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Nature release

A1 honse


...for Design,



Copyright 1997
R.S. Means Company, Inc.
Construction Publishers & Consultants
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Printed in the United States of America

Library of Congress Catalog Number 98-106185
ISBN 0-87629-463-8

. ~ e e ~do n s t t u d i o Data

List of Figures
Preface and Acknowledgements


About the Author
The Objectives of Value Engineering


The Reasons for Unnecessary Costs


When to Apply Value Engineering


VE Methodology and Techniques


Interface With Other Programs


Demonstrated Impact of VE


Part One: Value Engineering: Practical .Applications
Chapter One-Project Scope and Budget
Elements of the Project Budget
Prevalent Budgeting Techniques
Cost Control
Defining Project Scope
Parameters and Parameter Cost
Chapter Two-The Capitalized Income Approach to
Project Budgeting (CIAPB)
CIAPB Objectives
Measuring Property Value

Table of Contents


The Meaning of Capitalization
The Capitalization Process
The Need for Cost Control
Chapter Three-Preparation of Cost Models
Making Models
Construction Cost Models
Other Resources
Types of Models
Chapter Four-Planning for Value Engineering Services

VE Objectives
Level of Effort

VE and Total Project Management
Team Selection
The VE Job Plan
Chapter Five-Function Analysis
Classifying Function
Defining Functions
Project Level Function Analysis System Techniques (FAST) Diagram
Chapter Six-Creativity and Interpersonal Skills
Creativity and Fixation
Interpersonal Skills
Human Factors
Creativity Throughout the Job Plan
The Generation of Ideas
Delphi Technique
Value Engineering-A Crafted Strategy
Chapter Seven-Life Cycle Costing
Decision Makers' Impact on LCC
LCC and Total Building Costs
LCC Terminologyand Examples
LCC Methodology
Application of LCC to Buildings
Chapter Eight-Integrating VE into the Construction Industry
Planning and Design
Maintenance and Operations (M&O)

Tdk of Contents

Chapter Nine-VE

Applications to Risk Assessment and Analysis

Risk Assessment
Risk Analysis


Part Two: Case Studies
Case Study One--Corporate Office Building
Case Study Two--Hospital and Staff Housing C~mplex
Case Study Three--Refinery Facility
Case Study Four-Master Planning Competition
Case Study Five-Application to Design Review
Government Headquarters/C:omplex
Case Study Six-Highway Project: South Interchange


Case Study Seven-Wastewater Treatment Plant


Part Three: VE Workbook
List of Forms
Phase 1-Information Phase
Phase 2-Function Phase
Phase 3--Creative Phase
Idea Stimulator Checklist
Phase 4-AnalysislJudicial


Analysishudicial Phase: Analysis/Development
Analysishudicial Phase: Analysis/Ev;tluation
Phase 5-Recommendation
Phase &Presentation & Implementation
Web Site Resources

40 7

Value Engineering Services for CM/PM: Typical Scope of Work


Glossary of Terms




Part Four: Diskette
Life Cycle Cost Program with Linked Database

VE Workbook F o m with Supporting Linkages

Tabk of Contents

Inside Back Cover

10 1.12 1.6 1.4 1.1 1.13 1.9 List of Figures xviii xxi xxiii xxiv XXV xxvi xxviii xxix XXX xxxiii XXXV . the VE Approach VE Methodology & Techniques Value Engineering Job Plan Static and Dynamic Mechanisms Relationship of Current Activities with VE and Other Techniques Results of VE Programs Value Engineering (VE) Integration into Design 1.Figure 1.7 1.2 Imputed Income Economic Impacts of Cost Changes-Hypothetical Office Building 1.4 1.6 1.5 1.14 Program Budget Elements Cost Control FAST Diagram Elements of a Project Units of Measurement Construction Cost Summary-General Hospital Building Perimeter per Linear Foot Configuration FactorSpace Space Efficiency Factors Whole Bay Working Loads Plumbing Fixture Units HVAC-Cooling HVAC--Heating Total Energy Budget Levels Conveying System Quantities 2.2 1.1 2.11 Life Cycle Costs for a Typical Residential/Office Building The Seven Most Significant Factors Responsible for Savings Actions Potential Savings from VE Applications Major Decision Makers' Influence on Facility Costs The Conventional Approach vs.7 1.2 1.10 1.9 1.5 1.11 1.1 1.8 1.3 1.8 1.3 1.

s Platform Cost Model-Air Separation Facility Space Model-Manufacturing Plant A H Area Take-Off Standards Function AnalysisSpace Energy ModelShopping Center Energy ModelLOil-Gas Platform Energy Model-Administration Building LCC (Present Worth Method)--Court House Life Cycle Cost Model--Court House Quality Model Quality Model-Research Building 48 50 51 52 53 54 56 Level of VE Effort Nomograph Areas of VE Study by Design Stage Approximate Level of Effort Flow Chart-VE Procedures Work Plan Phases Process Data Requirements Typical VE Study ProcessParticipants and Milestones 59 61 62 66 67 69 71 FAST Diagram Procedures FAST DiagramStadium FAST DiagramGontract Information System (Existing) FAST DiagramGontract Information System (Proposed) FAST Diagram-Large Water Reservoir FAST Diagram-Automatic Fare Collection System LCC Model-Automatic Fare Collection System FAST Diagram-Air Separation Facility Cost Model-Air Separation Facility Function Analysis Worksheet-Hospital Cost Model-Hospital FAST Diagram-VE Study 75 77 78 Creative Ability Versus Age Fixation Solution Styles of Leadership Managerial Grid Adjustiv-Reaction Model Participants' Attitudes During VE Study Rules of Brainstorming Delphi Phases & Cycles 36 37 38 39 40 42 43 44 46 47 79 80 81 82 84 85 86 88 89 92 93 94 97 98 99 101 103 106 List of Figures .Ga.34 Work Breakdown Structure Cost Model-Pretrial Service Center Cost Model-Manufacturing Plant Expansion Cost Model-Wastewater Treatment Plant Cost Model-Highway Interchange Project Cost Model-Water Storage Dam Cost M o d e l e s h o r e 0il.

10% Discount Rate Recommended Economic Life Cycle Period Life Cycle Costing Logic Present Worth (PW) Compound Interest Factors (PWA) Compound Interest Factors (Periodic Payment) Life Cycle Cost Analysis Format Life Cycle Cost Analysis (Annualizec1)--Car Purchase Car Purchase Input Data Life Cycle Costing Example ( P W ) A L r Purchase Weighted Evaluation Cost of Ownership Using Present Wcrrth ConceptsOffice Building Life Cycle--Commercial Ofhce Expense (Including Staffing) Life Cycl+Hospital Expenses LCC Analysis (Annualized)-Enlisted Men's Quarters. HVAC System Life Cycle Costing Example (PW)-IHVAC System Life Cycle Costing Example (Present Worth Escalated)HVAC System Life Cycle Costing E s t i m a t A e n e r a l Purpose Worksheet Life Cycle Costing Estimate-Standt~yGenerators Summary of Life Cycle Costs--Top-h4ounted Freezer Solicitation for VE Services Classical VE Application During Design VE Organization Chart Integrated Cost/Quality Value Management Project Approach Facility Economics Activities Schematic Design Value Engineering-Chnstruction Office Modernization Program&si: Estimates Summary Office Modernization P r o g r a m ~ n s m c t i o nRisk Analysis Office Modernization Program-Gmstruction Risk Analysis.Cost Control-Delphi Method Example of HVAC System Initial Setup Cost Control-Delphi Method Example of W A C System Individual Worksheet Decision Makers' Impact on Total Building Costs Life Cycle Cost Elements Facility Types-Cost per Building Onas Square Foot Present Worth of an Escalating Annual Amount. VE Approved List of Figures .


Supporting techniques are illustrated. Since the first printing. A VE goal change emphasizes optimizing decision making rather than reducing unnecessary costs. integrated spreadsheet templates that are provided on disk as a basic tool. offered as an aid to advanced practitioners. accurate summary of recommendations have been developed and included in the new diskette. The integration of VE methodology into the design and project construction/management processes is an important focus of this book. The text outlines a VE Job Plan. and the text includes topics such as expanded initial and life cycle costing input. included as part of the text. Also since the first printing. which was the initial VE objective. integrating VE and risk analysis. These applications include a parameter-based cost-estimating system tied to the Cost Model and a life cycle costing system The disk interfaces with a workbook. Seven case studies illustrate the range of application for value engineering techniques. In lieu of publishing a fourth edition and repeating the basics. Optional tools. Easily used on IBM-compatible computers with Lotus 1-2-3 or Excel. the author and publisher decided a new text would better present the innovative VE concepts developed in the last decade. the disk includes formats developed during the completion of over 500 major project VE studies. a complement of clean tliscipline-oriented workbooks that are linked to provide a quick. The case studies make use of excerpts from actual 'JE study reports for buildings Preface and Acknowledgments . These are also provided in the new diskette. which is supported by a system of electronic. that guides practitioners through application of the Job Plan during the performance of a VE study. These include: Automated weighted evaluations worksheet in Excel General purpose linked cost model Excel-oriented spreadsheets for building-oriented conceptual estimates VE report formats for organizing a VE study report An Excel spreadsheet for collecting and evaluating creative ideas c.his book presents the significant advances made since the publication of the previous three editions of Value Engineering in the Cmtmctiun 1ndwn-y. additional VE tools have been developed. were developed especially for use in the VE process. use of Quality Modeling. which evaluate total building costs over the economic life of a facility. and greater use of computerized formats and linkages. This reprint includes an updated diskette with additional VE tools and automated formats.

With their encouragement. for the opportunities to work for them. and abroad. headquartered at Jiddah. where the author worked for some twenty years. Miles Award. and life cycle costing methods. who has the unenviable task of taking care of the author in retirement. Currently. Special thanks go to Nancy Gladwell. Hinchman & Grylls Associates (SH&G).and process projects to demonstrate application of value engineering concepts. The principal contribut& was the architecturallengineeringfirm of Smith. As a final note. the author worked on two New York City projects valued at $5 billion. and acknowledgment of their contributions is made with appreciation. The proceeds of the book are dedicated to my wife. the office manager. These results followed being recognized the the International Society of American Value Engineers by receiving their highest award. In particular. Robert Harvey and David Kirk (formerly at the World Trade Center) provided the opportunities and proving grounds to apply innovative methodology to many challenging and varied projects. These studies constitute some of the most diverse and complex projects in 35 years of experience. Saudi Arabia. the Lawrence D. Jill Woller and Bill McElligot. Ltd. in the NYC Office of Management and Budget. the author has developed various digital applications of VE methodologies that function as basic tools in the performance of value engineering studies. Mr. the author would like to thank the Abdul Latif Jameel Real Estate Investment Co. whose efforts provided valuable input into the development of life cycle costing. the former employees of the Port Authority of NY/NJ. in 2001. Don Parker offered his insight and experience in the development of the project cost control and value management aspects. He had the good fortune of acting as VE coordinator where $1 billion in savings were achieved with enhanced design in both projects. the author represents several consulting firms in the U S .. Abdul Qadir were exceptional people to work with. who gave her wholehearted support throughout the ups and downs of the consulting business. and the concepts underlying the integration of VE into the design process. During the past ten years.. Dr. by utilizing the methodology and tools illustrated in this book. Preface and Acknowledgments . provided opportunities to implement VE studies and explore new ideas. Stephen Kirk. Similarly. The tirm offered the environment in which to practice and implement new ideas. quality modeling. General Manager Mohammed Ibrahim Al-Abdan and Engineering & Projects Director Mohammed M. the author has performed over 50 VE studies in the Middle East and United States. the VE Job Plan. who now heads his own office. culminating a most productive year in retirement. Many people participated in the development of this new book by providing important information. Other key contributors were located in New York City (NYC).

and in 1996. on VE. PE. and in an equal number of corporations in the U. is currently president of Projacs USA. Inc. The author's publications include over 100 article. in 1980. and abroad. Kirk.Alphonse J. and for the Army Corps of Engineers in Washington. where he is currently involved with projects. principally on overseas airfields. value engineering. Hinchman & Grylls.S. FCVS.000 professionals. - Serving as director of value engineering for the Naval Facilities Engineering Command. the Alphonse I. and cost control. he was given an Exceptional Service Award for his active role in the disaster reconstruction of the World Trade Center. Dell'Isola an Honorary Associate. - - Mr. seminars. and cost control. In addition.5 billion. Mr.. and project wst contrcd for over 15. Dell'Isola has been working full-time in const~uctionmanagement and value engineering since 1963. Specifications & Estimates Branch. and briefings on value engineering.000 contracts for various organizations and agencies on vroiects totalling more than $50 billion dollars in construction that Gas resulted in'imdementea savings of some: $3.. Dr:Il'Isola was director of the Value Management Division of the large design firm Smith. D. Second Edition (McGraw-Hill. Life Cycle Costing for Design Professionals. construction management. Dell'Isola introduced VE programs in some 30 government agencies. the author has conducted workshops.with Dr. RICS. Third Edition (Smith. and Emirates. LCC. He has presented expert testimony to several (U. Dell'Isola.K. as well as several professional texts: V a L Engineenhgin the Construction Idwtiy. Dell'Isola Award for Construction.C. 1988). Projacs offers consultant sewices for project management. These testimonies were instrumental in leading to the adoption of VE for construction in federal government agencies.S.) elected Mr. a subsidiary of Pmjacs of Kuwait. 11?95). Previous experience was in field construction as a materials and cost engineer. conducting over 1. Stephen J. Saudi Arabia. Mr.) Senate and House committees and was a consultant to the Presidential Advisory Council on Management Improvement. Engiwdng News-Record cited the author in 1964 -foroutstanding achievement in value engineering. In 1994 The Royal Institute of Chartered Surveyors (U. and in 1993. life cycle costing (LCC). About the Author . For the twenty prior years. the Society of Japanese Value Engineers (SJVE) presented him with a Presidential Citation.C. SAVE International recognized his achievements by establishing a new honor and award for outstanding achievement. Many of his overseas efforts were in the Middle East. Hinchrnan & Grylls in Washington D.

Supersonic Wind Tunnel and Large Rocket Test Facility. Kingdom of Saudi Arabia ($3 billion) Hotel & Apartments (8. Taipei. 1983).AIA. Life Cycle Cost Data (McGraw-Hill. the following represent a cross section of the more significant. Kingdom of Saudi Arabia ($1 billion) Modernization Upgrades and Disaster Relief. AIA. Stephen J. Massachusetts Bay Authority. and Project BudgetingfmBuiIdings(VanNostrand Reinhold. Kuwait ($500 million) Rapid Transit System. Among the author's many projects. England. CVS.5 billion) -- About rhe Author .000 rooms) and Shopping Complex. Taiwan. with Dr. and the state of Florida. NYC. World Trade Center. Parker. Boston. Al Dell'Isola is a graduate of the Massachusetts Institute of Technology. an Associate of the Royal Institute of Chartered Surveyors (RICS) in London. MA ($2 billion) Government Complex (Amiri Diwan). 1991). CVS. Kirk.a Fellow in the Society of American Value Engineers. ROC ($1 billion) Offshore Drill Platform. NYC ($1. a Certified Value Specialist (CVS-Life). Airport Authority ($400 million) North River & Newtown Creek plus several other Water Pollution Control Plants (WPCPs). with Donald E. He is a professional engineer licensed in the Commonwealth of Massachusetts. ($5 billion) Artery (Highway) Project and Deer Island WPCPs. Corps of Engineers ($700 million) Atlanta Airport.. North Sea ($1 billion) Al Kharj Air Force Base. Inc. the District of Columbia.

is an economical assessment of competing design alternatives using the concept of equivalent costs. These items can account for over 60% of the total cost of running a facility. The VE process identifies opportunities to remove unnecessary costs while assuring that quality." Many owners. These objectives are accomplished through systematic application of VE and . Life Cycle Costing ( E C ) . and staffing costs. "Life Cycle Costs for a Typical Residential/Office Building. construction projects have been developed by generating a program of needs. especially federal government construction agencies. automobiles. However. VE generates these cost improvements without sacrificing needed pe~formancelevels. maintenance and operations costs. See Figure 1. The improvements are the result of recommendations made by multidisciplinary teams representing all parties involved.1. and :jubsequently awarding the for presenting and projects. In most areas of the industrial field--computers.T raditionally. reli:ability. Yet. Value Engineering (VE) is a methodology that is known and accepted in the industrial sector.-formal quality control/value assurance programs are a basic part of management controls over production. including the time value of money. the traditional approach does not allovv for programmed input to implement any kind of quality control/value assurance program. performance. LCC focuses on the total costs (initial cost + follow-on costs). aircraft. as practiced in VE. replacement and alterations expenses. systematic effort to improve the value and optimize the life cycle cost of a facility. have found the techniques of VE and life cycle costing to be successful in optimizing value and improving the return on investment (ELOI) for a given project. LCC concentrates on optimizing energy consumption. steel. It is an organized process with an impressive history of improving value and quality. Follow-on costs are all the associated costs of running the facility. and other critical factors will meet or exceed the customer's expectations. A wide range of companies and establishments have usecl VE effectively to achieve their continuous goal of improving decision making. VE is a rigorous. etc. large corporations have implemented very few formal quality control/value assurance programs for construction-related procurement. using in*house personnel or outside consultants to develop necessary documents. This approach has fulfilled managers' req~~irements controlling capital expenditures.

Life Cycle Costs for a Typical Residential I Office Building (Life cycle = 40 years) (Interest Rate = 10%) Finance 28.5% Replacement 11.7% 0 & M 13.4% .

Inmoduction A Briefing . Most facility owners would identify long-term profitability as their main objective. and improve quality." at major decisions affecting the initial investment and operating costs of a facility. and cost. In other words. Therefore. such as cost. or "second look. It is important to avoid confusing cost with value. VE can play a critical role in managing value to meet these goals. They would also quickly point out that high quality and competitively priced facilities. we can say that: Value = The most cost-effective way to reliably accomplish a function that will meet the user's needs. desires. Management has leamed that when personnel are involved in the decision-making process and committed to a goal. This has been demonstrated utilize their most important resourc-their through the recent quality revolution experienced in companies in many advanced countries. and material resources by eliminating unnecessary or excessive costs without sacrificing quality or perforrnance. Quality = The owner's or user's needs. Also. O f course. VE can also make contributions to improve human factors. Each person has an opinion regarding what affects the value of a product or service. and performance. If added cost does not improve quality or the ability to perform the necessary functions. Using the VE methodology will result in improved profit. Cost = The life cycle cost of the product. quality. A decision that improves quality but increases cost to a point where the product is no longer marketable is as unacceptable as one that reduces cost at the expense of required quality or performance. The quality revolution has demonstrated that waste and inefficiency are unacceptable anywhere in the organization. then value is decreased. To keep pace with the ever-changing business climate. The Objectivesof V& Enginekng VE techniques can be used to achieve a number of objectives. products. reliability. who bases the choice on just one criterion. and it will continue to pay dividends for years to come. or services are essential to achieve this goal. companies have leamed that they must offer users products and services that satisfy their needs in a timely and responsive manner. creativity. companies must better people. maintainability. Decision making can be improved by using the team approach. significant improvements can be realized. Often. and teamwork. Value engineering can also extend the use of financial. quality. reduce time.LCC techniques during design as a counterpoint. these must be produced economically in quantities consistent with demand. Responsible decision makers have realized that they must better meet owners'/users' needs at optimum value. VE facilitates management of both value and costs. Decisions like these lead to less than optimal overall decisions. and expectations. decisions are made by one dominant individual. desires. such as attitudes. or reliability. It can provide the networking required for improving coordination and communication. These elements can be interpreted by the following relationship: Function + Quality Value = Cost Where: Function = The specific work that a designlitem must perform. They can save money. and expectations. Three basic elements provide a measure of value to the user: function. The coordination and communication necessary to accomplish these complex and seemingly conflicting tasks are often difficult to achieve. manpower.

Also. the owner is not cognizant of the impact of the desired change. As technology progresses. "The Seven Most Significant Factors Responsible for Savings Actions. Habits are reactions and responses that people have learned to perform automatically. VE opens channels of communication that facilitate discussion of subjects and allows the expression of opinions without undue concern about acceptability. decision makers accept one of the first workable solutions that come to mind. An urgent delivery. Often. In many cases. but it is often not accomplished. design. Unnecessary costs are often caused by decisions based on what the decision maker believes to be true. Humans are creatures of habit. which can be eliminated by requiring the development of additional alternate ideas and then making choices based on economics and performance. An initial VE program study was conducted in 1965 by the United States Depamnent of Defense to determine the sources of opportunity for VE. Habits are an important part of life. continual updating of data is required. These temporary measures frequently become a fixed part of the design or service. or because I have always done it this way!" Changes in owner requirements. Failure to develop altemate solutions. Temporary circumstances. Many of the standards and specifications in use in large construction programs are at least ten years old. Lack of communication and coordination are principal reasons for unnecessary costs. Predominant among these were excessive cost. A habit is a form of response4oing the same thing. and the questioning of specifications. within the required cost range." The Depamnent of Defense study revealed that a VE action was usually based on several factors rather than on a single aspect.Th Reasons for UnnecessaryCosts The main objective of VE is to improve value. the change was rarely a result of correcting bad designs. additional design effort. or schedule can force decision makers to reach a quick conclusion to satisfy a time requirement without proper regard to good value. Unnecessary costs that lead to poor value are genemlly caused by one or more of the following: Lack of information.2. the owner's new requirements force changes during design or construction that increase costs and alter the schedule. rather than on the real facts. Habits and attitudes. resulting in unnecessary costs. because I feel comfortable with my methods. In addition. advances in technology. Honest wrong beliefs can impede a good idea that would othenvise lead to a more economical decision or service. The study identified seven factors that were responsible for about 95% of the savings. Insufficient data on the functions the ownerluser wants or needs and information on new materials. Each reason for poor value provides an opportunity for improved decision making and an area where a value engineering effort is appropriate. VE helps to isolate and focus on new technologies and standards in areas where high costs and poor values may be incurred. or processes that can meet these needs. This tendency invariably causes unnecessary costs. under the same conditions.without having to think or decide. "Am I doing it this way because it is the best way. Honest wrong beliefs. and VE techniques can overcome many of the roadblocks to achieving good value. The aim of the study was to obtain an indication of range and degree of application from a sample of 415 successful value changes. the same way. See Figure 1. but one must sometimes question. Second guessing designs to find them deficient Introduction A Briefing . products. it creates an environment that promotes listening and responding to varying points of view without becoming defensive. Lack of communication and coordination. Outdated standards and specifications. Lack of ideas. In too many cases.

In~loduction A Briefing .

S~ecialtvareassuch as fire nrotection. as illustrated in Figure 1. and landscaping-tier unusual To immove imalementation. A t the same time. VE develops a cohesive team of sesmotivated achievers committed to a common objective. factors or roadblocks lead to unnecessary costs. a decision-making representative for the owner should attend. approval of systems. concentrates on problem-solving techniques to break through obstacles." is much greater the earlier VE is applied. The planned VE effort consists of using the VE Job Plan. En@w~ng Figure 1.4." shows whose decisions have the most influence over the expenditure of funds during the life cycle of a facility. as illustrated o~~ A good rule to follow is to seek in Figure 1:6. the consultant's fee represents the smallest expenditure of all of the initial costs. Regarding total costs for a facility. on the other hand. the owner's desired tradeoffs. brat least be on call. the optimum results can be expected when resources are set aside for VE early in the design process. material handling. "Potential Savings from VE Applications. reliability. A mica1 VE team consists of a mix of personnel. Owners who delight in squeezingdesign fees invariably promote d"ringdesign to improvedesign poor value design decisions. during ap&c&n of the Job Plan. inefficient. thereby providing an opportunity for value improvement. services. Consultants' decisions influence about 50% of-the facility's total costs. The potential for savings. the VE Approach. &eparation equipment. it is essential to involve the owner and consultant in the VE process. are considered. and time. such as aesthetics. Imoduction A Briefing .3. always produces savings. "VE ~ e t h 6 d o l &Techniques. two things increase: the investment required to implement any changes. Several hundred studies have shown that a well-selected team that follows the organized VE approach. The Job Plan fosters improved decision making to realize the optimal expenditure of owner funds. Therefore." Individual efforts can be costly. "Major Decision Makers' Influence on Facility Costs. most designs can be enhanced. elevators. The importance of selecting appropriate team members cannot be overemohasized. focusing on owner and consultant impact. "The Techn%wsConventional Approach vs. and incomplete. To ensure optimal results. environment. Use of the team approach M e t b d o b and Several 1s a proven way of overcoming many of these roadblocks. while meeting required functions at most favorable value. design personnel brief the team on major system selection. When VE is applied later. flexibility. ~rudentkx~enditures decisions can return significant initial and follow-on cost and quality improvements. and resistance to change. or desi-to maximize results. Initially. See Figure 1. A team effort. Assembling the VE Team It takes time and effort to assemble the expertise to conduct an in-depth review using the Job Plan. Most designs still work as the designer intended. However. safety.provides little value opportunity. The order of magnitude of the results is the only variable. & When to Apply V VE should be performed as early as pssibl+before commitment of funds. The owner and consultants are the major decision makers." out team members with equal or better qualifications than the original design team. food on large projects. then review and offer comments on the team's ideas before a proposal is developed.5. following incorporation of VE study results.


Introduction A Briefing .

lntrodwtion A Briefing .

' 3a Recommendations fi Implementation .VE Methodology & Techniques VE TEAM 7 v VE Job Plan .

It teaches and supports the utilization of all existing techniques in application to the proper problem. all competefor management resources. and constructive . While it is important to recognize that these mechanisms exist and affect the project. It is the dynamic mechanisms that are involved in our subject. Selecting a Program Among the dynamic mechanisms that conserve and protect resources. Their dynamic quality is determined by several factors. The principal strategies. Appreciation of dynamic mechanisms as a resource is dependent on staff perception of top management's interest in them. training.8 shows some examples of static mechanisms intended to set overall policies and guidelines. . The process follows a well-documented. These devices are always in force.7. Figure L9 shows how VE methodology interfaces with the utilization of the other dynamic mechanisms. experience. The objective of VE is to impmve value. regulations. conservation. Static mechanisms are devices built into the process of doing business. VE has universal applicationin all of the areas in which dynamicmechanisms operate.. and laws. one program-value engineering (VE)-best meets management needs. and preconceived notions. "Value Engineering Job Plan.8. Improving value can be achieved in the following ways: Raise productivity Improve management Improve LCC Improve quality Reduce paper Simplify work Conserve energy Reduce paperwork Reduce cost Audit decisions 2. lnmodmh A Briefing . See Chapter Four for a more detailed definition of each phase of the Job Plan. but they are rarely measured. Inmface With Other Program Managers' responsibilities include the protection. The VE Job Plan is built around the scientific approach to problem solving." illustrates the interaction and steps of the Job Plan methodology. listed in Figure 1. Costs to achieve these benefits involve hidden resources. they are outside the scope of what can be affected by VE. proven strategy comprised of the following structured phases: Information Phase Creative Phase Analytical Phase Proposal/Presentation Phase Implementation Phase Figure 1. VE has the advantage of advocating or concentrating on techniques that focus on the relationship of cost and worth to function. such as guidelines. Figure 1. Emphasis on and utilization of dynamic mechanisms fluctuates with changes in organizations and economics. Following are several reasons that support thii contention: 1. The level of use by managers and employees is limited by understanding.VE techniques create changes to optimize design on purpose rather than letting changes occur by accident. utll~zat~on of the resources entrusted to them. The mechanisms available to managers to meet these objectives can be categorized in two basic groups: static and dynamic.

Value Engineering Job Plan Pre-Study No Information Gathering I RESULTS / A cis^^ & Follow up .

" t$j $ t $@4 C ri xi.*$ T t P g *$ ~ j€ 1 "-*a <-.:t It3 bxil 2 ".Static and Dynamic Mechanisms for an Operational Mission Related to Responsibility to Conserve & Protect Resources Static Mechanisms Dynamic Mechanisms 8 Personnel Celllngs 8 Productivity Programs 8 Budget Limitations 8 Competitive Procurement Work Simplification 8 Cost Reduction 8 Paperwork Management 8 Laws from Congress Davis-Bacon Act V" *J $vx"" #+I @ g "YJ x.d g$n i k* Innoduction A Briefing Life Cycle Costing Management by Objectives 8 Employee Suggestions 8 Management Improvement 8 Zero Based Budgeting 8 Total Quality Management 8 Value Engineering 8 Energy Conservation 8 Risk Analysis 8 Systems Analysis .

(Worth) Function Analysis System Technique (FAST) Diagramming Supporting Techniques for Redesign. 6 0 3 P @Audits Management Surveys @Management Improvement @Managementby Objectives @Zero-basedBudgeting @EmployeeSuggestions Energy Program *Performance Indicators *Contractor Ideas @PaperworkManagement Productivity Measurement *Complaints VE Methodology Function Analysis (Cost) vs. Development Work and Selection of Alternatives *Work Simplification @EconomicAnalysis L i f e Cycle Costs Design-to-cost @ManagementAnalysis Flow Charting *Weighted Evaluation *Trade-off Analysis @SystemsAnalysis @CostReduction @RiskAssessments @TotalQuality Management Results Optimize Value Cost Savings Time Savings Manpower Savings I .Relationship of Current Activities with VE and Other Techniques Supporting Activities Useful as Information Sources f 3.

Too many studies are subject to one or several of the following pitfalls: Definition of the incorrect problem. Digital. FritoLay. High Commission for Development of Arriyadh. Recommendation of unworkable solutions.3. Illinois. a Saudi chapter of SAW International was established which includes three Saudi professionals who are Certified Value Specialists (CVS). most major government suppliers and contractors have VE staffs. Boston. especially in front-end type applications. Saudi Arabia. The Port Authority of New Y o r w e w Jersey was very active. Through the Job Plan. Outside the federal government. significant savings and reductions m project budget overruns have been realized. and South Africa. Maryland. Chicago. February. Canada. approximately twenty countries have active VE practitioners. all major United States government agencies employ full-time value engineers. * No demonstration of creativity. Through the efforts of the GDMW. and the states of Washington. Florida. Failure to quantify benefits. IRM. South America. Seattle. There are more members in the Society of Japanese Value Engineers (SJVE) than SAVE International members in the United States. Saudi Aramco Introduction A Briefing . until a change in administration reduced their program. Failure to gather all necessary information. and Energy. the VE concept has spread in Saudi Arabia. In the private sector. there are currently programs throughout Europe. Germany. The GDMW has saved from $30 million to $75 million per year. and Owens Coming Fiberglass all have applied the technique. under General Otaishan. Outside of the United States. United Technology. June. where teams include a representative from the mayor's office. Taiwan." located in Northbrook. In Saudi Arabia. A-13 l-Value Engineering. 1996). One of the leaders is Japan. France. "The Value Society. Chrysler. Transportation. VE is one of the few programs a manager can initiate that generates more savings than cost! After an initial expenditure to launch a VE program. the leader in VE application is the City of New York. Application to Facility Programs Under several mandatory federal statutes (Officeof Management and Budget OMB Circular No. In all cases. the General Directorate of Military Works (GDMW). Other areas with programs include cities such as San Diego. and Saudi Consolidated Electric Company have initiated programs. while it improves quality. of the Saudi Arabian Ministry of Defense and Aviation (MODA). In addition. Hungary. 4. Return on investment (ROI) can be measured and monitored. '93 and Defense Authorization Act. has had a fulltime program for more than eight years. There are several excellent VE consultants available through SAVE International. Chevron. In the private sector. VE is a universal problem-solving methodology that can be taught and used at all levels. the Ministry of Municipalities. General Services. In addition. and eight Saudi Associated Value Specialists (AVS). VE provides a system to ensure that approved studies reach a definitive conclusion that includes implementation. Wyoming. Veterans Administration. SAVE International chapters are located in Korea. Saudi Arabian Basic Industries (SABIC). Failure to include implementation actions. There are formal programs in the Department of Defense and in the Departments of Environmental Protection. and Miami. Orlando. Ciba Geigy. retired. and Australia. and Virginia. value engineering pays for itself. Recently. In the government sector. GOSI-the Saudi Agency of Social Security. The VE Job Plan specifically addresses each of these issues. India. Philadelphia. Its applicability allows VE to improve all related studies.

An important aspect of value engineering lies in its ability to respond with timeliness. annual savings have ranged from 5-20% of annual costs.g. VE is almost unlimited in its ability to indicate areas of potential savings that were not readily apparent..and several other private investors (e. In addition. the scope of the project was reduced to be more cost-effective. The oil producer's ROI was substantial. DemOnStratd Impact Of VE Value engineering is effective in many are%$of the construction industry. have averaged an $80 to $1 return on investment. as part of a planned design approach. with a 10% average reduction in initial and follow-on costs. After the terrorist bombing of the World Trade Center in New York City. since occupancy would be adversely affected if the project was drawn out. Jeraisy Corporation and Saudi German Hospital) have used VE. the return on investment was marginal at best. the document/cost trails developed by the team were invaluable in explaining and justifyrng owner actions during negotiations with the insurance companies. VE can generate significant funds in initial installation and operating costs. depending on emphasis. The team provided an overview for each major expenditure to optimize first-time and secondary costs.10. Best results have been attained on large municipal projects. A classic example is the City of New York Gffice of Management and Budget. time was critical.000 in initial cost savings and $150. Often. VE has the potential for saviws in anv entity that spends monev. In one actual instance.and it can be utilized at different stages in the life of a building project. and helped achieve an 80% occupancy rate within three months. VE can provide objective scrutiny of a project to (1) determine cost-effectiveness within a planned time frame or (2) identify improved processes and performance. and the money saved was used to fund several critical projects that had been on hold. comolex facilities offer the meatest mtential. especially if no project will materialize unless the initial cost budget is realized. Typical Results The results of over 500 studies show a 5-35% reduction in initial costs and widely differing results for follow-on costs. When initial costs are critical. VE was integrated with the cost and quality control program for a courthouse facility that resulted in $1. In addition to identifyrng specific items that promote cost efficiency. When the plans were reevaluated. A VE/LCC/cost group responded quickly to maximize decision making and document actions. which has often experienced $100 in savings for each $1 invested in the VE study." Twical reauests for provosals and scones of work that generated these sa. as well as other large projects. ALJ Real Estate Development. approximately 60 studies were done on projects worth over $3 billion. the VE team questioned the economic feasibility of a building project. tracking both time and costs. Lareer. Owners who both build and maintain their facilities usually require a balanced emphasis on seeking out initial and follow-on savings. owners place less emphasis on follow-on costs. Results of recent programs wi& large ficility expenditures are'illustrated in Figure 1. There have been several studies where operations and maintenance costs have been solely targeted. In the process area.ion to'the amount of speiding A d the types of emenditures. one large oil producer started a VE program about four years ago Over that time. Applied with flexibility and creativity.500. and creativity. The potential for savings will vary directly inUpropor. For example. Risk analysis techniques were used to mitigate potential catastrophic results. As a result. These efforts resulted in a savings in time and costs.ings are iiiustrateci in chapter 8. Their ROI on wastewater treatment plants. introduction A Briefing .000 in annual cost savings for maintenance and operations. With emphasis on follow-on costs. flexibility. "Results of VE Programs.

5 - . $) Agency EPA Federal Highways Annual Approximate Expenditure Period Annual Program Cost - 3 -5 - Varies Widely - 1.Results of VE Programs (Million U.5 36 12 3 150 5-10 lto1.200 1.700 Present 300 1984 .MODA Saudi Arabia 200 1984 .5 Corps of Engineers 3.000 1986 Present 4 5-10 3-5 80 200 . NYC Design 81Construction United Technology GDMW .Present 0.20 0.1985 - 2.400 1964 .5 10 3-5 Veterans Administration School Facilities State of Washington Office of Management and Budget.400 1965 Present 3 200 5-7 Naval Facilities Engineering Command 2.20.S.Present 2.400 3 5 10 .Present 2.000 1981 Present Annual Savings 9%Savings 30 2-3 150 .100 1981 Present 10 .000 1984-87-88 1.5 100 3-5 200 1988 .

VE efforts are most effective when applied early during the design process. offered as an aid to advanced practitioners. With all of its potential and no sacrifice of needed requirements. integrated spreadsheet templates. In large construction agencies. Optional applicatim. including project enhancements. These funds should result in a minimum of 5-10% savings in initial costs and 5-10% follow-on cost savings in annual maintenance and operations costs. Work to change personnel's attitude from the beginning. as a basic tool.11. As for timing. See Figure 1.3% of total project costs for an effective program. no organization can afford to waste money while critical projects are lacking in funds. the following guidelines are recommended for setting up an effective value engineering program. but also for follow-on (LCC) costs. include a purmneter-based cost-estimating system that is tied to the Cost Model and a life cycle costing system. m e n needs increase and available funds decrease. A training program can create positive attitudes and set incentives for generating savings within the organization. why not accept the challenge and implement a VE program! Note: The CD that is part of this book package pr&s. * In establishing requirements for implementing VE programs. These goals and objectives should focus on optimizing decision making.Conclusion Based on 35 years of experience. The CD can be used on IBM-curnptible computers. Establish the organizational unit at a management level with responsibility for both initial expenses and operations and maintenance costs. There is as much or greater potential in follow-on cost savings as in initial cost savings.1-0. with Lotus 1-2-3 ur Excel. a system of electrunic. which illustrates how a large design firm integrated VE into its approach. integrate the program into the design process. I n d w t i o n A Briefing . In addition. Fund the program automatically as a percent of capital expenditures. Establish a mandated program for VE to realize savings not only for initial capital costs. expect program costs of 0. top management should set the goals and objectives. Focus on an organizational unit with overall fiscal responsibility to oversee thc application and implementation of the program.

Enhancement Inmoducnon A Br~efing .




the goal is to control costs to stay within the budget. a project had to be on schedule. Project features. project managers were evaluated using delivery time as the key factor. Previously. Generally. many seem to grudgingly accept less in terms of value and performance.000. schedule and performance. some even deducting desired work. This chapter's discussion on project scope and budget will help to illustrate potential problems and areas for improvement. Owners are sometimes required to make tradeoffs among these three factors. The cost of construction was not as important as generating income from the building or getting the facility on line at a certain time. Uncontrolled costs influence schedules through delays caused by high bids. To prevent this occurrence. Times have changed. The number-one position was performance at any price. This would result in wasted effort. Cost is in the uncomfortable position of being equal to. qualities. otherwise. or it was not useful. Designers sometimes make tradeoffs in performance to control costs. and amenities are often sacrificed to control cost overruns. Bid alternates. are introduced by design professionals and Chnpm One Project Scope and Budget . or projects that show poor return on investment (ROI) after the initial commitment of funds. designs were frozen as soon as they were created. the team coordinator should first determine whether the budget for the project can be used as a baseline for a VE study. especially for early concept studies in which budgets are notoriously problematic. Once a budget for a project is established. only to find out later that the project is really $2 million over budget. the best-performing design was the end objective. when facilities were less complex and prices were more stable. After all. a VE study might identify potential savings of $500. Project budget development is the process of predicting (or forecasting) within acceptable variances what the actual project cost will be when the project is completed. the value engineer must have expertise available within the team to review budgets. or in some cases more important than. lack of funds. costs were less of a problem. Social values are also changing. and fast track construction came into vogue.hen agreeing to perform value engineering (VE) for a project. Schedule was in second place. As costs go up. On top of this. Cost took the number-three position in its triad relationship with performance and schedule. In the rush to meet schedules.

insurance. Fipre 1. Proper budget preparation is necessary for management to make sound investment decisions related to the worth of the project. For a private sector project. taxes. and the effective performance of VE will be in jeopardy. If the budget used to seek the project financing cannot be used in htsi fashion. titling fees. "Program Budget Elements. VE must contribute solutions for the effort to be deemed a success.dget Project budgets have a number of cost elements. Problems concerning budgeting and cost control generally fall into the areas of "before" and "after" budget approval. Preerdent Budgeting A survey conducted by the Veterans Administration2 in 1974. showed the following ranges: Extreme deviation range = 66% (28% above low bid. Too many requirements are lump summed. the value engineer should know the components of a proper budget. the budget can be used through VE as a vehicle to control project scope and design decisions before experiencing a cost overrun. The result of these budgets. Each of the above items represents a potential problem. The design and construction schedule is not established." illustrates the five budget elements used by the General Services Administration (GSA)' to compute program costs for a project. The designer is not monitored. In order to judge its validity. Initial planning and design programming are inadequate. The schedule is not met. which the author st111 . An understanding of the various elements is essential in providing the baseline needed for VE. to the client. Once the investment decisions are made. These costs occur in all projects. Estimators have obtained requirements in piecemeal fashion. when compared to the actual construction low bid for the projects for the agency. 38% below low bid) Chapm One Project Scope and Budget . The method used to develop the project budget must be precise enough to provide a basis for monitoring throughout the detailed design process. Project cost is not properly evaluated during reviews. and permits.accepted by owners because the whole project can no longer be obtained within budget. believes is valid. How can budgets go astray after approval? Project scope is misunderstood by owner and users. then priced on a conceptual hasis in enough detail to allow the control process to be effective. Following are the key items in both areas: How can budgets be wrong at the start? Owner requirements are not fully known. additional items would need to be added to the Estimated Resetvation Cost (ERC) element to include costs for financing. both government and private sector.1. User changes are not controlled. requirements need to be better defined. Owner politics force budgets to match a ~redeteminedfigure rather than reflect actual requirements. indicated that the square foot method of estimating was used Techn@ueSby 82% of all architect-engineer (A/E)fim to prepare budget estimates. A good budget should be supported by established design parameters and quality levels. Requirements are not clearly communicated to the designer. whether real or imagined. control during execution will be difficult or impossible to achieve. Elements of & Project h.

3 "*Xi .t"S .Program Budget Elements b Building Equipment . Appmach Work C h a w Orders L==l inspection Design Revlew L!Design Changes Legend: A/E CM VM CPM 1 ArchitectIEngineer Construction Manager Value Manager Critical Path Method (Schedule) Chapter One Project Scope and Budget #S 3 . .

