When Is The Best Time For Value
Engineering?
When the greenhorn prospector asked a grizzled sourdough for advice on where he should
look for gold, his reply was, "Gold is where you find it." Specific opinions
about the best time for value engineering range from "never" to "at every
project milestone" depending on who you talk to. The most accurate answer, however,
is "Whenever there's a good opportunity for benefit." Projects or processes that
are limited in scope, repetition and complexity, relatively low cost, and/or incorporate
improvements from prior value studies may not benefit enough to make a reasonable return
on investment. Complex jobs with many phases and components, on the other hand, can often
provide good returns on the cost of multiple studies. In general a project achieves the
most benefit from a value study if it is performed when most of the critical information
is available, the objective(s) and boundaries are well defined, and the least commitment
of resources to a chosen action has been made. Also, studies that are conducted earlier
usually consider a broader range of ideas and are less inhibited by attitudes that have
become vested in a particular solution. For a project, this classically occurs at the
concept (35%) stage of design.
As suggested by the variety of names given to specific applications (value planning, value
management, value analysis, etcetera), the value method can be applied to a wide range of
problems and may be conducted successfully at a variety of times in the problem's life.
Selecting the best time for the study can be based on the needs dictated by the project's
current state of development or the specific demands of a particular phase of project
activity. For example, some projects are best studied at the outset (value planning) to
help determine the best way to approach the problem and to identify what kinds of
information will be needed to make reasonable decisions. Conversely, it may not be
reasonable to study other projects until significant background information has been
collected to form the basis for understanding the problem and its parameters. Projects
with several distinct phases or a sequence of actions may benefit from separate studies of
each phase or studying only the most significant phases. By focusing attention on the
functions of separate phases, studies can make proposals for improvement based on
information that may not have been available previously and with the advantage of the
information available from the preceding phase(s).
It is important to remember that because a value study is inherently limited in time and
resources, a single study may not be able to harvest even all the "low hanging
fruit." Occasionally, there are areas where improvement may have been possible but
which remained untouched due to either the limitations of time, lack of information,
misunderstanding the job's complexity, or the unique "personality" of the team.
In these cases more than one study may be justified. Where multiple studies seem
appropriate, selecting the phases for study, identifying which phases have the greatest
potential for benefit, and timing the studies should employ the same techniques and
criteria that are normally used to select a single project study. Additionally, you should
expect the cumulative benefits of multiple studies to significantly exceed those of a
single study.
For project designs, some clues that may highlight areas with significant potential for
benefit are: (1) repetitive elements where even a small improvement or savings in any part
will be magnified by its repetition, (2) significant, expensive elements that may have
limited availability or competition, (3) customized or tailor-made elements that may be
replaced by off-the-shelf items, (4) components or actions whose cost is inconsistent with
the importance of the function performed, (5) actions or elements that do not perform
specific, necessary functions, (6) redundant components that do not appear to be
justified, (7) element(s) that increase long term operation or maintenance costs, or (8)
element(s) that appear to be much more complex or exacting than normally demanded by their
function. For processes, clues that may reveal activities or processes (or their key
phases) that could benefit from a value study are: (1) time consuming, (2) the effort is
inconsistent with the product, (3) large commitment of resources, (4) repetitive, (5) too
many different people involved, (6) too many signatures or levels of approval, or (7) too
expensive. Some symptoms of problem processes are that they appear inefficient or
ineffective, and "everyone" complains. These clues are equally useful in
selecting the times, phases and components for multiple studies.
The following examples hint at the range of times when studies can be successful and the
advantages of occasionally performing multiple studies:
Powerplant Transformer Replacement (A Value Planning Study): The project
involved two powerplants, located very close to each other, whose primary function was to
generate power from water moving between reservoirs and a city water supply. The project
replaced five aged single phase transformers with identically sized 3-phase transformers.
One transformer would be installed at the "base" powerplant, whose single
generator operated to support normal electrical demand. Three transformers and a spare
would be located at the "peaking" powerplant, with three generators that
supported peak electrical demands. The team's review of the operating and power production
data indicated that (1) the "peaking" plant operated only two generators to meet
peak demands, (2) in "worst case" the "peaking" plant could supply the
peak demand from a single generator by operating longer, (3) the "peaking" plant
could supply the "base" plant's demand if that plant failed by diverting water,
and (4) all three transformers at the "peaking" plant were interconnected so any
transformer could support any of the three generators. Based on that information, the team
recommended that the spare transformer be eliminated, since (1) the spare transformer
would be deteriorating at almost the same rate as the installed transformers, (2) even if
one of the installed transformers failed all demands could still be met by the other two,
and (3) a replacement transformer could be acquired within 6 months. A second more
aggressive recommendation was to eliminate both the spare and another transformer from the
"peaking"' plant, since the transformer interconnections would allow all water
and power demands to be met even if one transformer failed. Only the first recommendation,
which saved $500,000, was accepted because if two of the remaining installed transformers
failed the power capacity would be reduced.
