE studies in several ways: – Consultant-led VE studies are of longer duration (4 to 5 days versus 1 to 2 days). – Consultant-led studies better utilized the technique of function analysis. – Consultant-led studies generated a larger quantity of ideas (60 versus 30 ideas per study). – Consultant-led studies developed VE alternatives to a much higher level, which allows project decision makers to render better informed decisions on their acceptability. (This is not to suggest that all VE studies be led by consultants, rather, that these attributes directly relate to effective practices. In-house-led VE studies can benefit from them as well.) • Function analysis is the most important technique of VE. Based on the research performed, the research team concludes that the application of function analysis was either not performed or incorrectly applied most of the time. This indicates that there is a significant opportunity to enhance the application of function analysis in VE studies. Doing so will likely improve creativity by increasing the quantity of ideas. • Some agencies are using innovative VE techniques, primarily through the incorporation of some form of RA or the use of value measurement systems. Clearly, exploring ways to incor- porate these more sophisticated methods into VE studies should be further explored. • A review of the VE study reports illustrates the need for standardizing information on the development of VE alternatives. There was a broad range of levels of development. Clearly, VE alternatives that are better developed and articulated are more likely to be accepted by project decision makers and implemented because the degree of uncertainty related to their feasibility is reduced. This is an issue of clearly communicating alternatives and providing the information necessary to make meaningful decisions. • VE is typically performed as an isolated activity within the project delivery process. Formal feed- back and lessons learned are not being captured or shared. This suggests that VE needs to be better integrated into the project delivery process rather than thought of as a “standalone” activity.

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TRB's National Cooperative Highway Research Program (NCHRP) Research Report 850: Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery examines the state of the art in managing project development and delivery through application of Value Engineering (VE). VE is a systematic process that combines creative and analytical techniques to achieve a common understanding of project requirements. At the project level, the goal of VE is to achieve balance between project needs and resources.

A set of seven training videos, an Excel-based Value Management System Tool, and a sample project application of that tool accompany the report.

Disclaimer - This software is offered as is, without warranty or promise of support of any kind either expressed or implied. Under no circumstance will the National Academy of Sciences, Engineering, and Medicine or the Transportation Research Board (collectively "TRB") be liable for any loss or damage caused by the installation or operation of this product. TRB makes no representation or warranty of any kind, expressed or implied, in fact or in law, including without limitation, the warranty of merchantability or the warranty of fitness for a particular purpose, and shall not in any case be liable for any consequential or special damages.

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