55-$125. and concerns change with time. factors such as facility quality level. and future life cycle cost (LCC) experience. Individual attitudes. Because people are involved. prescriptive means such as VE. Within building types. a systematic series of actions directed toward a desired result. facility configuration. directing. in other words.25/GSF Auditoriums $62.Mean deviation range = 29% (13% above low bid." When budgeting is performed in this manner. program content. Cost control does not promise an end to the problems of management.35-$114. this method cannot fairly represent the cost of the project at the budget stage. Often. For example. space efficiency. This method was somewhat more accurate than the square foot method.15-$46. 16% below low bid) About 12% of the A/E firms surveyed used a modular quantity takeoff method for budget preparation. the situation is not that simple. Further.00/GSF Budgeting on this basis might be called "pick a number. The strong. The ability to control costs to a budget seems to improve as the definition of the budget basis improves. Control is a process. The survey also indicated that the budget technique most commonly used for facilities is one that employs the following elements: Identify the type of facility. so that management can spot deviations in time to take corrective action. Thus. 10% below low bid) Median deviation range = 24% (14% above low bid. feelings. depending on the type of building. To manage something is to succeed in accomplishing it. Management is the act or manner of handling.The above data illustrates that cost control using a square foot budget as a basis is virtually impassible. Geographical location. Desired completion date. the deviations were as follows: Extreme deviation range = 31% (21% above low bid. or supervising something. 10% below low bid) One of the largest variables in budgeting is effective cost control through design development. one must have a budget baseline against which to compare. When compared to bid results. CostConDol There is a difference between managing costs and controlling costs. The minimum amount of information necessary for this type of budget is: Historical cost for the facility type. Budget the cost per gross square footage ($/GSF).assumption in the term control is that management is willing to exercise authority-to make a decision. to manage costs is to succeed in accomplishing a cost objective.15-$98. they cannot be controlled against the budget. Many talk about cost control as if they can control costs through some tangible. Chapw One Project Scope and Budget . this minimal information is all that is known or used when budgets are prepared. Because these elements are undocumented.15/GSF Offices (5 to 10 story) Parking Garages $20. Project budgets developed on this basis are inadequate for controlling costs during subsequent design stages. however. without documentation. Desired gross square footage.00/GSF Courthouses $93. construction budgeting publications3show a wide variation in historical $/GSF. cost ranges similar to the following sample data are typical: $59.whether they are inflation or design related. To exercise cost control. One cannot judge the adequacy of a budget unless the owner's requirements are clearly defined. one is limiting or selecting.

the first thing project managers do is consult the estimate to see what prices can be cut. In fact. This diagram considers cost control as one basic function of the organization (this restriction excluded listing other basic functions not germane to the issue). the information needed to control design is the same information needed to improve its value. the design professionals.2.The Cost Control FAST Diaeram " Many feel that cost conml means the control of money or a budget review." indicates. The FAST Diagram indicates that one controls cost by controlling scope." for a more detailed description of the FAST Diagram. there is a wide range of opportunity for freedom of choice of everything else in the project. when cost control is mentioned. These parameters must then be used as guidelines in supporting the ultimate VE recommendationsfor value improvement. VE is a technique directed toward improving value. then the value engineer must determine what they are before beginning his work. scope is defined by words. Defining Project Scope Chnpter One Project Scope and Budget For a construction project. cost will also have a wide variance. with a few of the basic methods necessary to achieve cost control. The diagram assumes that the function of cost control is a critical management objective consistent with the overall goals and objectives of the owner. See Chapter Three. with lowereorder functions to the right. Designing to Budget versus Improving Value The task of holding project costs at the level initially accepted by the owner depends on a team effort. and the owner's representative. drawings. Achievement of the cost control function depends on successful achievement of all functionsshown to the right of it. Scope control is achieved by identifying essential requirements and generating a baseline document to record them. Figure 3. The figure may be read by inserting any of the verb-noun activities into one of the following two questions: ?" "Why is it necessary to "How is accomplished?" The answer to the "why" question appears in function form to the left of the activity inserted. The old-fashioned idea of viewing scope as building square feet is not sufficient. If square feet is all that is specified. Critical path activities are Located on the centerline. scope consists merely of the owner's program needs for net square feet of space. the key to controlling cost is to control scope. money. VE does not control costs by looking solely at estimates. or less building scope (if approved by the owner) for a reduced budget. If they were not. See Chapter Five. Simply achieving the budget does not mean. "Function Analysis. The FAST Diagram illustrates the relationship of cost control to other procedural functions. the same building scope for a cost below budget. an effort identified by the term proiect cost control. The project cost control team members are the project manager. however. To most designers. or cash flow. and cost figures. Basic design parameters and quality levels should have been established during budgeting. It indicates only major goals and objectives.16. not dollars. Higher-order functions appear to the left of the figure. Thus. The key to achieving cost control through scope control lies in the definition of scope. As Figure 1. The answer to the "how" question appears to the right of the activity inserted. With such maneuvering room. "Cost Control FAST (Function Analysis System Technique) Diagram. the cost engineer. Such a system requires close . This can be achieved by providing more building scope (if needed by the owner) for the same budget. that optimum value is achieved.

Cost Control FAST Diagram Chapter Ow Project Scope and Budget .

circulation for stairwells and exits. are key in determining the project cost for any type of facility. and support space such as lunchrooms.3. elevatoring. Normally. For example. as shown in Figure 1.monitoring by management. The sum of all this space should represent the owner's requirementsfor the facility. mechanical. space to accommodate tour groups. The parameter quantity for each system depends on the criteria used or assumed. plumbing. heating. lighting. plumbing and ventilation) for each space type. It provides structural criteria (seismic and wind loading) and mechanical criteria (outside winter and summer design temperatures). auditoriums. S p e d Systems Special systems involve the identification and quantification of all special systems a i d features to be provided. Key Scope Drivers Seven broad areas. Design Parameters Once a program and configuration are established. Knowledge of these quantities of space facilitates the budgeting of equipment. "Elements of a Project. It does mean indicating the number of floors. The following information should be known: Number of permanent employees * Number of part-time employees Number of visitors Gperating hours Number of shifts Number of employees per shift This data influences the necessary amounts of plumbing. but it does permit verification to take place in order to regulate. one can estimate the design parameters for the major systems of a process facility or building. emergency generation. Generally. The scope of a project includes three elements: Project Cost Plan. and large conference facilities can increase building system requirements at a higher budget than if they were not provided. and electrical systems. and Design Basis. GeograpM Location Knowledge of the geographical location provides essentialdata for use in developing project scope. Chapter One Project Scope and Budget . finishes. and volume. height. when established. theater. The type of functional space planned for a facility will also determine the number of visitors it will draw. air conditioning. Project Management Plan (schedule). thereby achieving the control function. Configuration Configuration data does not refer to the process of designing the building. and communications systems. unintenuptible supply. and various system quantities (such as for power. perimeter. as well as the operating profile of the facility. the decision to include them is a simple "yes-no" decision by the owner. training. four major systems depend on engineering calculations based on design criteria. parking to meet local zoning. These are the structural. Occum Many features of a facility depend on the number of occupants who will use it. These are as follows." Each of these represents "values" thought to be desired by the owner. Functional Areas The net square feet of each space to be provided in the project should be listed by type. and so on. shopping.

Elements of a Project CodeIZoning Analysis Quality Levels Building Parameters Management Organization Methods of Accomplishments Procurement Schedule Total Budget Site Development Building Systems Chapter One Project Scope and Budget .

A parameter budget based on this figure can then be used effectively to control costs. knowing the $/GSF for constructing a residence does not help when pricing a ten-story ofice building. and complete understanding of the separation of classes inherent between differing $/GSF statistics.200 fixtures for plumbing and the subsequent estimate indicated 1. A program for aiding the efforts has been developed by Saudi Projam. Chapter One Project Scope and Budget . Over time. value engineering. life cycle costing. Geological data is also necessary for basic drainage and foundation information. mechanical. it does not characterize any particular system. a company offering consultant services for project management. Key milestone dates must be fixed or assumed to provide the scheduling data for a controllable budget. one could assume that either the budget was in error or too many fixtures were specified Related Ratios Parameter measurements result in the development of quantities associated with each system. it does not vary in a consistently predictable pattern. Parameters at the building level are difficult to develop. qualify. or you can buy one dozen or two dozen at a time. For example. material. Paramem Cost The most common way to estimate a new building is by the cost per square foot.4. related ratios for system quantities have been developed that provide a value standard to judge parameter quantity. However. Parameters are good indicators of worth for the value engineer. Cost is not constant. a pencil can be long or short. parameter units of measure can be developed based on some term or characteristic of the system to be priced. plumbing. the term Parameters ad parameter cost is often misunderstood and misused. A parameter is an arbitrary constant whose values characterize an element of a system. good judgment. and store for future use. $/GSF pricing for systems such as exterior closure. System quantities can often be increased or decreased without affecting basic system function. However. if the location is remote. if the budget were based on 1. budget elements can be added for transportation of materials and labor per diem. "Units of Measurement. parameters at the systems level are easier to develop in a meaningful way than is $/GSE Generally. quantify. For example. The user of $/GSF data must know more about the basis for the data to separate its applications between the buildings inherent in the statistics. and cost control. Figure 1.5. and equipment costs. This classical parameter is really not a parameter at all. These quantities can vary widely depending on the efficiency of design. Similarly.Geographical information is also important for determining necessary index adjustments to labor. Figure 1. The major problem with using costs per square foot as a parameter to determine function worth is that the cost for that unit of measure is constant for only one class or type of building at a particular time. For example. System costs known for one location can be indexed to another location and. Retrieval and reapplication of $/GSF data requires extreme care.676 fixture units. and electrical systems is not very helpful. "Construction Cost Summary." provides some common system-level parameters used for building construction.'! represents a recent parameter-based cost estimate developed for a hospital in Saudi Arabia.

000 BTUH 1.-.000 BTUH (heating system measure) Number of Sprinkler Heads Stations (for standpipe systems) AMP NSF Amperes of Connected Load Net Square Feet TONS 083 Fire Protection 0s Electrical 091 Service and Distribution 092 Power & Lighting 12 Site Work 121 Site Preparation 122 Site Improvement 123 Site Utilities ACRE SY SF LF Acre Square Yard Square Foot Lineal Foot Chapter One Project Scope and Budget .g .000 pounds SFSA CY SF= Squam Foot of Surface Area Cubic Yard Square Foot of Surface Area SFA LFR FLT Supported Floor Area (square feet) Supported Roof Area (square feet) Lineal Feet of Riser Flight XWA XDA Exterior Wall Area (square feet) Exterior DoorMlindow Area (square feet) 03 Superstructure 031 Floor Construction 032 Roof Construction 033 Stair Construction 04 Exterior Closure 041 Exterior Walls 042 Exterior Doors & Windows f~g &! 3% @$ 88 05 Roofing SRn SQ Square (100 square feet) PSF as^ Partition Square Feet Square Foot of Surface Area Gross Square Feet LO Landing Openings 08 lnteriw Construction 061 Partitions 062 Interior Finishes Q 07 Conveying Systems & 08 Mechanical SFSA MBH H W STA One Ton = 12.: > $ Units of Measurement System 01 Foundations 011 Standard Foundation 02 Substructure 021 Slab on Grade 022 Basement Excavation 023 Basement Walls Unit Measure Definition FPA KIP Footprint Area (Square feet) 1.

. . ... VFA u p p w ~ k r w h i M A Exterbr Ooors & Windowi XWA E ? ~ ~ ~ w w & I A ~ 1 3.. 1 1 Togtm* I I MPA MPA / R~WV / 6. No...mpSwn .170 ...yrrn i ~m i -i 011-/ .7~51 2 4 . . ...L....11 4.4 46... ToPICoff i ! 3648i. AreaPmtsGtad BCM BsrsmntC&Meter 6WA BasemantWtlllArea FI. M. ' Abbrevlationa AP . m....... / -D 01 ~FOUNDATMN 02 i.....M 1 61 1 6....6Z2..16 2.. PSN PartWcnSqane TMI 1m.~~ i mwwl 1 LS l...342 ~bt..-....... Umsr Masr -. - ..1 FXT FbgM FIXfWOCWm ~~~r RW Klbw#bComsded Chapter One Project Scope and Budget I / TFA T d Whes l\tba IZWOBtuh ..OI?fl 137x71 SqW..0921 ...... Togt Coet SYSTEM WV... SUB i .007Sq..1 m r m a damandon Coal ..1~1azl!s~abon~rade NOV-96 I ReK / d- i WM I MPA I 1 I ISLIB~UC~URE UWWt 8ub.Construction Cost Summary General Hospital in Saudi Arabia 180 Bed Hospital and Supporting Facilltles: 33..YOI)MQ~U~S i / I MPA MeterPIinlArea MS ~eler~qusn jFClPmem m*WI SW.........548 I 391 j 1...

considerable energies were expended working with the cost groups to refine procedures for estimating.Figures 1. "Ingredients for Accurate Construction Cost Estimating." and Figure 1. Chupter One Project Scope and Budget . Means Assemblies Cost Data.M.June 26. D. RefermeS 1 GSA Handbmk. for municipalities in the U." Actual Specifying Engineer.6 through 1.. As a result.12 are tables of various related ratios that can be used in making initial judgments of system worth regarding designed quantities.14. 3. V ~ W Manugmnt. G. RS. 1974. for example. "Conveying System Quantities.S. PBS P8000.C. Also included are Figure 1. This chapter illustrates some key ingredients of project cost control that enables a complementary cross-feed to the VE program.lA. and government agencies overseas. Hollander. They have been used and work well. the major problem encountered was the lack of realistic cost estimates broken into a useful format. 1997. The same problem occurs today in trying to set up VE programs."Total Energy Budget Levels." During the initial VE application from 1964 to 1965 at the Naval Facilities ConclusimEngineering Command in Washington. 2..13. Inc. Means Company.

Building Perimeter per Linear Foot Description: Notes: Footprint Area .


Chapt~rOne Project Scope and Budget .

KIPSIFloorBay Notes: Add 10% per floor for column load.Whole Bay Working Loads . 30 x 35 100 psf El 125 psf 30 x 3! .


QUANTITIES Cooling Notes: .Bwed on 78OF inside temperature energy efflcient Tons = GSF GSFITon Philadelphia San Franciwx. NCR Alaska 420 .

Ch@ter One Project Scope and Budget .

-.Carolina Chatleaton - 126 105 128 353 188 120 107 162 114 103 gB 121 184 143 141 --- -- - - -- 131 107 133 353 173 126 109 160 117 107 102 126 160 147 146 71 - -.. tam. .-.- 124 110 128 358 168 114 -.- 110 171 120 107 04 124 100 152 150 50 .BB 118 353 1 ~ 116 ) 97 153 lo7 98 gl 115 17t3 134 130 89 -- Not% U ~ r e indude s d e w meqy raquvcwnblforW n g . - 110 -..---.@..-. elevetom. -1 Dallas 131 116 136 358 175 119 . heaUng and axrllng auxfflarieo. " k$ 1 $24 Total Energy Budget Levels Commercial l Resldentfal FacllFties (InMBTW8FNesw) Arizona Phoenh 146 133 152 406 198 131 136 102 134 119 100 137 212 171 168 49 California LosAngeles 112 101 115 364 157 103 1W 151 106 01 74 108 171 132 128 42 SenFrandsco 108 92 100 353 150 1W 94 143 101 87 78 103 185 125 110 51 --- Colorado Denver 122 98 123 338 162 110 100 156 109 100 97 118 178 137 135 71 D. clacalators end lighting..C. Washington 127 107 120 353 160 120 108 164 115 104 06 121 185 144 142 63 M d a Miami 152 142 161 406 203 133 147 201 140 125 103 141 219 179 178 41 Qwrgia Anahla 122 108 125 353 185 114 108 180 112 100 88 116 180 141 138 53 - Ulinob Chicago 127 102 120 338 187 124 105 161 113 104 103 123 183 142 141 75 Louieiana NewOtieat~ 144 129 149 408 104 190 133 188 132 118 100 135 210 168 164 52 ---- -- Ma6sachuwtts Boston 1% 101 128 338 165 121 102 159 111 102 BB 121 181 140 139 72 Detmit 120 103 130 338 168 128 104 163 114 108 105 125 185 143 143 77 Mim Mlnneapoib 142 100 144 535 180 140 110 175 123 117 122 138 108 155 157 83 Mhwurl KansasCny 133 110 136 353 175 127 112 162 110 109 104 128 101 150 149 70 Mlchlgan - M0ntr1).-- -- Washington tP6 -- 134 190 133 fl8 100 136 211 169 168 51 .Houston 145 130 150 406 105 130 - 113 163 114 102 88 118 183 144 141 49 - - - 111 164 115 103 02 120 184 145 142 56 --- - --- - Seattle .exhaust h.---..~ F i u A Y a Chapter One Project Scope and Budget .--.-Tennesca Memphis 128 100 129 353 169 117 ---. N010:Spece k resewedin this table for t'e&mnm and induatrisl bulkJlngk ' F a b m ' R ~ V o 44 r No 2 3 ( 1 W ~ Y Y ~1 927 R8 . d n g ..--.-. GreatFalb -- -- 131 102 122 335 170 120 102 163 115 107 110 127 186 144 144 85 - -- -- New York New YO& Oklahoma OklahomaCiIy 120 110 132 353 172 121 112 167 117 108 07 123 187 147 148 61 Pennryftranb Philadelphia &. d o m e hot water...

5% of building population when all occupants start work at staggered time. broken down as follows: C b t a One Project Scope and Budget . or 1 for every 3 passenger elevators Used to carry 600 people or more between floors Capacity = 5. Q:{ Conveying System Quantities $ {High Level of Service: 1 Elevator per 500 people Fair Level of Service: 1 Elevator per 750 people General Formula: N= PxfxT 300 x E Where: N = Number of Elevators P = Design Population f = Peak factor f = 14. T = Round trip time (seconds) on morning peak E = Normal number of persons per car at peak: C = Car capacity in pounds 1 per 75.5% of building population when all occupants start work at same time.000 people per hour Energy conservation design standards of GSA for office space limits the installation of lighting and power to 7 watts per square foot.000 net square feet of space. f = 16.000 to 8.6L.


T he private sector has used the capitalized income approach to project budgeting (CIAPB) for many years as a building investment analysis technique to evaluate the economics of constructing property for owning and/or rental purposes. or as in the case of a developer. and/or each income+producingelement. the owner will be unaware of the consequences of a financially unsound project. Early in the project cycle. and income methods. market. as an indicator of how much to spend in constructing or improving a piece of property. lower attainable budgets for provision of space for a specific project. Cost Approach The cost approach (or replacement method) measures property value with an estimate of the dollar outlay necessary to replace the land and building with Chapter Two The Capitalized Income Approach to Project Budgeting (CIAPB) . Provide a performance indicator for cost control early in the project cycle to alert management to the need for value improvement. Facilitate treatment of each building. If the designer has a "costing out design" rather than a "design to cost" philosophy. the owner should be made aware of the differences in cost when compared with the owner's attainable rental income in the marketplace. The value engineer's understanding of CIAPB can result in an overall indicator of the required functions and the worth of a project. Propose realistic. Otherwise. If the owner wants to achieve a certain return on investment (ROI) for his partners or himself. establish the financial relationship between income and costs for each proposed capital expenditure. Mearuling Properq Value Real estate developers use three separate techniques for measuring property value. Each method may serve as an independent guide to an estimation of property value. CImB ObjecaVe5The value e n p e e r can use the CIAPB to achieve several objectives: Identify and consciously reaffirm or waive specific requirements that exceed the value provided by equivalent or alternate income sources. These are the cost. as an individual cost center. then cost control and value engineering (VE) to prevent cost overmns is a sound approach.

These properties must be comparable in condition and location to the proposed property. or market rate of interest (plus recapture provisions)+onstitutes a ratio of income to value at which property is exchanging in the market. cost of money." This approach requires the owner or his representative to determine the revenues that may reasonably be anticipated during the estimated economic life of the property. This approach is represented by the following generic equation: net income project value = capitalization rate The CIAPB process is based on the income approach to determine project value. Chaptm Two The Capitalized Income Approach to Project Budgeting (CIAPB) . Thus the generic equation to determine estimated total program costs (ETPC) for budgeting purposes is: ETPC = net income capitalization rate Meaning of Cupit&zatim The capitalization rat-" known as the going rate of interest. is generally accepted as a guide in the conversion of anticipated income into a sum of present value. determining the capitalization rate is a bit more complex. and they tell you they are paying an interest rate of 8%.improvements or equivalent utility under current conditions. You are curious to know how much money is left for you in the trust fund.000 (trust) For real estate transactions. Rate of risk. You call the bank. including recapture (capitalization rate). and quality level desired. especially when the property is acquired for income or investment. The gross income is reduced to net income and then capitalized (discounted) at a market rate of interest. However. Here is an example of capitalization in its simplest form: Suppose a rich uncle left you a sum of money in trust. every year you receive a check from the bank. which retlects the quantity. This ratio.000. Now you have all the information you need to capitalize the net income received into a present value for the trust fund: $10. Market Approach Using the market approach to property value. however. but he did not tell you how much. price data are gathered from recent transactions in which similar properties have been sold. and quality of the anticipated income stream. This year's check is for $10. Rate for nonliquidity-the rate necessary to compensate for relative inability to "cash in" the investment. style.000 (net income) . Rate of Interest The rate of interest consists of four factors: Pure interest-interest that can be secured on government bonds. or rate of capitalization. Costs are generally arrived at by market comparison. * Rate of management-the rate necessary to process and administer the investment. certainty. considering depreciation. Income Approach The income technique to measuring property value centers around the thesis that "value is the present worth of future rights to income. using historical cost experience of recently completed buildings of the class.08 (rate paid) = $125.

Fixed costs are the expenses necessaty to own and manage a property even if it is not occupied. Th Capit-&zationThe process of the CIAPB analysis involves three steps: - ~'~OC~SS 1. However. Chapter Two The Capitaliied Income Approach to Project Budgeting (CIAPB) . available financing terms. The capitalization rate could be indicated in tabular form as follows: Pure interest 9. Compute Net Income Second. Third. and may mean losses for the investor or lender. When placed into the generic formula. the basic formula is reliable and does not unduly skew results.00% Such a "built-up" rate. for purposes of gross estimates of value. This computation requires subtracting annual fixed expenses and operating expenses from estimated annual gross income. Such data would include potential rental rates and other costs near the location where the facility will be constructed. the desired rates can be obtained by asking what rates the owner is willing to accept in the analysis. or other considerations of real property investors.00% Risk 1 . Data collection from the market area is essential.and fourth-generation capitalization techniques have continued to expand this basic formula to account for such attributes as equity build-up. Local banks can provide the area norms for desired rates of retum on building projects. reduce estimated potential gross annual income to net annual income. research the community where the project is located. however.50% Nonliquidity 1.00% Management .The risk rate varies with the type of investment. interest rates. and the investor wants coverage of the mortgage amortization plus an adequate return on his or her equity investment. A city-guaranteed mortgage is relatively risk free. The use of these advanced techniques is encouraged with expert advice from an appraiser who is knowledgeable about the property. does not accurately reflect the motivations. Modified Band Rates The next generation of capitalization theory developed the Modified Band of Investment Theory based on more realistic assumptions: Ratio of equity x equity dividend rate (ROR) + Ratio of loan x amortization constant (CRF) = Weighted capitalization rate This formula simply states that most properties are heavily mortgaged. tax incentives. amount to retire a one dollar mortgage with interest over a specified term at a constant annual payment.. 2.00% Recapture (40 years) 2. Finally. possible property appreciation over an ownership period. Such losses are reflected in the applicable rate of interest. CRF = Capital recovery factor. and other considerations. and other available investment incentives. the following is derived: net income ETPC = (1-K) (ROR) + K (CW) Where: K = Ratio of mortgage to total project cost ROR = Rate of retum on equiw . However.50% Suggested capitalization rate 14. cost benefits. noninsured mortgages are high risk. Obtain Market Data First.

preventative maintenance.500 b.097336 Land cost = $15.442.1. Operating costs are the expenses incurred when a facility is used.77 = $5. including utilities.000 Estimated site cost (ESC) (land) Estimated design and review cost (EDRC) (7%) .77 per square foot per year Expenses = $8.500-2. you can base your budget on the unit costs to rent similar homes in the area.2. This example provides a construction budget of $86. taxes.550 Estimated reservation cost (ERC) (6%) $ 27.500 d. For example. which indicates the maximum amount of capital that a prudent investor would put into the project. and so on.000 square feet Site area = 100.066.500. An Example Using CIAPB Analysis Assumptions for this example are as follows: Gross building area = 315.352. computed as follows: General Application The CIAPB analysis can be applied to all forms of construction even when the owner is not in the rental business or actually receiving income. and reserves for repair and replacement. The maximum estimated total program costs (ETPC) will be: e.087.000 x $21.377. 3. custodial. Determine Maximum Construction Cost Next. security. From this. Total expenses will be: 250.000 x $8.300 Estimated construction cost (ECC) f. The gross annual income will be: 250.090. determine the maximum construction cost for the project by subtracting the other project budget centers from the capitalized project value. The basis of capitalization can be imputed income using avoided expenditures. Net income will then be: 5.000 = $3. Figure 2. if you plan to build a new house.442.00/GSF for the building. capitalize the net income.1 illustrates various types of imputed income for a wide range of projects.000 .36 per square foot per year Financing = 100% (30 years at 9%) CRF = . The maximum estimated cost of construction (ECC) will be computed as follows: ETPC 34.411. a.000 square feet Rent = $21.700 Estimated management and inspection cost (EMIC) (4%) .including insurance.2.550 1. A good source of data for expected income and expense for office type space is published by the Building Owners and Managers Association (BOMA). management costs. Chapw Two The Capitalized Income Approach to Project Budgeting (CIAPB) .000 c.090.000 square feet Rentable space = 250.36 = $2.00 per square foot The procedure outlined in items a through f below illustrates the sequence of steps used in applying the process of CIAPB analysis.442.

food service and room income Cafeteria Equivalent restaurant expense or loss of employee time to go outside Auditorium Equivalent theater income $P3 6:1 4 $*%d >&!$E & !J fgg &4* t4 &h kq p& &* Chapter Two The Cap~tal~zed Income Approach to Pmlect Budget~ng(CIAPB) .Imputed lncome Type of Construction Possible Methods for Computing Income Public School Cost per pupil based on payment of private tuition Wastewater Treatment Plant Community sewage charge Cost per million gallons Prison Cost per prisoner to house elsewhere Office Cost per square foot to rent space elsewhere Court House Cost per square foot to rent office space and to renovate it for court use Computer Space Cost to contract out computer processing Hotel and Motel Conference.

owners purchase insurance on their facilities to safeguard against catastrophic losses.6%. project construction costs rose 10% over what was originally planned.2 provides the economic summary of a Conmol project that was budgeted to provide aROI of 18. In the final situation. In the second situation. involved.1%. The income must produce a budget sufficient to construct the quality desired to justify itself. Considering how easily 10% changes can creep into a project. Chapter Tim The Capitalized Income Approach to Project Budgeting (CIAPB) . the ROI would be 13.Before spending capital for any project.2%-an increase of 66%. VE/LCC efforts would effectively dovetail with the purchase of property insurance and bring owners the knowledge that they are insuring a worthwhile investment. In many instances. both the construction costs and the operating costs are 10% higher than originally planned. actual application of the capitalized income approach to project budgeting and follow-on VE have resulted in doubling of the ROI. the resulting ROI is less than the owner would have accepted a poor ROI for the risk and effort during. This increase in initial cost reduces the ROI to 12. Figure 2. which can be reviewed on a cost per square foot basis. The figure presents several scenarios to show what would happen if construction and operating cost vary from budgeted costs: In the first case. The net result is an ROI of only 9. If this were the case. The entire financial feasibilityof a project can be drastically altered lo& before anythingis in the ground. the value of the budgeted amount can be checked against its economic benefits. The result is an ROI of 30. In all three cases. both planned initial cost and ownership cost are reduced by 5%. This result can easily be achieved by monitoring project costs throughout design and applying both VE and LCC techniques. In the &id situation.4%. T h N& for Cost h e r s have a critical need for cost control when they have justlhed a project budget to receive a certain ROI. The CIAPB determines the worth of the project.uhase and certainly. * Conclusion Typically. the imvortance of an effective cost control effort is apparent.1%. represents . the designed facility operating costs are 10% higher than planned.the -planning.

072.235 7.000 8.850.427(PWA) = $ 41.850.000 1.000 i.429.000 1.Economic Impacts of Cost Changes Hypothetical Office Building As Planned (Budgeted) Total Construction Cost Indirect Cost Land Cost Total Project Cost Less Mortgage Loan* Equity Investment Required Gross Income Operating Costs Net Income Less Mortgage Payment (Debt Service) Before Tax Stabilized Cash Flow Return of Equity Investment(R0I) Construction Cost + 10% Operating Cost + 1Doh Construction +lo% Operating Cost + 10% Economic VEStudies Construction -5% Operation.66% 30.110.305.000 18.305.740.0mx 9.000 4.m 0.000 5.000 3.422.740.000 8.000 48.75 x S 5.16% 12.740.583.000 3.427(PWA) = $ 38.583.000 4. 0.421.249.000 1.474.000 4.765 8.000~9.429.110.421.000 8.000 4.850.000 4.486.000 x 9.5% 34.000 1.072.387 0.357.850.427 (PWA) = $ 40.000 5.896.888.898.000 5.954.357.000 9.902.480.43% 9.435.000 3.435.000 4.000 5.384.757.850.12% 'Loan amount determined by 75% of net income capitalized @ 10% interest over 30 years.194 13.000 2.000 40.000 3.000 8.23% .000 5.75~S 5.75x s 5.429.


Experience has proven that the act of preparing the model is more important than actually having the model. other benefits include: Increasing cost visibility. w ~ t ha specific project. Organize the model so items above depend on items listed below. Make the total cost of items equal to the sum of each level. Helping to identify VE potential. it is an excellent way to document the effon of a prestudy VE review. Each element is assigned a specific block on the model. enabling one to see the high cost areas.' Once a model is prepared. the founder of VE. All models generically represent a work breakdown structure in which each pan works in relationship with the other parts. Providing a baseline reference for use in comparing alternatives. Normally. These relationships are illustrated in Figure 3. ldentifv cost centers at each level of indenture. develops cost breakdowns of each component or project element.reparing a cost model from a detailed estimate is a common practice in value engineering (VE) construction work. the cost model includes two types of costs: the actual/estimated cost and the target costs. "Work Breakdown Structure. The cost model is a tool that assembles and breaks down total facility cost$ into more functional units that can he quickly analyzed. and scope of the project. system. content. Costs are the foundation of value analysis. The value review team. or through levels of indenture. the study input is augmented by a cost validation effort to secure more meaningful costs." Models for any subject matter can be developed by obtaining cost or other resource information at the first level of indenture. the team uses available estimating data. However. The team adjusts the model blocks for each facility to better reflect the appropriatefunctional areas and estimating techniques. found so important to value work. - As a further enhancement.1. Preparing a cost model contributes immensely to the "mind setting" and "mind tuning" that Lany Miles. Chapter Three Preparation of Cost Models . augmented with cost expertise as required. or item. Some of the rules for making models are as follows: Work from the top down. then logically breaking down that information to subsequent levels. Preparing the model forces the preparer to become more knowledgeable about the size. whenever data is lacking or its validity is suspect. MakingModels A model is an expression of the distribution of costs (or other resources) associated .

L r --.Work Breakdown Structure (Levels of Indenture) Level 3 I 1 Component I 7 J -1- ---.- A I I~uba~sembl? ..-. component bubassernbl)/ -.

The major cost was a special ramp into one neighborhood. As a result. Figures 3. Implementation actions were lengthy.) Figure 3. wastewater.g. cost files on similar facilities. thereby enhancing the team's ability to review function-cost-worth. Figure 3.3 illustrates the same UniFormat level of detail for a manufacturing plant expansion project. UniFormat for buildings has become a standard in the construction industry because it is based on a building systems level of detail rather than on a trade breakdown. Note: A g e w d @@se cost model in an automated Excel format is included in the tools of the book's CD.4 is a cost model of a large wastewater treatment facility. with actual savings hard to identify. Some $50 million of initial cost savings were initially implemented. it is possible to develop a one-page visual analysis of the costs for the total facility.5.5 shows a computer-generated cost model of a large city highway network. The program totals both cost and worth input at the lower levels of indenture.8 demonstrate several cost models for a variety of projects.. most common work breakdown structure for a construction cost model of a ConstructimCost The building is based on the U n i F o m t system. the goal was to isolate functional cost elements. and airfields). The concern was several high-cost areas that were not related to basic function. The model isolated several major areas of cost savings. From the VE study. This model was developed from function analysis data gained from Figure 5. The cost blocks were developed in collaboration with owner cost personnel using functional analysis concepts.2 through 3. In this case. This body ofknowledge relates worth (target) to the system functions at the system cost level of detail.6 shows a cost model of a large dam. several months after the study illustrated in Figure 3. Figure 3. With a cost model. The costs represent the minimum cost believed possible for each block. This model indicates that the HVAC area has the greatest savings potential. dams. a state financial review committee questioned why more of the identified savings were not implemented. and several areas of design concerns were isolated. This model indicates that the architectural area has the greatest savings potential. Some Chapter Three Preparation of Cost Models . Figure 3. building systems are adaptable to parameter cost measurements. However.Subsequently. Figure 3. highways. (See Case Study Six for an in-depth analysis. some of which involved the impact of political concessions made by municipal officials. for example. some $150 million was saved. The cost model isolates several secondary function areas as high costs. secondary function ramps DN and CD. namely. a more intense appraisal-with costs upgraded as a basis for selection and political goals decreased-doubled the savings. the value engineer must create a special work breakdown structure for the model. diversion tunnel and spillway.4. For other types of heavy construction MO&h (e. Figure 3.2 illustrates a typical UniFormat building systems level cost/worth model for a pretrial service center building. Building systems can be directly related to one or two basic functions for each system. as used by the Construction Specifications Institute (CSI). The cost model was developed using the Function Analysis System Technique (FAST) Diagram concept (see Chapter 5). based on team experience with similar elements. This function-cost-worth approach is essential to the VE process. target costs for each project element are developed and listed below the estimated cost. These idealized costs are based on team expertise and a functional analysis of each cost block. The model was generated by breaking the project into component parts. The UniFormat standard has resulted in a library of historical experience of the square foot cost of various systems as well as parameter costs. and/or previous VE study results.3 was prepared using Microsoft Excel computer software. plants. Also.

9 Floors 118.Cost Model Value EngfneerlngStudy ~egend: VE Target ActuaVEsbmated: ~oj-k Location: Phase 01 W g n : Date: Pretrial Sewice Center Schemabc NOTES: Bldg. Type: -~ Corporate .040 Permanent . Type: GSF: Constr.

58 I I lsiteutilities I I &$ &+-* pj .26 4. Type: GSF: Const ~ y p e : SITE W O R K . Profit Site Prepzmtion 3.Cost Model Value Engineering Study Legend: VE Target ActuallEstlmated: Component was: or System LOCdliOm Phase 01 Deslgn: Date: Manufacturing Plant Expansion -Schematic NOTES: Bldg.

Chapter Three Preparation of Cost Models .

Chapter Three Preparation of Cost Models .

Chapter Three Preparation of Cost Models .

using some initial ideas developed by the ream. The savings generated-about $500. time. Actual implemented savings were approximately $30. they focused mainly on a revised layout of air compressor.000. Certainly. only lump sum cost data exist that are not really suitable for allocation to function without an extensive effort to generate additional data. and instrumentation equipment. and quality. The jack-up platform is a temporary unit used to house workers and supplies during construction. and aesthetics. utilities.The worth targets were established after team review of the project documents and function analysis. The model isolated high-cost areas: the design.$20 million in savings were implemented by the chief engineer. energy. Chapter Three Preparation of Cost Models .9 illustrates a typical space model. this model was developed along functional cost lines by using a FAST Diagram (see Figure 5. or all one can measure. the impact of these resources on the project.8 is a cost model of a prototype air separation facility. life cycle costs. The VE process can be as effective if cost is measured in some of the following ways: Square feet of space Weeks of time Kilowatt hours of energy Labor-hours Risk assessment In addition. and the actual gross area based on a takeoff of areas from delivered design work In this case. The savings were low because the design was over 50% complete. all the parameter measurements of quantity for a facility are resources such as: Tons of air conditioning MBTU of heating Fixture units of plumbing Kips of structural load * kW of connected load Note: Excel spreadsheets for conceptual estimating me included in the VE took section of the attached CD. quantity of materials. The following are .7 illustrates a cost model of a large offshore oillgas platform. In the early project phase. opt1mlzlng in examples of models that address space. electrical. Figure 3. it is not the only resource to which VE applies. but the facility was scheduled to be built in several locations. cost is not the full measure of value. Types of Models When resources other than costs are important. This model restructures the project estimate into more functional lines using FAST Diagrams of process and layout. It shows the gross square feet (GSF) of space originally programmed for a new manufacturing plant. all one knows about the project. Once the team realized that a general cost savings appeared feasible.7). models can be generated to assist . . structural. and the study was conducted as part of a training effort. Figure 3. and the VE team was asked to identify and isolate the apparent 30% space overrun. "worth" was established by the owner as the programmed amount of space. Other resources that represent value to an owner are space. Figure 3. Often. equipment.000. the savings were multiplied. and piping costs. . piping. Again. labor. who attended the final presentation. Thus. Space Model Preparation of a space model is highly recommended when a VE study is being performed at the programming or conceptual stage of facility design. OtherResources Although cost is the most common. is the area of various types of functional space.000--may not seem significant.

: Cost Model prow: Status: Value Engineering Study Phase of Design: Date: Offshore OIL-GAS P ! a t f ~ SAMRE DESIGN --.-Front End .-- -- Legend: VE Target: AetuallEsllmetsd: Choter Three Preparation of Cost Models .

DBtE Thousend NOTES: Type: OSF: ConaL Type: FIELD SUPPOR 281.6 RoDga -- .6 COMPRESS AIRBLAC WRlW AIR 421L9 605.9 1 lm5 X3.4 734.145.4 EWL AlR 676.8 I COMPRESS AIIIRBUC PROCESS - 6657.2 7.446.0 1 1.007.7 1.Cost Model Alr Sepatation Faclllty Logon* Value Engineering Study MTagel: ActuaMstmated: PhamdDeslgn .

..I I NOTES: BY. I lrsena L.rW: On.b.Space Model - Value Engineering Study F -. Manut.u1*II.ohlrlng Pbnl P= . M ~rpt: - ph. *cUMU. T W : .rolm.

See Figure 5. space for stairwells is always a secondary function as required by the codes). When the takeoff method for calculating area is not standardized. When function analysis worksheets are completed.Worth of space functions can also be established through historical data. Substructure has a value index (VI) of 1. One of the features of the energy model is the need to show the operating hours Chapter Three Preparation of Cost Models . especially in regard to seating capacity and type of parades. they normally stood in isolation from each other." for a detailed description of the process. the American Institute of Architects (AIA) method is used. What happens if the amount of space can also be changed?Would a 5% reduction in floor area represent a 5% reduction in project cost?Probably not. confusion often is the result. The value index can be determined for each function because the units of measurement for cost and worth are the same. cost is typically allocated to each function. "Function Analysis.3. Figure 3. the VE team uncovered several significant areas of confusion between user requirements and designer space interpretation. At the concept stage of design. An architect may sometimes be reluctant to indicate to the owner that the owner's space program is being exceeded. as represented by the type of system specified and the type of materials used.72 When both cost and space models were developed in the past. Another area of concern that has surfaced over the years is the lack of a standard approach to gross area takeoff.2 in Chapter Five. Construction Worth Model In performing studies.12 illustrates an energy model for a shopping center project based on kilowatt-hours per year (kWh/yr.10." illustrates the association's approach. and Supersmture has a VI of 1. In the process of doing the space model. lower floor-to-floor height and/or discreet layout changes would reduce this area. For example. In addition. cost improvement targets can be developed by assigning worth to system functions. this worksheet can be completed using areas of space in the cost and worth role. For standardization.). where the resource used was measured in square meters. merely selecting the high value indices as indications of poorest value from a unit priced cost model might not lead to working on the area with the highest potential magnitude of savings. Now the combined effect of both space and system changes must he analyzed. However.05 Superstructure = $1. The conveying system component of the cost model would be unchanged. Yet the potential savings per GSF is: Substructure = $1. space performance standards. Worth was taken from the AIA Graphic Standards using the Los Angeles Forum (basketball stadium) as a function comparison. A function analysis of space performed for a new sports stadium is illustrated in Figure 3. a 5% reduction in floor area would probably not change the number of elevators in the building. For example.1 7. in Figure 3. System characteristics. and elimination of secondary function space. It was prepared at the concept stage of design. When this occurs. Energy Model Another resource that can be modeled is energy Figure 3.This normally will account for targeted potential changes to either or both of the following: Svstem auantities.11. "AIA Area Take-off Standards. there is no recognition of a standard method of space takeoff.38. For example.

AIA Area Take-Off Standards Wdspaca (In) Le6s Thm 6'4" Bulkhead or Penthouse (Full) C C or Higher Chapter Three Preparation of Cost Models .

33 420.164 303 S RS RS S S S Total Prayer Ball Tea Room Ablution Toilet Boxes Patio Circulation Say prayers Prepare tea Wash feet Dispose waste View game Connect space Connect space RS RS B S RS Total Kiosk Public Toilet Concourse Corridor Store Space Circulation Serve beverages Relieve waste Route spectators Connect space House equipment Connect space S RS S S RS RS Total Seating Aisles Circulation Stairs Entrance Booth View game Access seats Access seats Access seats Control access B RS RS RS RS Total Field Track Inner Area Outer Area 5.400 4.75 2.00 1. vrp * Function Analysis .298 6.941 1.050 1.88 Use National Standards Delete ends Remove concrete rail'g 5f.55 1.627 Play soccer Conduct meet Bold team Permit view Total Cbter Three Preparation of Cost Models B S RS S 3.44 1.350 99 63 55 414 60 515 1 63 2.56 1.00 0.00 1.00 1.524 10.02 Reduce size Size of LA Forum Enterongrade Delete NO spaces/side 3.04 Reduce capacity=lO.108 RS 39 S 5 6 9 43 51 97 25 5 6 9 30 20 50 316 185 59 50 420 195 388 52 40 150 1 1 60 51 1.00 1.972 655 391 255 25 5.62 99.Space "7 && p?** Stadium 3 Funcibn Verb Noun Component Lockers Toilet Waiting 6 Activity First Aid Referee Room Entrance Toilet Coach Room Office Coach Toilet Supply Room Circulation Store clothes Dispose waste Instruct team Treat players store clothes Dispose waste Plan game Meet players Dispose waste store equipment Connect space Cbst Kind B M2 132 Worth M2 Value Index 66 2.OOO Delete dead end aisles Elimin.38 5.00 1. ' Remarks Reduce lockers bv 50% See above Size of LA Forum Combine spaces Combine spaces Delete Reduce size Delete Delete 10% allowance Total Kiosk Public Toilets Store Space Concourse Service Corridor Circulation Servc bevernges Dlspose waste House equipment Route spectators Connect space Connect space 55 138 345 1.00 ' .200 800 541 20.726 728 782 340 51 7.2 .416 4.85 1.47 1.37 10.412 6.00 Slze of LA Forum Two spaces/side Walk in on grade Delete enclosure 1.$f: .94 Size for 50 Size for 50 Reduce size 1. one crossover Use ramps at row 1 Provide one side only 1.296 5.11 2.71 1.33 2.00 195.33 5.00 6.84 1.00 I.44 1.00 1.43 2.400 3.48 0.

.... ....?~ =*KWH Nan-Study Areas Chapter Three Preparation of Cost Models .. NSF: 0' Dalgn!pnE! -- Enwpy Oclf: . . ..R ~ M shopplng Cbnter L~UO": -ofwm mfe: Notes: ~~. . ~~.?~$%!?. . .. EV-. ... ..

412 BTUH 1 kW = 3. changes to operating hours. all costs shown in the model can be equivalent annual or present worth costs. Figure 3.16 provides a thorough def&tion of the owner's project performance expectations. Worth for annual expenditures such as maintenance. Worth for the energy consumed can be taken from the energy model. 1 watt = 3. for the twelve major planning elements shown in Figure 3.412 BTUH Life Cycle Cost (LCC) Model The LCC model is the ultimate indicator of value to the client. Figure 3. and elimination of energy sources. From this model. alteration.13). This LCC Model (Figure 3.). That is.E In the preparation of the energy model in Figure 3. use of utilization rates for energy efficiency. The center of the circle represents the minimum response. These expectations must result in a consistent definition and understanding between the owner and the design team. The results indicated that to first have an excess of heat and then to run heatersldriets appeared questionable. the following dormation is useful. balanced or maximum response.15b) shows the capital costs for construction to be the area of greatest LCC savings potential. It encompasses both initial costs and running costs. Thus a full value p i c m of a facility is born. can be judged from historical data like that published by the Building Owners and Managers Association (BOMA). This sheet is used for present worth analyses of all costs. For conversion between the two types of models. Figure 3.16. The information is established from an interactive Quality Model Workshop at the concept stage. The LCC model can be based on either the annualized cost or the present worth approach.15b presents the LCC model (discussed in greater depth in Chapter Two and Chapter Seven). image concerns.7. Figure 3.14 is an energy model for an administrative building measured in BTUs per square foot per year (BTU/S. If desired. changes in system types. design criteria.15a is the LCC summary sheet from a recent study. the cooling load was isolated as a key area of potential savings. The model highlights the heating and office lights as the two significant high energy use areas. and performance standards. the costs can he converted by using a simple conversion factor. reductions in square footage. which outlines these costs and sets targets for analysis. replacement. the team focused on energy savings for the compressors and heatersldriers. w t y Model The quality model illustrated in Figure 3.per year for the various types of space as well as the unit rate: lkW/hr. Worth for the facility cost can be taken from the cost model. security. The quality model defines the overall expectations of the project representatives regarding project goals. or kW1S. in which owner representatives of the facility are polled for their concerns and opinions regarding their desired minimum. and so on. Worth is determined by asking "What if?" about potential elimination of the function.E/yr. This unit of measurement is often desirable because it facilitates comparison with "worth" set in that unit of measurement in published energy standards (see Figure 1.12.13 is an energy model for the oil/gas platform shown in Figure 3. Chapter Three Preparation of Cast Models . The LCC model considers optimum value because it takes into account all probable costs over the life of the facility. This consistency helps to ensure that original owner expectations in terms of functional performance are indeed met when the project is delivered and the facility is operating.