Department-wide Seismic Planning Process (A Process Value Analysis - Stage 1):
Public Law required the federal government to reduce its buildings' risk of failing during
earthquakes. To comply with the law, required the Department of Interior to catalog,
assess and prioritize repairs to over 80,000 structures. In the face of limited fiscal and
staffing resources, some process for setting priorities and performing hazard and
structural assessments was needed. The Value Method successfully developed a multi-stage,
integrated process to meet the requirements of the law.
Seismic Evaluation Process (A Process Value Analysis- Stage 2): The
seismic evaluation reports used to identify and estimate the cost of correcting building
discrepancies, and prioritize building projects under the seismic safety program were
expensive and time consuming. In 1999, the evaluation and reporting criteria became more
demanding which increased evaluation and reporting costs beyond what had been budgeted. A
value study was commissioned to find ways to perform the seismic evaluation and reporting
within the available budget. The three problem areas identified by the team were: (1) the
reporting format was complex and redundant, (2) the cost estimates for building evaluation
and reporting were generic and were not based on specific building(s), and (3) the travel
and reporting deadlines were putting an unfair burden on a very limited number of
engineers. By focusing on the functional priorities of the report, the team was able to
recommend a simplified report format to reduce preparation time and cost, eliminate
redundant information, and highlight the information used to prioritize building repair
projects. At the presentation to management, the program staff indicated that implementing
the simplified report immediately would contain costs within the current budget, make the
report more useable and reduce preparation time. The team's other four recommendations to
satisfy the remaining budgetary and staffing problems were accepted for implementation
over the long term.
Developing A Strategic Plan (A Series of Studies): A value study was
commissioned to bring a diverse group together to develop a strategic plan for the
organization's Information Technology (computers) that could be accepted by consensus. The
team consisted of members from a variety of computer and information technology system
stakeholders. At the outset the team determined that there needed to be a sequence of
study meetings to accommodate the members need to meet for short, discrete periods and to
provide opportunities to consult with others. The first meeting was used to establish the
functional objectives of the plan and in the break the team members consulted with
management and their contemporaries to validate those objectives. The second meeting
adjusted and refined the goals and brainstormed ideas for alternative strategies that
would achieve the stated objectives. The members used the break before the third meeting
to enlist the help of management and other staff members to expand the list of potential
strategies and get input on the ideas the team had produced. In the third meeting, the
team evaluated and prioritized the various strategies and selected those with the best
chance of successfully achieving the objectives. Before and during the fourth meeting, the
team separately and jointly developed and refined strategies that could be presented to
management for review and decision. The team presented their proposed objectives and
strategies for Information Technology to management. The final report incorporated the
comments and suggestions received during the presentation and management adopted the
strategic plan.
Within the Bureau of Reclamation, the best time to study a problem is typically chosen by
those who are closest to it. For a project, the design team usually picks the study time,
and for administrative processes, it's normally the office that is responsible for or most
involved in the action(s). Although Public Law (1996), OMB Circular (1988), and Department
of Interior guidance (1989) require a project to be studied, Reclamation sometimes
performs multiple studies where it is appropriate due to the project's complexity, special
needs or circumstances. Timing a value study is an important decision but apparently there
is more than one "best" time.
Chris Morell is an electrical engineer, architect and Certified Value Specialist. He
has been the Value Program Coordinator for the Bureau of Reclamation's Technical Service
Center in Denver, Colorado since January 1995. He has led numerous value studies for
Reclamation and other Federal agencies, and speaks on value engineering at conferences and
seminars.
Norm Hyndman is a registered Professional Engineer (Civil) who has been a key member of
the Bureau of Reclamation's Value Program since January 1999. Norm came to Reclamation
from the Federal Highway Administration where he ran the Division Office Value Program for
eight years. He has led numerous value studies for Federal Highways, Reclamation and other
government and private organizations.