-SAMPLE DESIGN ~ E~m~d_ ~ r. .. - AduallEstlmated: Chapter Three Preparation of Cost Models .--.rrrrrrrrr..propu: Stalue: Value Engineering Study phaseof ~eslgn: Date: OIL-GAS Platform -Offshore -.-. -. .-..-.r -..

000 - S.050.500 SF Domestic HW STUlYR 73.890.837.000 w=w'Q 62.500.000 18.167.753.250.330.125.166 62.500 1.050.450 .500 Floor Arm NSF Floors: Quantities: 2 &d & $3 g-3 I i 1 Exterior Energy BTUNR 11.062.492.804000 154.375.100 Hra Slte BTUNR 11.000 Cooling BTUNR 256..500 SF Heatlng BTUNR I 562.500 SF Auxlllary Power BTUNR 705.725.187.000 lnterlor Energy BTUNR 2.292 (Arch) 62.000 11.I".000 3. 1 Energy Model Legend: Value Engineering Study VE Target: ActunllEstimated: + I Component WF - $ti Adrnlnistration Building 34 -k! && SO 9 ' 0 Completed Notes: - - project: Lowtlon: Phase of Deslgn: L W ~4 *-& E.750 10.153.000 11. - 69.744 14.050.000 1.500 685.500.500 Total 12.WO Hra 2.830.050.500 SF Cafeteria BTUNR 80.000 -b(lO Hls Sewlces BTUNR 42.580.000 Total BTIJIHWSF 4.100 4.000 4.500 43.433 9.000 2.125.625.000Hls Office Space BTUNR 1.000 62.500 SF 62.000 277.

900 987.888 0.000 10.410 13.000) (171.00% Capital Cost A) Design B) Construction C) PW Estimated PW 987.000) (1 71.2394 657.499.800 6.510 0.486 5l.000.485 OperationlMaintenance Cost A) Utlllties B) Cleaning C) Maintenance D) Building Management E) Security F) Trash Removal G) Domestic Water Total OperationMaintsnance (PW) Cost Total Present Worth Life Cycle Costs Life Cycle (PW) Savings PW = Present W m PWA = Present Worth of Annuity Chabter Three Preparation of Cost Models .000 30.925) (3.000.000 157.280 0.000 11.900 13. cash tlow) 30 Total ReplacernentlSalvage PW Costs Factor 0.891 80.510 43.3855 80.OW) Estimated D) E) F) Other Initial Cost Total Initial Cosl (IC) Impact Initial Cost PW Savings ReplacementEalvage Costs A) Cooling Towen B) Other Renovation (%) C) Chillers D) Cooling Towers E) Other Renovation (%) Year 10 10 15 20 20 F) G) Salvage (nea.800 6.888 43.1486 80.800 16.800 16.499.Development Phase Life Cycle Cost (Present Worth Method) Original Court House Date: Project L i i Cycle (Years) Discount Rate (Percent) Alternative 1 SO 10.0000 0 0 1 .000 11.000.925) 61.843 80.1486 43.843 0.3855 43.0573 (3.000 30.891 1.900 987.410 10.000 157.280 657.900 987.oooo 0 0 0.000.

Chapter Three Preparation of Cost Models .

Quality Model Engineering Performance Effectiveness Community Va User Comfort Environmental Effectiveness Architecture I Image Effectiveness .

The opportunity to utilize this resource and to combine it with the functionally cost-oriented value engineering is enhanced by application of the modeling methodology. and schedule are placed at lesser response. the owner and design team compare the alternatives with the quality model. or item was an important feature of VE in construction from its earliest stages. the quality model is used to ensure that VE design alternatives are consistent with original owner expectations. and a neutral opinion between the extremes. The document that results from the Quality Model Workshop is the Quality Model Diagram. Among the advantages construction has over the industrial sector is the availability of cost estimating resources and bid data.17. site planninglimage. Techniques of Value Analysis and Engineaing. Models can be developed that optimize the impact on a project of resources other than cost. During the workshop. energy. securitylsafety. McGraw-Hill. capital cost effectiveness. space. These alternatives are then reviewed in the workshop session.1 7 is a Quality Model Diagram from a recent workshop on a research project. Attitudes and expectations regarding operational and technical performance-having been clearly defined. users. The number of participants in the Quality Model Workshop should represent five points of view: financial. modeling is useful in the development of a design-to-cost philosophy set up by functionally oriented blocks. depending on the complexity of the project. The objective is to determine and document through group dynamics a consensus directive that will guide all subsequent decision making in the development of the design. Figure 3. which is illustrated in Figure 13. system. Each of the twelve major elements may consist of 20 to 50 subcategories. the VE team explores a number of alternatives that seek to optimize owner expectations. energy. User comfort. community values. those of lesser concern toward the center. facility operations. Miles.Second Edition. and documented-becomethe yardstick by which decisions are made. understood. the Quality Model Diagram records the relative choices of importance between the twelve major planning elements. Finally. design. Conclusion Referemes Chapter Three Prepmion of Cost Models Modeling to graphically express the distribution of costs associated with a specific project. Lawrence D.The quality model then serves as the foundation for the VE application. time. Along with a narrative. . and construction. During the early design phases. and architectural/image. Those items of greatest concern are indicated on the outer edges of the diagram. and risk. for example. As design proceeds. Project managers will find far-reaching usefulness in a tool like modeling. 1. The alternative that most closely matches the owner's functional performance needs is selected for further development. 1972. The model shows that the owner places high emphasis on operational effectiveness.

- Quality Model Research Building Engineering Performance .

follow the Job Plan. Changing elements to improve quality or performance to more desirable levels established by the ownerluser. and the VE services are planned and presented. without adversely affecting the overall project schedule. Schedule services to allow time to perform all desired tasks. This action should result in savings in the following areas: Initial capital construction costs. regardless of whether specifically requested. L Some requests for proposals (RFPs) for VE services indicate very little comprehension of value engineering. and life cycle costing (LCC). the VE team develops alternative solutions for specific functions. By using creative techniques. Ensure that the fee quoted is commensurate with the project value and size to offer a reasonable return on investment (R01). what services thev want. Phase the work. The response can: Structure the proper number of teams and select team staffing to provide a quality study. Predicted follow-on costs. It behooves those who respond to offer nothing less than professional-level VE services. both public and private sector organizationsare requesting value engineering (VE) services at an increasing rate. Chaptm Four P l m g for Value Engmeermg Serv~ces . The objective of a VE study should be to obtain the optimum functional balance among construction costs.I n today's climate. without detriment to costs of operations and maintenance and/or income. The value engineer can educate the client subtly. VE O&ctives spent. and maintenance. VE is a systematic. and apply function analysis and creativity. However. These services should use the VE methodology. preparation of models. and life cycle costs. such as collection of information.operation. many are not. sophisticated in their knowledge . and what they expect of the service. by the manner in which the response to the RFP is structured. both value and client requirements are improved by one of the following: Eliminating or modifying elements not essential to required functions.of VE. Adding elements that achieve required functions not attained. user requirements. Some of these narties are verv. multidisciplined teams. such as facility staffing. following the Job Plan. organized approach to obtaining optimum value for each dollar Tnrough a system of investigation using trained.

in annual savings. Initial cost savings are used to establish a fee target. initial cost potential savings of at least $1.1% to 0. If the project is less complex and repetitive.000. fees for that project would be lower.$500.Either or both of the above. Based on a 10:l ROI (a conservative ratio based on experience that would result in a 20:l R01 for total savings). Anticipated cost versus anticipated return on investment (ROI). VE study costs should always be computed based on the estimated amount of work needed to provide proper services. stage of design. total costs for implementing a VE program range from 0. the $500. Experience has shown that 5% savings of initial cost and an additional 5% savings (present worth) of follow-on LCC are reasonable initial goals for a welleplanned VE effort. One method of computing the study cost is to establish a savings goal for the project. However.OOO/year to realize $50. When planning for VE services.000 ROI This fee is based on a one-study effort on a fairly complex project. less time is required.000 in Present Worth of follow-on costs would equate to: $5009000PW 10.000/10 = $50.000 must be isolated to realize $500. constraints such as cost versus time. Number and composition of the VE team(s). less material needs to be covered than at working drawings. the cost should be checked for logic and reasonableness against the project cost as shown above.0 PWA = $50.3% of program costs (over $200 million).000.1 provides a nomograph based on a one-study effort that can be used to make a rough judgment regarding the affordable level of VE effort based on project size.000. Equally. based on results of approximately 500 projects.000 (initial cost) $500. more money (up to 0.000 (LCC present worth) $1.3%) must be allocated. project complexity.000/yr. Chapter Four Planning for Value Engineering Services . As a range. when results indicate an overall savings under conditions established by the owner/user. hve[ of Effm The appropriate level of effort for a given construction project is a function of several factors. and owner fee constraints.000/year in implemented savings. The major elements to be determined for a given study are: Total manpower and number of studies required. is 50% of the recommendations. fees for a $10.000 in implemented savings. since follow-on costs do not affect initial fees. separate plans are required for large.000. Figure 4. Therefore. Consider the following example on a $10 million project.) The average implementation rate. (See Chapter Seven for further explanation.000 (Total) Note: Using a 10% interest rate.000 to $50. multiproject programs versus plans for individual projects. and the degree of completion of the design. Therefore. mainly project size. Fees vary depending on the complexity. Savings goal = $ 500. Subsequently. the target fee for a study cost can be computed as follows: Initial Savings . the isolated follow-on cost savings should be $lOO. Planning for programs is based on: Program expenditures Budget and time constraints Desired results For example. If an otYner wants to maximize savings.000 project of one study would vary from $25. If the study is at early design documents.

ChaQter Four Planning for Value Engineering Services .

500 225. The proposed planning budget would be the following: Approx. some 18 projects involve approximately $160. this represents 5.or three.000 22. Level Project Cost of Projects A Over $20 Million 2 B $10-20 Million 6 C $2-10 Million 10 D In-house Proj. one team could be established to study that subject across all buildings on the project. plus 80 to 100 labor-hours (professionalonly) for pre. The number of teams necessary to perform each study depends on the complexity of the project and the extent of preselection of potential study areas by the value engineer and the client. Case 1 A government agency has an annual construction program of $200. What would be a reasonable VE program cost. Standard teams generally consist of three to six members who conduct a 40-hour study (not counting prestudy and pststudy work). The owner has decided that projects under $10 million will have only one VE study.3 ~rovidesan approximate level of VE effort as a function of the number of teams and number of studies. architectural/structuralteam.000. a two. mechanical/electrical team. Total Cost Approx. and Admin.000 Chapter Four Planning for Value Engineering Services .000.000. For example: Projects that consist of multiple large buildings with different functions might require one team per structure.0 labor-weeks or 200 labor-hours of effort per team. The lower threshold indicated a project cost of $2. Under time and budget constraints. and how should it be planned! Using Pareto's Law as a basis. In such cases. for early stage effort when there is minimal documentation. However.Normally.500 285. Teams can also be established to study related disciplines on large projects.000 $750. and design review efforts are linked using common personnel. e. the sizes of the projects should be analyzed to determine the number of projects (20%) that have the bulk of expenditures (80%). the initial study will be a three-day formal study and the follow-on efforts will be a five-day formal study.000 130. schedule.The second study would be conducted stage of design (40%-60%) completion. though a difficult one. the first study would be conducted during the design programming/schematic/ concept stage of design (+15%)completion.000 $110.and projects over $10 million will be scheduled for two studies. The result is usually significant savings in manpower and improved service. a five-day formal study yields the best results. If all external wall systems are similar on all buildings regardless of their function. The following two case studies are based on the author's experience. In this case. VE CostJProject Total $ VE study can be considered.g. cost. involving some 150 projects.000 of the total program.. civiysitework team.2 illustrates typical studyareas for buildings at various stages of design.000. and poststudy efforts. Mgmt. VE adTotalProject Management W used in conjunction with total project management is most effective when VE.000. In general. these minimal workshops may be an option. at the tentati~e/~reliminary/intermediate Figure 4. it is desirable to conduct two VE studies for any major project. Figure 4.000 47. For a five-member team. No.

Fire Protection MechanicalSystems SeIeoNon Refinement of Service & Distribution C O W *Input to Schematic Piarm *Energy Cotmewation Basic power supply A m c h to Use of Natural & Artifioial LigMing Perbrmam Requirements for Lighting Need pd f o r a l Eledrical Systems S i i Selection Site Development Criteria .Site Forms 8 Massing Requirementsfor Acass Wevm to/from Facility *Utility supply Site Draimge Chapter Four Planning for Value Engineering Services Detalled Systarn Sslednn IMal Syasm Drawings & Key DetallS Distribution I Riser Diagram 0utline ~pacincgtionsfor System Elements ~ ~ n h v e & ~ l gm h t n8 SYng Selectionof Llghtlng & Electtical 8ystems Oeneral Servlce. Onding. Details *Floor & Roof Framing Plans * W n g of Ma)or Elemefh *Outline Specifications ~pproaeh to rne~ttanam. Paving Plans Plan *Planting Plan ryplcal Site W l h r *Outline Specificattans for Site Materials LishnW Layouts *Outline Speclflcatlonb r ElecbicalElements . t o h m Building Roof Types & Pitch Interior Design Configuration of Key R o o m Organization of Circulation Scheme Need a Types of Vertical Circulation Impact of Key Equipment on Facillty & Site Passive Solar Ussga *Concept Elaboration *Selection of Wall Systems *Schematic Elevations *Selection of Roof Systems Room Dmalgn *Selection of Partitions *Circulation Sking Basic Elevator & Vettical Transportation Con~apb lmpad of Key Equlpmentson Room Dedgn *Elevations *Key Usvatlon Dctalls *Key Roonng Details Initial Flnish Schedules Interior Consbudion Elements Integralionof Shucblral Framing Key Interior Elevatlorrs Outline Spacincation Rr Equipment Items ~ a s l c~nergyConm!Aa l m p d of Mochnnical ConcepEs on Faclllty *Inlllal Systems Selection Sourm Aliocation Periormanm Requirements lor Plumting.Areas of Study General Project Budget LayoM Criteria & Standards structural Foundation Subshucture Superst~cture Architectural Exterior Closure Roofing Interior Consbuction Elevaton Equipment Mechanical HVAC PlumMng Flre Protectton Electrical Servioe & Distribution Ughting& Power SiW Preparation utllltlep LandscaPlng Conceptual Dedgn -r=W R m m Intsrpretntbn SiteiFaciliIy Magling Accass. HVAC. Power & DisttibutionConwpta m i l e d Syaarrm sabdion Distribution Diagrams *Key Spsa M g n Concept Elaboration lnmal ~i Plan Schematic Planting. Circulation Roled Budgel Design Intentiom Net to Gmss Ratios Schematic Schematic Floor Plans Schematic SecZions Approach to SyDtems lntegratlon Floor to Floor k l g M Functional Space Design Development Flow Plans ssctlons Typical Details Integrated Systems Space Clrculetlon ~peclncatlons *PerFomance fbqulremeida Shudurel Bay SMng Framlng Systems Eqhratlon Subsurface condkbns Underground Concepts lnltiil Framing Review *Structural Load Criteria *Schematic Bsssment Plan *Selection of Foundatbn Wtem * W u r a I System Selectlon ~Frsming Plan Outline *Sizing of Elements mBament F b r Plan * b y Foundation Elements.

Chapter Four Planning for Value Engineering Services .

+ $750. by analyzing the 18 projects.000 $110.000 in initial costs $200.000= 251 The above ROI reflects actual results attained in several agencies.000 for the early stage (0-15%).000 = 30:l Chapter Four Planning for Value Engineering Services .") Case 2 Assuming the same construction program as in Case 1. = 47%. The cost for two Level B studies are estimated at $17.000.000. since expenditures are reduced by approximately $350.000. with an emphasis on training and familiarization during the first year.10.000 Targeted ~otentialsavings would be cut by approximately 50%. By selecting the larger projects and those with the greatest potential.000.000.000 Administration Total Cost $350.00O/yr. Target savings for this program would be: $200.0OO/yr.000 C 1 Study 2 22.000 present worth of annual savings of approximately $500. the proposed planning budget would be as follows: No. Again.000/yc x Approx. Agencies with larger programs ($1 billion) have results in the 100:l ROI range.000 for the 30%-50% stage and $20.000 B 1 Study 4 30.000. less training and more application.000 capital cost $10.0 (PWA) = PW $10.000.The costs for the two Level A studies are estimated at $35.000 120.000. "Results of VE Programs.000. of Level Projects Projects Cost/Projects Total A 2 Studies 2 $55. if agency budget restrictions were critical. (See Figure = $l. This could be achieved by adding VE provisions on selected design contracts and reducing the required number of studies.500 45. in annual costs Present Worth of Annual Savings = Annual Savings x PWA (Present Worth of Annuity) = $l.for a total of $55. and 75. The cost for one Level C study applied at the 25%*50%stage is estimated at $22.OOO. and in the third year.000 Over $20.000 x 0.000 D Project Mgmt. Target savings for this program would be: $5. 10.000 present worth of annual savings $20. for a total of $47.000 Total LCC savings Return on Investment (ROI)= $10.000 for the 30%-50% stage.000 $5-10.000 Return on Investment (R01): Savings/Program Cost = $20. The program should be time phased. a minimum program would have to be considered.500 for the early stage and $30.000/$750.000 in initial cost $5. full implementation with minimum training.000.000.000/$350.500. $10.000.OOO/yr.000. some will have greater potential than others.500.000 Total present worth of savings is approximately: $10.000 $10-20. In the second year.000/yr.000.000 x 5% = $10.

Information Gathering Step What functions are being provided? What do the functions cost? What are the functions worth? What functions must be accomplished? 2. and a specialist in laboratory equipment. Regardless of the specific technical skills required for a project. The technical competence of team individuals is more important than the team's precise composition. Development of Proposal How will the new idea work? Will it meet all the requiremencs? How much will it cost? What is the LCC impact? Chapwr Four Planning for Value Engineering Services . Creativity & Idea Generation What else will perform the function? How else may the function be performed? 3. The Value Engineering Team Coordinator's (VETC) skills should be more creative. Open mindedness and enthusiasm. The simplest Job Plan follows a five-step approach that is integral to VE methodology. Too many members from the same discipline on a team tend to stifle creativity. Analyze Ideas/Evaluation & Selection Will each idea perform the required functions? How might each idea be made to work? 4. - The VE Job P h A key point of the organized M effort is the use of the Job Plan. If team members have more and better experience than the design team. Skill in selling and making presentations. Ideally. there are some universal considerations for team members: * The VETC should be a recognized Leader in the application of VE procedures to similar projects as those being studied. Ability to think quickly and write clearly. Steps in VE JobPlan 1. Preference should be given to using ~ e o p l who e have technical competence as well as the following traits: * Sensitivity to the problems involved in gathering information. The skills and expertise of VE team members must be tailored to the nature of the specific project. VE for a major biological research laboratory should involve personnel with design experience using special mechanical systems with HEPA filters. The Job Plan is the organized problem-solving approach that separates VE from other cost-cutting exercises. no more than one or two inexperienced members should be on a team. Key questions are answered at each stage. then results are practically guaranteed. architects with extensive lab design experience. with equal (or more) experience as the design team members. For example. organizational. Team members should be highly qualified. Disciplines on each team should be mixed. Perseverance in following through. ~eam members should have participated previously on VE study teams. and motivational than technical.TeamSelection The VE team should have a qualified professional (preferablya Certified Value Specialist) as its coordinator.

Analysis. all of the Creative. Preparingfor the Study: Preparing for the study generally involves the following: Prepare study plan and schedule. Pratudy Phase Prestudy activities should occur prior to conducting the study phase of the VE Work Plan. Thus. Set up owner/designer briefing for first day. Development. and Presentation steps.5. Information and documents are furnished by the designer and distributed to the team to prepare them for their area of study. equipment. The Work Plan serves as the framework for conducting the services. Advise team members. The success of a VE study depends largely on proper preparation and coordination. Arrange study facilities. Set up presentation time. Establish study location. The VE team should begin these three activities on the first day of the study phase.5 outlines the tasks for the study.t h i i of the Report step. Function analysis FAST Diagram development Assignment of costlworth to function C b t a Four Planning for Value Engineering Services . for large projects. and one-third of the Report step. All participants are briefed on expectations for their roles and responsibilities expected during the study. A work plan for the total VE effort incorporates the Job Plan in a comprehensive effort to deliver a finished product. Set up client idea review for midweek. Beginning the Infortnation Gathering Step: Whenever possible. Study phase: Perform the remaining one-half of the Information step. etc. prestudy activity falls into two categories: Preparing for the Study and Beginning the Information Gathering Step. The VE Job Plan is blended into each phase. Work Plan Study Phases The VE Job Plan can be blended with the study Work Plan as follows: Prestudy phase: Perform one-half of the VE Job Plan Information step. It outlines the Job Plan steps. before first day. As much as possible should be completed before the InformationGathering step except for the three following activities. sufficient lead time should be scheduled prior to the study phase to adequately perform several key areas of the Information Gathering step of the VE Job Plan. Poststudy phase: Perform the remaining t w o .4 is a flow chart of VE procedures. Arrange travel and accommodations. Presentation/lmplementation& Follow-up Why is the new idea better? Who must be sold on the idea? What are the advantages/disadvantagesand specific benefits! What is needed to implement the proposal? Figure 4. Validate cost estimate and draft quality model (optional). Distribute all project information to all team members for their review. Figure 4.

Chapter Fmr Planning for Value Engineering Services .

Prepan Alternate asslgn i-- +I..& cost ~ o . Envlronrnent Appwranw. ) -tVEMeataOmur.".s Quallty Model (Op4lonalJ W Select Areas Develop Costa Outline High Cost Areas 1 = F = v q * z w * ~ m:P r...*--1- i T??~~TZZ~~T& Project Study Phase Inlroducl~onby Program Coordinator Introducllon by Program CooMlnator Project Ocmcdptlon 6 Presantatlonby Dsrlqmr tndlvldual CreetiveThtnklng 7---w77.. a#tk..~.MI senlclvr d ' .. HI"..j wlth O*W..: Prepare VE Pmlimlnary Reporl Owner Approval OrnalDsafgnw Rspersa Rna( ~asponseulm Implemenmuon Fwornrnendalfans Submlnalto O w w Flnal Repon w l h lrnpl-tatlon Redexlgn 5 I - w . riI: t+ I We Cyck Comparison + ft !d i lkndop-tlwa ! SunmsrirrFhding.e.I. Dlatrlbuteby Funcllon ni+frlhute .5 4 9* g$ 9 Work Plan Phases &j k6$ Pre-study Phase Vertly Schedule Collect Design Data I Ouillrta Format tor Cast Data OisWbuC to Team Membma 1 Suggasted F m t lnf ME Verity Cost Deb I Outllne Necasslq Background .c"~=md. h ~ Construct Energy Model Oull~nePotentla1Enerqv I Collecl Data re: Mods OpbraUon I Ovtllm Pmkcl Aeapon8lblllUea Famlllarimtlon by Team Mmbma 1 8 . w Bld Analysls 4 :L I! k L Chapter Fow Planning fm Value Engineering Services !6: 5.a~---=9&-& 33 i' uascnec~i~s~ br QP t 23 Eilminalelmpractlcal Ideas I Develop Preliminary Deslgn 01 Rank ideas wllh AOranmges h Dtsadvantaoea. Safely.: it 1.AIE / OlldPfmmwh 1"- I!Detnn*HA-tarcr~fW q Rwlev i- Irt.PllE Select Beat Ideas For Devehopment 4 & !.A .3. ~onstruct. W W g M EvaluElon hctvdlnp on-~mnornk ~onaidamtlons. MalntalnaMll(y. Dab Oualne P m W t Consiralms ri 'k ib.. etc. Tred. Rollabillty. ...

and selection of specific areas for value improvement. and implementation costs are determined. impact on LCC is analyzed. the team quickly does so now. If the major cost elements were not validated during the prestudy phase. Read and review all information prior to the study. Pressing such proposals might have a detrimental effect on the acceptance of other study ideas. and ask for it. sketches are prepared. Whenever possible. Benefits are identified and estimated. "Process Data Requirements. The VE team will not waste time develaping proposals that have no chance of implementation. from their points of view.6. if authorized by owner. They should be asked to leave telephone numbers of key points of contact for the VE study team to use during the study phase." if applicable. During the Development step.Information step activities to be completed during the prestudy phase include: Obtain the following project data. assignment of cost and worth to functions. permitting a better opportunity for acceptance. specific recommendationsfor changes are prepared. completion of the worth models. Prepare all models in advance. Client concerns regarding the study outcome are alleviated. the client/owner and A-E should be involved before ideas are selected for development. There are many advantages to client and A-E involvement during this step: The VE team has a forum in which to discuss advantages and disadvantages with the owner and A-E. The Information step is concluded during the study phase by team preparation of the project FAST Diagram. function analysis. Prepare a list of questions or clarifications to ask during the design briefmg on the first day of the study. The VE team then accomplishes the Creativity & Idea Generation step during the study phase. This ensures project familiarization. Chap~rFour Planning for Value Engineering Services . - Study Phase The Information Gathering step continues as both client and designer conduct presentations of the project on the fist day of the study. Validate cost estimate and draft quality model as required. The Analysis step involves the judgment of ideas. calculation of the value index. As many ideas as can be generated are listed. The VE team can judge whether or not disadvantages to specific ideas can be mitigated or modified to be made acceptable. typical for buildings: Program of requirements Design criteria Project constraints Master plan (if available) Environmental assessment Pertinent building codes Alternate designs considered Drawings and outline specifications Design calculations Site utilities and soils data Detailed construction cost estimate Obtain special data typical for buildings housing processes shown in Figure 4. and incubation time is provided for the ideas. Make a list of all missing data or need-to-know data.

each piece with: AdministratlonlPurchasinglSalesData 0 Manpower plan working hours salaries~benefits ~2-2 production capacity horsepower 0 Organization chart LA utilities required cost 0 Sales.%3 e2 e"i 65b Q Process flow chart 0 Equipment list.gk*. each with: acceptable reject rate gx..q$ 8"9 expected volume market value WarehouselShipping Data 0 Financing period Q Equipment list. $2*-j $7j 2 fQ "3 0 Items produced. *+ *-" "F+* 3 [~g Other vendor purchases volume and cost to support production 0 Raw materials.[ $ ' j r": Process Data Requirements t-4 Pi$ ptj $2) Manufacturing Data *9P g. each with: &% .* p> i. hi energy consumption maintenancehepair custodial security Economic Data 0 Desired return on investment (ROI) a ii4 ?r $Z 0 Estimates of other annual expenses annual production volume . each piece with: production capacity horsepower • cost 0 Interest rate for analysis purposes Q Packaginglshipping methods Escalation rates salaries energy raw materials 0 Stock level Life span for analysis maintain for each product shelf life for each product Chapfer Four Planning for Value Engineering Services Q Overhead rate . each product I-: c4 5d rj s 4 g9$ 0 Production manpower plan shifts or schedule salarieslbenefits 63s .*>: S* $2 days of inventory needed rate used in production +PJ- waste unit cost &l $4 t"$ .4 by$ &$ I$#! $23 84 .

Level of effort for a given construction project should be reflective of the savings potential. outlining the participants and milestones involved in a typical VE study. and to estimate initial and follow-on cost impact. The appropriate level of effort is a function of factors such as project size and complexity as well as constraints of cost versus time anddegree of design completion. These can often be addressed by modifying proposals to mitigate the concerns expressed. the VE team should listen to responses and questions after the presentation. In addition. This phase normally consists of: The preparation of a preliminary draft VE Study Report for distribution to the client. is included on he attached CD. A firm foundation for a study can be assured by the careful selection of a Value Engineering Team Coordinator (VETC) who has expertise in group dynamics. Cmlmim VE is an organized approach to problem solving. including foursections that eLiU quicken the assembly and prepmatim of the report. Figure 4. On the last day of the study. and careful attention to level of effort. Proper planning for VE services sets the stage for a successful study.The Presentationflmplementationstep also begins during the study phase. "Typical VE Study Process. It indicates the interactions that occur among the study participants. The preparation of a final report documenting the decisions of the implementation meeting. an automated format for rhe VE report. Integration of the owner and designer into the process enhances study results." is a chart of the process. A Work Plan that incorporates the Job Plan serves as the framework for conducting services. Postst& Phase d The balance of the Presentation/Implementationstep is completed after the formal study time by the Value Engineering Team Coordinator (VETC). Chapter Four Planning for Value Engineering Services .7. The purpose of the presentation is to explain the merits of each idea and the rationale for acceptance. with or without selected team members. Effective planning includes team selection. and team members whose skills reflect the technical needs of the study. An implementation meeting with the client and designer to discuss their responses. the VE team makes an oral presentation of its proposals to hoth client and designer representatives. development of a Work Plan that incorporates the VE Job Plan. Note: As an aid for the VE engineer.

Post-Study Phase Team Coordlnator Design Consultant 1. P m m t VE pmpouls Deslgn Consultant 11.4 Owner 2BrlefVEtaam A Conduct VE study S. 4 qr: t -3 $4 4 R f$ f$ fy fttp Typical VE Study Process Participants and Milestones I. RWW VE i d u s 4. BrIefalM team L Revkw WE Meps 6. S ~ b m l t h qualMutions and c o ~pmpoul t S. Comment on Team's P-Won 10. M report 4. Comment on each YE proposal Owner 3.$ ! "6-8 f%% Ill. Attmd VE team brWng LYd * Id VE Team pmpouls 7.lnmrpomta 8cop of .Auambhnridlead M study team *" k: 2 p. Pre-studyphase VE Consultant Owner Owner Deslgn Consultant VE Consultant W VE conmuttant 6. implement approved VE changes 7. Attsnd VE 6tudy pmsenmtlon O . Review designer Comments A Appmve or disapprove each VE proposal Chapter Four Planning for Value Engineering Services Design Consultant Team Coordinator B. Prepare Rnal report (optional) . Preparedrafl repon 2. Dlstributodata d i>.Jj #-J b$ $9 k$$ tj +c:+ II. Provldm dulgn data approved VE changes h SohOdule VE study - I. Pmpan M S. R w k . Identify t a m members KS 4. Study Phase Team Coordinator Design Consultant 1.G.3 g?3 A $.crvlcs in VE wnbact 2 Adverti~a VE procurement 3. Pnpammodels 10.


standards. the basic function &a match is to generate flame. a new category-required secondary function-was developed by the author. Basic Function Basic function is: That which is essential to the performance of a user function. The glossary accompanying this text provides definitions for 24 different types of functions that all value engineers need to study and understand. One cannot eliminate a basic function and satisfvthe user. Without this innovation.F unction analysis.generated without the tip. or secondary function with no worth. For example. the study of design performance. VE does not recommend changes that eliminate or compromise basic function. or The function describing the primary utilitarian characteristic of a product or design to fulfill a user requirement. The phosphorus tip is classified as a basic function. Required Secondary Function Since the construction field works according to many codes. and safety requirements that must be met if a permit to construct is awarded. is the heart of value methodology. "Can the function be eliminated and still satisfy the user?"If the answer is no. A required secondary function is any function that must be achieved to meet codes. standards. resulted in a project worth so low Chapter Five Function Analysis . the function is basic. the worth of the project function developed under the classical approach-ither basic function with worth. It is one of the few things that makes this technique different from all other cost reduction techniques. Funcam In an effort to make the classical methodology work better in the construction area (as opposed to the industrial area). the classifications of function were modified to include the following: Basic function(s) Required secondary functions (modification to industrial area) Secondary functions These classifications are defined in the following paragraphs. or mandatory owner requirements. The key function of all those defined is the basic function. All basic functions must be achieved as the result of VE. No flame can be . - The determination of a basic function is made by asking.

the fire protection system function is to contro~extinguishfire-a secondaryfunction worth zero. As such. Functions can be defined at various levels of indenture. or school project were to include a cafeteria. The work and effort to prepare the FAST Diagram is not perceived as worth the benefits gained from project understanding. Why not try to prepare one on the project as a whole. One can still challenge the extent and manner of performance. It brings out Chapter Five Function Analysis . The next higher-order function is to generate sales. Secondary Function If secondary functions are removed from the design. hospital. under the classical approach.1. making marks. The slab's basic function is to "support load. Thus VE methodology can be applied to everything. For example. you could still support load. the function of a store is to sell merchandise. Everything that exists has a function(s) that can be defined in the two word. a value engineer asks. Their rationale involved the (FAST) repetitiveness of redefining building functions that really never vary from project Diagram to project. "FAST Diagram Procedures. as well as a detailed FAST? When VE is scheduled early for a project. both the basic and required secondary functions can be realized. However. one might explore alternative ways to feed people and achieve implementation with a higher success rate than working on alternatives to teaching students. "What is the function of the building?"For a prison. to treat patients. However. to teach students. if a prison. who would build a hospital without a fire protection system?Classifying the function as a required secondary function having worth is a more realistic approach." If the leveling slab were removed. Patients can still realize treatment without this system. Consider these examples: The label on a pencil that identities product is a secondary function. provides greater opportunity for savings. Project Funnia Figure 5. Analysis SYS~Y?~ In recent years. At the project level. the impression it made on peers negated any value gained. The basic function of the pencil. the probability of success for the value engineer working on the higher-order project function(s) of the project is relatively slim." is the traditional FAST Diagram for taking project functions and arranging them in logical order. because implementation does not depend on major project changes. There are other ways to understand the details of a project. for a school. can be achieved without the label.that the value engrneer appeared "foolish" to peers. and the next highersorder function would be to generate profits. value engineers performing studies in the construction field have often omitted the preparation of a FAST Diagram. for a hospital. Deking FUmtim Functions axe defined by using a verb (active if possible) and a noun (measurable if possible). the basic function of a hospital is to treat patients. the project-level FAST Diagram helps to define the purpose(s) of the project from the owner's point of view. the value engineer may be missing out by skipping the FAST Diagram. this does not mean that the VE team should not challenge the project function(s) if there are strong feelings about it. For example. the project function might be to confine convicts. For example. But. such as performing a cost estimate validation or a design review. their worth is zero. verb-noun form. Using the classical approach. however. A secondary function would be a leveling slab under a slab on grade whose function is to prepare subgrade-a secondary function. but the function is required by code. Working at the lower level of indenture. Unless the VE is done at the early program phase. In most cases.

FAST Diagram Procedures FumUOnStha Chapw Five Function Analysis .

5 is a FAST Diagram for a supporting service of automatic fare collection for a mass transit system.3a and 5. graduation ceremonies) for the army. The FAST Diagram focused on the high cost of sending tapes and correcting data. objectives. When these functions were presented to the commanding general (the user). Figures 5. this vital aspect of the VE study would not have been known. Figure 5.g. It seems that traffic to get to them was unbearable and several patients had died in ambulances from beltway accidents. This FAST Diagram and the life cycle cost (LCC)model in Figure 5. challenging the function of the project paid off. It provides a logical approach to get the team started on a solid basis. New equipment and methods were isolated that cut cost and time by 50%. Use of the FAST Diagram technique has proven to be of exceptional value (see example presented in Figures 5. It provides a valuable "mind setting" and "mind tuning" about the project in a short period of time. The function analysis was costed out and isolated the high cost functions as being ( 1) to divert flow (temporary tunnel). Instead of building a hospital. the team recommended using a helicopter service to save time. Failure to explore the function of a project leads the value engineer to overlook the obvious by assuming knowledge.2 illustrates a FAST Diagram prepared at the project level for a new 15. This task consumed more than half of the 40-hour workshop. T. patients downtown. It facilitates presentation and discussion of the project's overall goals with the designer and owner for better communication.. Without preparing the FAST Diagram and discussing it with the user. the basic functions of the hosvital were to save time and to treat patients. and Welfare (HEW) for a grant to build a hospital next to the beltway circling the city. The study resulted in using the temporary tunnel as part of the final design. - Figure 5.000 seat stadium on a military base.2-5. the team looked at alternatives to save time.lere was plenty of room to trea. It was necessary to do the FAST Diagram to find out what was happening and to develop labor-hour and cost elements for the functions being performed. and aspirations. and (2) how spectators and participants were invited to attend.however. Idea generation had to be a concurrent effort to develop meaninghl proposals within the workshop. The VE team thought the basic functions of the stadium were to conduct competition and ceremonies (e.3b are existing and proposed FAST Diagrams for a departmental contractor information system of a large federal government agency. In thii case. These costs appeared inordinately high when compared to the basic function of the dam (store water). thereby allowing the spillway to be reduced in scope. Education.11) when firstetime VE applications on a project type are conducted. One can assume that the function of a hospital is to treat patients. Preparing a project-level FAST Diagram has the following benefits: It allows a quick function challenge to validate or question the proposed conceptual design decisions. so. In this case. and (2) to relieve pressure (spillway). but the patients could not eet there in time:.6 focused the VE efforts on the LCC for the passenger agents and their Chapfer Five Function Analysis .. but consider the following case: A request for $63 million was received by the Department of Health. even though existing city center hospitals were using only 50% of their bed capacity. Figure 5.the owner's goals. he said it also would be used to parade tanks. Preparing the diagram led the team to challenge ( I ) its size based on where it was located.4 illustrates a FAST Diagram developed for a dam project to be used for a water resewoir in Taiwan. It surely influenced the type of ideas presented and the user's receptivity to those ideas. both of which were required secondary functions.

Construct Event Facilities - Accommodate Spectators b Construct: F Bleachers Concessions *Toilets *Support Space . Ceremony - AccomInvite modate Participants Participants - Accom.modate .- FAST Diagram Stadium I WHY? Improve Readiness Conduct Competition - - .-Schedule Events Conduct .Spectators -- - I Improve Fitness Facilitate Camaraderie -Improve Morale Witness Event Accommodate Participants b Construct: b Fieldrrrack Locker/Toilets Referee Space First Aid Equipment Storage Invite Units Invite Public Establish .

- Initialtransaction flow (15.FAST Diagram Contract Information $stem .847.000 Legend: OM6 Office of Management & Budget IRS Internal Revenue Service - .Existing .849) Estimated Total Cost = $1.-3Error correction transaction flow (3.-.821) ! =.

On-line Initial transaction flow (15. . - Transmit.821 total transactions) =-I-.800 .849 transactions) Estimated Total Cost = $ 823.2 w 8 FAST Diagram 9 - g Contract Information System Proposed g R 5' 3 > 5 8. Error correction transaction fiow (3.


Store Tickets C o u n t Revenue .Maintain Equipment .FAST Diagram Automatic Fare Collection System .

Life Cycle Cost Model Value Engineering Study Rapid Transit System pmlect: Section: Automatic Fare Collection Phase of Deolgn: I Date: Component or Legend: NOTES: VE Target: ActuallEstimated: All costs in Present Worth NT$ (TaiwanDollars) $1 US = 26 NT$ ~ Chapter Five Function Analysis .

7 illustrates a FAST Diagram of an air separation facility designed to produce oxygen. and so on. For more information on FAST.11 is a FAST Diagram outlining the steps of a typical VE study. and is briefed on project objectives and constraints. in one page. Cm'wim ChaQter Five Function Analysis As an aid to better understand the process. a FAST Diagram for one office building is basically the same for all office buildings. . - For typical buildings. outlines the key functions performed in a VE study. Ekch task has been isolated and set forth using the "how-why" logic. A final study recommendation to use an upgraded automatic fare card (AFC) to issue larger value tickets. standards. As a result.9 is the function analysis form used recently for a hospital study. This diagram. combining and modifying equipment to reduce both initial costs and LCC. In practice. and/or mandatory owner requirements. the study focused on the equipment and architectural areas. see the articles on the attached CD. The basis of the worth generated in the function analysis is: Historical costs from VE effort for those cost blocks. Figure 5.10. is developed from data from the cost validation and from the function analysis (Figure 5. For additional examples. which reduced passenger agents' work. very few secondary functions exist. a standardized cost model broken into functional cost areas has been used over several hundred building projects. The cost model provides insight and guidance for future team action. Overall savings potential was also indicated. Figure 5. illustrated in Figure 5. validates the cost estimate. Most are required secondary functions because of codes. The FAST Diagram was converted into a functionally oriented cost model. Blank VE study forms are contained in the Value Engineering Workbook presented in Part Three. cost forms are linked to move data automatically. This holds m e for schools. Initial savings of some 10% were implemented on a long-standing company product with a similar reduction in LCC. Alternate system or material concepts to meet requirements.required duties. For typical building-oriented VE. The exercise helped focus results on consolidating the design to reduce piping and electrical costs.9). Figure 5.Then the function analysis is performed.8. hospitals. based on team experience. In this case. Ideas isolated during the reviews that would affect the cost for that block. The VE team first reviews the project documents. Figure 5. was approved. see the case studies presented in Part Two. This study exemplifies the benefits that can accrue by using FAST and combining it with other techniques. The cost/worth model. police stations.

Vented Nitrogen.Gaseous Nitrogen LPOZ .Main Compressors.Waste Nitrogen. - - Cool Air 02 - -.FAST Diagram Air Separation Facility Produce HP . HPOZ .Low Pressure Oxygen. Cool Air 02 I I - I I Store Lp o2 I vent VNZ-GNZ OK? Cwler I 5 6 % 6 5 56 Reject Heat I Alr Booster Operate Pump f I I 02 p 6 - I I operate BAC Regen WN2 6 1 8P $ 5 1 Operate Chiller I I 5 Operate Remove lmpuritles G 5 29 Fin Fan $ 6P I Purify Air I I . VNZ .High Pressure Oxygen BLAC .417 6 5 $ 1 1 operate ' B c:l 5 * - Deliver LP Produce LP 6 6 % 2 02 \ 7 ScCWeeLine Legend: WNZ . I Operate Compress 5 . BAC . GNZ .Secondary Compressors 8 f B 6 65 S 66 6 I 5 62 Intake Air .

4- Equlpmenl WPlnS PlpiKI Bulldlnp 1 u BOA % Electtical 2M.6 - Bulldlngs - Plplng 21 3 - Bulldlngs 12 9 2 0 1 1 918 1 Eleclrical Electrical Structural Stwl - Equipment Pl~lng - 79 o 119.4 4.47&0 --Piplng iao Foundatbns 20 o 20. 1605 50s 9 2636 SEPAflATEY R ~~~ 2.0 Bulldlngs 129 0 201 0 Equipment Foundatbns 23.4 - 210.- VE Target: AduaUEstimad: .1437 7.9 49..O C Foundalbns Electrical ? ---.Tvpe: GSF: Con* Type: - I PROCESS .176.6 Instrumemallon - 13 1 In~mentatlon - .1.O Equpmew Equipment - 129 2a1 I 3190 $555 W5 129.246.8 Plping 45. flP1W 104 - 43Q InstrumcXnatlon -- 18 1 Electrkal 60 8 Equipnew 2.007 0 5754 7516 1.0 89 9 120 0 2f9 7 *- Electrical ML8 53.446. 2. 473 9 lnslmmentatlon Stmdural Steel Slruclural Steel Structural S l w l Strwtural Steel 30 L O 30 60 17 0 22 0 hO 54. Legend: Value Engineering Study Location: ~rolotype Phaae 01 ~saiw: Schemstic Date: -.3227 P Foundmlbns Fwndatbns iao LO 90 204 0 %CQBulldlngs Buildings 3395.a 4.0 8002 4.0 103 2 Equipnenl Foundations 30 1608 - Foundations 300 15.0 30 13 0 1M.733 8 -- OTHER .4 COMPRESS AlRBPiC PURIFY AIR COOL AIR m? .4 lnstrumenlstbn 4938 595.0 25.0 Buildlnga 2426 136.4 495 lnslrumentatbn Inslmmentation .Pro- B'aa.0 118.246.--!#=72 COMPRESS AIRBLAC - .5 Electrical 33.Cost Model Alr Separation Facility ~olsa.---*A 1.

FUNCTION ANALYSIS WORKSHEET PROJECT: Hospital ITEM: COMPLETE LIST BASIC FUNCTION: Treat Patients COMPONENT COST1 NNCTlON KIND COST DESCRIPTION WERENOUNl WORTH -.201 1.200 1.37 ARCHITECTURAL 04 Wall Closure Enclose Space B 05 Roofing Protect Bullding 06 Interior Const.696 3.816.333 633.867 1.408.87 B 1.520.905 1.747 1.667 110.904 6.387 2.004 1.267.83 Revise layout 124 OKSite Work Supply Utilities B 138.566.667 50.367 1.70 TOTAL MECHANICAL 081 Plumbing Service Building B 2.789 4.320 985.780.639 1.60 121 Site Preparation Prepare Site RS 62.428.526.933 1.809 1.299 1.30 RS 800.787 281.25 TOTAL STRUCTURAL 01 Foundation Support Load B 02 Substructure Support Load RS 03 Superstructure Support Load B TOTAL Reduce percentage 5.787 492.34 Eliminate water level 960.133 1.653 6.701.597 4.079 1.755.278 1.25 082 HVAC Condition Space B 4.116 567.469 1.442.36 3.896 1.47 8.734 1.667 3.225.693 1.557 704.845 1.62 RS 933.45 B 7.882.39 Relocate structures 123 Site Utilities Supply Uiiiities B 2.25 122 Site Improvement Improve Site RS 1.230.578.129.267.791.224.253.404.660 1.126.00 11.149 1. B = Basic Function S Secondarf~urklion RS ~equirdseconda~ Function - - COMMENTS SITE WORK Overhead &Profit Manage Work RS 907.60 1.469 1. Finish and Divide Space Transport Weight 07 Conveying System 1.39 Move substructure to grade level Simplify structural system 5.667 1.580 1.84 RS 408.61 9.33 083 Fire Protection Protect Building and People 084 Special Mechanical Control System TOTAL Note: Cost in ConstructionCosts with no contingency or escalation Replace granitelmarble with precast elements Reduce space Change wall construction from gypsum to CMU Consolidate waste and soil line Use unitary cooling Limit sprinklers at public areas Page 1 of2 Chapter Five Function Analysis .

519 4. TOTAL 1.333 9.733.25 Centralize load - 092 Emergency & UPS Backup Power 093 Ughting & Power 094 Special Electrical Light and Power Space Support Systems - RS 2.299 1..373 1.479.779 844.408.133 1.667 1.667 690.-- FUNCT'ON KIND COST NERB-NOUM WORTH COMMENTS .421. Project Generate Profit RS 7.267.58 42.022.5% Demobilizesite RS 252.53 RS 3.000 10.54 1.71 7.FUNCTION ANALYSIS WORKSHEET PROJECT: Hospital COMPLETE LIST BASIC FUNCTION: Treat Patients KEM: COMPONENT DESCRIPTION COST1 .669 647.846 6.417 161.096.979 1.941 1.938.333 B 1.262.093..469 112 Furnishing Support Program B NIA NIA 113 Special Const.72 17.112 4.5% Manage Work RS 1.086 809.785 1.56 Site Overhead 2.009.333 1. Distribute Power B 862.692 66. B Bas c ~ G c t i o n.576 1.809 1.929 1.56 TOTAL OVERALL TOTAL Chapter Five Function Analysis 10.56 Reduce Percentage .153.760. Support Program B 15.292.435 1.56 * I I Office Expense & Profit 15% Admln.943 1. Equip.56 " rn Dernobilization0.280.986 1.859.013.70 Medical Equipment TOTAL Improve light GENERAL Mobilization 2% Mobilize Site RS 1.672. Support Program B 1.703.~ z n d a r Funct~on y RS Required Secondaly Function ELECTRICAL 091 Service & Dist.572.49 EQUIPMENT 111 Fixed & Mov.410 1.53 Use local market Use local market & postpone expensive equip.262.


Fast Diagram VE Study Scope of Study Chapter Five Function Analysis .


or any combination of these. ranging from discovering something that is new to oneself.2 illustrates this phenomenon. Fixation can force the use of traditional approaches over more creative ones. parents begin to restrain their children with rules. the nine-dot puzzle in Figure 6.3. The result of fixation is that the likelihood of solving a problem diminishes with the passage of time. develop. establishing fewer boundaries in their problem solving. and formal education takes a toll on creativity. and implement ideas. "Creative Ability Versus Age. Because of the team element in the creative process. Creati~tr adFiwatihn When one addresses a problem. As time goes on.with training and deliberate practice in creative techniques.2 is normally solved more quickly by homemakers than by engineers. to patenting an invention. to discovering something new to someone else." work experience ingrains into the mind what will work and what will not work. fixation may occur. The example in Figure 6. may be inclined to reach out more often.1.") There are many levels of creativity. By the time the child grows older and arrives in the "real world. artists. Homemakers. a relationship between people. on the other hand. Fixation is addressed in the value engineering (VE) process because it can numb capacities to create. everyone can regenerate and become highly creative. if a solution is not uncovered within a short period. The longer one seeks a solution.C reativity refers to behavior that uncovers a relationship where none previously existed. Figure 6.2 demonstrates the need for a multidisciplinary team for optimizing results of a VE exercise. the further away it may seem. It is the author's belief that we are all born with creative ability and display creativity uninhibitedly as children. objects. For example. symbols. and architects. Creative techniques are gimmicks (or exercises) to help one overcome fixation. Fortunately. (See Figure 6. The solution to the problem--going outside the d o t s i s shown in Figure 6. the rate at which you become creative can depend in large measure on your interpersonal skills. Chapter Six Creativity and Interpersonal Skills . This may be because engineers tend generally to be logical thinkers who may somewhat confine their thinking within preset limits.


fixation sets firnits on creative thinking. ~3 ia Using a pencil. draw 4 straight lines without lifting the pencil Connect all dots. $1 {Jd EXAMPLE *"*"g * %$ 1 2-4 rg:.FIXATION Time - Basic solutions come early the longer the time. Chapter Six Creativity and Interpersonal Skills . Based on established patterns. the less the probability. fixatlon stimulates mediocrity. m Unless overcome.

f34 8 s $.. the solution lies outside traditional problem solving. going outside the dots to solve the problem..4 iilri $4 .G SOLUTION $J< it** f&4 $$ $ rdj d. This problem illustrates that creativity sometimes means moving beyond your fixed problem solving approaches.i 3" f. iz4 2 BrtC Q3 M! &$ L**$ *>"*i ?qy$ i.g.. a. housewives.J k-4 F?. e. fonnulas) to their thinking. doctors and lawyers) tend to set artificial limits (codes. Eskimos. Many times. and children solve this problem much more easily than engineers do.$qr @ $ p-+ f* :d !s*34-2 &s b2 Logical thinkers (engineem.-4 3 ** 3 c9 . b: +$ $4 ~ 2 4 FJ 1-4 Chapm Six Creativity and Interpersonal Skills .i*d t&j k* g l td i *. book solutions. k..

Uses generally accepted and emerging industry practices. Demonstrates personal attributes. outstanding value engineer. However. Knows own capabilities and does not exceed them. Demonstrates leadership skills. Uses generally accepted and emerging technology. Identifies needed data. poor value results from a failure to (1) develop a cost effective program to meet owner needs. Distinguishes between relevant facts and extraneous information. or device. reads. and presentation of results. Larew. Defends the "sale" by answering questions. Uses available resources (books. plan. the desirability (benefits exceed costs) of the effort. and timely summaries. analysis. effort. Takes the initiative (proceeds without being told). Develops effective interpersonal relationships. journals. films. Supports proposals or suggestions for change with a convincing explanation or demonstration of the need for the project. providing additional information. a professor of civil engineering at Ohio State University. Chapter Six Creativity and Interpersonal Skills . files) to learn from others. Demonstrates analytical and problem-solving ability. Integrity Emotional stability Enthusiasm Self-confidence Sense of responsibility Empathy toward fellow workers These factors closely relate to the professional development of a creative. logical. teaches engineers about interpersonal skills. the preferability (better than alternatives) of the plan. Demonstrates selling skills. Completes assignments on time and within budget. Demonstrates technical abiity. His course explores the following six characteristics of an outstanding engineer. the practicality (workability) of the idea. Uses group resources. and observes to understand the views of others. Listens. A review of contemporary building projects indicates that designs are satisfactory within discipline areas.InwrS& Skies Ih. Increases in cost and time are incurred for user/owner changes and compromises that are required to realize needed program and building system integration. or refuting arguments. Shares relevant information. Adapts to the reader or listener. Presents relevant. etc. Accepts the risks associated with initiative and responsibility. expenditure.Richard E. Demonstrates communication skills. Uses an organized plan for data collection. and (2) to draw upon interpersonal skills to effectively integrate required building systems.

Get to know each team member and focus on each member's strong points.6. unable to work well. However. a quick overview of the management matrix and people grid is appropriate. The Adjustive-Reaction Model. there are no results. we should overview the principal styles of leadership. Also. the styles of leadership take more time. Logical thinkers are difficult to hold through the creative ~hase.4 illustrates these principal styles. The VETC who "kills them with kindness" will get their total support. You will hold their attention for only a short time. using strong interpersonal skills to bring the owner and designers constructively into the process. The key points this figure brings out are: Chapter Six Creativity and Interpersonal Skills .Human The leadership provided by the Value Engineering Team Coordinator (VETC) is a kev com~onentofthe successful VE &The. Figure 6. As we move from left to right. this type is your best performer. For this reason. rather than using the proven VE methodology. but the effectiveness of solutions is optimized. selling skills are a basic requirement for success. As noted in Figure 6. try to select a balance of types. but the effectiveness of solutions increases. The VE approach focuses on the "Join" type of leadership style. an aid to help sell proposals. the VETC should have a basic understanding of the human factors that are aspects of any study. This is especially important to value engineers. In forming a team. Since VE deals more with people than the traditional approach does. Know the personality types you have on the team.However. Friendly helpers do not appreciate demands or el ling. because without the owner/designer's acceptance of their proposals.4. They want to jump to developing proposals as soon as the information phase begins. This style takes a bit more time. if there are e the strong achievers will become h t r a t e d and political or ~ e o p l problems. Figure 6. When working with strong achievers. make sure the environment is set up for quick results. These styles vary in time and effectiveness. must orchestrate the stud. there are basically five styles of leadership. a VE Team Coordinator has a much better chance of working with and motivating them towards acceptable solutions. They will focus on developing their own approach. It indicates that there are basically three types of people: Strong achievers Friendly helpers Logical thinkers By analyzing the people who are involved in a VE study and their reaction to various situations. Friendly helpers typically respond to requests for their assistance that let them know how well liked they are. Leadership As indicated by Professor Carew. is illustrated in Figure 6. Salesmanship As indicated in Professor Carew's outline. and learn to use them to your best advantage. Management Since people make up the managers and problem solvers. This is one of the principal reasons why the VE approach consistently can improve decision making over the traditional (Won-Join") approach to design solutions.5 is a typical managerial grid. The "Tell" (dictatorial) style is the fastest way to implement a solution. You must work with logical thinkers to overcome their frustration with group dynamics. leadership skills are essential to success. the effectiveness of the solution leaves much to be desired. when it comes to writing up proposals with technical documentation.

Chapter Six Creativity and Interpersonal Skills .

l l c n & ~ ~ r y .Managerial Grid Friendly Helper-has to learn that conflict is reality. Logical Thinker -must learn that feelings Influence solutions. -- Sa'rc*: W .~ I O r W Chapter Six Creativity and Interpersonal Skills . these are facts of life (feelings are facts).

to not release frustration.: Adjustive Reaction Model -- [E+~/~=F=POW* * POW effect = Frustration. F = Frustration Rationalization Chapter Six Creativity and Interpersonal Skills w All or None w Problem Solve .- [:I r. physlcal or N = Set of Needs emotlonal suicide.

it will be wise to drop that item and seek positive results in other areas. The creative step. bringing a point of view and premise not held by others. the initial reaction will be negative! Allow the original decision maker the time and space to go through the process and problem solve. a new language. including the following: The organization itself. the results will justify the means. This step involves creative application of the evaluation p r o c e ~ t i m u l a t i n gthought about advantages and disadvantages of all ideas. Traditionally. Positive Attitude An overview of VE study participants' attitudes in three separate studies is illustrated in Figure 6. The application of creative methods should ensure that creative ideas are many. the methodology urges us to gather more information. It is creative in its effort to mitigate unfavorable features of ideas. Results are gained from a creative climate. the whole value process is creative and requires interpersonal skills. It gives anew understanding of both the cost to perform a function and the amount of resources proposed to perform the function. All must learn the value language to develop optimum solutions using the Job Plan. while a negative attitude will lead to negative results. and respected for what they represent-the notential for an imnroved solution.7. Often. If you cannot get by the "fight" stage. Then that person can act constructively on the proposal. Cost models. Creativity Throughout I Job P h Creativity and interpersonal skills seem to occupy one step in the VE Job Plan: the "Creativity & Idea Generation" step. The VE team leader should encourage a positive attitude in all participants throughout the study. quality models. and ranking ideas. and techniques such as the Delphi Method will help to bring about a new sense of the possibilities. The development step. Actually. The analysis step. in its analysis to anticipate potential roadblocks. the VE Job Plan application does result in some highs and lows. One should seek the means to overcome or bypass roadblocks. All of these actions require new thinking. performance. As long as the study concludes with positive reactions. results could be catastrophic. developing criteria for weighted evaluation. This step is a n orderly approach to eliminating alternative solutions through a positive process. It is normal for people to resist change. A positive attitude will lead to positive results. Each person should come from a different discipline. (See discussion of the Delphi Method later in this chapter. Function analysis. The VE team leaders must maintain a positive attitude at all times. These should be recognized and dealt with in a positive manner. This step is creative in its insistence on bringing more facts to bear. However. * The project selection. and build models for cost. a stranger group. One must try to sense the best opportunities to make a difference in cost. Building function/cost/worth analyses requires creativity in determining how to allocate cost and what alternatives are to be used to judge worth. and/or schedule. gather more exact information. and a n expectation that the project is larger than any one team member. place numbers on the key ideas. If you are not initially success€ul. The information step. It must be open to and ready to accept change. T ry to assemble a group of strangers.) The team selection. diverse.If one keeps pushing against a roadblock continually without relief.drop that particular effort. including life cycle cost (LCC) and break-even analysis. Chapter Six Creativity and Interpersonal Skills . and in its development of strategies to encourage implementation.

.....Participants' Attitudes During VE Study -.... .... ............ Time (Days of Week) Chapter Six Creativity and Interpersonal Skills . .

Brainstorming Behavioral scientists know dozens of methods for speculation and generation of creative alternatives. This step can be either the most important or the least important of all the Job Plan steps. Before closing the session on possible solutions. It prevents the premature death of a potentially good idea. Evaluation takes place after the brainstorming session has ended. Brainstorming is a freewheeling type of creativity. Normally. Watch for opportunities to combine or improve ideas. Generatiionof I& In VE. Seek a wide variety of solutions that represent a broad spectrum of attacks on the problem. In the general practice of VE in construction. a pro forma. predicting. To speculate is to adds the notion that ponder. If nothing good can be said about an idea. Withhold adverse judgment of ideas until later. Before opening the session. 4. team selection. appreciate the accomplishment. if the decision makers have taken an active part in creative activity from the project selection to proposal development. Techniques for generating ideas include brainstorming and checklisting. adapting to. brainstorming is most often used for the creative step. Rule out criticism. The elimination of adverse judgment from the idea-producingstage allows for the maximum accumulation of ideas. 3. A team leader records each idea offered by the group. both of which are described in the following sections. methods used to gather information. allocate time for a subconscious operation on the problem while consciously performing other tasks. no attempt is made to judge or evaluate the ideas. Generate a large number of possible solutions. During this session. speculation may have a lighter tone. Creativity goes further in anticipating. is there a real need to have a discrete step for creativity? If it is all creativ~rganizationin attitudes and expectations. nothing should be said. produce and document alternative concepts. a group leader will open the session by posing a problem. it conserves time by preventing shifts from the creation of ideas to the evaluation of the ideas. Also. 5. sometimes with the assistance of a tape recorder. and enable the team to use its results for the next steps in the Job Plan. All have a serious tone.8 illustrates the generally accepted rules for brainstorming. Figure 6. 2. It is the least important. and dealing with negativism and other forces that hinder implementation. the group leader might set the stage by reviewing the following group brainstorming guidelines: 1. Consideration of all ideas encourages everybody to Chigter Six Creativity and Interpersonal Skills . but there must ka step in which ideas are accumulated: the "Creativity & Idea Generation" step. function analysis. It is the most important step if the decision makers have not been active in the process. new ideas may occur at any stage. and so on-what is left for the phase called "speculative" or "creative"? The creative step is necessary to transform the team into a creative organization and process. to muse.The presentation step. If the entire process may be identified as creative. project selection. A typical brainstorming session takes place when four to six people sit around a table and spontaneously generate ideas designed to solve a specific problem. set a goal of multiplying the number of ideas produced in the first rush of thinking by five or ten. to reach out.

:j Use "Free Wheeling" Thlnklng I* I4 .s. I &B - h WHY? Establish Receptive Atmosphere Dder Judgement - Rule Out Critlclsm - $"$ - k 4 d : ? a r.Combine Ideas I Generate Wide Use 'Checklist Unusual Ideas Chapter Six Creativity and Interpersonal Skills I . lj l hi 8""-4 Encourage d Free Flow of Ideas x. $23 x @> >.V* kT3 pt3_ * Rules of Brainstorming f:i.

The idea-generating efficiency of the group increases as its size increases. but it does at least generate leads toward the final solution. This gives an opportunity to the innovator.explore new areas. Two or more people working together under these ground rules can generate more ideas than one person working alone. All people are not alike. participants should suggest how ideas of others might be expanded. importance. clues. experience. Group members need not all know one another before the session. complexity. This is possible because ideas generated by various members of the group can be modified or improved. or how two or more ideas can be joined into still another idea. and managerial level. The members of the group should be selected to represent different work backgrounds. For example. The author's experience indicates that from 20% to 40% of the ideas generated today are drawn from previous studies. it can process and integrate only up to about seven bits of datasimultaneously. Thus it is difficult to always follow all the VEsteps and brainstorming guidelines. However. or possibilities that serve to provide ideas. The checklist is one of the most commonlv used aids in the search for new ideas. it may be time to split the group into smaller working groups. unfortunately. Chapter Six Creativity and Interpersonal Skills . Treat all ideas with respect. The human mind is greater than the most elaborate computer in that it can store an almost infinite amount of data. these techniques can be modified for special situations. or leads concerning the problem or subject under consideration. w conservation ideas. Checklisting A checklist is an accumulation of points. this is not usually as productive as group brainstorming. but they should not come from different levels within the organization. VE studies also vary in size. People vary in education. The techniques eliminate habitual responses and force people to use innovative thinking. In addition to contributing ideas of their own. However. Brainstorming does not always yield a final solution. a key member should have a working familiarity with the subject under study. Because of this limitation. Checklists range from the specialized to the extremely generalized. areas. and thev numerous publications assist the designer with e n e-. The objective is to obtain a number of ideas for further follow-up and development. However. The technique and philosophy of brainstorming may also be used by individuals to generate solutions to problems. the previous group brainstorming rules are helpful in applying the creative approach to problem solving. there are two general rules that apply 10all creative exercises: Withhold judgment about any idea(s). until it reaches the point where operation becomes so cumbersome as to discourage some members' participation. This will reduce the possibility of senior members exerting pressure or dominance on junior members. Following is a discussion of an idea-generating technique that is especially useful in construction situations. However. and the resulting ideas can be offered as possible solutions to the problem. who might be reluctant to voice thoughts under ordinary conditions for fear of ridicule. provide a checklist to simply remind the designer of key concepts that save energy. even those that seem impractical. If this occurs. - Using the Creative Problem-Solving Techniques Creative problem-solving techniques are the tools used to expand the team's creative ability. and schedule.

Now it is part of value engineering. Delphi was not originally intended to determine a consensus among experts on these matters. all ideas are discussed in the group and individuals reveal cost targets to one another. the group may be assigned the total project and would be multidisciplinary. Individual: Next.. marketing. The new total of target cost is then recorded in the upper left comer of the format. i. 4. Delphi identifies experts' central tendency regarding (I)where they feel VE potential lies in a project and (2) what they would do to change the design. as appropriate. The Japanese government and industry adapted it to predict markets in dozens of countries and for hundreds of products. Chapter Six Creativity and Interpersonal Skills . as well as a minority report. and becomes an indication of system worth. This might be a team to study space. The Delphi technique is particularly effective in the following situations: Short VE studies of one to three days. 3.Del@ TeChnqlueThe Delphi technique was bom of a Rand Corporation response to the army's request for a way to overcome the dilemma of having to act on informationprovided by experts who give contradictory recommendationsand by decision makers who are uninformed about the experts' specialties. In Delphi. allocation of resources. each individual in the group uses his or her expertise to write down ideas to improve value for the function(s) shown (see Figure 6. high-salary employees who are not inclined to learn the "nitty gritty" about VE techniques. architectural group. We will concentrate only on the pattern useful to construction. as illustrated in Figure 6. the leader asks each individual to accept his or her own ideas and indicate what the effect would be on estimated cost if all of them were adopted. It is important at this time that all members of the group listen to the individuals on either end of the central tendency of the group. e n e r g o r one of the building systems. and sets up a Delphi worksheet. Group: Once the individuals are finished. rather. The team should not be multidisciplinary. There are several Delphi patterns for various applications: construction. cost estimate.10. Studies in which participants are high-caliber. and specifications. Those who see savings opportunities and those who see spending opportunities should each explain the rationale for their thinking. Delphi works in phases or cycles. the mechanic~lLearn might consist of all mechanical engineers. Conference: The conference is a meeting of all the group~mechanical group.9. and other outside experts. The group should attempt to agree to report all of their ideas and their average target cost. modifying. Studies made up of team members with no VE experience. Each group reviews and discusses its portion of the design. models. The following sequence applies: 1. the owner. In some cases. Group: Each group of three to five experts is assigned a portion of the project relating to their area of expertise. the Delphi technique should foster constructive cooperation among participants who will agree not to disagree and to explore further. etc. The purpose of the conference is for each group to reveal all ideas to the other groups for sharing. The goal of Delphi is to pick the brains of experts quickly. as illustrated by Figure 6. designer. and "hitchhiking" (where one idea becomes an inspiration for another). when it is used in construction.11). It worked so well for the army that IBM picked it up. 2.e. Target percentages of cost reduction are placed against each of the components. and so forth.Once this is accomplished. when time and funds are limited. treating them as contributors.

Chapter Six Creativiv and Interpersonal Skills .

". Coolina Tower CW Connections - a*z-*.d u B4.* l&$ GSA Element Description - 110..$ $ 3j P" ? &&&j . 72 * F Winter Separate in-line electric duct heaters Chapter Six Creativity and Interpersonal Skills ! g+$i & #. pa $1 &d Project: Target Cost Estimated Cost Location: Building Type: office Construction Type: $4 &:.000 GSF VA system.$9 Cost Control 5. % ~4 Cycle 1 Sheet Date Phase 1 $yp 9 v*. 440 tons.j !p The Delphi Method V%.*$ Control Reduce Supply Temperature Humidity Air 93 *'<A .* Delphi Example of HVAC System Initial Setup i%*> * p< # 4 s -i ?:>$ xe Ja J+d &s ~8-4 p. 250 SF/Ton v RooftopChiller with Cool~ngTower Design temperature 70 * F Summer.z.

wconnections Pumps cwpiping Air Handling Units Duct Work VAV Boxes Controls 31.200 7.500 -5% -25% -30% -10% -10% Cycle Sheet Date Phase Reduce Tonnage Reorient Building Water Cooled Chiller FCU System Reduce Outside Air Fix Windows Self Contained Packaaes " Return Air in Plenum Increase VAV Spacing Put Chiller on Grade Air Cooled Condenser 78 O F Summer Design 68 F Winter Desfgn Delete Refum Air Insulation Delete Standby Pumps Split Chiller Loads v i* VAV System. 7 6q &"h: +X " &4 k%! @ $> 8% Coo!ing Tower . 72 F Winter Separate In-line Electric Duct Heaters 8-+.400 23.400 70. p$ &ls Q*: 13 Chapter Six Creativity and Interpersonal Skills .000 81.900 20.200 119. i V G L 2-3 cost Control The Delphi Method Delphi Example of HVAC System Individual Worksheet WsjJ Project: GSA Location: Office Building Type: Construction Type: Control i-s*e waJd Reduce Supply Temoeralure Humid~ty Air CJ!~ !%4 t\. 70 F Summer. & sg Et.. 440 Tons.300 10. 250 SF/Ton pj $1 Rooftop Chiller with Cooling Tower Design Temperature.

and use of resources. and we will do all we can to preserve that element. The opening statements from the VETC were. experience indicated that any change would bring great resistancefrom the designer." and "Yet. reliability. and exercise effective interpersonal skills to bring the owner and the designers constructively into the process. The improvements can be made in total costs. to the problem-solving order of the Job Man. bit of craked strategy. to the offset of furation. Chaprer Six Creativiq and Interpersonal Skills . The building consisted of two triangular-shaped. Looking at the design. Note: An automated Excel spreadsheet is included in the VE tools on the CD to colkct and evaluate ideas generated. For these reasons. the staff-and conditions of dignity-to consider innovation to major improvements on the original design. quality. the logical VE challenge was the twin tower design. performance. At the end of and the design h e workshop the general manager approved all the architect agreed to imnlement them with minor modifications. which results in an inability to solve a problem. a trip to the architect's office was taken before the workshop. The meeting established such a good relationship that the VE Teamcoordinator invited the design architect to attend the workshop. V& Engineering-A Crafted Strategy VE is crafted in its strategy and tactics to provide the designer and owner the time. have a special sensitivity to human factors. The VETC also invited the general manager and chief engineer from the owner project real estate development firm.The Delphi procedure is repeated for at least one more cycle to permit group discussion and accommodation of what they learned at the conference. At this workshop some 130 ideas were generated. serviceability. Value engineering is crafted from the beginning to protect risk and to achieve design excellence. It was a grand success because of. the VETC's leadership is a key component of a successful VE study. However. Throughout this process. This strategy is crafted from the very beginning to invite protected risk and the possibility to achieve design excellence. In an effort to establish a positive environment. They discussed various other design elements over tea. Throughout the study process. and in the offset of hation. the place. high-rise towers. the problem-solving order of the Job Plan. From this effort comes a list of alternatives for further analysis and development into VE proposals." The design architect expressed his firm desire to maintain the twin-tower concept. See Case Study One in Part Two f& more detail on the ideas that were implemented. The design concept was quite expensive but impressive. A kev contributor to these ideas was the design architect. The creativity requirement in the VE program must answer these questions: * What alternatives provide a lower total cost at no loss in pedormance of required functions? How can we adopt changes without violating fixed schedules? How can we be sure that the proposal will please the principals for schedule? for cost? for performance? for personal recognition? Consider this example of a crafted strategy: A recent VE study was conducted on a corporate office building. "Tell us what your essential design element is. Creative W strategies are included in project and team formation. producibility. we must achieve the owner's objective of meeting budget and schedule. the VE Team Coordinator (VETC) must encourage creativity. from which 50 proposals were nroduced. The tactics range from the project and team formation. the team leader should have a specialsensitivity to human factors and exercise effective interpersonal skills as needed.

Often. and human factors. This type of poor value results in increased cost and time incurred for ownerldesigner changes and the compromises necessary to realize progam and building systems integration. They must become adept at brainstorming. checklisting. and creative problem-solving technique-three methods for expanding the VE team's idea generation. Technically satisfactory designs alone do not produce cost effective programs that meet owner needs and integrate required building systems. a review of VE studies reveals a lack of creativity in the bulk of projects. interpersonal skills.Value engineers should be cognizant of the variety of leadership styles and personality characteristics that might be displayed by people with whom they work. it seems. Chapm Six Creativity and Interpersonal Skills . They must develop effective sales skills for promotion of proposals for ownerldesigner acceptance and for team motivation. An underlying cause appears to be the failure of curriculums to offer instruction in subjects such as creativity. group dynamics.

The Environmental Protection Agency (EPA) requires a cost-effectiveness analysis of alternative processes for the early planning and design of wastewater treatment plants. However. exvressed in terms of equivalent costs. compounded annually. it can be said that $100 today is equivalent to $673 in twenty years' time if the money is invested at the rate of 10% per year.L ife cycle costing (LCC) is the process of making an economic assessment of an item. or has the capacity to earn. A number of government agencies have already introduced mandatory LCC requirements. Since energy is an annual cost. The U. The exact amount depends on the investment rate (cost of money) and the length of time. area.effectiveness studies and benefit-cost analyses.S. The US. LCC techniques should also be used when undertaking cost. Air Force was one of the first government agencies to use LCC for its housing schemes. both present and future costs are taken into account and related to one another. the baseline used for initial costs must be the same as that used for all other costs associated with each proposal. including maintenance and operating costs. $100 invested at 10% annual interest. In making decisions. In other words. system. The Office of the President of the United States has issued directives to government agencies to reduce energy consumption and has encouraged everyone to reduce energy use. Total owning and operating costs of buildings have been rising steadily for many years. will grow to $673 in 20 years. Naval Chapm Seven Life Cycle Costing . For example. LCC is used to compare proposals by identifying and assessing economic impacts over the design life of each alternative. A current dollar is worth more than the prospect of a dollar at some future time. interest. constant dollars must be used for the analysis. The lack of such formal procedures can lead to poor decisions. as inflation changes the value of money over time. LCC principles are required to equate its impact against initial costs. The essence of LCC is the analysis of equivalent costs of various alternative proposals. LCC techniques were introduced as a direct consequence of the energy crisis. Today's dollar is not equal to tomorrow's dollar. since LCC analysis involves cost at various times.' To ensure that costs are compared on an equivalent basis. or facility by considering significant costs of ownershiu over an economic life. Money invested in any fonn earns.

One of the principal reasons for unnecessary costs is the uni-discipline approach used by most designers. By 1985. Idaho. such as highlyautomated office facilities and high-tech laboratories. disciplinary approach to building as a system can significantly reduce unnecessary costs. the uni-disciplinary approach has expanded into LCC and discipline-oriented solutions to energy problems. Unnecessary costs occur especially where decision areas overlap.2and the Corps of Engineers has issued a m a n ~ a l . To take maximum advantage of LCC. Missouri. Traditionally. and they are beneficial only in providing data for future projects. Unfortunately. the design of mechanical+electricalsystems takes precedence over architectural design. Maryland. and design development phases. investment tax credits are given for energy conservation. time impact. Massachusetts. income. a multi.Facilities Engineering Command has published a guide. However. and New York had issued formal guidance manuals for LCC requirements. Decision Makers' Impat on LCC Figure 7. It was followed closely by Florida. Block C-6 (tax elements) deals with the cost impact of the tax laws. Blocks C-1 (initial costs). and C-4 (maintenance costs) are self-explanatory. preliminary design. C-2 (financing costs). Effective timing is also important. Colorado. Wisconsin. suppose an LCC analysis is required for a branch bank. A replacement cost would be a one-time cost incurred at some time in the future to maintain the original function of the facility or item. Texas. and different depreciation periods are allowed. and each case must be analyzed on an individual basis. other disciplines merely respond to the architect's direction. New Mexico. Wyoming. In some cases. Washington. Alaska was the first state to pass mandatory LCC regulations. LCC adTotal LCC Figure 7. denial of use.2 shows how the total costs of buildings are incurred. and stafhng and personnel costs related to functional use. These costs must be continually reviewed as tax laws change.1 illustrates the impact that design-stage decisions have on building costs. North Carolina. C-3 (operating costs). different depreciation rates can be used. for example. The multi-disciplinary approacb shows that the best solutions are developed when all participants cooperate to solve the total problem. for example. particularly during planning and budgeting. and New York had passed mandatory provisions. and Florida." Suppose two banks have exactly the same Chapter Seum Life Cycle Costing . Decisions made by one discipline will affect the cost of the work covered by the other disciplines. Nebraska. ~ Several years ago. the design has been dictated by the architect. For example. The cost of changing a design increases significantly with time. Wyoming. LCC exercises that are undertaken during the construction phase or owning and operating phases produce limited results. The blocks are numbered C-1 through C-8. It portrays the design process as a team effort in which various disciplines make decisions in a discipline-oriented environment. The function of the bank is to "service customers. the techniques should be applied at the earliest stages of the design concept. is concerned with total building costs over the economic life of a facility. a template is available for IBM-compatible equipment using Lotus 1-2-3 or Excel. Block C-5 (alteration and replacement costs) identifies costs involved with changing the function of a space. Utah. Block C-7 (associated costs) is concerned with costs such as insurance. This model has been BuiIding Costs used as a basis for an automated approach. It seems that the basic function of a facility-to house p e o p l e i s superseded by energy conservation concerns.

Decision Makers' Impact on Total Building Costs Owner's Requirements Chapter Sewn Life Cycle Costing .

Life Cycle Cost Elements 1 I Costs I Other I I Owner's Total Cost 1 LCC C-1 to C-8 I I I I I Salvage Value Associated Costs Tax Elements C-8 Alteration & Replacement Costs C-7 C-6 C-5 t Costs Costs I piiGGq Construction Costs piq .

entire series equivalent to P at interest rate i PWA = present worth of an annuity factor Nonrecurring costs (when A = $1. The cost impact of insurance was illustrated by a recent study of a food-distribution warehouse. In LCC. One alternative would require moving people out of a space for six months. the other bank requires a staff of 12 to process the same number of clients per day. Initial (present) costs are automatically expressed in present worth. This block of staffng-personnel costs represents the requirements related to the buildingfunction. the construction costs of which are the same. or they may be converted to an annual series of payments by the annualized method. a cost difference or some other comparison would have to be considered for the difference in staffing of these two banks to provide the basic function of the facility. The differences in high and low initial costs are quite significant. Procedures. both present and future costs for each alternative must be brought to a common point in time. such as demolition. Recurring costs are as follows: Equation 1 Where: i = interest rate per interest period (in decimals). and examples for both methods are discussed in the following sections."for hrther information about life cyclecosts. and negative if additional costs. "Preparation of Cost Models. Either method will properly allow comparison between design alternatives. The value is positive if it has residual economic value. Present Worth Method The present worth method requires conversion of all present and future expenditures to a baseline of today's cost. but one system had a lower annual insurance premium. the cost of not being able to use the space would haie to be consaered. Block C-8 (salvage value) represents the economic value of competing alternates at the end of the life cycle period. Tnus functional use costs for a branch bank would relate to servicing customers. As another example of denial-of-use costs. In LCC analysis. (See Chapter Three. One of two methods is used: Costs adExmr~ksmay be converred to today's cost by the present worth method.initial costs. the one that uses less staff is more cost effective. One bank can process 200 clients per day with a total staff of 10 people.3 indicates the difference in LCC for various building types. The following formulas are used to convert recurring and nonrecurring costs to present-day values. Figure 7.) Terminology To compare design alternatives. Clearly. minimum attractive rate of return n = number of interest periods P = present sum of money (present worth) A = end-of-period payment or receipt in a uniform series continuing for the coming n periods. the other alternative could be accom~lishedduring non-working hours. are required.00) are as follows: Equation 2 Chapter Sewn Life Cycle Costing . In this case. the estimated cost equal to the present worth of the annual rates was used for each system in the LCC. All costs were comparable. suppose that there are two approaches to building alterations. conversion tables. as are annual costs.

31 0.45 (Lost Income) 0.57 2.50 31.00 130.00 150.95 8.48 9.06 3.10 10.04 NIA 0.30 2.74 88.39 0.00 6.92 0.70 1.00 100.00 (Lost Income) 0.00 42.00 86.13 0.57 2.00 145.10 22. Custodial Cleaning (Custodial) Repirs & Maintenance Roads 8 Ground Maintenance 2.60 3.00 2.30 .00 4.28 1.73 0. Office $IGSF Low High Financial SlGSF Low High University $/GSF Low High Research $/GSF Low High 126.95 7.75 18.00 4.37 0.90 0.63 2.50 8.44 1.Il.75 12. Semnd W o n .35 029 0.80 3.32 157.00 4.53 (Lost Income) 0.20 6.00 6.00 8.30 1.11 0.18 1.20 1.95 9.90 1024 25.53 1.00 9.50 2.85 13.20 22425 462.60 22.75 1.65 1.52 15.40 5.10 15.50 7.48 2.03 0.10 220 3.20 0.50 1.00 130.20 0.40 0.50 6.07 0.80 26.00 70.68 4.95 1.50 33.25 0.25 2.23 220 0.00 4..70 3.17 0.90 4.75 9.50 9.15 7.00 225.10 0.07 1.90 0.00 105.00 $IGSFIYear SIGSFIYear $IGSFIYear SlGSFlYear dlGSFlYear 1.50 26.86 0.00 15.68 3.00 1.50 6.15 'Excerpted from Life Cycia C d n g lm Design PmLssionals.00 112.80 0.19 3.28 7.10 2.73 0.60 21.72 2.65 0.00 2.00 110.60 0.50 5.) Interest (Debt Service) Staffing (Functional use) Denial-oi-Use Costs Other Costs: Security Real Estate Taxes Water 8 Sewer Fire Insurance Medical $IGSF Low High 0.15 2.00 0.44 4.96 0.29 1.95 8.75 6.39 2.00 2.00 0.30 0.75 19.00 0.50 3.00 0. Repair 8.10 14.92 0.00 150.00 5.38 5.00 10.28 9.70 11.40 2.48 0.75 7.70 46.50 13.30 7. McGrawH.10 2.05 9.- Facility Types Cost Per Building Gross Square Foot* INITIAL COSTS: Initial Project Cost Construction Cost (incl.90 20.80 19.88 75.30 7.16 1.80 49.90 359.17 0.20 10.50 21.70 10.73 177.00 100.00 29.20 220 5.51 153.16 0.60 11.98 0.09 0.90 3.80 0.20 120.54 Alterations and Replacements Alterations Replacements 2.00 4.57 2.30 255.50 42.12 IVA 0.40 0.84 22.00 20.75 0.80 33.90 3.72 1.00 225.90 5.50 5. Mgmt.85 4.50 22.69 0.05 0.23 2.00 210.00 10.48 0.23 1.00 4.20 1.00 125.75 194.28 0.00 31.94 3.70 0.94 0.69 0.00 30.86 0.40 1.00 (Lost Income) (Lost Income) ANNUAL COSTS: $/GSF/Year EnergylFuelCost 1.70 0.39 6.10 9.50 1.88 1.50 7.20 2.90 75.45 1.00 Industrial $IGSF Low High 90. Contingency Fumishings/Equip.60 30.00 19.00 50.40 5.80 (Lost Income) 0.36 228.99 1.70 0.07 0.40 2.00 125.75 2.00 4.66 3.00 2.00 40. 1995 0.35 Associated Costs Administrative (Bldg.09 0.00 300.12 029 2.32 26.18 0.22 3.60 1.78 0.00 5. New York.80 4.50 1.45 5.03 113.69 30.50 45. lnc.00 100.00 95.28 1.30 1.48 Maintenance.07 1.52 68.75 1.00 150.24 5.80 146.25 9.40 264.00 110.11 2.50 1.50 5.35 495.21 280. Site) Design Fees Construction Administration Site Reservation Costs: Const.50 21.00 11.00 147.86 0.85 199.00 6.05 3.53 1.50 3.04 8.48 1.60 9.00 30.70 6.85 6.90 0. Interim Financing Other Corp.75 4.90 1.70 0.68 6.

through OMB Circular A-94. recurring.00 n = number of interest periods i = interest rate per interest ~eriod(in decimals) PWA. and nonrecurring costs to an annual series of payments.00 i = interest rate per interest period (in decimals) n = number of interest periods PP = period payment factor + Chapter Seven Lie Cycle Costing . The following formulas are used for this conversion: Initial costs: Euuation 4 A = p '(l+i)" = p p (1 i)" . This method may be used to express all life cycle costs as an annual expenditure. The number of interest periods. the owner or designer must determine the rate of return. with interest rate i PW = present worth factor n = number of interest periods To use these formulas. Some calculators. thus no adjustment is necessary. Initial and nonrecurring costs.1 Where: e = escalation rate A = $1. such as energy.4 is a table of escalating values at a base interest rate of Annualized Method The annualized method converts initial. but they do not deal with escalation. or the life cycle period of the study is usually expressed in years.Where: F = sum of money at the end of n. from the present date that is equivalent to P. n. Normally. The federal government. Figure 7. escalation tables are not available.11 = PWAe + + [(I e)/(l i)] .000 all at once. by the following formula: Equation 3 P=A [(l + e)l(l + ill x [(I + e)/(1 + i)n . = Present Worth of Annuity escalated Where: e=1 P=An Economic tables exist for the many combinations of interest rates. that is. such as the Texas Instruments Business Analyst and the HewlettAckard HP-22 Business Management calculators. Recurring costs. This interest rate is discussed later. however. as previously discussed. require equivalent cost conversion. a life cycle between 25 and 40 years is considered adequatefor estimating future expenses. are already expressed as annual costs. has established 10% as the interest rate to be used in studies of this type. have economic equations built in for quick calculation. Home mortgage payments are an example of this procedure. a buyer opts to purchase a home for $349 per month (360 equal monthly payments at 10% yearly interest) rather than pay $50. interest periods. excluding the lease or purchase of real property. and discount rates. However. Escalation Differential escalation (the rate of inflation above the general economy) is taken into account for recurring costs.1 Where: A = annualized cost P =$1.

329 9.241 14287 14.116 23.840 24 25 26 27 28 29 30 31 32 33 34 70.377 5.243 30.871 11.334 8.588 4.246 3.613 20.806 8.706 9.194 7.358 6.027 1.962 24.048 5.695 18.770 11.m 13. W 38.417 34.W 3.455 8.453 6.791 0.784 10.283 43.837 8.€8B 9.752 17.735 ISM0 15. m 47.453 14.759 14.496 9.927 39.729 13.267 21.000 32.000 5.657 1 1 .448 33.575 8.m 13.470 15.000 4.495 17.279 1.649 4.647 10..277 7.426 0.659 10.973 1.609 9.032 15.291 15.165 27.363 18.W 2.845 28.090 40.335 5.W 42.683 9.471 11.W am 9.850 2S.198 16.16.814 7.278 12074 13.797 5A28 6.456 21.112 14.268 10.1- 7. ~ ~132 .886 2.758 4.699 0.OW 6750 7.426 9.703 10.607 16.612 12.771 13.m 10.000 28.441 6.479 9.567 7.079 12.736 2.- 0.825 8.381 26.739 14.490 53.736 22.441 39 40 Chapter Seven Life Cycle Costing .781 2.438 3 3 .860 10.427 l0.008 1.951) 5S.839 2.10s 9.283 22.221 12.250 25.517 14.677 9.879 64.526 7.488 a 1 0 8 19.981 32.lOJ 7.189 15.W 20.403 18.307 9. 8 7 ~ 3 i ..m 8S41 ella 8.W 1.591 19.831 8.312 30.m 11.W 19.4.241 38 86..573 1 2 3 4 5 6.28.000 23.510 8.014 23.224 4.551 15.141 11.491 m.-Escawm -Rats.000 18.528 12.111 m250 23.154 27.480 12.929 57.365 35.019 6.770 m.080 30541 31254 31.685 2 24.W 11.867 19.980 i2.384 16.810 31.850 21. m 43.820 24.678 51.- 10.235 8 7 6 9 10 7.723 4.424 (4 YR.622 28.819 12.680 8. W 3.270 45.170 3.W R475 10.743 80.127 9.483 4239 O m 4.139 9.233 12.910 12.194 11.598 7.000 8.684 22 23 12.202 13.946 3.198 15.012 36.108 23.000 2.015 11.W 38.485 6.437 14.m 9.672 11.821 5. m 9.674 18523 17.671 20.757 9.078 7.884 10.508 10.184 7.589 27.979 19.138 1718.I 1 2 3 4 0..000 17.787 2.237 9.209 9.521 13.050 48.885 1.818 15.983 16.181 31.024 11.769 15.711 162% 18784 17289 17.354 10.214 58.601 9.807 8.839 21 22.m -1 1.756 26.822 13.355 14.638 20..2w I1 12 13 14 20.094 13.274 18.918 1.723 9.516 13.301 13.806 6.470 25.594 25.527 25.73S 13.584 3.870 10.137 27..W 13.323 12.411 8.973 2.813 2.038 28.988 35 38 78..363 8. W 7.859 21.203 5.102 11.569 9.033 25.631 45.072 10.095 29.944 21.892 2.478 23.167 4.077 W.083 3.779 0.053 3.810 9.033 24.867 12.110 4.830 12.713 10.138 12.824 8.053 6.634 3.222 28.820 11.761 19.746 42.141 41.150 48.187 8.551 10.288 17.695 22.981 57.460 1.513 1 0 .972 8.505 9.m 13.278 15. 4.018 2.582 13.679 24.027 12.000 34624 10.03 16281 16A78 16.681 33.m I6 17 I8 19 10 11.365 4.797 54.481 19.000 37.825 22.348 2 9 .896 12287 12.m l2.464 38.528 30.122 28.m l0.615 5.211 10.433 44.910 4.080 10.lW 8.185 5..830 6.853 I3.878 i8.1.261 48.749 51.871 7.000 3 9 .287 6.9.863 8.812 6 7 8 1638 1.938 18.491 10.324 4.024 q.372 a220 9.419 9.6% 15.m 13.888 38.022 19.735 3.1343 13.234 5. m 11.384 49.3.370 9.787 3.000 9.251 11.906 m.733 9.454 23.970 12.927 1.882 25.526 9.797 14.252 20.973 9.808 40.348 21.m 1.W 11.718 11.756) 8.Dm 15.m 8.17.W 5.355 21.842 7.335 56.027 2.181 38.498 5.772 8.516 Z.840 20.477 11.454 13.849 12.699 ie.394 6.000 30.530 10.377 13.097 21.933 14.882 3. W 10.564 41. 10Y0Discount Rate .776 10.m 18.288 6.453 27.858 14.115 5.971 2 1 .774 16.181 9.124 14.448 17.919 2839 1735 4.858 8. m 32.235 18.128 13.231 1 7 .W 17.280 5.718 15.993 10.323 10.578 O.824 7.853 9.m ~.000 7259 7.047 9. ~ 8 18..838 48.mi 22. ~ 7 25.535 3.888 5.000 i5.m 12.000 33.605 0.708 22.077 9.033 8 .416 10.321 10.353 10.003 74.075 64.764 6 zo.781 6.Y18 .051 10.799 16.770 22.389 15.355 37 EZ.528 7.151 13.298 26.355 11.616 5.800 20.745 10.687 3.2BB 80.610 14.107 20.423 13.762 13..m 4.1%3 72.954 1l.644 9.417 59.449 12.842 16.128 87.606 10.335 13.314 12.54s 1 i .380 13.222 1B.297 34.415 17.488 23.717 35847 4 i m m .514 11.M8 11..808 9. o n SZ000 37.233 la713 is 10.2% 7.244 17.682 16.147 53.382 29.418 11.382 1ZBgS 13.145 4.127 61.m 8201 8.107 17.868 34.821 10.326 14.946 2.m 10.Ui7 11.058 67.193 7.158 i5.985 14..781 15.m 18287 18.017 6.618 6.251 16.808 21.110 3.281 9 10 11 12 13 1.443 4.979 51.Present Worth of an Escalating Annual Amount.863 11.535 27.578 17.MKI 17.362 11.934 10.% ------0 .063 25.000 14.845 1.598 6812 5812 6 .OM) 41.278 11.576 15.562 12.092 5.509 7.513 8.m 3.aX) 8.796 7.514 8.8.878 11.723 35.009 2.049 8.429 10.695 13.683 8.497 38.553 6.572 7.W 1B.307 23.090 5.W 39.031) 11.320 8.523 7.

Devreciation Period The depreciation period usually corresponds with the estimated useful life of an asset. if the LCC is being conducted in 1997 dollars. say the life cycle for analysis is 20 years and energy is estimated to escalate at 5% per year.2010. the life cycle cost is the sum of the initial. For the example above. In establishing this rate." Any reference to the discount rate means either the minimum acceptable rate of return for the client for investment purposes. Tax accountants have ready access to these changes in rates. That is. Although this approach is particularlycommon in government projects and in personal economic studies. as they will differ in terms of buying power.For nonrecurring costs.2000. Chapter Seven Life Cycle Costing . the differences must be considered. The devaluation of money is estimated at 4% Therefore. for example. straight line. When the comparative analysis includes items with equal escalation rates. For example. There are several ways commonly used to distribute the initial cost over time. A t times the owner may establish the minimum attractive rate of return based only on the cost of borrowed money. The disk supplied with this book contains the LCC program and all required values. To accommodate these differences. However. the effect of escalation will be canceled out. and double declining balance. Discount or Interest Rate Calculation of present worth is often referred to as discounting by writers on economics. and 2020 year dollars. then the purchasing power of a 1997 dollar should be used throughout the analysis. Escalation Escalation has a significant impact on LCC and is accommodated in LCC by expressing all costs in terms of constant dollars. This period becomes the basis for a deduction against income in calculating income taxes.187 versus an unescalated value of 8. all expressed in equivalent dollars. For example. the PWA equates to 9. Figure 7. or the current prime or borrowing rate of interest.5 14 if no differential escalation is applied. several factors must be considered. for both the present worth and the annualized methods. sum of the year's digits. Since all costs are expressed in equivalent dollars. in a comparative analysis it is not correct to mix 1997. It is recommended that a differential escalation be applied. and nonrecurringcosts.4 gives the present-day value of an escalating annual amount starting at $1. Equation 3 is the formula used to determine present worth of annuity factors having differential escalation.00 per year at a 10% interest rate. The Internal Revenue Service has established and made available certain guidelines for various system components. and the rate of return for the industry (before or after income taxes). then use Equation 4 to convert today's cost (present worth) to a n annual expenditure (annualized cost). it may not be applicable to projects in acompetitive industry. who frequently refer to an interest rate used in present worth calculations as a "discount rate. during which time the capital cost of the asset is written off. when cost elements with varying escalation rates are included. the present worth of the energy cost should be differentially escalated at 1%. the rates of escalation for certain items such as energy have been increasing above the average devaluation of the dollar. For example. recurring. use Equation 2 to convert future expenditure to current cost (present worth). including the source of finance (borrowed money or capital assets). the client (government agency or private indusuy). those elements that are differentially escalating or devaluating (at a different rare than the inflation of all other costs) need to be moderated.

That is the best alternative representing the best choice balancing costs and noneconomic criteria. component. and aesthetic factors of the project. especially information regarding useful life. 25-40 years is Long enough to predict future costs for economic purposes to capture the most significant costs.5. or item under study may be the physical. but it is unusual for facility components' data to he available. and to review the benefits and costs. The author has published two texts that attempt to publish such data6 Consider this example of LCC methodology. the state of the an. its age when acquired. a salvage or residual value must be established.Input data. The useful life of each system. The first requirement . to determine the payback period. specific project information and site data are usually available. This is illustrated in Figure 7. must establish this time frame. where an annual cost for 100 years discounted to present worth at a 10% interest rate is plotted. The area under the curve is the cumulative total present-worth equivalent cost of the system. to perform a cash flow analysis. it is possible to perform a sensitivity analysis. One will cost far more to construct than the other because it relies more heavilv on Chapter Seven Life Cycle Costing .' LCCMehdology Figure 7. If the building life is considered as being forever. The salvage value is the estimated value (constant baseline currency) of the system or component at the end of the economic life cycle or study period. and rate#of-returnalternatives. The owner. Of the input data required. a noneconomic comparison is made to evaluate the assumptions about component costs balanced with the functional. A hospital staff and its design team are considering two alternative nursing-station designs for each bed wing. First is the economic or study period used in comparing design alternatives. or economic life. alternatives can be generated. inventions. A time frame must also be used for each system under analysis. technological. There is no system retrieval format for LCC data readily available to designers. maintenance. depending on the client's requirements and special needs. Although such input is needed to calculate roughly 25% of total costs. and other developments within the industry.Amortization Period The amortization period is the time over which periodic payments are made to discharge a debt. and operations. the climate in which it is used. T i e Frames Several time frames are used in a n LCC analysis. The useful life of any item depends on such things as the frequency with which it is used. Salvage (Residual) Value When evaluating alternatives with unequal useful lives during the economic life cycle period. few designers have access to comprehensive data in a format facilitating LCC analysis. Other Methods of Economic Analvsis Other methods of economic analysis can be used in a life cycle study. With this data. The value of a system at the end of its useful life is normally equal to its salvage value less the cost incurred for its removal or disposal. not the designer. Financing costs are assessed during this period. The resultant weighted choice is proposed as the Lowest optimum alternative. followed by LCC predictions. Note that 80% of the total equivalent cost is consumed in the first 25 years. From these predictions. technological.LS the . This presents a serious problem. With additional rules and mechanics. The period used is often arbitrary and is selected to meet the economic needs of the project. to determine rates of return. to establish a break-even point between alternatives. whether preventive maintenance procedures are followed as recommended by the manufacturer. economic changes. the policy for repairs and replacements. extra investment.6 illustratesa flow chart for applying LCC to aproject.

Chapm Seven Life Cycle Costing .

Life Cycle Costing Logic Generation of Environmental Sltlng 8 Orlentatlon Speclal Features Life Cycle Cost Predlctlons lnltlal * OperatlonslEnergy Malntena~w AlleratlonlRephcement Tax Elements Associated Salvage Value Facility Components - lnltlal Cost UseTul Llfe Maintenance Energy Optimlzatlon Marketing Non-Econornlc Comparisons Criteria Wslghtfng Weighted Evaluation Crlterla &Standards Economics MiscellaneousData Recycle for Development of Other Alternatives or Refinement of Existing Alternatives Chapter Seven Life Cycle Costing .

See the discussion of weighted evaluation later in the chapter for further details of the process. assume that the mortgage payment on a house is a monthly series that can be converted to an annualized series. and so forth. the discounted costs are totaled and the lowest cost alternative is identified. The costs isolated for each alternative must be grouped by year over the number of years equal to the economic life of the facility. more detailed procedure allows a more comprehensive total system or facility to be analyzed based on LCC.automated devices for patient monitoring and record keeping. When the annualized method of LCC is being used. In either case. and blank worksheets are available in Part Three. LCC Formats Formats for manual techniques and for computerized spreadsheets follow as examples. All follow-on costs are recalculated to resent-day values (discounted for the cost of money). the decision-making team isolates the significant varying costs associated with each alternative. Then. it is more commonly used. Initial cost and present worth of future costs are reduced to annual series. those elements should be fixed or removed from consideration to reduce the time and complexity of the comparative analysis.4 and 7. is also considered for the end of the life cycle period.7 through 7. "Value Engineering Workbook. The present worth method allows easier consideration of differential escalation therefore. taxes. For the present worth method. Chapter Sewn Life Cycle Costing . Salvage value. maintenance. First. Finally. Will the savings in nursing salaries justify the increased facility cost? Several steps using the LCC methodology are required to answer this question. The automated solution in this example has higher capital investment costs but lower functional use (nursing salary) costs. A 10% interest rate is used by most federal agencies. The short manual form procedure is used primarily to compare specific facility components such as the type of exterior siding.9. The manual procedures provide LCC information from which improved decisions can be made. probable replacement and alteration costs should be considered. piping. If two or more events have roughly the same likelihood of occurrence. then the option selected must reflect this. All initial capital expenditures are in present-day values and require no conversion. The longer." The CD that is part of this book package contains a parameter-based cost-estimating system that is tied to the Cost Model and to a life cycle costing system. If this happens. The final selection of an option should be tempered with noneconomic factors. All costs are converted to current dollar value by present worth techniques using areasanable discount factor. The impact on total cost of any noneconomic factors will be factored in by the decision maker using a weighted evaluation procedure. Both procedures will result in the same economic recommendation. but many private owners use a higher rate. Annual costs of operations. are added to yield the total annual costs. Next. the equivalent cost baseline is present-day values. those facility elements that will be the same in any d the options being reviewed should be identified. various roofing materials. Referenced economic tables are contained in Figures 7. For example. It may be necessary to make a sensitivity analysis of each of the assumptions to see if a reasonable change in any of the cost assumptions would change the conclusions. and so forth. the probability of such an occurrence must be carefully weighed. the equivalent cost baseline is annual costs. If more appropriate. costs may be isolated by time spans equal to the mode of user operation. if relevant.

Present Worth (PW) What $1.00 Due in the Future is Worth Today (Present Worth) Single Payment Yrs. - 6%PW 7%PW 8%PW 9%PW 1WPW lZ%PW 14%PW 'Formula PW= (i/(l+i)") W h m : I r e p a e m an interest rate per intsresl p ew n repeserw a number of intersstpencda PW mpwents!Jmpr~wwfhol$ldveinlhskmre Chapter Seven Life Cycle Costing .

00 Payable Psriodically is Worth Today' Ym.Compound Interest Factors (PWA) Present Worth of Annuity (PWA): What $1. - . - 6%PW 7%PW C b t e r Seven Life Cycle Costing 8%PW 9%PW 10%W 1mPW 14%PW 18%PW 18%W MKPW YrS.

142378 0.161036 0.329234 0.218315 0.120000 0.23319238 0.187468 .20690108 028501013 0.60728972 0.228607 0.201303 0. -----Ym.149029 0.153486 0.06W00 0.31977784 1.30540938 11 .20000WO 0.2501% l.1BOWWO 0.578180 0.47472527 0.26080042 0.243226 0.Compound Interest Factors (Periodic Payment) Periodic Payment (PP): PerWic Payment Newway to Pay On Loan ol$1.35737507 0.288591 0.185553 0.WiBW9 0.295228 0.187444 0. - B%PW 7XPW BKPW BXPW I OXPW 1ZXPW 14XPW 1aPW 1 2 3 4 5 1. - l&PW 2OKPW - Yn.45992388 0.418348 0.25715750 0.257092 1.1WOW 0.174015 0.27138987 0.24807046 0.38628912 0.198891 0.580769 0.85454545 0.28238200 0.14WGUOO 0. 0.395055 0.209798 0.203363 0.34320478 0.20218838 0.205405 0.192072 0.553092 0.545437 0.29128355 I.219118 0.388034 0.30(170575 0.24524436 0.23239482 022252464 0.62288286 0.43073148 0.301921 0.155820 0.19171354 0.ogOw0 O.162745 0.187879 0.186799 0.23852276 8 7 8 9 10 Chnp~rSeven Life Cycle Costing .308689 0.173641 0.381052 0.37173887 0.00 (Capital Rewvety] Annrdties (Uniform Series Payments).0.176984 0.33437970 1 2 3 4 5 8 7 8 0 10 0.179135 0.180874 0.402115 0.135888 0.27742393 0.44525787 0.222820 0.07oMW 0.63871550 0.23022426 0.263797 1.160080 0.21557002 0.374110 0.21708249 0.591898 0.24761260 0.277409 1.237395 1.243891 1.147022 0.315471 0.080000 0.

For Car A. all annual costs are added. The present worth factors for two and four years are 0.11.900 x 0.ear for five years. $3. as illustrated in Figure 7. Car B is a larger size American model. The form is divided into three parts as follows: 1. For example.10 shows a model form for predicting annualized LCC. and Car C is a luxury model. The following is an example of a LCC study for a proposed car purchase (see Figure 7.) The salvage value should be taken into account. For example. the annual costs are entered. It is only when there is differential escalation that the use of differentially escalated dollars should be considered.900 over five vears would be a credit of $2. Part Three of Figure 7. respectively. Initial project costs or other capital investment costs. The same calculation is made for salvage and replacement costs.8. The input data collected is shown in Figure 7.675 x PP equals $4.500.826) and at four years is $154 ($225 x 0. After determining the annualized equivalent cost for the initial and replacement cosu. For example.683. Car A has $2. the LCC analysis baseline is normally current dollar so all costs listed should be the equivalent to the purchasing power of the current dollar.12.135Iyear for five years. Car A's credit is 10% of $16.900 five years from now has the same buying power as $2.7. $750Iyearfor licenses and insurance.826 and 0. They all are equivalent costs assuming a 10% rate for interest. Car A is a moderately priced import. In terms of constant dollars.9. The replacement costs are listed and the present worth factor for each year determined. taken back to present worth (discounted). as has $638Iyear for five years. so the present worth of the tire replacement at two years is $186 ($225 x 0.418 (present worth of salvage) x 0.200/year for maintenance and operation cost. and the annual differences are calculated. A consulting engineer needs to purchase a new car. the equivalent-annual .fur nu^ Using the Annualized Method Figure at 10% interest for a salvage value of $3.. 2. or $1. The engineer has selected three cars for an in-depth LCC analysis. It will be a company car and as such will be eligible for investment tax credits and depreciation allowances. that is. the trade-in of Car A equates to a credit of $3. for the salvage of Car A. the cost is estimated at $225 each cycle. 3. The depreciation credit is calculated as follows: Chapter Sewn Life Cycle Costing .2638. The output data that takes all present worth equivalent costs and equates them to a common baseline of annual costs using the capital recovery factor or period payment (PP) necessary to pay off a loan of $I from Figure 7. or $2.2638 (PP). The periodic payment (PP) necessary to pay off a loan of $1 at 10% interest over five years is PP = 0.683). When dollars are realized from the trade-in.418. For example. These can then be converted to present worth costs by using the correct factor Present Worth of Annuity (PWA). or $638/.11 summarizes the annual owning and operating costs. All major single future costs of replacement expenditures and salvage values.418 today. the initial costs of getting the car on the road are calculated.650. All costs should be in constant dollars. assume that tires are replaced in two and four years. a credit results: the salvage or residual value. The next step is to calculate the present worth of replacement-salvage costs.11). In terms of equivalent costs. The present worth of each cost is amortized using the periodic payment (PP) factor. The intended purchaser has friends in the local dealershipsand can purchase the car slightly above dealer cost with the first year's license and insurance: The investment tax credit is calculated at 10% of each car's base cost. using data in Figure 7. First. and a depreciation credit of $990Iyear. (See Figure 7.62. These costs are totaled. the costs of the tires in terms of current dollars is constant. The present worth of the future costs are then calculated. or for Car A $15.

Year PW = Amount x PW factor 3. Year d. Other Initial Costs a. Capltal IC x PP Recovery Years @ Replacement Cost: PP x PW -. Year PW =Amount x PW factor 5. Annual Cost a. Year PW =Amount x PW factor 4. e. Year e. Maintenance b. b.n Year . 2 - c. Total Initial Cost Impact (IC) Initial Cost Savings 5 % Single Expenditures @ Present Worth 1. Year Salvage 2. Year PW~= Amount x PW factor 2. - c.A b. Alternate NO.: Discount R a t e : % Description Itern A 0 Mechanical 0 Electrical 8 -:: "e! 0 . 3. - Sheet No. Year PW = Amount x PW factor I Salvage Amount x (PW Factor A Annual Owning & Operating Costs 1. b. Interest Amount Amount Amount Amount Amount I )= % I I I I 1 - - - - d. Operations c. Total Annual Cost Annual Difference (AD) J -- 4. I Original Base Costs Interface Costs a. Present Worth of Annual Difference vPP = Periodic Payment (PWA x AD to pay off loan of F a c t o r ) $1 PWA = Present Worth of Annuity (what $1 payable periodically is worth today) PW = Present Worth (what $1 due in the future is worth today) Chapter Seven Life Cycle Costing . Year c.Life Cycle Costing (Annualized) 0 Others Pmcess Economic Life: -Years " C 4 E * - zC 3 3 s E0 5" I 6 2 Alternate NO.

Chapter Sewn Life Cycle Costing N /A f of .Life Cycle Costing (Annualized) Item: CAR PURCHASE a Process Others Economic Life: 5 Years 0 Mechanical Electrical Date: Sheet *On: Discount Rate: 10% her Initial Costs PW =Amount x PW factor PW = Amount x WV factor raight-line depreciation.

500 2. 2.000 5% 3.000 1.000 2.Car Purchase Input Data ($) Cost Element Car A Initial cost $16.000 350 400 .000 5% 15.500 Sales tax 5% Trade-in value(5 years) 3.900 License and insurance cosffyr. 750 Maintenance and operating costlyr.800 300 750 $30.500 1.200 Tire costs at 2 and 4 years 225 Major replacement at 2-112years 500 Depreciation 5 years straight line Investment tax credit 10% Tax bracket of consultant 30% tax rate Car B Car C $15.

In Part One.900 x 0. each alternative is listed and ranked against each criterion.418.. appearance. the initial costs are listed and are already in present worth terms. its follow-on costs were the lowest. x 30% tax bracket or $990Iyear credit. it is dropped from the evaluation. In the analysis matrix. A weighted evaluation is used to more formally organize the process. During evaluation it is important to discuss and weigh the following areas: Needs versus desires Important versus unimportant Design tradeoffs versus required functions Note: An Excel weighted evaluation worksheet is included in the VE tools section of the CD. Even though it was not the lowest initial cost. (That is. equivalent to $2. if a car does not meet minimum safety requirements. operation and maintenance.2OO/yr. For example. +major preference. Weighted Evaluation As a final action. the annual operating cost of Car A is $Z. Finally. the raw scores brought to a common base (10 is used for a normal evaluation).$16. Results From Figure 7. Procedure The recommended procedure for weighted evaluation has been broken down into two processes.3-above average preference. When criteria are deemed equal. and the rank and weight of each constraint are multiplied and totaled. The alternatives are then scored for recommended implementation. No alternatives are considered that do not meet minimum criteria. In comparing two criteria. Chapter Sewn Life Cycle Costing . Criteria are compared. replacement. and salvage). the criteria-weighted process and the analysis matrix. The criteria-weighted process is designed to isolate important criteria and establish their weigh&or relative importance. the present worth of the replacement-salvage costs are calculated. x (present worth of annuity in Figure 7.300Iyr. I -light preference). performance. and costs (initial.62. safety.ZOO/yr.8) 3. the present worth of salvage of Car A is $3.13. Worth Format Using Method " the Present The same result is obtained when the present worth concept is used. each criterion is assigned a score of 1. Scores are then tallied. one against another. The present worth amounts are then totaled and differences calculated.14. preference for one over the other is scored according to its strength.340 present worth (see Figure 7.500 (initial cost) /five years (straight line depreciation) = $3. all criteria important in the selection of the alternatives are listed. as demonstrated in Figure 7.13). Good decisions are made by placing the proper emphasis on all criteria. and the criteria and weights transferred to the analysis matrix. Next. On the criteria scoring matrix. the annual costs are converted to present worth. 2-average preference. For example. Weighted evaluation ensures optimum decisions. the economic data of costs have to be tempered with the human factors such as comfort. or a credit of $2. This series of comparisons is the simplest way to achieve the evaluation. salvage values are negative. the purchaser developed the criteria weights shown and selected Car A. Again. and the owner benefits in the other criteria made it the optimum choice.791. For example. or $8.

615 3.500) 1 1 (2.753) (8.067 2.791 -. --- Total Annual Cost Total Annual Cost(PW) 7.500 (1. Escal. Annual Costs Dif.843 (3.: PW I I I I I I 1 A. Tires B.000 (900) (3.791 (990) 1 (1. Operating Cost B.119 26.683) (3. License & bsur. Major Replace. (6.687 -.582 5.620 F.791 0 3.200 750 0 3.456) 1 7.418) (3.Life Cycle Costing Example (PW) Car Purchase Item: Process 0 Electrical Economic Life: 5 Years Mechanical Others N /A 1 of 1 Discount Rate: 10% Year 2 4 Original Alternate No.800) 2.2.900) ---- PWA.994 6. straight-line five-year depreciation. 2.412) - G.824.170) (15. Dep. Estimated Present IEst~matedT-PreGnt ~stlm&d precent Description I Date: Sheet No. Total ReplacemenUSalvage Costs (PW) I 3. H.370 I Savings % I 1 1 23.65% 1 1 9. = Present Worth of Annuity Escalating ( what 51 payable periodically that is differentially escalating is worth today) The depreciation credits column is based on 30% tax rate.725) 1 1 1 8. C .489 Life Cycle Present Worth Savings 5.791 7. -- E . H.300) 1 (1. G. I Alternate NO. A.000 1.340 2. C Tires -.83% 1 1 I I PW = Present Worth Factor (what $1 due in the future is worth today) PWA = Present Worth of Annuity Factor (what $1 payable periodically is worth today) PWA. Chapter Seven Life Cycle Costing .000) (9. 0 3.800 10. Credits (2.445 Grand Total Present Worth Costs 2t422 24.430 10. Salvage 5 0.

rence -.nce Average Preference -.Sllght Preference Lener/Lener No Preference Ea& Scored One Polnt 5 -Excellent 4 -Very Good Chaptrr Sewn Life Cycle Costing 3 -Good 2 -Fair 1 -Poor I of I .: How Important: 4 3 2 I I Criteria Scorlng Matrlx .Major PreH.Above AveragePrefen.Weighted Evaluation Project: Car Purchase 0 Arehltectural Structural a a Mechanical 0 Others Sheet No.

interest = $672.000 ($861/m x 9290 m2 = approximately $8. operations.which is the annual value of interest.482. 2 Initial Costs = $80/ft.500.8).000 ft. Annual charge without interest equals initial costs divided by number of years: Difference = $1.8).000 every ten years Cost of Ownership Calculations: 1. The figure indicates that for the building m e and data used. less the payoff without interest. and alterations and replacement costs. and 22.072.000/year. Chapter Seven Life Cycle Costing .2 ($64. 28% of the cost of ownership is in financing (cost of money). etc.000 x (PWA) 7.58 x 7. Present worth of annuity.2 x 100.2 = $8.000 (9290 m2 x $64.00 (see Figure 7. Present worth of the interest costs for the estimated costs equals the present worth of annual difference of payoff with interest.000 = $120.020.5% is in annual maintenance and operation charges.000).019.OO payable periodically (Figure 7.47 (PWA) or approximately $4.000.9).*pplicatihn 'fLCC to BuiIdingS The application of the LCC concept to buildings is graphically illustrated by Figure 7. indirect costs. which shows hypothetical ownership costs of an ofice building using present worth concepts.' ($861/m ) 2 Building size 100. Present worth of annual costs equals the area times the annual cost times the present worth of $1. Annual financing charge = 12% x $600.' (9.00 x 7.15.000 ft? x $6.000 (see Figure 7. 2.000 .000 ft.840. Present worth of interest (financing) of annual costs equals annual financing costs times present worth of $1. The remaining amounts are for design.5% Indirect construction costs 10% Alteration and replacement costs $1.00/ft. Average $6.290m ) Cost of real estate (not included) Interest rate 12% Life cycle 20 years Cost of maintenance.58/m2) Design 4.47 = $5. The data on which the figure is based are as follows: 2 Initial cost of building $80/ft. Annual cost = 100.$400.000. Present worth of initial costs equals cost per unit area times building size. approximately 40% of the total cost of ownership is in initial cost. Annual charges with interest equals initial costs times periodic payment necessary to pay off a loan of $1.000.47 PWA). $5. 3.8. Present worth of financing costs equals present worth of financing for estimated initial costs and annual costs.00 payable periodically (PWA) 12% interest rate from Figure 7. approx.00O/year = $672.

Chapter Seven Life Cycle Costing .

000 28. as well as efficiency savings." This statement should be the ultimate goal of the VE effortssavings in total costs.020.000. staff.0% Present Worth-Total Cost of Ownership $19. Figure 7." The article states.000 4.000 + $156.000 x 0.841.000 Annual 540. another viewpoint is achieved.ooO = $BOO.000 Total PW Alterations and Replacement = $483. A similar situation was recently experienced when additional initial costs added to a five-star hotel complex was more than justified through projected increase in occupancy.0 Annual Costs 4. it cites where a renovation/upgrade in office space was paid back in productivity gains in less than one year. Other Costs Design costs = design percentage times initial costs = 4.000).7). Yet.500.000.16 illustrates a commercial office operations expenses on an annual cost basis (1990 prices). Figure 7.00 due in the future (Figure 7.5% x $8. "Giving Productivity an Energy-Efficient Boost.000 x 0.0 Other Costs: Design 360.000 If we take the above concept and add to the life cycle costs of the office workers' salaries. operation and maintenance for a hospital.Present worth = $120. while staffing is 50%.000 2.000 3.000 + $5.0 639.000 = $639.000.0 Indirect 800.840 (approximately $540.17 illustrates the total cost for the total present worth for capital expense. decisions made during design significantly influence the bulk of the total costs. 4. Summary of Costs: Present Approximate Worth Percent of Total Initial Costs $8.5 Financing Costs: Initial 5.500. Total present worth of financing costs = $540. The figure is taken from an article in ConsultingSpecibing Engineer (January 1997) entitled.47 = $537. which is about 6%.000 Indirect cost = indirect cost percentage times initial costs = 10% x $8.5 Alteration and Replacement Total 100. $1.000 = $360.020. Present worth of alteration and replacement costs = cost in future year(s) times present worth of $1. Chapter Seven Life Cycle Costing .104 (twentieth year) = $156. It is interesting to note the percentage of initial costs to the total cost. "Because of the importance of salaries in operating budgets.000 x (PWA) 7. Present worth of alteration and replacement costs = $1.00O.560.000 = $5. payback calculationsshould include potential performance improvements and absenteeism reductions.000 40.000 22.000.322 (PW for tenth year) = $483.482.ooO. For example.000.

. ..-.. Soume: &rfldlng Omrersand Managem Assmiation. . . .. .. - -. . .. . . .. -. .LIFE .. .. . .. . . - . - .. Office Workers' Salaries .. ... . .Statistical Abstract of the United States. .. STAFFING) ...(INCLUDING . f991 .. .... . . . . .. .. . . . . ....-EXPENSE . . ... . . .. . . . . . .I - CYCLE COMMERCIAL OFFICE. . . . -- . . . . .. -. . . -... -.__~ . . . . Gross Office Rent Total Energy Electricity . . Electric Power Research Insh'Me.- Repair and Maintenance I J ... ... . I . . .. . .. -. .. . -... .

Chapter Seven Life Cycle Costing .

The original design results in substantial replacement costs of $35.000. $25.000 are estimated for the twentieth year. the present worth of $35. the chiller to be replaced costs $23.9 is entered under the interest rate across the 25-years line to find the periodic payment necessary to pay off a loan of $1. the original design has replacement costs of $35. 1.where F is the factor to be used.500 x 1.494. as indicated by the parentheses. 2. air conditioning system (HVAC) system. However. Each total initial cost is multiplied by chis factor to determine the annual capital recovery costs. For altemative No. It is assumed that the study group considered the original design and developed two alternatives for comparison.000 will be incurred in the twentieth year. F = (1 + .18 shows the LCC analysis of this example using the annualized method. and $27.1102. After determining the annual amount of initial and replacement costs. this will require using present-day costs escalated for future price increases. In some cases.. For example.000.3855 x $35. the annualized costs are determined. the salvage value of each alternative at the end of the life cycle period is estimated. 2.000 at the tenth and twentieth year.000 for alternative No. replacement and salvage costs are considered.835 for altemative No. The initial cost must be amortized by determining the annual payment costs necessary to pay off a loan equaling the total initial cost impact. ventilation.600 x 0. 1 is estimated at $70. For example. Twenty years from now in terms of constant dollars.49. In the case of salvage value. For alternative No. it is estimated to cost $23.000.Owner-supplied equipment costs $48. alternative system No. A 2% differential escalation would be applied to the 20-year cost estimate. replacement costs of $30.494 x 0.000 for altemative No.000 at year 10. In this instance. For example. Next. Replacement costs used must be those costs (using current dollars) estimated for the year indicated.7. The periodic payment necessary to pay off a loan of this amount is $13. or $1. $4. 1. Figure 7. i is the differential interest rate in decimals. costs of $35.150. The original design initial base bid cost is estimated at $49. This must be done to keep all amounwi in terms of a constant present-day dollar purchasing power.49(F) or $35. Information from the table in Figure 7. The annual differences are then determined and used for Chapter Seven Life Cycle Costing .500 today. For example.000 for the original design. which has a present worth of $13. For the exercise.858 per year.487 per year. and $7. and taxes-are added. These amounts are then discounted to determine the present worth using Figure 7. the present worth (discounted future costs) is amortized over the projected life. replacement of a chiller was estimated to occur at 20 years. Finally. the escalation should be limited to only the amounts of differential escalation over and above dollar devaluation. The formula for calculating escalation is F = (l+i)Y. To do this. the costs are negative.450 for the orignal design." The interface costs for electrical total $10. or $13.1102. maintenance.200 for alternative No.Application of LCC to HVAC Systems Following is an example of the use of LCC for selection of a heating. For example. A market study indicated that the cost of that particular type of chiller was estimated to escalate at 12% per year and dollar devaluation was averaging 10% per year. The next step is to convert the replacement and salvage costs to a uniform series of payments. and altemative systemNo. the annual cost required to recover the original cost of $107. 1.494. Next. a span of 25 years at 10% interest is used. other annual costs-such as operation.000 due 10 years in the future is 0.02)" = 1.000. The total represents a uniform baseline comparison for the alternatives over a projected life at a selected interest rate. and y is the number of years. 2 is estimated at $62. 2. or $11. These figures are shown under "Base Cost.600 over 25 years at 10% would be $107. in this case $0.1102 per year.

.2.......--. HVAC System 0 Others 0 Mechenlcal Structural Economic Life: 25 Years I I r of r Discount Rate: 10% Alternate NO.. 13s960 .667 35... N/A SheetNo-: Electrical Descri~tlon ltem Date: Alternate NO. b. . ..667 . Mahtenam al a 3 .077 PWA Fador ~ - &p! Ed &{ ]:LE - 13....427 ~ .- .. PW = Amount x PW factor ... . . Annual Difference (AD) 4.425 -....M ~. ....... .. . Rtwlaw. .. lnstal/ation ..... Ekiling H. . ... n.. Replace... El&rim/.._ -.0923 ~ Salvage a. d~ - 2.. . .. w 0.900 - . .683 PP = Periodic Payment to pay off loan of $1 PWA = Present Worth of Annuity (what $1 payableperiodically is worth today) PW = Present Worth (what $1 due in the future is worth today) Chapter Seven Life Cycle Costing .-Year 25 AAiunt P W ~ n t x p W x p...- -- .. Present Wollh of Annual DlHerence PWA Factor x AD 9. _ 7!?? . .. m. ... PW Amount x PW factor Year 20 Equip..... - Year 10 EQUiD. 2 lO. 3. Total Annual Cost -....-------...1486 Amount Year -- Arnouiii PW~mountxPWa8&. . .naI S W O I - .. Domestic HW Energy 3.425 3.024 3.2..--. ata!..--.fBl -1.... .. .n~~~w e. .418 5.. -.... 49261 34. Amount 0.. . .- .. C.-- c.3855 -Amount 0...821 .. ..025 . 2 . 1 oli~inel I 4.1q Ba8e Costs lnt*rmu~.. ~-~~ ~ ~ - ~ 3?E- .. Other lnltlel Costs a..Year PW=ni x PW factor ... Owner Suppled Equlpment b. .~- ~ 33.... 38.. _....Life Cycle Costing (Annualized) Life cycle Period Item: Enlisted Men's Quarters.- ~ 16..... ...-~ ~p ~ .....O a.060 - ~ .

LCC Analysis-Equipment Procurement Figure 7. collateral and initial costs are in present-day values and are entered directly.91 for B.077.For example.323. The original concept was validated as the optimum choice. This form is also useful as a summary sheet for individual items or component analysis. or $5. As previouslystated. versus $231.21 shows a general purpose LCC worksheet that can be used for a more detailed system analysis using present worth. or 1. or 1. All present worth amounts are added and the comparison is made for recommendations.50. bidder D was awarded the contract even though his initial unit cost was $309. alternative No. For example. or $26. In using the present worth concept.19 shows the application of the present worth method and uses the information from the previous example. $357. The example points out the impact of consideringescalation and shows that alternative No.0Opayab1eannually for 25 year. In this example. These factors would be used to adjust the annual costs per year acc6rdingly.5411~. The present worth of the annual difference (PWA from Figure 7. In the case of the present worth method. the present worth of the annual difference indicated for alternative No. or $3.20 shows the same example but uses differentially escalating rates using a discount rate of 10% for operation and maintenance costs. If the annualized method is used. Figure 7.recommendations. more than offset the difference in initial cost (on the basis of present worth analysis). the factor for 2% differentially escalating maintenance cost would be 10. 1 is still the recommended alternative. the baseline of comparison is the present-day value. The impact of recurring costs. Figure 7.4 provides the required data. Operation costs are differentially escalated annually at 5% per year while maintenance costs are differentially escalated at 2% per par.427/year-would be recommended.23 outlines a formal procedure for LCC of a n equipment procurement (freezer). General Purpose Worksheet Figure the adjustmentfor the annual maintenance costs of the original design would be $2.82/9. Chnpter Sewen Life Cycle Costing . Annual costs are entered and multiplied by present worth of annuity (PWA) factors from Figure 7. Single costs in the future (salvage and replacement) are discounted using present worth factors from Figure 7. the annual sum for operations and maintenance may also be increased by a factor to account for differential escalation.8 x the annual difference) can also be determined. which has the lowest annual owning and operating costs savings (annual differences)-$5. The results validate conclusions developed using the annualized cost baseline.427 x the present worth of $1.8. x 1. For this procurement. The operation cost factor for 5% would be 14. 1 is the annual difference of $5.077 (PWA).42 for D versus $464. In this example. these escalating rates were calculated as the differential between the escalation rate and the rate of inflation.22 shows an LCC analysis using this worksheet for the selection of emergency power systems of a large computer complex.19.900Iyr.59. for the original design the present worth of the annual costs for maintenance equals $2.53 for bidder B.7. Figure 7. 1.4419. Figure 7.427 x 9. As previously explained. which equals $49.19. For example. LCC analysis can be accomplished using either the annualized method or the present worth method.90O/yr x 9.

C.559 Llfe Cycle hesent Worth Savings ~- Savings% PW = Present W M h - 0.74% 9. Pipmg. G.110 317. Heabng Energy D. Domestic HW E.0096 PWA P 304.864 13. D.83% Present Worth of Annurty Chapter Seven Life Cycle Costing . - A. H. DucIwork & Suppoff Equip.449 34.Cooling Energy C.: 1 o f 1 Discount Rate: 10% CIossd Loop H 6 ~ t Pump Original EaUmatsd/ Prsswrt Cost Worth Description I I 1. - Total ~peratlonlklntenanceC o r n pW) Grand Total Present Worth Costs 352. Refrigeration Equ~pment 6. F. InltlaUCoIbteralCosts CPlpe System wfth Air Cooled Chlller & Heat Recovery cplpe System with Water Cwled Chlller & lreet ~ecovery I Alterawe No.895 48. Maintenance 6.Life Cycle Costing Example (PW) Me: HVAC System Item: 0 Transportation a Electrtcal 0 Mechanical Economic Life: 25 Years 0 0th- NlA sheet No. Electrical lnstallahon C. 1 IfstlmeWl/ I I Cast I / Alternate No. E. 2 Present l~ttmatedlPresent Worth I I I Cost 1 I Worth A.

0923 (18. 1 AbmaW Na. Sevlngs% PW = Present Worth Chapter Seven Life Cycle Costing Others Discount Rate: 10% . Maintenanm 8. Equip.lnltlaUCollateralCosts A. Domestic H W E. Eqyp.- PWA = Present WorM 1 I 1 .0% 5. Repkc 10 B. Refrigeration Equpent_ .0% G. Tots1 RenlaoementlSslvaae asts iPW I r ~ . 1.. Electricai lnsiaLtion n E.000.. - 8. H.- - Grand Total Presenl Worth Costa Life Cycle Prssant Worth Savlngs .~. _ . . Escl.0% 5.~C .Duchvorlc & Suppwt Equip _ C. P~ping. -Other lnitlal Cost. Heating Energy D. F. G. F. % 2.~ ' .20 _ 1 . R ~ I B c . Salvage 25 0.~ ~ .A. ~ O V S ~ b e t ~ecoveiy OrlglW Alternate No.. Annual Cosls A.. Cooling Energy C. - Year A.Life Cycle Costing Example (Present Worth Escalated) Item: Dale: N / A SheetNa: 1 of 1 HVAC System a ~~~m E&ectrlcet Economic Life: 25 Years h3achmfcn1 i I CPIDd~rn I rl-PlpBSyst(Hn with water wlth Air C l d Loop Hsfi -led Chltiem 6 Cooled Chillers I pump +%e@m sat R . Total Annual Cost Total Annual Coat (Wn . 2 Entimaled Pnamt Btlrnated Present Ealmated Pressnl ~ost worn C& worth cost wo1m I I.0% 5._ -8. ~ 3..

E..... ..-. -TOt.S - - .e W m h L h Q"&- . .... I ~...-.. ~ P r s s s n ( W m h ~ ~ PW= Pmaenf Worth PWA -Present Wodh otnnnuify ..Nn...... . I A I Chapter Sewn Life Cycle Costing .--....Life Cycle Costing Estlmate (PW) General Purpose Work Sheet Study TlUe: 0 r r a n m m 0 ~lkfia~ P M&IMI~Y 0 omem EmnomieLife: DlsmUnlgl Rate: -% Years A h t s NaP A-No. L m . . .IS8hq.... - -- 0 0 -I - - - i e K ! % - .. ~~ - ~ -..-.......( ~~ .. ~ I i I -- 8 I .- II*Mt..

-. 7..~. A.dmmM RMnl Eubmad worn cm w m 01 1.rfh - - PWA Chapter Sewn Life Cycle Costing - msanf Worth o l ~ n n u l f ~ .800.WO.L .-nt cm 2. .aarn % -.m 2 ..OW 7 W& 1. !flWM Q 7 rings D.Life Cycle Costing Estlmate (PW) General Purpose Work Sheet SNdy Tllle: 0 ~mncportaaonQ m: Standby Oanaraom lOfl.40D. .. Dsscriptlon ~ CwS4 ~hginea - Ulnut. 2.(XM I Wmld Runt W h .?.w .WO 12LlOW . . - - %j. +.W M Es34 Rata P W x l l E d AJ-Wts.778 0% 0% F.240 rlJOO - PW6IS.m 1a.- c M-nd- mmamNo. :f .. Disoount Rate: 10% Emnomic Life: 40 Years I Shaet No. 32.L-- - 9.779 9.. 176.WLIWO 126.. . c. . .000 --lrzsrOOO 5 - ~ 4-2mKW 1.151 000 I26. D h d 4-21#HIKWGtlS Turbines Engfnes -- P m t E.O .m 1 I..3 ~ . Chsdr 6 n ~ W bnifion t .!?!!@%Lhedi-!uer 11 4 - - E c.-- - .. PW prese?.000 -1 -: 0 P.m 1 9. 1 . R w f e w h r i M ~ BGQ . ..: m ~ n w awn EWUWI WM ~mmwNal 8-1WOKW M D . -- ---F (Fallurn rale me m lour) - Tax Elements 010 EICU W I. -:... Ganeralors B swltChg.m m o w / 4E1W -.. l.3900 4aoW141nm t.. ~ 8-IWOKWGas T~rbines RBCID.a Cod ! IninaUCollRrnI Cml. change I m 6.

24 688.21 248.01 760.Summary of Life Cycle Costs for Top Mounted Freeref' Zone Type Cost A B C D E F 1 Ab RC LCC~ 242.01 790.36 493.09 518.91 709.91 696.50 357.42 666.40 741.96 739. Ah= Acquisition costs RC= Recurring LCC~-Life Cycle Cost Present Woltn - .22 231.76 4 Ab RC LCC~ 272.44 263.50 357.42 666.04 464.1 0 245.40 741-76 'See reference procurement discussion in text.21 518.96 754.24 694.25 486.92 252.90 486.45 431.45 431.86 248.92 267.69 309.95 257.53 464.36 493.69 309.

follow-on costs-annual. EE which relates refrigerated volume and the electrical energy consumed to maintain the refrigerated volume. Ch@m Seven Life Cycle Costing . to pay the expected future costs associated with a particular investment alternative. a discount rate of 8% and a product life of 15 years were used. One such libercy was assuming aU initial and collateral costs were at the same baseline. of operation The correction factor is a constant of 1. can be written as follows: LCC = V + V x $.63. but the cotnplications involved did not warant incorporation of additional refinement.The procurement in Figure 7. the extensions are m e complete rhan they would be if a hund calculator had been used. at a given rate of interest. R=PxTxDxC Where: P = computed electrical energy T = annual operating time in days D = total discount factor. food compartments) x (correction factor) x (food compartments) kwh of elec. energy consumed in 24 hrs. which will convert the stream of operating costs over the life of the equipment to present worth form (Figure 7. provided a projected cost savings over the useful life (15 years) of some $260. Thus the LCC evaluation formula. based on anticipated demand quantities.23. Also.000. For purposes of this procurement. In some cases. the value of P is determined as P = V/EF. replacement.8).8). The examples were prepared in an Excel spreadsheet that refmed to mrxe detailed data than is indicated on the spreadsheets. making tool to allow direct comparison between different expenditure patterns of alternative investment opportunities. where: EF = (Vol froz. Therefore.-uld vary jbm the beginning of the year to the end of the year. an energy cost of $0. resulting in a total discount factor. Overall Note Certain liberties have been takain the abme discussion to simplify the LCC process.56 (Figure 7.04 per kilowatt hour was used. of the product being offered and the energy factor. The LCC formula used in this pmcurement is: LCC=A+R Where: LCC = life cyclecost in present value dollars A = acquisition cost (bid price) R = present value sum of the cost of the electrical energy required by the refrigerator freezer during its useful life. Tables for annuity factors and so forth have been developed for beginning of the year and end of the year dm. LCC = A + R = A + (P x C x T x D). these costs could v a q a few years in a construction project.56 EF = A + V/EF x 124. Also. C = cost of one kilowatt hour of electricity The discounted cash flow or present value methodology was used as a decision. the tables refkct that assumption. of 8. V. The value for P in the energy cost equation is a function of the net refrigerated volume. D. In this chapter. etc. Stated in mathematical notation. The present value sum represents the amount of money that would be required to be invested today.04 x 365 x 8. all costs were end of the year values.976.

Escalation factors based on differential factors should be applied if the evaluation group feels they are appropriate. No major decision regarding buildings that involve large follow-on costs should be made without using the LCC technique. Second Edition for more complete tables.. a conditional recommendation should be made. 1995). Where savings are augmented by escalation. a sensitivity analysis should be conducted using the best available estimated escalation factors. Life Cyck Costingfor Design Professionals. Dell'Isola and S. the concept of LCC for decision making has become increasingly important. Second Edition.Cmlmim With the advent of increasing interest rates and escalating energy and labor rates. 3.S. See Life Cyck Costingfor Design Professionals. DelPIsola and S. Economic Studiesfor Military Construction Design Applications.. Inc. (Washington. Life Cyck Costing for Design Professionals. 6. 5. A. TM-5-802-1. Naval Facilities Engineering Command.J. U. Second Edition for further details. Inc.. A. 1980).J. Kirk. LCC analysis techniques using the equivalent cost concept provide vital tools that should be used by all designers. July. 2. Inc. 1995).S.Life Cyck Cost Data (New York: McGraw-Hill. P-442. When the evaluation group feels the available data are too variable.J. (New York: McGraw Hill. Kirk. Ecomm'c Analysis Handbook. D. Referewes 1. Dell'Isola and S. A. Chapter Seven Life Cycle Costing . This technique must be based on bringing all costs to a common baselinethe concept of equivalent costs for comparison before selection.J.Kirk. a stronger recommendation can be made. U. Second Edition. See Life Cycle Costing for Design Professionals..J. 4. (New York: McGnw Hill. 1983). Where savings are compromised by escalation.C.J. Army Corps of Engineers.

Clmpter Eight Integrating VE into the Construction Industry . As a result. As the text indicates. the recent trend has moved from requests for individual studies to a more comprehensive task order approach. Planning and design 2. The typical approach to planning and design was to (1)proceed with design until an established t i m e f o r example. both nationally and internationally. offering the classical approach to VE applied during design to owners and design consultants. This VE consulting office continues to thrive. Figure 8. encouraged the design community to embrace VE. or (2) wait until a cost ovenun surfaced.1 represents a typical solicitationfrom a government agency for VEservices. architects and engineers were resistant to the implementation of VE. an analysis of the problem suggested that the VE specialists were located too far from where the design was prepared. Billions of dollars in savings have resulted from these efforts.v alue engineering is effective in many areas of the construction industry. The greatest potential for the integration of VE exists in three major areas: 1. and it can be utilized at different stages in the life of a building. schematic or design development. The experiences of the A/E firm of Smith. the U. when the firm used the same classical approach for its own in-house design. Hinchman & Grylls (SH&G) offer an illustration of this evolution. Maintenance and operations these three construction areas. the greatest potential for integrating value Planning and DesiflOf engineering lies in planning and design. In the early 1970s. Eventually. Early in the development of value engineering. difficulty arose. This realization was critical to improved decision making for the design team. However. However. the application of value engineering moved to earlier design phases and was integrated into the design process. who recognized continual cost overruns and poor value results. Further study of the problem indicated that the real issue was the need for value consultation throughout the design process. This strategy has reduced the time and effort required for contracts and administration.S. At first. it became apparent that more savings were being lost than realized. the classical approach is always remote. government and owners. the firm realized the importance of VE and established one of the first consulting VE offices. Construction 3. In time.

N62467-97-R-0883. In the event that a selected A-E firm cannot perform their duties under the terms of the contract due to quality. No firm will be awarded more than one (1) contract. The format for responding to each criteria shall be indicated in lieu of completing Blocks 7 . IN.000. Mitchell. A separate submittal is required to be considered for each contract covered by this solicitation. MS. SC. WI. a different A-E firm (backup) will be employed to perform the work. and OH. KS. CO. The two contracts shall be for value engineering (V-E) studies and reports on all types of facility design projects and the ability to provide a 40-hour Society of American Value Engineers certified training workshop. workload.00 to $500. PO Box 190010.Solicitation for VE Services COMMERCE BUSINESS DAILY Issue No.00 per year. WY.Indefinite Delivery Requirements (IDR) for Value Engineering (VE) Studies and Reports in the Southern Division AOR SOLICITATION NO. on occasion. L.and KY. PSA-1788 Publication Date: 02/24/97 Services Architect and Engineering Services -. FL. will encompass the following states: LA. TN. North Charleston. Naval Facilities Engineering Command. The second contract. ND. This contract may use negotiated fee schedules. AL.SD. The A-E fm selected for contract number 97-R-0883 will be the backup for contract number 97-R-0884 and the A-E firm selected for contract number 97-R-0884 will be the backup for contract number 97-R-0883. The following criteria (listed in descending order of importance) will be used for the basis of selection.000. The first contract. Chapter Eight Integrating VE into the Construction Industry . OK. GA. 2155 Eagle Drive (29406). 8 . Contract award is contingent upon availability of funds. The anticipated value of this contract is between $100. MI.1-4. Firms shall indicate in Block 1 of their SF 255 the contract number for which they wish to be considered. The contract period shall be one year with four (4) one-year options for the complete services listed above. be asked to provide the services described herein at government activities outside the geographical area encompassed by these contracts. will encompass the following states: NC.Construction Synopsis# SN033843-0029 NOTICE TYPE: Solicitation NOTICE DATED: 021997 OFFICE ADDRESS: Commanding Off~cer. one for each contract. negotiations or any other problems. AR. (803) 820-5749 NOTICE TEXT: Two firms will be selected for this solicitation. Frances J. N62467-97-R-0884. 9 and 10 in the SF 255. TX. SC ZIP CODE: 29419-9010 SUBJECT: C .NE.Southern Division. These actions will be decided on a case-by-case basis as approved by the contracting officer. The contractors may also.: SOL N62467-97-R-0883 RESPONSE DEADLINE: DUE 032597 CONTACT: POC Adrnin Questions: Ms. MO. MN.

highest education 1eveVdiscipline (example: BS. b) Ability of the fm to conduct several studies concurrently and sustain the loss of key personnel while accomplishing work within required time limits. 2 . 4. for project managers and team leaders. b) Conduct Value Engineering training. that contains the following data about the member's assignment Team member's name. the name of each planning team member. firm name. and the name of at least one alternate for each key person. SUBMISSION FORMAT: Provide a tabular listing of all excellent performance ratings and lemrs of commendation from both private and DOD clients (designate your role: prime. LOCATION: a) Knowledge of probable site conditions over the Southern Division geographic area of responsibility. Work on these projects must have been done in the last 5 years. SUBMISSION FORMAT: Submit a matrix for proposed team(s). identify the number of teams (planningfdesign.j $- a r yn $$ 823 a&-9 g?. SUBMISSION FORMAT: Submit an organizational chart with the following information: Principal point of contact. mechanical engineering). b) Knowledge of regulatory requirements. SUBMISSION FORMAT: Provide a description of at least 3 projects with client references (point of contact and phone number) for which team members provided a significant technical contribution. rtifi(within the past 5 years) of the individuals 2.. and c) Geographic location of the fm to ensure timely response to requests for on-site support. PERFORMANCE: Past performance ratings by Government agencies and private industry in terms of value engineering studieslreviews and value engineering training..! *'<Q ky :" 5.3 Iff& i *a &4 Chapter Ei~ht Integrating VE into the Construction Inchtry . Indicate how each project is relevant to the work described herein. project completion date and final cost estimate compared to the contract award amount (note whether bid or negotiated).- 1. all team members' assignments. SPECIALIZED EXPERIENCE: Recent experience assigned to the proposed team in a) Organizing and leading VE studylreview. and c) Designing various types of facilities. b) Conducting Value Engineering training. number of years of professional experience and number of years with the firm. SUBMISSION FORMAT: Provide a list of recent projects performed by the firm or joint venture partners and appropriate consultants in the enumerated 26 state area. Also. managed by proposed project managers(s).44 t 4 4 3 $? . Projects shall be in the left column and team members' names shall be across the top row of the matrix. % time to be spent on this team. client's need date.. project manager. CAPACITY: a) Capacity of f m and proposed teams to accomplish the work. team leaders.. PROFESSIONAL QUALIFICATIONS: Technical qualifications of the firm's proposed team to a) Provide Value Engineering (VE) studies and reports. proposed team assignment. including alternates. and c) Professional registration and Ce ed Value Specialist (CVS) certification of the proposed team members. states of professional registration. These ratings should be dated 1992 or later and should include those for joint venture partners and consultants. that started since Januiuy 1992 and include the following data: client's contact. Provide a list of projects of various sizes. consuItants and joint venture partners) they have managed over the past three years. identify which team members worked on the projects described above. consultant or joint venture partner). In matrix form. office location. 3. i*' q @ & %$ d.

and performance references other than Southern Division. they will be asked to provide a formal subcontracting plan in accordance with FAR 52. &. For each contract. Small Business and Small Disadvantaged Business Subcontracting Plan. with print size not smaller than 12 pitch font. 7. SF 254s already on file will be used. specific quality control process.p 1'4 "k 4 Source: Federal Information & New Dispatch. 202-544-4800 . JOINT VENTURE. or consultant. 25 MARCH 1997. small disadvantaged businesses.find-inc. #$Q # %A% &.219-9. a listing of present business commitments with their required completion schedules. Part 204 Subpart 204. whether as a joint venture. label lower right comer of outside mailing envelope with "A-E Services. Site visits will not be arranged during advertisement period. CAGE and TIN are discussed in the DOD FAR Supplement. Include telefax numbers in Block 3a and Contractor Establishment Code (formerly the DUNS number). 97-R-0883 or TIME on TUESDAY. Submittals received after this date and time will not be considered. provide one original SF 255 and SF 254 for the prime and an SF 254 for each consultant proposed.M. Commercial and Govenunent Entity (CAGE) Codes. This shall include an explanation of their management approach and commitment to accomplishing numerous small projects (less than $1M) as well as large projects (more than $lM). The submittal package must be received in this office not later than 4:00 P. e-mail: find@find-inc. if known. teaming arrangement.q Chapter Eight Integrating VE into the Construction lndusuy .671-5. The SF 255 with attachments shall be limited to 25 pages (8. Ins.5 x 11 one side). their commitment to a quality philosophy. Naval Facilities Engineering Command (include 3 or more with names and telephone numbers of the contract administrators). The DUNS. (Find).com. If additional firms are needed for consideration. financial and credit references (include name and telephone numbers of officers at their financial institutions). http:llwww. For consideration. VOLUME OF DOD WORK: Firms Will be evaluated in terms of work previously awarded to the firm by DOD within the past twelve months with the objective of effecting an equitable distribution of contracts among qualified A-E firms including small and small disadvantaged business f m s and f m s that have not had prior DOD A-E contracts. prior to award. SELECTION INTERVIEW REQUIREMENTS: Prior to . historically black colleges and universities or minority institutions in performance of the contract.J $. a portfolio of VE engineering studies (both new construction and upgrades to existing facilities)." This is not a request for proposal. f m s slated must submit their Design Quality Assurance Plan the selection i n t e ~ e wA-E (DQAP).TEAMING OR SUBCONTRACTOR UTILIZATION: Firms will be evaluated on the extent to which they commit to using small businesses. Address all responses to ATTN: Code 02 13FM. and Taxpayer Identification Number (TIN) in Block 3. If the successful f i i is a large business.3%< " .

The cost staff is a team of architectural. also provide input into the preparation of a cost estimate. the wntrolling elements of cost and quality place a "bounds" to the design Work Plan and are shown above and below the normal design activities. top management committed to a revised organization that placed VE in a prominent position. The classical approach separated VE application from the remainder of the A/E activities. who has no direct management reporting responsibility to the design team. as illustrated in Figure 8. quality. key information from a typical project has been abstracted to graphically illustrate how VE is integrated into the design process. actual application of individual VE studies for a project were on a case-by-case basis. and time to meet required owner functions. To do this effectively. mechanical. The VE consultants (as independent evaluators) performed their duties at the end of each stage-at the "nodes" shown in Figure 8.2. The Need for VE "Between the Nodes" In 1987. Poor timing of an otherwise good idea. This objectivity is further assured by the team coordinator. and monitored results. So that VE might succeed. the consulting value engineers did not oppose.Differences Between the Old and New Amroaches . This "review and revise" approach is not particularly appealing to an A/E fmn that ideally prefers a "review and approve" approach. Elevator specialists. provided active participation in the early planning. It was easier to maintain a discrete set of work activities requiring little coordination with the variety of A/E design decision+making activities that occur between the nodes. within the nodes. VE is defined broadly as the balancing of cost.3 illustrates the resulting group. And still. and design products. Architectlengineers did not have much say in this approach. Proiect Work Plan Bcforc every design begins. discipline responsibilities. SH&G embarked on a pilot program to integrate VE into the design process (between the nodes) for all large design projects. or pressure from design project management "to forget the VE idea" to maintain the design schedule.4. The quality (value) teams are selected and organized specifically for the needs of each project from those architects and engineers who have no prior input to the design being reviewed. The Work Plan is updated throughout the design process. since the study coincided with the normal review and approval process of most owners. In Figure 8.2. They simply agreed to keep this application separate. coordinating relationships.4."and the cost. mechanical controls specialists. the VE team participates throughout the progression of design following the project design work plan schedule. This set of information is referred to as the Project Work Plan. Figure 8. As such. and electrical estimators and schedulers. a project schedule is prepared to graphicallyportray the stages of design.- Until value consultation through the design process became an accepted practice. The design team prepared each stage of design with little or no coordinating input from the value engineer. Chapter Eight Integrating VE into the Construction Industry . many good VE ideas came too late to be incorporated into the design. and value engineering responsibilities. negated many good ideas. the frrm assigned a value specialist to its main design office. structural. Once assembled. Both cost and quality are further subdivided into modeling. Unfortunately. In Figure 8. They believed that the overall project schedule would not be affected. hospital equipment specialists. Little or no integration with the design team resulted in fewer management headaches for the VE consultant. Unfortunately. called "Facility Economics. The first several months were devoted to the study of how best to incorporate the principles of VE into the routine activities of the A/E office. quality. and so on. many good VE proposals were not accepted by the design team because of lack of integration within the design decision-making process.

Chapter Eight Integrating VE into the Construction Industry .

1 Quality Coordinator (Team Varies/Project) Architectural Quality Civil Quality 11 I Quality Coordinator (Team Varies/Project) Architectural Quality 1 1 Civil Quality Electrical Quality 1 .VE Organization Chart Manager Facility Economics (Certified Value Specialist) 1 Cost Manager Veam Constant) 1 1. Architectural Costs 1 Quality Coordinator (Team Varies/Project) Architectural Quality Civil Costs Civil Quality Electrical Costs Electrical Quality Concept Costs Design Quality - - 1 1.

Integrated CosUQuality Value Management Project Approach Chapter Eight Integrating VE into the Construction Industry .

For example. the classical VE reviews still occur at the completion of each major stage of design. Quality Task 204: Schematic VE Workshop is described in a one-page narrative covering the topics of: Purpose Participants Data required Activity Product The narrative for this particular activity is included in Figure 8. function analysis. as a convenience. and the VE team. and design standards regarding space and engineering functions. Also. the design team. but they are also performed by the original design team. Chapter Eight Integrating VE into the Construction Industry . parameter. by both an independent team (to maintain objectivity) and. These reviews are augmented by other less-formalized. The database includes information such as ideas from previous VE studies.measuring. being part of the same organization. Each VE activity is coded in the Project Work Plan to describe the task in greater detail to the project manager. systems. The cost database includes historical. these activities occur throughout the design decisionmaking process. The VE team. Databases have been created to support both cost and quality VE activities. Management of cost and quality occurs only when management takes specific corrective design actions to deal with the variations between the budget model and the actual design measurement. One significant change is that VE can be practiced on both a formal and an informal basis. automated cost. However. Another difference is that the VE team's job does not end when the VE recommendations are given to the original designers. must assist in the implementation of each idea. are taken i t various times during the design progression. this team may be called upon to complete the work. so the value engineer can in turn complete needed assignments.value-related studies "between the nodes. The diagram also isolates the design and cost information needed to conduct workshops and when they should be held. separation of creativity and evaluation. Changes from Classical VE This new approach in design has resulted in several fundamental changes to the classical way of conceptualizing VE. and life cycle cost (LCC) information. a group that was not involved with the previous decision. by the design team. unit component. They may be performed by an independent team of value engineers (as in the classical approach). this documentation provides guidance for others in the integration of work assignments and data requirements.5. The principles of VE-including following the Job Plan. As the diagram shows." These studies are scheduled by the VE manager to coincide with key cost-driver decisions. Modeling is the initial budgeting of both cost and qualiw requirements bv the owner. The independent VE team is structured based on the needs of the specific value study. but it always consists of other design team members who have not participated in the original design of the project. as well as when they will be done and how. findings from post-occupancy evaluations. If further research is required. and managing.estimating system has been developed to integrate these efforts into the VE process. Measurements (or estimates) of cost and qualin. LCC analysis and recommendationsare still a fundamental part of every study. These databases continue to be improved through experience and formalized feedback from post-bid analyses and post-occupancy evaluations at the completion of projects. Explaining each of the tasks helps both the project manager and the design team better understand what the duties of the value engineer are. A specially designed.

j ~9 %!!a 5v Q'? v Once this information is complete. it should be given to the quality coordinator for review prior to the schematic VE workshop. prepared by the VE coordinator. Chapter Eight Integrating VE into the Construction Industry . Soils Report .*# @+A Purpose Review the schematic submittal to optimize decisions.Site Analysis. the project manager should obtain the following data: . documents the VE process and recommendations. f4 * $: 4 a $ q. A draft VE report is presented at this time documenting the recommendations. (The actual length of the VE session depends on the size/complexity of the project and the results to be achieved. Elevations. The following phases are followed: Information Phase (including function analysis) Idea Phase $. The ownerluser representatives and the construction manager also participate."a $\'$ - Upon completion of the above. and begins to isolate areas for in-depth value improvements.P$ $ 4 i"21 [:P Activity $. 204: Schematic VE Workshop . 1. who serves as the quality coordinator. $?j Once the team is assembled.5 h i ? t5 2 Product 4 p9$ .s Facility Economics Activities .a $ *" . :+?$ 9 9 !-. The quality coordinator prepares a VE work session agenda and recommends the independent team members.b . desired quality and cost. The project manager is requested to arrange a VE session. Project Schedule ~4 $3 A). q . Data Required $ . Participants The basic work is performed by an independent VE team under the leadership of a Certified Value Specialist. the team gives an oral presentation of VE recommendations to the design team and senior ownerluser representatives. Prior to the VE workshop. compliance with required standards.Building Description Forms .- i . j$ $ ttd s . kgS p$ &! k* c54d p 5 ' Analytical Phase Recommendation Phase ab* 9 k *<2 t .$$ %.i it. cost and quality models.* :-4* * 2 ri i Y PJ j _ * i ( 2 -it $.2 * ? Schematic Design .Schematic Estimate.: i >.i f-3.Plans. The quality coordinator will recommend the proper length of the VE workshop to achieve the objectives of the project manager). 9 >g:d r<A 4. The design team provides information and is available throughout the VE workshop to answer questions.I b.+$ & . The team then reviews the documentation. A final report. for technical adequacy. . Sections . a project briefing is presented by the design team.

just plain increased project management application. every major project has followed similar Work Plans. These guidelines result in greater objectivity in the VE process than the in-house designer efforts can offer. VE was applied during the construction cycle. "Value Engineering-Construction. Since then. When a PM/CM approach is used. Clients and designers alike agree that greater value results from the integration of VE into the design process. This cost was paid by the owner directly. it improves the effect on project value and design ~mductionefficiency In fact. However. At the same time. experience on over 50 large PM/CM projects has shown a resultant VE savings that far exceeds fees. VEbelongs in thii professional's tool kit. contractors are invited to submit Value Engineering Change Proposals (VECPs) on contract changes that reduce costs. the contract for these services is the preferred placement for t h e m provisions. On a more personal basis.Benefits of Integration Since integration of VE with the design process in 1987. In all instances. Increased monitoring and management of quality and cost throughout design.Figure 8. COmmtim Initially. * Greater knowledge of costs and the resulting economic impact of various design decisions. project manager. A typical scope of work for value engineering services for PM/CM is provided in the Appendix of this book. This clause is part of the Standard General Conditions. the added cost has a lesser impact on the overall fees for designing a project. The Cost of Integrated VE The classical approach to VE application segregated the labor involved in a study by the VE consultants. interpersonal relationships within the organization are improved. Because VE has been applied from project initiation through completion. all Depamnent of Defense Construction Contracts (unless specifically exempted with good reason and in writing) have included the VE Incentive Clause. the value engineer on one project becomes the designer on the next. and design team have all benefited from the organized methods of VE. Since each VE team member knows that the next project he or she designs might be value-analyzed by the same people now being evaluated. it is difficult to isolate all the value improvements resulting from this new approach. The basis of bid is not changed. This results in the informal incorporation of VE ideas and attitude into the mainstream of design for the next project. the use of VE as a part of the managers' scope of work is a n innovative tool to increase the effectiveness of their services. They share in any approved VECPs. Chapter Eight Integrating VE into the Construction Indushy . Since the PM/CM is responsible for cost.6. The owner. With integration of VE into the design decision-making process. In 1968 the Armed Services Procurement Regulations began to write construction contracts that included Value Engineering Incentive Contracts. and quality control. Other improvements include: Greater team interaction. When used for fast track. The scope of services within the framework of PM/CM responsibilities differs from those offered by a VE consultant and/or an in-house designer or owner. VE began as an essential part of a larger overall production/manufacturing organization where the benefits outweigh the added design management responsibilities for the designer and in clients. schedule. and it becomes effective after award of the contract." is an excerpt from the VE Program Guide for Design und Constraction. * Easier and more economical implementation of VE recommendations. as set forth in the clauses (normally about 50%). Another successful integration of VE has occurred in project/mnstruction management. bid ~ a c k a ~ i norg .

" as used in this clause. in accordance with (b)Definitions. (3) A separate.The Contractor shall submit VECPs to the Resident Engineer at the worksite. noting any effect on the wntract completion time or delivery schedule. identification. - "Contractor's development and implementation costs. (7) Identification of any previous submissions of the VECP.. or Government-furnished property. such as any net increases in the wst of testing. whether or not the acquisition cost changes. (d) Submission. means agency costs of operation. the agencies and contract numbers involved. means the estimated reduction in Contract wst ofperformance resulting from acceptance of the VECP. testing.provided.248-3 Value Engineering--Constmction As prescribed in 48. including any amount attributable to subcontracts under paragraph (h) below. The Contractor is encouraged to develop. the instrictions in those procedures re1atLg to fbn&t. (e) Government Action. and (2) Results in reducing the contract price or estimated cost without impairing essential functions or characteristics. such as test and evaluation and operating and support costs. 'Government costs. the comparative advantages and disadvantages of each. the instant contract. "Collateral savings. maintenance. preparing. including subcontractors' development and implementation wsts (see paragraph (h) below)." as used in this clause. "Value engineering change proposal (VECP)" means a proposal that -- (I) Requires a change to this. or (ii)To the contract type only. The term does not include the normal administrative costs of processing the VECP. (6) A statement of the time by which a contract modification accepting the VECP must be issued in order to achieve the maximum cost reduction. and submitting the VECP. The cost reduction associated with the VECP shall take into account the Contractor's allowable development and implementation costs. The Contractor shall share in any instant wntract savings realized from m t e d VECPs. with a wpy to the Contracting Officer. "Instant wntract savings. insert the following clause: Value Engineering Construction (March 1989) - (a) General. If additional time is required." as used in this clause. (I) The Contracting Officer shall notify the Contractor of the status of the VECP within 45 calendar days a f h the contracting office receives it. - (2) A list and analysis of the wntract requirements that must be changed if the VECP is accepted. means those agency costs that result directly from developing and implementing the VECP. and the effects of the change on the end item's pedxmance." as used in h s clause. a justification when an item's h c t i o n or characteristicsare. Ifthe proposed change is affected by wntractually required configuration management or similar procedures. and priority assignment shall govern VECP preparation. (5) A prediction of any effects the proposed change would have on collateral costs to the agency. the Contracting Officer shall notify the Contractor within the 45-dav period and provke the reason for the delay and the-expected Chapter Eight Intepating VE into the Construction Industry . means those net reductions resulting from a VECP in the agency's overall projected wllateral costs. the Contractor shall include Leach VECP the information described in subparagraphs (1) through (7) below. prepare. and previous Government actions. The VECP shall include the following: (1) A description of the difference between the existing wntract requirement and that proposed. "Collateral costs.that it does not involve a change -(i) In deliverable end itan quantities only. minus the allowable Contractor's development and implementation costs. maintenance. (0 below. if known. means those costs the Contractor incurs on a VECP spec~ficallyin developing. (4) A description and estimate of costs the Government may incur implementing the VECP. as well as those costs the Contractor incurs to make the contractual changes required by Govenunental acceptanee of a VECP. to implement. including any suggested specificahonrevision." as used in this clause. and submit value enginwing change proposals (VECPs) voluntarily. exclusive of acquisition savings. operations. (c) P73CP prepamtion.I 52. and logistical support.202. including the dates submitted. logistic support. detailed cost estimate for (i) the affected portions of the existing contract requirements and (ii) the VECP.beine altered. As a minimum.

aizl ~- (f) Sharing. (h) Subcontmcts.. When the head of conhcting activity determines that the cost of calculating and tracking collateral savings will exceed the benefits to be derived in a w-on contrack delete graph (g) from the basic clause and redesignate the remaining paragraphs ~ ~ 1 ~ Source: Value Enginemng Program ChutefirDengn andConstruchon.. but shall exclude any value engineaing incentive payments.The Contractor mav restrict the Government's right to use... (2) Ifthe VECP is not accepted.. except &at. (The terms "unlimited rights" and "limited rightsn are defined inPatt 27 of the Federal Acquisition Regulation. The Contracting Officer's decision to accept or reject all or any part of any VECP shall be final and not subject to the Disputes clause or otherwise subject to litigation under the Contract Disputes Act of 1978 (41U. any part of ~ ..C. p. In wmputing any adjustment in this contract's price under paragraph (0above. at any time before it is accepted by the Government.52.W C P or the supporting data by marking the following legend on the affected parts: "These data." If a VECP is accepted. with respect to data qualifyingand submitted as limited ri&s techuical data. in whole or in part.248-3 Value Engineering--Construction date of the decision. explaining the reasons for rejection. The Contractor may withdraw any VECP in whole or in part. 4-7.WSPQ2. Vol.S.601-613). (g) Collateral savings.) (End of clause) Alremole I (APR 1984). u s l ~ o w e v <the Contractor's share of collateral savings shall not exceed (1) the contract's fm-fixed-price or estimatedcost. at the time the VECP is accepted. whichever is greatm. and that amount shall not be subject to the Disputes clause or otherwise subject to litigation under 41U.furnished under the Value EngineeringConstruction clause of contract.51. This restriction does not limit the Government's right to use infomfation contained in these data if it has been obtained or is otherwise available from the Contractor or fian another source without limitations. it shall not be liable for any delay in acting upon a VECP. The Contracting Officer may require that the Contractor provide Written notification befom undertakulg significant expenditures for VECP effort. in whole or in part. this the C ~ M O . (2) Poyntmt. . (3) Any VECP may be accepted. or disclosed. . used. that these payments shall not reduce. the Contracting Officer shall notlfy the Contractor in wribg. Payment of any share due the Contractor for use of a VECP on this contr'act shall be authorized by a modification to this contract to(i) Accept the VECP (ii) Reduce the contract price or estimated cost by the amount of instant contract saving%and (iii) Provide the Contractois share of savings by adding the amount calculated to the contract price or fee. or (2)$100. If a VECP is accepted.(i).C.. even though an agreement on price reduction has not been reached.601413.000 or more and may include one in subcontracts of lesser value. The Contracting OfXcer may accept the VECP.2. the ContracMs allowable development and implementation costs shall include any subcontractor's allowable development and implementation costs clearly redting from a VECP accepted by the Government under this contract. the Contractor hereby grants the Government unlimited r i m in the VECP and supportmg data.. The Contractor shall include an appropriate value engineering c l a w in any subcontract of $50. . 1993.. the Government's share of the savings resulting from the VECP. the &v&ent shall have the rights &died in the contract modification implementing the VECP and shall appropriately mark the data.S. Chapw Eight Integrating VE into the Construction Industry May ID. shall not be disclosed outside the Government or duplicated. pnfm kt accordance with the existing contract. The Contracting Officer shall be the sole determiner of the amount of collateral savings. . for any puzpose other than to evaluate a value engineering change proposal submitted under the clause.Data. by the Contracting O f f i d s award of a modification to this wntract citing this clause. Until a notice to p r o d is issued or a wntract mDdification m l i e s a VECP to.000. the itlstant wntract amount shall be increased bv 20 wrcent of anv projected wllatmal savings determiied td be reakzd ih a typical year of use after subtracting am Government co& n ~ t ~ ~ v i ooffset. by issuing the Contractor a notice to proceed with the change. The Government will process VECPs ~ t i o u s l yhowever. provided. The GovernmenYs share of savings is determined by subtracting Government costs &wru instant contract savings and multiplying the result by (i) 45 percent for fixed-price contracts or (ii) 75 percent for cost-reimbursementcontracts. (1) Rates.

However. yet. some contractors who have bid Guaranteed Maximum Contracts have used VE. it will maximize the effect on project value and owner satisfaction. the VE Incentive Clauses have been included in many U.As aresult. and contractors will discover that this approach has little impact on their overall fees.S. design team project/construction managers. It is difficult because of the current budgeting practices that independently budget M & 0 and capital expendims. schedule. adding extra costs to reduce M & 0 are not normally considered. and design review procedures.In addition. sales and profit should increase significantly when VE is sold as part of their services. These contractors offer owners a reduced cost. what has been done in a number of occasions is to add an M & 0team to the VE studies scheduled during design. VE has been conducted solely for M & 0projects. These teams have resulted in adding creativity and sensitivity to the process not previously realized. The effort would be integrated with the normal cost. if their proposals are accepted. Chapm Eight Integrating VE into the Construction Industry . but the opportunities have been very limited. The real goal of a value engineer should be to integrate the VE process into standard operating procedures. Maintenance and Cm'wim This is the area where VE has least penetrated. However. Results have been quite significant. government contracts for M & 0services. but these would be augmented with the VE techniques. The owner. In a few rare instances. They have developed a trained staff that performs a "mini" VE study. As a result.

the owner required a VE effort that would be augmented with an application of risk assessment and analysis for future projects. Risks were categorized as "medium" or "high. city port authority to apply VE methodology in conjunction with formal risk assessment and analvsis. The VE team worked with a risk analyst to provide more comprehensive feedback regarding potential risk areas and a broader evaluation basis for establishing cost ranges. 30-vex-old . one of which would cover risk assessment and analysis. using 15 professionals covering the major aspects of the project. The team was broken into several groups. along with levels of severity or risk exposure. there was an opportunity with a large. Chapter Nine VE Applications to Risk Assessment and Analysis . The risks were isolated by all teams and consolidated by the risk team. During the creative phase. a wide range of possible risks was identified. Several recent projects had large cost and schedule overruns with adverse occupancy effects. Risk Assessment A VE study was scheduled during early schematics. along with improved total project objectives. After presentations of the project by the owner's staff and a review of available information. Therefore. office com~lexthat was in . ideas were solicited from all teams for possible mitigation of the identified risks. Team members conducted a formal VE study along with an initial assessment of project-related risk. Administration and Contractual Issues 111." Random or extraordinary risks were not included. This chapter describes a simplified example outlining the techniques used in this study. would be realized. Construction IV. The development of mitigating actions using the VE methodology proved more powerhl than was initially imagined.. The client owned a large. the risk assessment team discussed the phases and scheduling of the project and identified with the other VE teams the following categories of risk to be included in the assessment: I. the process of an extensive upgrade and modernization. it became obvious that the combination was a very powerful tool. Quickly. Tenant Relations and Public Image During the information phases.n 1993. The marriage of the two concepts would give additional assurance that more accurate project budgets and schedules. Design 11.

Team would also be responsible for tenant/ public/contractor communications.Identification of Risks The assessment effort identified five risks as most important: Tenant Risks: There was a serious risk that tenants would not renew leases if they believed the modernization program ignored their needs or if improvements took excessive time. 11. 3. Mitigation The following were general recommendations to mitigate design risk: 1. Owner to assume more risk in asbestos cleanup efforts (see environmental and design risk issues). Improve detail of any performance specifications and provisions of information to bidders. local authority guidance on life safety. Design Risks: The perception of how design decisions for necessary technology upgrades affect cost and rental revenues was isolated as a risk item. I. In addition. B. Design uncertainties (medium risk) 3. 2. Dedicated ownerlmanagement coordination (high risk). Indicate a dedicated ownerlmanagementteam to communicate to top management all aspects (including contractual) of modernization program. Union participation and work claims (medium risk). Advantage of contractors currently doing work (medium risk). Provide bidders with more detail and available documents on existing conditions and owner. including revenues. The absence of such a team could adversely affect the upgrade results. and indoor environmental issues. Interest and availability of qualified modernization and maintenance contractors (high risk). Mitigation The following were general recommendationsto mitigate administration and contractual risk: 1. 4. 5. The key design risk factors identified: 1. - Chapter Nine VE Applications to Risk Assessment and Analysis . 2. EnvironmentaI/asbestos issues (high risk) B. 3. Administrative Risks: The complexity of the modernization program required a dedicated ownerlmanagement team. Following is a more detailed outline of the categories." with a potential adverse effect on costs and schedule. Owner biases of general conditions (medium risk). Key target: Plan work so that only clean. asbestos. Administration and Contractual Risk Issues A. Improve documentation of existing conditions of equipment and systems prior to development of bid documents. asbestos-free areas are subject to new construction. Schedule technical review by VE team to focus on ability of design to accomplish objectives without significant adverse impact on costs and revenue. Environmental Risks: The presence of asbestos affected costs and had a significant impact on scheduling. 4. with some risk-sharing by owner on any changes . Design A.identified. Level of information in bid documents (high risk) 2. Contractor Risks: The submittal of competitive contracting bids was evaluated as "uncertain. The kev administration and contractual risk factors identified: 1. owner response to tenant complaints needed to be improved.

Mitigation The following were general recommendations to mitigate tenant relations and public impact risk: 1. Develop more detailed information provision to prospective bidders and risk-sharing by owner. Establish dedicated management team for the modernization program to include responsibility for developing detailed construction inspection program and improved level of detailed specifications. After the risk areas and possible mitigation are identified. Under the guidance of the dedicated management team. Review owner general conditions for possible changes of more onerous requirements. 2. To this estimate was added the designer's concept of standard owner markups. As technology advances. 3. These included the project estimate runs. 2. 2.1 in columns 1 and 2. Risk Analysis This section presents the methods and findings of the risk analysis performed by the VE team. 3. Chapter Nine VE Applications to Risk Assessment and Analysis . The key tenant relations and public impact risk factors: 1. 4. Expand and improve technical specifications by requiring consultants to retain specification consultant(s) for concurrent development of specifications. Construction Risk Issues and Mitigation A. 4.000)for this project.000. Tracking the Estimate and Risk Analysis Column 1: Original (DesignerIOwner) Estimate The designer's estimate submitted for the project by the owner's project manager includes the hard costs (construction = $46. The general recommendations to mitigate construction risk: 1. Management team will be responsible for maintaining communications with facility tenants to promote and enhance public relations during the project. Column 1 (Submitted Designer Budget Estimate) was the starting point for the VE team evaluation.2. Anticipate prospective tenant elevator demands and identify service options to ensure marketing success. to arrive at the total project cost estimate of $82. which are listed in Figure 9. After project completion. the risk tea. Tenant Relations and Public Impact Risk Issues A. Explain benefits of modernization program to tenants. IV.5 million. Assign responsibility to seek out additional qualified contractors and conduct interviews to indicate objectivity in bid award and selection process. Minimize adverse tenant impact through fast track schedule.withadded cost expertise from the VE team-performed a number of project cost estimate adjustments. 3. Length of time for modemization and upgrade (medium risk). owner must keep abreast of changes and implement those considered cost effective. Establish and enforce detailed equipment acceptance testing procedures. 111. reevaluate system upgrades for cost effectiveness. implement an increased tenant public relations program during construction to communicate project status. with scheduling of operations and shut-downs during off hours as much as possible. B. Reduction of value of office space as perceived by current and prospective tenants (high risk).

157.Office Modernization Program Cost Estimates Summary (Millions) Submitted Designer Budget Estimate DesignertOwner Budget Estimate Adjusted @ Risk Approved VE Teem Estimate @ Risk Total Construction Contract Cost Project Cost Before Contingency Project Contingency Total Project Cost Risk Analysis Adjustment Adjusted Total Project Cost Potential Project Savings Additional Savings (PW) Reduced Maintenance Total Potential Savings Incl.5 .

. The VE team identified major project components as ranges of cost (rather than single estimates). a project contingency of $10. The appropriate levels of uncertainty (potential viability) were identified for the primary project components.7 million. Approved Add-ons. extra work allowances). other elevator costs. The 80th percentile was then identified from the results of the simulation. temporary construction costs).8 million. for a total project cost of $168. This is the risk-adjusted estimate. The team estimated the normal level of construction uncertaintyand then reviewed the various risk factors affecting the project as proposed.2.2-3) and a simulation program (@Risk).8 million and a risk adjustment of $14. 3. planning and engineering. electrical Structural Other Costs Security Tenant construction Soft Costs Escalation. The simulation was performed using a microcomputer spreadsheet program (Lotus 1. construction contingency.For this simulation.00 1. Chapter Nine VE Applications to Risk Assessment and Analysis .00 1. The following factors resulted: Construction Costs Architectural Mechanical Elevators Other Modular overlays. and a simulation analysis was used to identify the 80th percentile (80% level of confidence) that was deemed appropriate by team and owner for the construction cost.95 . etc. and VE Team Estimate Revisions Adjusted for At-Risk Adjustments included the following: 1. The construction and project contingency and risk adjustment were estimated after a simulation analysis was performed for the adjusted base estimate.000 samples (using a Monte Carlo sampling technique) were taken within the ranges of data identified and the distribution of outcomes identified. with a baseline estimate of $143.Column 2: Estimates Adjusted to all Applicable Owner Standards. The "high" factor represents an estimate of cost with a 10% probability of being too low. This column shows the results of the risk analysis for the original project proposal as adjusted.95 1. Low Mid .3 million. the "low" factor represents an estimate of cost with a 10% probability of being too high.00 In the above chart. (See Figure 9. The estimate was adjusted to include the Standard Owner Guidelines not included by the designer for addeon allowances (e. Note: These costs were reviewed with ownerldesign personnel and accepted as valid costs.g.) The figure illustrates results of risk analysis for an estimate having an 80% probability.. tenant construction costs.95 . 2. contingency.95 .1. Items were added to the estimate to reconcile it with components identified as essential by the VE team to meet owner initial objectives (e. The VE team made further adjustments to the original estimate to allow for comparison of equal projects.oo 1.95 .g.00 1.

Office Modernization Program Construction Risk Analysis Adjusted DesignerlEstimateOwner Total Project Cost .

00 1. contingency.3). the VE team budget indicates additional follow-on savings of $0.Column 3: Approved VE Team Estimate Adjusted for AteRisk Adjustments included the following: 1. The risk analysis simulation was performed on the data.95 1.2). The appropriate levels of uncertainty were identified for the project components.9 million in maintenance and operations. The recommended and approved VE team proposal budget is estimated to be $157. 2. equates to $157. The method used in this analysis identifies overall levels of cost uncertainty and then varies the percentages based on additional risk factors (such as availability of a dedicated management team).5 million (as shown in Figure 9. Most project Chupter Nine VE Applications to Risk Assessment and Analysis . and tenant interface impact.2% is recommended. For the accepted VE team proposal. The following factors resulted: Construction Costs Architectural Mechanical Elevators Other Modular overlays. Note that initial costs were slightly increased due to the extra initial costs incurred for mitigation. when adjusted for contingency and risk ($13.5 million. The level of project contingency and risk adjustments based on the uncertainties isolated for the adjusted designerlowner estimate is 17.oo . RAA requires a clear idea of total project costs.5%.95 .00 1.2 million). another computer run using the Risk software was conducted.3 portrays the results. Also.rather than design-oriented team is mandatory. A team effort is required to set realistic ranges and isolate risk areas as well as to estimate mitigation actions. In summary. which is $11.8 million (as shown in Figure 9. The VE team estimate was adjusted to include the accepted VE proposals. etc.oo 1.95 Mid 1.00 Using the above input. Costs were also included for particular risk elements such as net cost work (security).95 . electrical Structural Other Costs Security Tenant construction Soft Costs Escalation. The recommended project proposal budget is estimated to be $168. Low . general conditions.15 1.3 million that. an overall additional markup of 9. the key differences between a typical VE study and a study with a risk assessment and analysis (RAA) requirement are: RAArequires a greater emphasis on initial cost efforts. Also. Figure 9. It follows that the risk analysis identifies the specific levels of risk or uncertainty facing the program and quantifies the risk wherever possible. Cmlusin The immediate factor recognized by all personnel involved in the study was this: Validation ofthe baseline estimate by aproject.3 million less than the project proposal because of several VE recommendations and reduced risk. These involved the typical VE ideas plus the risk mitigation ideas approved by the group during the risk assessment and study. The plot shows a baseline estimate of $144.

Office Modernization Program Construction Risk Analysis VE Approved 1.0 -1 .

it would appear that owners would be most responsive to using a VE study with and development teams consider only construction costs. financial expense. Before they can fix the ultimate project budget. As a result. This requires owners who are responsive to initial startup. However. operat& and maintenance. insurance. hopefully. Chapter Nine VE Applications to Risk Assessment and Analysis . This book and this chapter will. From the discussion in this chapter. A principal reason for this is that risk mitigation frequently requires adding initial cost to reduce soft (contingencies) costs. Owners who are not sophisticated in budgeting and project cost control may be inclined to base decisions on knownpathways and familiar products. RAA requires additional creative efforts (such as brainstorming) to develop mitigation ideas for isolated risks. RAA requires enlightened owners (highly structured. Too few owner/managers of facility projects have the ability. the VE ideas must be implemented. compamnentalized owners do not respond) with easy access to total budget thinking. which do not represent an accurate picture of total owner costs. The final risk analysis requires the results of the approved VE actions to be meaningful. The agenda and time schedule of a typical study will not work well. security and user costs. provide information and methodology enabling owners to choose VE studies that combine risk assessment and analysis. or are organizationallystructured. to respond. sales &d marketing. the post-VE study efforts are longer and augmented. the real world is not so logical.




approximately $10.000 square feet 1 mezzanine level for a restaurant 3 levels of shops 2 17-story office towers Principal study constraint: Maintain the architectural image of the building. or 15% of the initial cost. and electrical-studied a large commercial office headquarters facility1 consisting of the following: 3 basement levels of parking 800. and Basem Al Shihabi. with special thanks to Sulliman S. four teamsarchitectural. $350. A-4) Use Precast Hollow-Core Plank Floor Construction (No. E-1) 177 178 182 183 184 187 189 193 197 199 202 'Acknowledgment is made to the National Company for Cooperative Insurance/(NCCI). Principal Designer of Omarania &Associates. and reduced costs for operations and maintenance. (The Table of Contents on page 177 is one of the excerpts and refers to some documents not listed here or shown in the section. Cue S t d y E h n B The items listed below and shown in this case study have been excerpted from an actual VE report. On the final implementation.000. Their input was critical to the success of this study. In addition.) Descdptia page Table of Contencs (from original study report) Executive Summary Construction Cost Summary Cost/Worth Model Function Analysis Worksheet Summary of Results Summary of Potential Cost Savings from VE Proposals Selected Value Engineering Recommendations Stop Elevators at Upper Ground Floor (No. A1 Medeiheem. mechanical. S-3) Modify Thermal Energy Storage (TES)Design (No. was saved. structural.000. Case Study One Corporate m c e Building . Project Manager of Cooperative Real Estate Investment Company. M-2a) Reconfigure Electrical Distribution (No.n 1994.00O/year in follow-on savings resulted in increased utilization of space.

Case Study One Corporate Office Building .

-.VALUE ENGINEEIUNG REPORT Corporate Office Building Table of Contents DESCRIPTION SECTION LIST OF FIGURES & TABLES EXECUTIVE SUMMARY ES-l WTRODUCTION General The Design Team The Value Engineering Team Executive Briefing VE Study Agenda PROJECT DESCRIPTION General Scope Architectural Structural Elevators & Escalators Mechanical HVAC Mechanical Plumbing Fire Protection Electrical Cost VALUE ENGMEERING ANALYSIS PROCEDURE General VE Job Plan Economic Factors Function Analysis Worksheets CreativeIEvaluation Worksheets SUMUARY OF RESULTS General Value Engineering Recommendations .: . ... ... .. :. ~ ~ ? . . .. . ..Pfrbmrlh>&a . ~ t ~ : * *.iw~ . ' . ..... .. .. . : ' .s. . . .'.. ... . ..*&~of~mth. :. .. ~ ~. *. 2 Vpf... . Case Study One Corporate Office Bu~ld~ng Sekcted zxerpts' appenr in this case .*z*t:-. 3 - 2 %..: . .study. . . . . .-.~. 1 ....: .

three levels of shops. From these ideas.5 million. recommending initial cost savings of $1 4. This commercial office headquarters facility consisted of approximately 800. and Electrical. and two 17-story office towers.000 square feet of space with three basement levels of parking. a mezzanine level for a restaurant. The design was at the Design Development Phase (60%) stage. they would result in an additional annual savings in facility operations and maintenance of $500. the designer. and the owner. this report includes 30 design suggestions for overall project enhancement that were documented for consideration during continuing development of the design. Four teams conducted the study: Architectural.00O/year. SUMMARY OF RESULTS The teams generated 130 ideas to improve the value of the project. Structural.000. add hydraulic elevators for-the basement. ARCHITECTURAL Sixteen proposals were generated with the constraint that no major architectural feature or concept would be touched.33 Case Study One Corporate Office Building . This would result in $1. the estimated construction cost was approximately $71. The major areas isolated were as follows: Stop elevators at the upper ground floor. SUMMARY OF PRINCIPAL RECOMMENDATIONS Following is a summary of the major recommendations made during the workshop. and stop one bank of elevators on each tower at the 16th floor. A principal constraint of the project study was to maintain the architectural image of the building.000. In addition. Team members were drawn from the offices of the VE consultant.Value Engineering Report Corporate Office Building Executive Summary This document is a report of a value engineering (VE) workshop conducted in 1994 at the request of a real estate investment company. If all these proposals were implemented. Mechanical. The Summary of Results in this report contains detailed proposals for each recommendation. 50 proposals (including alternates) were written.

000).000. Case Study One Corporate Office Building .44 million).000). a large increase in revenue of $70.million in savings and improve elevator service over the present scheme. which is marginal. since traffic flow and separation of traffic negated the value of escalator service. By changing space to useable (rentable).000). Delete escalators and stairs on the north side up to newly proposed office areas. yet adequate penthouse walls and interior wall modifications ($500. to bring costs closer to budget ($800.000). The major items were as follows: Eliminate 2nd-level penthouse by relocating water tanks at roof and in conjunction with deletion of 4th.000 but not in addition to using precast).000 would be saved. Use less expensive. STRUCTURAL Nine basic and optional structural proposals were developed. Note: Significant savings in maintenance and operm'on would also be realizedfrom implementing the above items. The major items were as follows: Consider precast hollow-core floor planks for either or both basement and tower floors (savings: up to $1. Delete 4th and 5th basement levels used for storage tanks and relocate tanks and spaces (savings: up to $530.and 5th-level basement (savings: up to $1. Relocate and delete one set of outside stairs to the basement not required by code ($130. - Since the net to gross space could be improved. Modify floor slab design using two-way slab and beam (savings: up to $800. MECHANICAL Seventeen basic and optional mechanical proposals were developed. About $750. Use a lower category of finish material that will still meet owner requirements. reduce proposed lobby space on each floor.00Wyear was forecasted.000).

Consider "shelling" space to reduce capital expenditures. 0 0 Use ASHRAE inside temperature design criteria of 78 F for summer and 68 F for winter. Case Study One Corporate Office Building . Note: A detailed economic analysis was conducted on deleting the TES system. Decrease the number of generators from two each per tower at 900 KVA to one per tower. Use light troffers for distribution in lieu of linear diffusers. There were three additional suggestions that were rather controversial but should be reviewed for project value improvement: Delete metering and use proportional charges to tenants. ELECTRICAL Nine electrical proposals were developed. The results indicated that although the lije cycle costs of the TES system were estimated as less expensive. per box appears too costly and should be reviewed in light of potential savings of $370.. . The major ideas were as follows: Reconfigure electrical distribution using a high voltage bus to the penthouse and relocating transformers to the various floors ($1. The generator will be sized at approximately 1. the order of magnitude was disappointing. Present coverage of 270 S.3 million in savings).73 million in potential savings).00O/year). Reduce loads on emergency power by using diesel-driven fire pumps. In conjunction with the above proposal. reconfigure HVAC electrical distribution using 380V equipment rather than 240V equipment. Project value would also be improved significantly by increasing rentable space with this relocation. use demand and load factors usual for similar buildings ($1. postponing fitup cost until tenant desires are known or leasing the space is certain.000.000 in initial cost and $54. Therefore.000 plus maintenance savings of $25. and reducing the number of emergency receptacles.F.000 KVA to meet power company requirements (savings: $650.Modify thermal energy storage (TES) systems by relocating tanks at basement levels 1-3 and relocating pump rooms to level 1 basement (savings: $450. the team focused on modifiring the proposed design to optimize usage.000). Also.00O/year. which would result in a more flexible ceiling system for tenant layout and save $265. backup battery-operated emergency lighting fixtures.Increase coverage of variable air volume (VAV) boxes.

000 per yeat.F.0001year in annual costs).000 S.for their participation in this workshop. However. Only those in which choices were indicated were leftopen tofuture selection. The VE team and A-E representative sat down and agreed to a new baseline estimate of $70. Without their cooperation and input. Case Study Une Corporate Office Building . We appreciate the splendid cooperation of the designer and owner. in particular. the A-E estimate was reviewed by the VE team and a number of cost questions were generated. CONCLUSION All of the above recommendations and design suggestions are contained in the Summary of Results of this report. In summary. approximately 35.634.000 in initial costs and $20. the results of this workshop should prove to not only reduce initial cost but to favorably influence follow-on costs of ownership in the range of $265. would mean savings of up to $12. and selected system reconfiguration (savings: up to $350. Normally. It was deemed by the A-E team not to be of significance at this phase of design.000 for the building. of extra gross area was calculated by the VE team. The only point in question was the area of the building. satisfactory office fixtures. it is unlikely that all ideas will be accepted.5 million. COST During the initial phase of the workshop. change from use of parabolic to less expensive. the president of the design firm. if implemented. about 50 ideas.Make a number of lighting changes: Delete emphasis lighting for inside of exterior wall in office areas where control is questionable. the potential to improve the value of this project would not have been as significant. Note: At the final presentation the owner directed the designer to make all the changes immediately.

"~~LW KVA 1W 237.4a 1Zg(m a m n51Pnamr X M 8~ ~0.W QOaO 4.W6 w ~ ~ s h k .5~ am KVA 8. k a LS sts ICIP 1pss.ts s ?is 8bn BJ81 a m 2.127 ~I.772.Construction Cost Summary Corporate m c e Building 60% Design Stage TOTAL COST I IP6lt$~tSTfMl Sub System -- -w.(M L82 4 Case Study One Corporate Office Building .W 053 WlgJudlhpLPmv" OSF 7mOm 5 07 3=1.m tzta m IZIU I MDM $25 3azs B ~ U M 4ZDT PSM mn*(or- TFA OBS- OSF 318m (81- m 8(0 ~2 HVK TON 1.237.e~ 2.vlllm BCF m3-m BWA U U ~ ml~momammm mZ RodCaanmm UFA UO.9l3 710 4.83 stz.w 1.0% m7i 1.a 311868 n.M U8. l~mpl *TElmclmurow o?1aamar* UPA wm.w ~ m h k t h AP 181.060889 SO7 6aF 400% 1859 1.WW 5R9 09l&-mg.885 47l MPA MPA m?-E+.77Z.- -- Rmonm MI 012 P W w 0 1 - m aUBcTRucW(IL WPZR~TRLICTLIRE R~~ORCLWUIIC l.W&IIS -- MS(UCnhdbr FLT ~1 WA M2UbDomLYlkdm .S49 ZBI 525.s am= 8 m .W 40. m 1 w 20) -7 22m.5271112 $.18 3.857.413 7.

BJ*OUI 68.534 801.815 I I I 12.Sitework Building-Total Structural J-xG 122 Slte Improvement 123 Site UtIlmeS 124 MT-site Work NOTES: Bldg.745.534 .CostMlorth Model Corparate O(Aar Bulldlng RoJect: Localon: Phase of Design: Value Engineering Study - 804( Dm: Total 70. Type: Area: (SIX) Area: (SW) M W1.

000 1. Reduce escalators.949 1. TOTAL ARCHITECTURAL 04 Wail Closure Enclose space B 05 Roofing Protect building RS 1.00 124 offsite Work 0 0.137.26 ~elocate 4th & 5th level tanks.329.02 123 Site Wlties 0 0.OOO 1.00 TOTAL 1329.24 11.000 1.974 0.481 4 300.517 1.956.832.663. B 9.300.000234 695.35 Reduce basement stops.388.413.087 25.119 10.14 Combine triangular buildings.500.06 Re-evaluate flnlshes.000 1.25 Consider hollow precast planks for fbor and masonry core walls.685 1.033.FUNCTION ANALYSIS WORKSHEET PROJECT: Corporate Onrce Bulldlng BASIC NNCTIOIQ: OfflCgg LOCATION: FUrmON (VERB-NOUN) B Basic Function S = SecondaryFunction - COMPONENT WORTH - COSTIWORTH COMMENTS RS RequiredSecondary Function 121 Site Preparabn 0 122 Sie Improvement 1.259 1. 30.19 No comment STRUCTURAL 01 Foundation Supportload B Relocate4th & 5th level tanks. Reduce planters 8 granite.857.00 1.300. 03 SupersWre B 3. Support load and house B staff 5.619. Re-evaluate door selection.333 5. B 7.772.000 1.695 3.000 1.390.400 9.126 8. use hydraulics.674 1.944 1.16 06 Interior Construction Finish and beautify 07 Conveying System TOTAL Transport people Case Study One Corporate Office Building .44 Reduce skylights. 10.690417 1. Delete outaide stairs.02 1.500.000.

800.789 1. Reduce cable sizes.wNCnON.266.71 2.543 1.861.23 lf 331.266.09 Reduce telephone risers. ERE-NOUN S =Secondary Function KIND COST WORTH COST1WORTH COMMENTS RS = Required Secondary Function 081 Plumbing Service building B 1.086.613 1.14 Reduce lighting lixtures. Optimize floor outleis.12 Reduce generator capacity.974 1.037 7.000 0 0.Support building 112 Furnishing Provide services 113 Special Const. Distribute power 092 Emergency & UPS Backup power 093 Lighting & Power tight space 094 Special Eleclrical Support systems TOTAL 111 Fixed & Mov.534 496.787.00 Re-evaluale furnishings.401 3.000.081 8.036 560. 1. 3.08 4.667 357.68 Extend 13. Locate transformers in basement.422.376.43 56 1. Reduce exchanoe caoacitv.036 1.365.000 0.OO 612.1 1 083 Fire Protection Protect building & People 2.012 3.944.468 1.00 Re-evaluate special construction.523 1.FUNCTION ANALYSIS WORKSHEET PROJECT: LOCATION: Corporate Office Building COMPONENT B = Basic Function MECHANICAL BASIC FUNCTION: Omces .550 1.808 2.329 1.086.000 1. 880.8 KV system through building.OO 082 HVAC Condition space B 8. TOTAL Case Study One Corporate Office Building B B .971 1. 3. Equ~p.548. ' lZ800. Delete bus ducts.631 2.000 439.068 11.999 2. 426. use diesel backup pumps.974 1.398.46 084 Special Mechanical Controi system TOTAL Reduce AHU's Reduce VAV boxes Simplify diffusers Simplify lobby supplies Delete NC of garage litt lobbies ELECTRICAL 091 Sewice & Dist..457.867 1.OO 16.

000 1.741.8M.634.00 70.1 8 Demobilizetlon 0 0110 on. COST1WORTH 0 0.230 1.677 ias3. Case S d y One Corporate Ofhce Building .FUNCTION ANALYSIS WORKSHEET PROJECT: Corporate Otfica Bulldlng BASIC FUNCTION: Offiws LOCATION: COMWNENT B = Basic Fundia. GENERAL FUNCTlON KIND COST WORTH (VERBNOUN) S =Secondary Function R e = Requid Secondary Function MobllizaUonExp.574. a Prom 0 om rm4ooo 1-18 58. Exp.049 COMMENTS Reduce percentage.20 Site Overheads TOTAL OVERALL TOTAL 1.

00O/year. When reviewing the results of the VE study. 30 ideas are provided as Design Suggestions that clarify design. of Proposals Initial Savings Life Cycle Savings 45 14. The shell space is presented for consideration. For clarity.VALUE ENGINEEMNG REPORT Corporate Office Building Section 4 . representing $14. there is a tendency to disregard a recommendation because of concern about one portion of it.727 19.430. VALUE ENGINEERING RECOMMENDATIONS The VE teams developed 45 proposals for change. Not included in this total are two optional mechanical proposals ("Shell construction" and "Delete TES system"). and apply those parts to the final design. Often.4 million in life cycle (PW) cost savings that represents follow-on annual savings of $500. as well as four alternate structural proposals. consider the areas within a recommendation that are acceptable. or affect cost. In addition.649.5 million in potential initial cost savings and $19. improve design. The proposal to delete the TES system was dropped. Dollars) Case Study One Corporate Office Building .Summary of Results GENERAL This section of the report summarizes the results and recommendations for the study. proposals have been separated into p u p s as shown below: Recommendation Category No. Ideas that were developed are submitted here as recommendations for acceptance.S.617 Architectural Structural Mechanical Electrical TOTAL Savings Summary (All Costs in U. When reviewing this report. it is important to review each part of a recommendation based on its own merits.

Means cost data. adjusted for local conditions for comparative purposes. and data provided by Saudi Projacs estimators.Cost is a primary basis on which to compare alternate designs. Where appropriate. the VE team used R. are shown within each recommendation. and the effect on operations and maintenance. Where this was not possible. we have used the project cost estimate developed by the VE team in cooperation with the A/E as the basis of cost. A summary of potential cost savings for each VE recommendation follows. All life cycle costs were based on the economic factors listed in Section 3 of this report. Case Study One Corporate Office Building . To assure continuity of cost among the recommendations proposed by the VE team.S. the impact of energy costs and replacement costs.

270 8.825 A-35 Delete tents at second floor. 466.000 A-17 Change granite at prayer roof.630 A-13 Delete terrace planters. A-9 Delete escalators & stairs. A-4 Stop elevators at upper ground floor.400 A-19 Delete skylights over stairs 5 & 6. 607.017 741.160 A-14 Delete one bank of elevators at floors 7-18. 556.275 232.130 A-36 Eliminate 4th & 5th level and relocate spaces. 1.800 A-16 Change roof of bridges.630 139. INITIAL SAVgJGS LIFE CYCLE SAVINC3 139. 32.160 13.670 A-32 Modify granite usage between towers.400 607.800 A-27 Increase granite wall at triangle offices.800 A-20 Redesign cove at triangular offices. 7. 2. 46.000 2. 41. ARCHITECTURALTOTAL Cae Study One Corporate Office Building See S-3 .058.100 102.275 A-15 Plant level curtain wall glazing and interior modifications. 8.825 46. 232.SUMMARY OF POTENTIAL COST SAVINGS FROM VE PROPOSALS PROPOSAL ARCHITECTURAL A-3 Relocate basement stairs.500 A-18 Reduce lobby for 2-tenant floors. 71.400 A-34 Revise floor paving at colonnade.350 13.

S-7 can be used only if S-1 is used. but exclude basement parking floors.350 S-9 Use steel stairs in lieu of CIP. 849.220 Optional Ideas S-la Use two-way beam and slab design for all structural floors in lieu of rib slab and beam design.248.350 $2. 121. 643. 121.720 $2?248.200 535.200 S-6 In core areas use 20 cm masonry for cross walls in lieu of CIP for top 30 m of walls.350 S-10 Reduce basement wall thickness from 30 cm to 20 cm at first level. The other optional ideas may be used only in one of the following two combinations: Care Study One Corporate Office Building .441.600 1.5.100 S-2 S-7 Similar to S-6 but also use masonry for E-W core walls on grid lines 8. 349.100 Note: Optional ideas are not included in totals. 129.441. 535.730 Use precast prestressed concrete hollow-core planks spanning between CIP beams for basement levels 1 and 2. 1. STRUCTURAL TOTAL 20.600 S-4 Delete 4th & 5th basement levels.600 S-1b Similar to S-la above.5 and 11.220 10. The combination of ideas totaled above is recommended as it provides the maximum savings.INITIAL S LIFE CYCLE SAVINGS STRUCTURAL 5-3 Full hollow-core plank floor construction.

600 M-30 Modiiy office supply air device. Case Study One Corporate Office Building 200.750 M-26 -Increasecoverage of VAV boxes. 260.200 Revise air conditioning at wmmon spaces of ground and mezzanine.300 M-39 Delete BTU metering.050 M-9 M-16 Simplify stair pressurization with 2 small wall-mounted propeller fans.000 $3.700 M-3 Simplify air conditioning in wre of basement level 5.141.672.INITIAL ?RoPosAL SAVINGS MECHANICAL M-1 Simplify air conditioning in core of basement level. M-23 Simplify air distribution in lift lobbies.550 M-22 Revise air conditioning at common spaces of 1st floor. 1. MECHANICAL TOTAL * Needs further review by client. M-5 Delete air conditioning in car park lift lobbies. 8. 39. M-2a Modify TES design. 6. 454.800 M-36 Delete level 2 penthouse.580 LIFE CYCLE SAVINGS . M-8 Revise air conditioning at east entrance of ground and mezzanine. 1. 9.* 1.077.400 M-29 Modify HVAC for 3-tenant suites. 382.300 M-38 Use ASHRAE recommended criteria.

PROPOSAL Optional Ideas M-2 INITIAL SAVINGS Delete TES system. Case Study One Corporate Office Building . LIFE CYCLE SAVINGS Dropped Bid alternate option. M-24 Shell construction Note: Optional ideas are not included in totals.

E-39 Reconfigure electrical connections for for VAV boxes.000 E-4 Reconfigure HVAC system electric.370 LIFE CYCLE SAVINGS .324.370 E-37 Replace parabolic lighting fixtures in offices. 1.630 E-18 Reconfigure emergency power.130 E-7 Reconfigure lighting systems.730 E-29 Reconfigure telephone exchange & system.000 E 3 5 Delete lobby cove lighting in rental tower.800 88.735.700 E-38a Delete glazing cove lighting. 336.PROPOSAL INITIAL SAVINGS ELECTRICAL E-1 Reconfigure electrical distribution. 133. 1. 166. ELECTRICAL TOTAL GRAND TOTAL Case Study One Corporate Office Building 249. 653. 16.

as suggested in other proposals. Life Cycle Cost Summary Original Proposed Savings TOTAL LIFE CYCLE Capital 1. This proposal also eliminates service to B4 and B5 levels (three stops).VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: Corporate Office Building Stop elevators at upper ground floor ORIGINAL DESIGN In each tower. It is assumed that these functions will be relocated elsewhere. six elevators serve the 3rd basement level for garage parking. However.257 Case Study One Corporate Office Building .130 10. The space currently occupied by the elevators on the lower ground floor becomes the elevator pit for the towers.670 $1.159. which indicates that the present design does not meet minimum requirements for good elevator service. As a result of this proposal. which is not the case in the present design. engineering office.500-pound hydraulic elevators in the basement at each tower. PROPOSED DESIGN Stop ofice tower elevators at the upper ground floor. to serve garage parking only between basement level 3 and the upper ground floor. DISCUSSION Attached to this proposal is an elevator consultant's report (not included in this case study).558. The space saved is approximately 100 square meters per floor.017 499.722 SAVINGS: Replacement Annual O&M 0 0 0 16.800 6. This proposal improves handicap accessibility in the basement by ensuring that all elevators serving the basement levels will be accessible. Maintenance on elevator landing openings will be reduced.295 1. The proposed separation of elevator function improves service to office tower users and to car park and shop users. These same elevators serve podium shopping and the 18-story office towers. water storage. This is estimated to be worth $300 per opening per year. Add two 2. It improves privacy for office tower use. it is unsafe to combine people and water tanks in these lower levels. and other support functions. the space saved herein could be used for the relocated small dormitory. Space savings is gained on basement levels 1 through 3.058. because shoppers cannot go past the upper ground-floor level as they might do in the original design. one on each side of the end of each elevator bank.

(Roveme cide al north lower) ) . South Tower DRW FD A-IS Case Study One Corporate Office Building Typbl proposd garage eIevatm.VALUE ENGINEERING RECOMMENDATION PROJECT: Corporate Office Building ITEM: Stop elevators at upper ground floor Proposed Elevators at Upper Ground Floor M e t e this wall lo p M d e space behvean e h b n at basement for mechanical plplns.

600 71.680 ORIGINAL DESIGN Tower elevators (UG to B3) Tower elevators (B4B5) Shaft walls (27 1m x 20m high per shaft) Lobby finishes Lobby doors Lobby services Total PROPOSED DESIGN Tower elevators Basement hydraulics Garage elevator shaft walls Tower shaft walls LO LO mz m2 3 20 960 320 %US499.058.975 346.040 23.COST WORKSHEET RECOMMENDATION PROJECT: Corporate Office Building ITEM: Stop elevators at upper ground floor ITEM UNIT QUANTITY UNIT COST TOTAL 19.325 17.330 74 74 57.722 Case St& One Corporate Ofhce Building .295 Total SAVINGS %US1.

a specialist in the use of structural precast products highly recommends the use of hollow-core plank as both economical and available. dollars) Case Study One Corporate Ofhce Building Replacement Annual O&M . The topping is also provided in the original design. prestressed concrete hollow-core planks. PROPOSED DESIGN Use precast. The hollow-core planks would span 10 m (9 m clear span) between CIP concrete beams running in N-S direction. We have also conferred with the director of the local precast plant regarding the use and availability of precast hollow-core planks. DISCUSSION The proposed design generates significant savings in construction cost and time.VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: Corporate Office Building Use precast hollow-core plank floor construction ORIGINAL DESIGN The typical floor construction for all floors above level 1 basement is cast-in-place (CIP) concrete ribislab spanning between CIP concrete beams. A 7 cm topping slab is placed over the floor.S. with 7 cm topping slab. A new 21-story hotel is being designed locally using hollow-core planks. In addition. The construction is proposed in all floor areas where riblslab design is presently shown. The precast planks will be 25 cm thick. LIFE CYCLE COST SUMMARY Capital Original Proposed Savings TOTAL LIFE CYCLE (PW) SAVINGS: Life Cycle Cost Savings (in U.

800 Case Study One Corporate Office Building .COST WORKSHEET RECOMMENDATION PROJECT: Corporate Office Building ITEM: Use precast hollow-core plank floor construction ITEM UNIT QUANTITY UNIT COST TOTAL ORIGINAL DESIGN CIP &/slab Total PROPOSED DESIGN Hollow-core plank Total SAVINGS $I .441.

A-4. and use of one riser per tower.860 2.670 0 55.3%. dollars) Case Study One Corporate Office Building .000 Life Cycle Cost Savings (in U. See No. LIFE CYCLE COST SUMMARY Original Proposed Savings LIFE CYCLE 0SAVINGS CAPITAL REPLACEMENT ANNUAL O&M 2. M-2a PROJECT: Corporate Office Building Modify Thermal Energy Storage (TES) design ITEM: ORIGIN& DESIGN Present design calls for a thermal energy storage system (TES) consisting of four 690 m3tanks attached to two 214-ton chillers. = $30. Also.700 0 237. The mat slab must be dropped 2 meters and provisions made for a lift room under the elevators that stop at the upper ground level.466.15O/tank area x 2 tank area = $60. This proposal can be implemented only if the elevators are stopped at the ground floor.0 m ideal. This proposal now shows an improved return on investment of 48.200 %US 975. only one riser per tower is proposed for the new TES system.660 454. The chillers run at approximately 100% during off-peak hours and store energy that is used (cold water) for peak periods and for emergency usage.4% over the original design of 21. The original costs are included M-2.30O/yr. 12.6 m vs. relocation of TES pump rooms.VALUE ENGINEERING RECOMMENDATION No.S. DISCUSSION This alternate will require approximately $124. PROPOSED DESIGN The VE team proposes to eliminate the 4th & 5th basement levels and relocate the pump room to basement level 1.012.030 0 182.000 of tank construction and a reduced rental impact because of relocation of the pump rooms from the 1st floor to the basement. Note: This proposal must be evaluated for tank depth of 10. Tank area involved = 7 m x 36 m x 3 floors = 756 m2 Rental cost lost per yr.

000) actor ORIGINAL Est. Costs PW Costs PROPOSEI) PW Costs Est.VE RECOMMENDATION NO. N-2a LIFE CYCLE COST WORKSHEET PROJECT: ITEM: Corporate Headquarters Building Modify TES System Discount rate: 10% Economic Life: 30 years (All costs in $US x 1. Costs INITIAL COSTS Chillers Other costs TES equipment Tank cost 48i5 Tank support Transfer beam Elev walls 1-3 Pump rm mods Extra tank cost Other savings Total Initial Cost REPLACEMENT COSTS 20 years Total Replacement Costs ANNUAL COSTS energy maintenance value .rental Tots1 Annual Costs 0 TOTAL PW COSTS LIFE CYCLE PRESENT WORTH SAVINGS REWRN ON INITIAL INVESTMENT Case Study Ow Corporate Office Building .

M-2a Project: Item: Corporate Headquarters Building Modify TES design I TES TANKS -PROPOGED PUMP RoDM Elevation top ground floor (upper) = 2.760 m3 Note: Tank depth of 10.2.0 m .6 is marginal .VALUE ENGINEERING RECOMMENDATION VE Rec.3 m Proposed elevation bottom of bottom tanks 12.4 m x (2 sides) = 3. additional tank depth will be required.9 m Volume of tanks = 6. - Case Study One Corporate Ofhce Building .224 m3 Required volume = 690 x 4 = 2.6 m x 23.if not satisfactory.5 m x 10.950 m Proposed elevation top of tanks 0. No.water level .

515. The bus duct system set consists of two 2500 Amp.8 KV cable for the loop.360 $US 1. Each transformer is connected to a main switchboard (MSB) for HVAC loads and general power. Reduce the size of equipment by using 380V for HVAC.. 300 KVA at 14th floors at 220V 2 ea.VALUE ENGINEERING RECOMMENDATION PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution ORIGINAL DESIGN Existing system uses 13.8 KV cable. a set of bus ducts distributes load to building floor panels and distribution boards.974 Life Cycle Cost Savings (in U. Loop can be achieved across the 17th floor bridge.154 $US 7. Relocate transformers on building floors. connected to each MSB for general power. Connect all transformers by a looped 13. which is a rare size. using more than 2 imnsformers for general power distribution with 220V secondary. and a 3000 Amp.8 KV switchgear with four 2000 KVA transformers to step voltage down to 220V.8 KV feeder from the local power company room connected to owner's 13. bus duct. 300 KVA for elevators at 380V Use 3 x 150 rnm213. 300 KVA at 6th floors 2 ea.380 $US 781. From each MSB.8 KV switchgear to include 1 incoming and 2 outgoing for the looped 13. a total of 418 panels. Transformers should be as follows: 2 ea.S.810 $US 17. and it is connected by a specially manufactured 5000 Amp.041 %US1. Every panel is metered. Reconfigure 13. dollars) Case Study One Corporate Gffice Building . LIFE CYCLE COST SUMMARY Original Proposed Savings CAPITAL REPLACEMENT $US 2.897. 2000 KVA for HVAC located at roof plant rooms 1 ea.339 0 0 0 LIFE CYCLE (PW) SAVINGS ANNUAL 0&M $US 25.8 KV cable. four 4000 Amp. PROPOSED DESIGN Delete the bus duct system. 1000 KVA for emergency power 2 ea.734. The load assumed for future shop spaces results in having some 70 mm2 cable. The main circuit breaker (MCB) for each MSB is 5000 Amp. 500 KVA for floors basement 5 through floor 2 at 220V 2 ea. Basement boards are connected by cables and each transformer is considered a separate unit and cannot support another in case of failure. connected from each MSB for general power to each emergency switchboard. General power MSBs are connected through automatic transfer switches (ATS) to separate emergency generators for each tower and no bus coupling exists between towers for emergency use. All lighting panels have 48 poles. connected to HVAC MSBs. No demand or diversity factor was used for riser design.

Use of bus duct requires much more maintenance cost than does cable. E-1 PROJECT: Corporate Ofice Building ITEM: Reconfigure electrical distribution PROPOSED DESIGN (continued) Refer to attached sketch for additional details of the proposed system. This proposal minimizes the use of expensive draw-out circuit breakers. DISCUSSION The system as designed is very expensive. Use cables in conduits from transformer board to each panel. this can be accomplished without extra cost except for a shaft for the high voltage cables. Transformers located at floors will also improve system performance. The proposed system achieves both flexibility and lower initial cost. With 2 plant rooms in each tower on each floor. Annual maintenance and operation costs are estimated to be 1% of initial cost. Reconfigure all panels for anticipated loads and the required number of poles. This proposal requires space for the transformers on the recommended floors. The proposed system should use standard materials to maximize competition and eliminate the use of specialized manufacturers for designed equipment. without any flexibility to transfer power from one tower to the other.VALUE ENGINEERING RECOMMENDATION No. Case S t d y One Corporate Office Building .

VALUE ENGINEERING RECOMMENDATION VE Rw.NO.E-I PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution Case Study One Corporate Office Building .

No.VALUE ENGINEERING RECOMMENDATION VE Rec. E-1 PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution NORTH TOWER ptoposed Root Distriion Alternative 1 Case Study One Corporate Ofhce Building SOUTH TOWER .

II I I 1 8 I I I 8 8 I I .Distribution NA4 j 'b t I I 8 1 I t ! 8 i # I I . E-1 Corporate Office Building Reconfigure electrical distribution I' : Proposed Floor.I 1 I I I I 1 I I I I *II v I 11.COST WORKSHEET PROJECT: ITEM: Recommendation No.R2Ptzr D A Y m w Oown to BASEMENT L M L 1 Case Study One Corporate Office Building .

COST WORKSHEET Recommendation No. E- PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution C o s t O r O ~ ~ End Box 2000 Am Case Study One Carporate Gflice Building .

COST WORKSHEET Recommendation No. E-1 PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution Case Study One Corporate Office Building .

. E-1 PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution .COST WORKSHEET Recommendation No.- Coat of Ploposcd Design Care Study Gni Corporate Office B u ~ l d m ~ - * < - A .

COST WORKSHEET Recommendation No.E-1 PROJECT: Corporate Office Building ITEM: Reconfigure electrical distribution Case S d y One Corporate Office Building .

Based on several reviews with the owner and AC3. structural. A-8) Reconfigure Electrical Distribution System (No. E-l. A-7) 233 235 Reduce Thickness of Precast and Use Wall and Plaster for Housing (NO. CaSeStudy Ekments The item listed below and shown in this case study have been excerpted from an actual VE report. Initial cost savings of $10. Follow-on cost savings vary up to $1. The VE team studied the project from four viewpomts: architectural.) Description page 213 Table of Contents (from original study report) Executive Summary 214 Section 2: Project Description 217 220 Section 3: Value Engineering Procedure Function Analysis Worksheets 223 Cost/Worth Models 227 229 Section 4: Summary of Results Selected Recommendations Rearrange Clinical Labs/Hemodialysis Department (No. Study objective: Review the design documents to optimize the cost impact of design decisions. ME-6) 240 Case Scudy Two Hospital and Staff Housing Complex . approximately 35 proposals were implemented. (The Table of Contents on page 213 is one of the excerpts and refers to some documents not listed here or shown in the section.000 will result.000.000/year.000 to $12. Phase 3 (50% working drawings).000. depending on the final design alternative. depending on progression of the design and future estimates. for a hospital and staff housing complex. the medical equipment specialist documented three areas that would generate additional income.A value engineering study was conducted on the proposed design development. mechanical.2 & 4) 237 Add 3 beds to Hemodialysis Department (No.000. and electrical. Separately.

Case Study Two Hospital and Staff Housing Complex .

i l . 1 Master Only (Not included in case study) (Not included in case study) (Not included in case study) from This is the ~ ' l ofe Contents the actud VE report.Hospital Function Analysis Worksheets Housing Housing CosWorth Model CreativelEvaluatlon Worksheets - (Not included in case study) SECTION 4 SUMMARY OF RESULTS General Value Engineering Recommendations Summary of Potential Cost Savings from VE Proposals Design Suggestions Value Engineering RecornmendationsMlorksheets (Not included in case study) (Selections Only) APPENDICES A. Case S t d y Two Hospital and Staff Housing Complex . ' * ' . Report of Hospital Consultant B. Mechanical Engineering Comment C.VALUE ENGINEERING REPORT Hospital (Not included In case study) LIST OF FIGURES & TABLES EXECUTIVE SUMMARY SECTIONI (Not included in case study) INTRODUCTION General The Value Engineering Team Executive Briefing VE Study Agenda SECTION 2 PROJECT DESCRIPTION Requirements CivillStructural Architectural Mechanical Electrical Drawings Cost Estimate of Main Hospital Cost Estimate of the Housing and Dormitories (Not Included in case study) (Not Included in case study) SECTION 3 VALUE ENGINEERING ANALYSIS PROCEDURE General VE Job Plan Economic Factors Hospital CostMlorth Model Function Analysis Worksheets . Selected excerpts appear in this case study. Marked-up Set of Drawings.

000 capital expenditure. In addition. 50% working drawings proposed for the hospital. and increased revenue of about $265. suggested recommendations of potential deferred construction costs for supporting and medical equipment are included amounting to some $5. These proposals represent potential initial savings of over $16. some 22 design suggestions representing VE team design review type comments were generated.000. By doing this Owner will defer some $15.000 S. Phase 3. Some 127 ideas were generated during the initial review phase. Figure 4-2. A rough cash flow analysis indicates Owner will be some $200.000 S. from which 56 ideas were developed.F.VALUE ENGINEERING REPORT Hospital EXECUTIVE SUMMARY A Value Engineering study was conducted on the design development.000. Consider design build.500. these are located in Section 4. Case Study Two Hospital and Staff Housing Complex .000 and additional follow-on potential savings in operation. The project involved a hospital of some 350. A marked-up set (one copy) of drawings indicating these and additional comments are attached. As a separate input. lease-back for 20 years. He incurs some additional annual leasing costs that would be less than amortizing his capital investment over 20 years.000 lyr ahead using an equivalent cash flow analysis avoiding a $3. and a housing complex of five buildings of some 195. The study was conducted at the Architect's and Engineer's office in November 1996.000.000.000 /year by: adding three beds to hemodialysis.F. one mobile ultra sound.000.000 in capital outlay and own the facilities after 20 years. the medical equipment specialist documented three areas to generate additional income of some $100. and two mobile radiographic X-ray machines. Also.00Olyear. SUMMARY OF PRINCIPAL RECOMMENDATIONS General The team suggests that the Owner considers two options to defer initial cost outlays: Delete nurses' house and rent space. Note: The above savings are not additive.000. The objective of the study was to review the design documents to optimize the cost impact of design decisions. maintenance. The costs validated by the VE team and agreed to by the NE amounted to approximately $93.

This results in an overall chilled water flow reduction leading to lower piping costs. less expressive canopies. i n annual savings The major items being: Consolidate the sanitary waste and sewer lines within the building. Use a central variable air volume system approach rather than fan coils in the general patient rooms. Simplify ground and basement slab levels to reduce changes in grade. Hookup to municipal would occur when new line is installed. Revise design of hospital and housing exterior pre-cast panels from 7" to 5 thick or consider using masonry and local stone. Consider increasing chilled water temperature rise from 42°F to 46"F across the cooling coils. For housing.500. eliminates intrusive maintenance. Consider eliminating the sewage treatment plant. - Structural 2 ltems totalling approximately $130. Alternate solutions: a) Consider a less expensive plant yielding $320.000. An increase in cost would be incurred in trying to fit utilities in the proposed ceiling space. This recommendation was not analyzed in great detail. however. Revise finishes of ground floor (granite) and use less expensive. This results in overall initial and life cycle cost savings without compromising the required environmental patient comfort. Consider providing a chilled water thermal energy storage system as a means of electrical load shedding during peak hours. The central system improves indoor environmental conditions for patients by providing higher filtration levels in the space. reduced pumping energy and an overall efficiency increase of the chiller operation. it could be developed should the electrical building load grow beyond electric company standard substation size or ability to deliver peak power. more practical floor finish for operating rooms. eliminate basement in water table and use less expensive exterior wall panels. - Mechanical 14 ltems totalling about $1. Case St& Two Hospital and Staff Housing Complex . delete doctors' unit balconies.000 Revise structural system to flat slab and increase floor-to-floor height to 14'-3".0001yr.000 in initial and $110.000 The principal items are: Review design of interior partitions for housing and hospital. and lowers operating costs. Raise hospital basement level by one meter to reduce hydrostatic uplift on slab.- Architectural 16 ltems totalling approximately $3. Note: Original design of 13 feet would not accommodate economically the required utilities.000 initial cost savings. or b) provide a septic tank system resulting in $375. Design general patient bedrooms for 75°F rather than 65'F inside design temperature during the cooling season.000 initial cost savings.

The above equipment will add some $ The largest area of potential savings was isolated by a critical look at the medical and recommending the following: Eliminate items redundant with building (construction) equipment estimate.0001yr. Centralize the Unintermptable Power Supply (UPS) system.000 in initial savings and $100. e. - Medical Equipment 9 Items totalling approximately $7. in annual costs.00OIyr. .g. in additional income.800. Case Study Two Hospital and Staff Housing Complex . etc.- Electrical 11 Items totalling approximately $3. cardiac catheter lab. Procure local equipment wherever available at less cost. The principal items are: Re-configure site electrical distribution system to optimize use of high voltage distribution. Add equipment needed to meet overall hospital requirements (added costs). nuclear and gamma cameras. Relocate switchgear nearer to load center. Energy savings do not offset initial costs. MRI. Consider adding select equipment to generate additional revenue such as: Add one additional ultra sound scanner. Replace parabolic with prismatic lens fixtures and electronic ballasts with high power factor. There are several significant proposals presented: Consider deferring several items to postpone costs until patient load increases to create break-even conditions.300.500.00O/year in additional income. Change chiller voltage from 280 volts to 380 volts. Re-canfigure outdoor lighting reducing number of poles.. Add 2 mobile radiographic X-ray machines. Deferred capital cost of some $5. Add three additional beds in hemodialysis for pediatric patients presently not covered.000 not included above. Reduce quantities that appear excessive and buy alternate equipment (other manufacturers) that produce equipment (non-proprietary) adequate for the hospital functions.000 in initial costs plus $650.

Housing: It is required to accommodate all doctors and a total of 130 nurses. Civil Structural Engineering a. in general. Partition Wall Finishes Enamel paint.000 S. c. b. Finishing Material of Facia Pre-cast concrete panels d. b. Walls Interior: Drywall partitions with two (2) In" sheets each side. 3. Structure Precast hollow-core slabs with a reinforced concrete frame. Utility building housing chillers. e. Site On-site wastewater treatment. c. Selected area in basement calls for linear metallic ceilings. e. Requirements of the Hospital a. a recreational area is to be provided. b. Parking one car per bed plus staff and out-patient Site plan is provided. effluent recycled for irrigation. Ceilings Armstrong-type painted tiles and waterproofed gypsum board for wet areas. O. with lobbies and ground-floor granite specified in selected areas. Architectural a. d.incinerator. Number of Beds = 180 Area of land = 500. Exterior: Precast concrete panels with upper 20% window area. 2.- SECTION 2 Project Description 1. Floor Heavy-duty vinyl flooring. Case Study Tw Hospital and Staff Housing Complex ..F.

Telephone company to provide backup lines. Standard equipment to be specified. b. Steam boiler for laundry. Fire fighting system: Wet pipe. 5. Low-pressure gas (LPG) services. Oxygen. i. Automatic temperature control system. j. g.4: Mechanical Systems The mechanical works include the following systems: a. Domestic hot and cold water system. d. Fire Alarm System: System to be microprocessor-basedautomatic. c. ventilation and air-conditioning system. f. Radio Communication: Masts and power to be provided on roof. and CRT shall display graphics of system under activated alarm. 100% outside air with heat recovery in critical areas.700 KVA units. c. analog addressable system alarm. Case Study Two Hospital and Staff Housing Complex . d. Waste disposal and incinerator system. e. Rainwater drainage system. to be displayed on a digital readout screen. e. consisting of: Four (4) aircooled chillers (size not noted in outside equipment area) Fan coil units with fresh-air ventilation in general patient rooms Fan coil units in general out-patient areas VAV in administration areas Single-zone constant volume. I. Standing Generator System: 2 . Telewmmunication: Distribution will be by horizontal and vertical ladder-type cable trays. Irrigation system. The following systems are proposed: a. Reverse osmosis/ionizedwater system. b. Fixtures to have electronic ballasts and deo starters. k. Lighting: Primary lighting recessed parabolic fluorescent fixtures and energy-saving lamps. UPS Systems: Central plus 2 floor units for selected areas. Power Distribution: Vertically via XLPE cable in shafts. f. A minimum of 30 minutes backup used. sterilizing and washer/decontaminatorsunits. combined sprinkler standpipe system with combination electric and diesel fire pumps. Heating. g. Drainage system. vacuum and other medical gases network system. - h. Electrical Building load is estimated at 6000 KVA.

earthing rods and pits. Total Estimated Costs Case Study Two Hospital and Staff Housing Complex $93. foundation earthing.F. The project estimate at bid and area analysis follows: Main Hospital and supporting areas (356.000.000. arrestor. e.) = $ 18.000 S.000 .F. OR. lightning conductors.) = $ 74. Cost Estimate The estimate was developed by the Project Manager and adjusted and validated by the designers' estimator (see Section 3 .F. low-current systems. Lightning Protection: System to consist of air terminal. k. transformer grounding. medical equipment.g. Special Call Systems: 1) Staff automatic system 2) Nurse call and hospital communications system 3) Radio paging system 6. j. Earthing (Grounding) System: System to consist of Power Co. Housing and Dormitories plus supporting areas (197.Value Engineering Procedures for Estimates). electric device.F. UPS.000. Unit Cost = $93/S.h.000. Security System: Four sub-systems to be provided: a) Key management system for low-risk public areas b) Card access control for high-risk areas c) Closed-circuit TV i.000 Unit Cost = $ 210lS.. and special systems.000 S. equipment grounds.

To present a clear description of our assessment of the project in terms of cost and life cycle usage. the design team and owner made an initial presentation on the design constraints and development. These were the design documents. Also. selected plans and design documents (Design development) -.namely. This estimate was resolved with the design team estimator and the resolved estimate was used for cost modeling and proposals. It was the objective of each team member to analyze the project. At that time. a list of questions and ideas to be reviewed during the first day of the formal workshop was generated. (5) Presentation phase. The project documents were also reviewed by a medical equipment layout specialist for basic comments. (6) Report phase.selected members of the VE team reviewed them. A VE budget level estimate using the UniFormat system was prepared at the start of the workshop. Also. including plans. additional drawings were submitted to the team. organized approach. were given to the client and design team. (2) Creative phase. recommend alternatives and estimate initial and life cycle costs whenever significant for the original system and for each proposed alternative. These comments were reviewed with the consultants by the team and incorporated. VE JOB PLAN The VE team analyzed the project documents submitted by the design team. At this time the estimate did not reflect the level of details of the documents. find high-cost areas. cost estimate. The VE study was organized into six distinct parts comprising the VE Job Plan: (1) Information phase. we have outlined the procedure followed for the study. and design report.SECTION 3 -VALUE ENGINEERING PROCEDURE GENERAL Value engineering is a creative. The actual recommendations derived from the analysis are identified in Section 4 of this report. A multidisciplinary team was formed to analyze the project design utilizing applicable value engineering techniques. PRESTUDY Upon receipt of the project documents-. (4) Development phase. into the ideas generated during the formal workshop. whose objective is to optimize the life cycle cost andlor performance of a facility. as applicable. In accordance with the agenda. (3) Judgment phase. and the approach that we applied to the study. The comments received from the medical equipment specialist. from a large AIE firm specializing in hospitals. other criteria were used to assure the proposed recommendations did not sacrifice essential functions and timely completion of the project. Case Study Two Hospital and Staff Housing Complex .

This list may include ideas that can be further evaluated and used in the design. and the cost associated with that function. The teams assigned worth to the cost model based upon the function analysis performed. Preparing the function analysis helped to generate many of the ideas that eventually resulted in recommendations. ldeas found to be impractical or not worthy of additional study are disregarded. and owner preferences. the magnitude of its potential benefit. the VE team performed function analyses of the different components of the project. and the results are included on the right side of the worksheet. the electrical and mechanical. The value engineering team looks for quantity and association of ideas. and its impact on aesthetics. Cost is in the form of unit cost ($/SF) for the project. Included in this report are the function analysis worksheets (Figures 3. the value engineering teams judged and ranked the ideas generated from the creative session. and those ideas that represent the greatest potential for cost savings are developed further. all ideas were reviewed with the designer and owner team to hear any objections. During this time. stage of design. This procedure forces the participants to think in terms of function. cost to develop. The ideas were ranked from 1 to 10. and. Additional site savings in electrical utilities were isolated. costlworth models were developed for hospital (Figure 3-2a) and housing units (Figure 3-2b) to assist in isolating areas for value improvement. judgment of the ideas is restricted. Backup cost data is furnished with the model. To assist in preliminary judging of ideas and to gain additional knowledge regarding them. The creative idea listing is presented in the last part of this report as Figure 3-3. their and 3. and historical data for similar systems. based on the differences in the costlworth estimates. the value engineering team thinks of as many ways as possible to provide the necessary functions at a lower initial andlor life cycle cost and design enhancements to improve required functions. to a lesser extent. as taken from the resolved cost estimate for the project. based on the resolved cost Judament Phase In this phase of the project. The functions of any system are the controlling elements in the overall VE approach. Actual savings implemented will depend on time required to implement. The remainder of the creative idea listing worksheet was used for this phase. problems or agreement. Creative Phase This step in the value engineering study involves the listing of creative ideas.Information Phase Following a study of the latest engineered documents. the time necessary to implement. ldeas with a ranking of 8 or more were developed or combined into proposals. probability of implementation. which will be screened in the next phase of the study. with 10 being the best idea. This model indicated that the greatest potential for value improvement exists in medical equipment. Factors used in evaluating the ideas included: the state-of-the-art of the idea. architectural. During the creative phase. Case Study Two Hospital and Staff Housing Complex . Next.

The VE recommendations were further screened by the VE team before the oral presentation of results. VE proposals were reviewed. The VE recommendations are included in Section 4 Summary of Results.03 cents/KWhr (average) 1 to 5% of capital cost depending on element Caqe Study Two Hospital and Staff Housing Chmplex . where appropriate. - Presentation and R e ~ o rPhase t The last phase of the value engineering effort was the presentation and preparation of recommendations. On the final day of the VE study workshop. Economic data and assumptions made for the life cycle cost comparisons were as follows: Discount Rate Analysis Period Equivalence Approach Inflation Approach Present Worth Annuity Factor 10% (compounded annually) 30 years Present Worth converted to Annualized Method Constant Dollars 9. ECONOMIC FACTORS During the value engineering study. a presentation of recommendations contained in this report was made to the same team who attended the first day.42 Operating Costs Energy Cost Maintenance Cost 0. Sketches and design calculations. each recommendation has a brief narrative to compare the original design method to the proposed change. Therefore. edited for clarity. and a des~ri~tive'evaluation of the advantages and disadvantages of the proposed recommendations. life cycle cost comparisons. selected ideas were expanded into workable solutions. Recommendations and the rationale that went into the development of each proposal are described in the proposals presented in Section 4. It was important that the value engineering team convey the concept of their recommendation to the Designer. and re-evaluated for computation of cost savings. construction cost and life cycle cost summaries are prepared for each element of the project. Development consisted of the recommended design. At the conclusion of the workshop. are included with the recommendations.Development Phase During the development phase of the value engineering study.

dm 1.299 1.668 IA28.818.89J 125 ~ ~ v m s t a s n d ~ t W2 WAC Candil1on space B 4W.734 1.W 1.780.FUNCTION ANALYSIS WORKSHEET PROJECT: ITEM: BAslcwmron: -1 Hcuglhl.079 1.cilltk. W I Plumbing .m 1.33 O(U F bP W h 084S~MadwnlGal TOTAL Case Study Two Hospital and Staff Housing Complex lilm. m .4Cd.m ~~~u~ltoycoo~np.520 scls.225.626. ~ ~ U EOQT M ~ ~ WORTH F COST1 WORTH WMMENn ~ WE WORK ZAlS. 123 SHa VnlIW 1 3 6 .905 1.62 w- RS BJJ.m W B M-bpsopls RS 800.0 11OpU 125 w%- a404.SCn 3520.47 8.787 492.- NNCTW (MII&NDV)o KIND S=-haobon R S - R . nwraendbsslps(isnu -- - COMPONENT DESCRIPTION 0-&sieFur&mn - -- -.333 $33.747 1.m 8 1. ~ 124 OR-SHa WolC TOTAL 04 Wall C)osum E~~ y*ca I ~ g pnosddM.ndw w F.

OENERAL 7B% WiIizaUmExp. 2% 1.D13.m. E q d p .56 7522419 4.ndHpportlnpF. i m t . Impmm l@ddMbuhn. M M e powsr m~rnYbUPS -FJC+'= W3 UgMing h Pc?mr LbM 6- 094 Special Eledrieal s4Wirydan.938$(17 1267. T ill F i ~ e d b ~ .6% On.rn3u s.Enp.262112 4.56 Ikmo(ril~0.pitn) noBplW.W n * .T79 844.490 1. S w i W buMlng 8 112 Fumwllng RovidssavksP RS suppal buimlns Wtd s q u l r n ) B 113 spaisf cm.6 PmRt 15% TOTAL Cme Srudy Two Hospital and Staff Housing Complex .mhm IH 1.9W 1.m TOTAL centrslb.WZ 04nCas 1.56 Sits Overhda 2.760373 171 7.133 125 RS 2PW333 140639s 1.859576 1.979 1.00 is.49 I3 12Bz.333 1.943 1.OS6. 0 862.FUNCTION ANALYSIS WORKSHEET PROJECT: ITEM: B A S I O V Ib.417 161.5% lZ'=&W 8 W .sllitlcr ibuwrdmotwLsn(.672AWO 10~zi. 091 SsmeLMsl.53 0 0 0.669 647.ia.k&.50 lO.. TOTAL U.56 252.93 RS 3..887 BW. m 1.wi 1.669 1.n 37.

358.773 1.209.933 1.667 1. .373 1.25 Eliminate water level problem. Rs = Rqdred secondsryTu6dioo SITE WORK Overhead B RoM 0 0 0.358.38 1.25 Move subslruclureto grade 01 Foundalron Support load levwl.00 121 Site PreparaUon 0 0 000 Included in Hospital 122 Site lmprowment 0 0 0.40 2.477 168.602.400 1.46 Simplify struchlral s ~ t e m .381 1. s.950.144 2.777 58.000 729. 03 Superstructure Suppal load and house staR B WTAL 1. 8 93.600 1.066 1.933 1.904.933 1.358. TUML 04 Wail Clmure Enclose space B Change grariilelmarbls with w e .63 Rsducespace occupant 3. 912.44 MECHANICAL 081 Plumbing Sewlce building 8 787.450.00 included in Hospital TOTAL 0 0 0.41 TOTAL Cuse S d y Two Hospital and Staff Housing Complex .35 Consolidate wasteand Mil tine 082 WAC Condibon space 8 1.48 Changewall construction from gypsum board to CMU.382 1.25 6.MO 1.44 Use unitary d i n g 083 F i n Protection Protect building 6.867 1.00 None 2137.00 Includedin Hospital 123 Site Mities 0 0 0. .people 0 0."diry F.FUNCTION ANALYSIS WORKSHEET PRWECT: ITEM: RdBlC FUNCTION: Hospital Houslng and Donnitoriu House doctors and hos~ital staff COMPONENT DESCRIPTION B.941333 1.n .832 75.436.. G-driy FUNCTION (VERB-NOUN) KIND F"*n.121 4416.W None 084 specmi Mechanical Control system 0 0 0.00 B 210.240 1.200 582. FUNCTION ANALYSIS WORKSHEET PROJECT: ITEM BASIC FUNCTION' HosobI ~i'ing COMPONENT DESCRIPTION B = Boob Function and Dormltorlu House aoc(ors and hmpml stall FUNCTION (VERB-NOUN) S = Secondary Funmn KIND COST WORTH COMMENTS .G*" COST COMMENTS -- ".00 includedin Hospital 124 Gff-Site Work 0 0 0.600 1.083 1.329. RB=Rsq"indSecb.079. 05 Roofing Pmtect building 06 Interior Construcbm Rnmh and beaubllyspace RS 0 07 Conveying System Transporlpeople 6 TOTAL 94.

.667 0 0 0.301....417 1..933 388. .307 144 112 Furnlshlng Pmvlde sewlces 920.000 582.. . .405 11.51 1. .44 Use local market GENERAL 20% Mabiliration Exp.569 1.000 155...067 1. Improve llght dlstrlbuPon EQUIPMENT 111 Flxed 8 Mov Equlp Support budding 224.. B Pmflt15% TOTAL TOTAL Case S d y Two Hospital and Staff Housing Complex .707.00 093 Lighting 8 Power Light space B 830.144.267 1... .000 737.. ..067 1.FUNCTION ANALYSIS WORKSHEET PRDJECT: ITEM: BASIC FUNCTION: Hospital Housinp and Dormltorles House doctors and hos~hal staff COMWNENT DESCRIPTION FUNCTION (MRB-NOUN) KIND COST . B = Bask FuncUon S = Secondary Function RS = Requlred secondary Funmn ~LECTRICAL 091 Service & Dd.008..720 1. COMMENTS Distribute power B 230...63 094 Speclal Elecbical Support systems 146..400 1 58 113 Specla1 Const TOTAL 0 0 000 1....707 1 55 2..883. .. 2% Sde Cverheads 2 5% Demobilization 0 5% Off Exp.32 Centrake luad..667 97. .53 092 Emergency 8 UPS TOTAL 174.053 1.267 IM)...44 16242. .

E ti % a"' $ 0 0> Case Study Two Hospital and Staff Housing Complex :g g-5 12 . s .~~~ 1%" im . 1 1g.0 t u x 8 P 2$ 3-s *u .

0. Expense & Pmflt 15% 10.553. .-.831- -~ 1 1 l~xpense2% I .38 ?..w~ Area: (SF) M 1091 Sewice 01 Foundation - - -. I 1 1 ~ Fixed 1 L lo". --- 082 HVAC -. - 11 Distribution .1.- .%I Overheads 2.CostNVorth Model Legend: ActwbEslinMad YE Terga Value Engineering Study NOTES: Type: h a : (SF) TotalC O ~ O I U I 18. . -.-. . -. ... izno.- . and .. _. .-0..-.W - . J ..88 05 Roofing ..14 -112 Furnishing /--HOUST~.!95.. /"iprnent -.37 . L ~oe!tones -. 1.--.025 Off.. .30 106 Interior 1 083 Fire 033 Llghtsng B Power Construction .-.-1E.6% ..917 Eldg. Mechanical 094 Special Electrical S stern - . .

Where this was not possible. consideration should be given to areas within a recommendation that are acceptable and apply those parts to the final design. . of Proposals Deferred Cost Reductions GENERAL 2 16. VALUE ENGINEERING RECOMMENDATIONS The value engineering team developed fifty-six (56) proposals for change. we have used the project cost estimate developed by the VE team in cooperation with the Designer as the basis of cost. 22'design suggestions are provided to clarify design. plus over $500. All life cycle costs were based on using the economic factors listed in Section 3 of this report. When reviewing this report. A summary of potential cost savings for each VE recommendation follows.919.000.007.0001year in present worth of annual 0 & M cost savings. Value engineering recommendations are presented in Section 4.809 ELECTRICAL 11 3. as shown below Recommendation Category No.228 7.427 7. Ideas that were developed are submitted here as recommendations for acceptance.690 55 Savings Summary Legend (All Costs in $US) To assure continuity of cost between the recommendations proposed by the VE team.000. For Owner consideration.919.947.143 STRUCTURAL 3 128.000.586. some recommendations for deferred cost reduction of $19.477 2. or increase cost.086 4. Offen there is a tendency to disregard a recommendation because of concern about one portion of it.000) in potential initial cost savings and over $265.146.494. Cace Study Two Hospital and Staff Housing Complex . the VE team used data provided by PM estimators.784 MECHANICAL 14 1.345 4.359.947.242.695.228 19.718 17.00O/year in additional income.000 ARCHITECTURAL 17 3.783. improve design. They represent approximately sixteen million dollars ($16. In addition.VALUE ENGINEERING REPORT Hospital SECTION 4 .427 16.784 128.000 are presented.143 3.359. It is important when reviewing the results of the VE study to review each part of a recommendation on its own merits.SUMMARY OF RESULTS GENERAL This section of the report summarizes the results and recommendations for the study.494.725 MEDICAL EQUIPMENT 8 Total of Proposals TOTALS PW of Add'l Income Initial Savings Llfe Cycle Savings 3. proposals have been separated into groups. For clarity.345 4.

000.561 A 13 Relocate basement of housing units to above grade.273 A5 Revise layout of outpatient area'waiting room.320 298.000 - General Total -- -- 16.668.206.Summary of Potential Cost Savings from VE Proposals Hospital Deferred Reductions PROPOSALS Life Cycle SaLings IP\M GENERAL. grade. lease back ~ 16.273 5.) Case Study Two Hospital and Staff Housing Complex . (Savings not included in total. 4.000. Hospital.467. (28.118 A 25 Combine doctors' housing and optimize design. (See A 24 & A 25.Hospital 298. not included in total) A 9b Interior partitions .) 2. savings not included in total.191 A8 Exterior precast panels.) Courtyard re-evaluation 178.485. (See A 24 & A 25. savings are redundant. SITE G9 Delete Male housing and rent space.605 7. (See A 24 & A 25) A 9a Interior partitons Houslng (See A 24 & A 25.327 A 12 105. (Not additive to G-10) G 10 Bid housing using design.216 478. Note: If G 10 implemented. these savings can be implemented.627) A 24 Combine nurses' dormitories and optimize design. 478.191 -95.088 178.561 105.327 239. A7 Clinical LabsI HemodialysisDepartment -95.088 A 17 Raise hospital & building grade by 1 meter. not included in total) A 11 Eliminate balconies on doctors' housing units.216 A 22 Raise partition size from 10 cm to 20 cm minimum in basement.000 Initial Savings PROPOSALS Life Cycle Savings ARCHITECTURAL A3 Relocation of medical gases PMG 5.320 A 10 Change canopies on Housing units (See A 25.288 - Note: If G 10 not implemented. (Savings not included in total. build.627) (28. not included in total) 239.815 3.

power. 27.359.784 Structural Total MECHANICAL M2 Consider point use water coolers vs.6M) 3.336 1.216 128.216 478.809 .140 Mechanical Total Cme Study Two Hospital and Staff Housing Complex 1.240) (506. fan coil units in patient rooms. 271. 361.146.4) (506.242.808 156. M 22 Use central AHUs vs. M 21 Provide for HEPA filtered re-circulation of operatingroom air. these savings can be implemented.336 Internal floor finish -change granite to perlato Sicilian.2.064.Summary of Potential Cost Savings from VE Proposals Hospital A 27 Consider masonry exterior walls.333 34. M 26 Cool computer rooms with AC units w/Econocoil. 478. 28.) A 28 A 29 1.359. M 19 Modify summer inside design conditions. 156. Note: if G 10 or A 8 not implemented.200 271.200 Change OR floor finish to less expensive material. M6 Connect to Balada sewer.4 Reduce slab on grade thickness and use vapor barrier membrane.808 S 7&8 Re-evaluate the use of hollow-core slabs & change floor-to-floor height (4. (Savings not included in total.3. M 15 Increase CHW temperature rise.143 3. M 20 Reduction of OR airflow when not used. 14.477 2.000 53.784 128. central M5 Consolidate sewage and waste lines. air.877 M 28 Delete diesel fire pump and provide emerg. M 10 Consider using water-cooled chillers vs. eliminates STP.600 361. M 12 Use de-coupled loop piping.240) S 14 Simplify ground-level heights. M 14 Shade air-cooled chillers.064.147 M 29 Use CHW cooled units for substationNPS cooling.143 Archltectural Total -- --- - Initial Savings PROPOSALS Life Cycle Savings STRUCTURAL S 1.400 64.

228 Case Study Two Hospital and Staff Housing Complex . Deferred lnitial Cost initial Savings Present Worth of Additional Income Life Cycle Savings 7.621 Electrical Total Deferred lnitial Cost PROPOSALS MEDICAL EQUIPMENT ME 1 Consider leasing equipment for clinical labs.Summary of Potential Cost Savings from VE Proposals Hospital PROPOSALS lnltial Savings Life Cycle Savings ELECTRICAL E 1. 80.345 7.272. 1.733 E 15 Delete clocks in patient moms.919.41 3 184.621 1.947.865 403.014 4.000 Defer procurement of Nuclear MedicinelGamma.668 E 16 Centralize UPS.200 3.831.000 E 17 Change chillers supply voltage to 380 V. 56. ME8 Optimize procurement of medical equipment / furnitureIkiichenIlaundry. 262. ME 3 Defer MRI equipment Deferred lnitial Cost ME 4 ME5 1.613.000 80.014 E 11 Reconfigure outdoor lighting.2&4 Reconfigure electrical distribution system.228 4.427 7.316 395. 1.250.494.723.952 56.512 E 14 Delete plumbing fxtures sensor.730 33. 205.952 E 20 Relocate switchgear room in basement.667) 2. ME 2 Defer cardiac equipment.344 E6 Replace electronic ballast with high-power factor ballast.783. Deferred lnitial Cost 419. 4. ME 6 Add 3 additional beds to hemodialysis (see A7 for new layout).345 Add one additional ultrasound unit.473 1.272 E 10 Use GFI to control 1 circuit receptacles.667 3. 93.667 Deferred lnitial Cost 2. ME9 Add mobile radiographic units. 26.250. 106.086 4.500) 606. 15.566.395 (90.659.494.745 E5 Replace parabolic fxtures wlselect prismatic lens.725 lnitial Cost Life Cycle Savings (28.035 45.818 E la Consider alternate configuration.

. Curtains Chart dressing Chair dialysis Hemodialysis unit Oxygen outlet Medical air outlet Medical vacuum outlet Markup Total Cost Original Proposed Savings Care Study Two Hmp~taland Staff Housing Complex In%ial Annual O&M N.-. They are divided into separate areas for blood donation..- The rearranged layout improves the flow of outpatients to the labs and the blood donator to the donation area..-. . Also.. Quantii Unit Cost Unit Not applicable Total Cost .-. . It will allow the addition of hemodialysis beds that will increase the revenue of the hospital.--... bfscwslon.. "-". switching the donation area and hernodialysis area will allow an increase of 3 additional beds for hemodialysis patients. .-- - . .. Additional beds will be designated for this purpose. clinical lab and for hemodialysis. . Note: See ME 6 for overall savings generated. No. .. ..A. . . keeping the required privacy of the clinical labs.. 95... ...--. . F. Consider rearrangement of the clinical labs and blood donation as per Sketch No.Value Engineering Recommendation Project: Hospital Item: Revise Layout of Clinical Labs 1 Hemodialysis Department VE Rec.43 PW Annual Savings at (Factor) TOTAL SAVINGS (Initial + PW Annual) ($95. Advantages and Disadvantages - ---.r .191 -95. . .--.--. A7 The dinical labs and hernodialysis department are located between axis 10.. A-7.191 9. . 15 and A. The change allows for an improved separation between the donation area and clinical labs. and accessibility of outpatients to donation area..191) ... the present design does not accommodate pediatric patients. See attached plan. . Qhglriai Design . In addition.

Value Engineering Recommendation Project: Hospital Item: Revise Layout of Clinical Labs 1 Hemodiafysis Department VE Rec. A7 Sketch No.v------- Caw Study Two Hospital and Staff Housing Complex . No. A7 .

Value Engineering Recommendation
VE Rec. No.

Project: Hospital
Revise exterior precast panels for hospital and housing.

Present design calls for 7" exterior precast concrete exterior wall panels for both the hospital and
housing (see AD-I).

I . Use 5" precast wall panels for hospital only.
2. Use CMU, plaster and texture paint for housing units.

The team discussed panels with a local manufacturer, who indicated that a 5" panel would suffice.
This change will result in considerable weight and cost savings.
The recommendation to use CMU, plaster and paint for the housing is based on budgetary
resrictions. Maintenance costs should be slightly higher for the housing exteriors requiring painting

7" thick precast panels, hospital
7" thick precast panels, housing
Mark up

5" thick precast panels for hospital
building only
CMU, plaster and paint, housing
Mark up

Exterior Wall Maintenance - Original
Exterior Wall Maintenance - Proposed


Case Study Two Hospital and Staff Housing Complex


0 13

Total Cost



unit COG







Total Cost





- - - -





PW Annual Savings at (Factor)
TOTAL SAVINGS (Initial + PW Annual)


Annual 0 8 ~

VE Rec. No. A 8

Value Engineering Recommendation


Revise exterior precast panels for hospital and housing

I Oetoik



atoa NO:

AD 1




Pmjul: 5 M 2

dale: OCT. 96



















Case St&

Two Hospital and Staff Housing Complex

Value Engineering Recommendation
VE Rec. No.
E 1,2&4

Project: Hospital
Reconfigure electrical distribution system.

The design document shows a substation building of about 9,500 SF to house 6 transformers
for both housing and hospital. After revising the loads to all facilities, the required transformers
capacity will be 9000 KVA. From the substation, it is required to run about 59.000 LF of 3 x 300
plus 150 mm2 low voltage cables complete with manholes and all supporting items to feed
electrical loads in all buildings and chiller compound.

Propixie$ Design - --





The VE team recommends the use of high voltage distribution utilizing 13.8 KV network to different
facilities and using oil-type transformer, outdoor mounted near load concentration. Pad mounted
transformers of the loop feed type are recommended.

, .


P;dvant&ges and bI3advmtagei
. - .
.- . . . . . . . . .





.-. . . . . . .


. . . . - .

The VE team feels that proposed design will result both in initial and LCC cost savings. In addition,
better power distribution performance and improvement of service is achieved.
The only disadvantage is that the owner has to maintain the transformers. Maint. should not exceed
2 hourslyr. for each unit Replacementcosts are minimal when transformers are designed as they
are at 80% of their capacity. Their life expectancy should not be less than 25 years. High
voltage cables once properly installed needs no more maintenance time than low voltage cables.



PW Annual Savings at (Factor)


TOTAL SAVINGS (Initial + PW Annual)

Case S d y Two Hospital and Staff Housing Complex


Cost Worksheet
VE Rec. No.
E 1,284

Project: Hospital
Reconfigure electrical distribution system



Unit Cost


2.1 67.783
Total Cost


Transformer type 1000 KVA
High voltage switchgear 11 CBS, tie break.
LV cables to 2 doctors' housing
3 x 3000 + 150 mm23%VD
Cable to recreation building
3 x 240 + 120 mm22.73%.UD
Cable to main building
3 x 300 + 150 mm 2.5%VD
Cables to female dormitories
3 x 300 + 150 mrn2 at 2.9%VD
Cable to mosque
3 x 185 + 95 mm2at 1.55%VD
Cables to Hospital
3 x 300 + 150 mm2at 1.25%VD
Cables to chillers, MCC only
3 x 300 + 150 mm2
Substation building
HV cables 300 mrn2

Markup (Contingencies)

Maintenance cost
Operation cost 1 Power loss











Total Cost

Case Study Two Hospital and Staff Housing Complex

Value Engineering Recommendation
VE Rec. No.
E 1,284

Reconfigure electrical distribution system





















For hospital: 3 x 300 + 150 mm2
For chiller: 3 x 300 + 150 mm2
For Doctors housing: 3 x 300 + 150 n
Dorm: 3 x 95 + 150mm2
For Mosque: 3 x 95 + 50 mm2
For Recreation: 3 x 95 + 50 mm2
Building for switchgear L SCECo





Mark up (Contingencies)



Total Cost


Maintenance cost


0.01 5







For Housing: Transformer pad-mouni
oil type 1500 KVA
For Hospital: Transformer pad-mount
oil type 1000 KVA
For Chillers: Transformer pad-mountt
oil type 2000 KVA
HV switchgear incld. CBS for 1 incon
outgoing, 4 for loop feed
13.8 KV loop feed 300 mm2

Operation costIPower loss

Total Cost

Case Stwly Two Hospital and Staff Housing Complex

Value Engineering Recommendation
Project: Hospital
Add 3 Additional Beds to Hemodialysis Dept. (see A 7 for new layout)

VE Rec. No.
ME 6

Present design call for 4 beds in hemodialysis.

Revise design to add 3 additional beds to cover needs for pediatric patients & the prenatal units.
Relocate the unit to a larger space (see A-7).

This area is in demand. Hemodialysis is a needed service with long waiting lists at existing
hospitals. The local market should be more than able to supply the need for the additional beds.
The projected income will easily offset initial costs and help defray other expenses. At present.
pediatric patients cannot be property serviced.
See income projection and costs attached. Break-even is less than one year.





See present worth of
additional annual income ii

PW Annual Savings at (Factor)
TOTAL SAVINGS (Initial + PW Annual)


Case Study Two Hospital and Staff Housing Complex

Cost Worksheet
Project: Hospital
Add 3 Beds to Hemodiatysis Dept.

(See A-7 for new layout)

Initial Cost
Beds at $35,000


Replacement @ 8 years and 16 years
PW @ 8 years
PW @! 16 years





Annual Cost
Main equipment
Operation supplies


VE Rec. No.
ME 6





Income Projections (outlays in equivalent annual dollars)
Average case per wash
Case per day (3 hrs per wash)
Days of operation per year


Breakeven analysls Equivalent Annual Cost
(Initial + Replacement Cost) x PP
Maintenance and Operation


Total Slyr
Breakeven i n Slyr = Equivalent annual cost of expendituresIannual income
= $108,584/yr 1 $298,6671yr = 0.36yearsor less than 5 months

= 190,083 x 8,561 =
PW = Annual Income x PWA
Annual Income = Income - Expense = 298.667 - 108,583 = $190,083

Case Study Two Hospital and Staff Housing Complex


00&in savings were realized.) Description Page Table of Contents (from original study report) 245 Executive Summary 246 FAST Diagrams Team 1: Layout 248 Team 2: Process 249 Team 3: Electrical/F'ipingMechanical 250 CostrJCTorth Model 252 Summary of Results 253 Summary of Potential Cost Savings 254 Selected Potential Cost Savings from VE Recommendations 256 Revise Layout of Site (No. On final implementation.000. P-36) 263 Revise 115 KV Plant Feed from Underground to Aboveground 270 (NO.000/year. Case Study Elements Case Study Three Rehnery Facility The items below and shown in this case study have been excerpted from an actual VE report. Three teams. Follow-on annual savings were $500. L-10) Combine/Reduce Size of Storage/Port Tanks (No. process. representing an 11% reduction. E-3) . studied the facility from the following points of view: layout. (The Table of Contents on page 245 is one of the excerpts and refers to some documents not listed here or shown in the section.I n 1993 a value engineering study was performed as one component of a training program at a refinery facility in California. and electrical/mechanica~piping. 60%+r approximately $35.

Case Study Three Refinery Facility .

M/E This is the Table of~mf&tsfram rhe'0~tt.I EXECUTIVE SUMMARY INTRODUCTION General Executive Seminar Value Engineering Teams VE Workshop Agenda PROJECT DESCRIPTION General Background Site Project Scope Schedule Budget VALUE ENGINEERING ANALYSIS PROCEDURE General Cost Model FAST Diagram VE Job Plan Economic Factors SUMMARY OF RESULTS General Value Engineering Recommendations Layout .L Process .P Mech~Elec. Sekc~dexcerpts appear in this case sludy.d VE re#mt. Case Study Th~ee Refinery Fac~l~ty I '? .VALUE ENGINEERING REPORT Refinery Project TABLE OF CONTENTS Section LIST OF FIGURES & TABLES ES.

This Executive Summary describes their efforts. process. and 24 mechanicaland electrical design suggestions estimated at $2. An additional $1 million in annual cost savings would also be achieved.5 million in initial costs. and eliminate pipeline scrapers. the team developed 12 design suggestions. The team generated 64 ideas. The principal proposals were to combine or delete excessively redundant type tanks.Value Engineering Report Refinery Project EXECUTIVE SUMMARY This report presents the results of a 1993 value engineering (VE) study as part of a training effort for the proposed subject facility. from which four were selected for development. eliminate some of the excessive fill requirement in the off-plot tank area. The team generated 44 ideas. The team focused on the piping as well as the electrical comments generated by the electrical team. from which four proposals and five design suggestions were generated. The team generated 32 ideas and developed five proposals with estimated savings of $7. In addition. There were three study teams for the refinery facilities located overseas: layout. These teams comprised some 15 professionals from the oil company and their consultants. The principal proposals were to consolidate the site to reduce interface cost. Team 1: Project Layout The team conducted a component function analysis and developed a Function Analysis System Technique (FAST) Diagram as an aid to understanding the present design. install the main electrical distribution line above ground. reduce the size. use seawater for process cooling. These would result in $38 million in VE recommendations.6 million. and consolidate buildings to reflect required rather than desired future requirements. reduce the number of seawater pumps.2 million in additional savings. Team 3: ElectricaUMechanicaWiping The team reviewed a myriad of functional areas from their function and FAST analyses. and reduce the size of the main transformers Case Study Three Refinery Facility . and mechanical/piping/electrical. Team 2: Process The team reviewed the process flow for the project and developed a component function analysis and FAST Diagram. The principal proposals were to eliminate one product loading arm at the port facility because of its poor value. The team isolated potential savings of some $8.

Cue Study Three Refinery Facility .closer to actual needs. use earthen b e m for the site. Careful foiiow-on study should be given to the design suggestions that have a potential additional savings in excess of $2 million. Another $1 million in annual operations and maintenance savings could be accomplished if all of the ideas were implemented. and delete one of the pipe launchers and receivers. This represents approximately 17% of the planned investment for the project areas studied. Some key design suggestions were to eliminate the 15% overdesign for tanks. reduce pump spares. Total Impact The total impact of this workshop was to identify potential savings in initial costs of about $55 million.

verticslb from h e d c a l paM.Laput Laation: HOW? >>> <<<WHY? House Supplies Support PlP.Reading (mm right to lefl on Re FAST Diagram explains why each functlon is necessaty.Readtngfrom lefl l o right on h e FAST Diagram erplains how each function can be achieved.FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST) FUNCTlONlLOGlCDIAGRAM Projecl Name.Functjons VLBt happen'at Me same time" are shorn.Projed Smpe .Functions are Ute objectives of the pmjed expressed in active verbs and measuraMe nouns. . Transpolt Feedslock I . . Refinery Team 1 .. Transport Produn Mmufadure Prcduct (out at Scope) I NOTES: Product U2 Product U1 Transpolt Produa M Slore Produd U3 .. .

Case Study Three Refinenl Facility .

Case Study Three Refinery Facility .

- I . -Reading from left to rigM on the FAST Diagram explains how each function can lm achieved. Fundions Vlal happen "at the same lime' are s h m vertically fmm Me uiiiwlpath.FUNCTION ANALYSIS SYSTEM TECHNIQUE (FAST) ProjeziName.Fundlons are the objedives of lha pmjed expressed h adive verbs and measurablenouns. Refinery FUNCTlONlLOGlC DIAGRAM Team 3b . -Reading from right to left on the FAST Diagram explains why each fundon Is necessary.PipinglMechanical Location: I A <<< WHY ? H0W9rrs Transfer PmduU I Store Mf-Site Operate Transfer Product Opate Pmdud L-l- Ship Transfer Operate Loadlng Pmjed Smpa NOTES: .

COSTWORTH MODEL VALUE ENGINEERING STUDY Legend. Project: Phase: Date: RflB!Y -- - .--- .- - -- Case Stwly Three Refinery Facility .-Fe~ibllity --- .

000 41 5.540. VALUE ENGINEERING RECOMMENDATIONS The value engineering teams developed 13 VE proposals for change based on the current design and 41 design suggestions having a potential initial cost savings of some $60 million and present worth life cycle cost savings of $68 million.902.000 7. Ideas that were developed are submitted here as recommendations for acceptance.000 2.000 38.VALUE ENGINEERING REPORT REFINERY PROSECT - SECTION 4 SUMMARY OF RESULTS GENERAL This section of the value engineering study summarizes the results and recommendations for the study.180.000 47.000 45. Code Proposal Initial Cost Savings Total PW Cost Savings 4 4 5 8.The table below provides a summary of proposals.105.900. VE Proposals Layout Process Mechanical L P M TOTALS Design Suggestions Layout Process MechlElec TOTALS GRAND TOTALS Case Study Three Refinery Facility L 12 P 5 M/E 24 2.500 2.000 63.125.000 2.177.700. One additional proposal (P-44) is not included in the above totals because it is an alternate which was not fully developed and affects ROI.000 .000 No.180. Often there is a tendency to disregard a recommendation because of concern about one portion of it.473.874.662.000 25. consideration should be given to the areas within a recommendation that are acceptable and apply those parts to the final design.900.000 7. When reviewing this report.000 8. It is important when reviewing the results of the VE study to review each part of a recommendation on its own merits.000 5. Recommendation Category Ref.422.500 13 54.

Building L-3 Combine Buildings L-10 Revise Layout of Site L-27 Combine MCC and Control Room L-DS Design Suggestions Layout Totals PROCESS TEAM P-14 Use Seawater for Process Cooling P-17 EliminateReduce Seawater Pumps P-25 Product Pipeline Scrapers P-36 Combine/ReduceSize of Storageport Tanks P-44 Reconfigure Plant to Make no Benzene' P-DS Design Suggestions Process Totals Note: ' Idea is not fully evaluated. and is not included in totals. needs fiirther study. Case Study Three Refinery Facility .SUMMARY OF POTENTLAL COST SAVINGS FROM VE RECOMMENDATIONS NO. DESCRDPTION INITIAL COST SAVINGS ANNUAL O&MCOST SAVINGS TOTAL PW COST SAVINGS LAYOUT TEAM L-2 Reduce Size of Admin.

SUMMARY OF POTENTIAL COST SAVINGS FROM VE RECOMMENDATIONS NO.500 . DESCRIPTION INITIAL COST SAVINGS ANNUAL 08rMCOST SAVINGS TOTAL PW COST SAVINGS MECHANICALPIPINGTEAM M-10 Eliminate One Loading Arm M-17 Combine Wastewater & Off-Plot Tankfeed M-21 Eliminate Tank Area Fill E-2 Reevaluate Substation E-3 Revise 115 KV Plant Feed M-DS Design Suggestions E-DS Electrical Design Suggestions MechanicaltPiping Totals Grand Total Case S d y Three Refinery Facility TBD TED TBD $25.054.000 $10.

000 Care Scudy Three Refinery Facility . Most personnel and utility facilites move to the west near the site center. (4) four other product types (mixed parts). Lengths were scaled from the drawings. All the fbture siting is moved to the far west. PROPOSED DESIGN Various rearrangements were considered as a means to reduce pipe costs. The rearrangement is shown on the attached sketch.940. LIFE CYCLE COST SUMMARY Capital Annual O&M Original Proposed Savings LIFE CYCLE (PW) SAVINGS $ 2. They are briefly described and comparatively ranked on the attached Weighted Evaluation sheet. DISCUSSION The primary driver for this proposal was to minimize the piping to carry the hack q d forth flow sequences.499 meters. goes to tank at (2) and back to Refinery at (3).847 meters to 4. L-10 Refinery Projects Revise Layout of Site ORIGINAL DESIGN Layout and flow sequences are shown on Attachment I. As shown. the highest ranked alternate was based on moving the tanks to the south of Refinery and moving all hydrocarbon products facilities to the east. Refinery and product store tanks run along the north side of the site. Added costs of moving building further from water and power supplies are assumed balanced by cost reduction in moving wastewater treatment and surge ponds closer to the wastewater pumping station. The result was a reduction in on-site piping from 7. Feed enters at (I). (benz).VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO. Products flow from (3) to (4) C. Then all products flow from tanks to point (5).

Cyclohexane pipe is 852 meters long and costs $71. unit wst is $884/m. L-10 Refinery Projects Revise Layout of Site Piping Unit Cost Determination Extension of off-site pipeline to feed storage tanks: Line cost $43.000.000. Thus. except cyclohexanes: Cost from estimate is $5.332. Unit cost is then $83.5 krn length. On-site hydrocarbon piping.030 m. and length from layout drawing is 6.VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO. this is $649/m.795.000 for 67. Information is £rom aredunit 90-90 from cost estimate. Caw Srudy Three Refinery Facility .30/m.

G10 Refinery Projects Revise Layout of Site Original Layout Case Study Three Refinery Facility .VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO.

VALUE ENGINEERING RECOMMENDATION PROJECT: Refinery hojects ITEM: Revise Layout of Site Proposed Layout rz a Case Study Three Refiney Facility b NO. GI0 .

Major Preference 3 -Above Average Preference 2 -Average Preference Criteria Criteria Scoring Matrix *Arbitrarily assigned score of 1 to keep in evalutation.Weighted Evaluation Project: Refinery Facility Revise Layout of Site How Important: 4. 5 -Excellent 4 -Very Good 3 -Good 2 -Fair f -Poor Care Study Three Refinery Facility .

00 903.COST WORKSHEET RECOMMENDATION NO.30 884.368.00 664.448 665 678 m 83.736 Care Study Three Refinery Facility .041 SAVINGS S 2.628 752 m 884.574 122.00 55.00 884.876 917 m 884.00 810.352 m Total $-3. Unit Cost Total ORIGINAL DESIGN Pipeline extension to feed tank Feed tank to Refinery Refinery to 1st storage to site edge Refinery to 2nd storage to site edge Refinery to 3rd storage to site edge Refinery to 4th storage to site edge Refinery to flare Total PROPOSED DESIGN Pipeline extension to feed tank Feed tank to Refinery Refinery to I st storage to site edge Refinery to 2nd storage to site edge Refinery to 3rd storage to site edge Refinery to 4th storage to site edge Refinery to flare 326 139 m m 649. L-10 PROJECT: Refinery Pr'ojects ITEM: Revise Layout of Site Item QBrL Meas.768 1022 m 884.659.395 599.00 211.

L 1 0 PROJECT: Refinery Projects ITEM.000) Pro~osed PW Estim.LIFE CYCLE COST WORKSHEET RECOMMENDATION NO. cost ANNUAL COSTS Assume maintenance equals 1% of investment Maintenance 10. Revise Layout of Site Discount Rate: 10% Economic Life: 20 years PRESENT WORTH ANALYSIS Orivinal Estim. w r Q&s (Costs all $ x 1. PW Costs costs Costs - INITIAL COSTS Pipelines Total initial cost REPLACEMENT COSTS Not applicable Total rep].7 60 642 Total Annual Costs Total Annual Costs (PW) TOTAL PW COSTS 6.670 LIFE CYCLE PRESENT WORTH SAVINGS Care Study Three Refinery Facility .

900. etc.000 145. they are re-run via an off-spec tank.25 million without sacrificing/compromising the operation.000 $ 33. If a product is off-spec it is routed directly to the process or to the feed stock tank.000 $ 27. By-product Storage: All by-products are shipped directly to the port in dedicated lines.800. greater maintenance (morellarger pumps. On-spec Benzene goes to a product tank for either shipment to port or for local sale. Interim Product Storage: None is provided on-site. A feed stock tank is provided to.000 .) and permanent cash tied up of $1 1. the other feeds the process. b) provide surge in case plant is off-line and c) catch off-spec product for rerun.100.600. P-36 VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: Refinery Projects CombinelReduce Size StoragelPortTanks ORIGINAL DESIGN Feed: Feed arrives Grom source to one of two stock tanks." Changing paradigms involving break tanks will result in significant wst savings of $25. All products run down directly to the port.000 685.000 Annual O&M $ $ $ 830. more instrumentsition.NO. By-product Storage: The two by-products run down to day storage prior to batch shipment down a common line. While one is filling. Product quality is continuously monitored by line sampling. a) keep the plant on-line during a feed line interruption. The perceived improved reliability of the original system is just that. PROPOSED DESIGN Feed: Feed directly to process. at a very high cost of initial capital outlay. If off-spec. DISCUSSION The excess tankage and associated large volume pumps and large diameter piping represent a textbook "wst of quality. Interim Product Storage: Benzene and cyclohexane run down to day tanks for checking product quality prior to shipment to the port. LIFE CYCLE COST SUMMARY Original Proposed Savings LIFE CYCLE (PW) SAVINGS Case Study Three RefineqfFacility Capital $ 60. more monitoring wells.5 million in the hydrocarbon inventory of these tanks.000 $ 39.

analyze. There does not seem to be a good reason for on-site storage. 12".VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO. Interim Product Storage: It is not possible to get a representative sample of an 8. Case Study Three Refinery Facility . If the tank is off-spec. but an equivalent amount of a permanent revenue loss. This will be similar to product handling during start-up as the process becomes lined-out. and take action (must be able to operate a chromatograph 24 hourslday). or to feed the plant if the pipeline is down. Savings in Associated Facilities: Reduce quantity of monitoring wells Smaller VRS required (only one tank vs.000 . but the charge pump can remain off Only one charge pump is required as it is in intermittent service. Operator intervention should occur as soon as the problem shows up instead of risking an 8. flow can be reversed in the off-plot line by shipping back from the port. Local sales can be taken right off the run-down line. four) Eliminate N2 pad for 6 tanks Eliminate N6 pad for 3 tanks Eliminate 14 pumps Replace 5 miles of lo".000 bbl of material must be reprocessed.000 . Instead. and 14" line with 1 -4".2-6"andl-8"line ' Reduction in energy costs for extra pumping Increase reliability (less pumping & VRS equipment in chain) Basis for Savings: o Ability to frequently sample. Off-spec products are routed hack to the Front end (or into the process immediately). If the rate isn't sufficient.000 . o Process has sufficient stability to allow normal operation under spec.14.14.000 bbl batch to be spoiled. P-36 Refinery Projects CombineiReduce Size StorageFort Tanks DISCUSSION (Continued) Feed: The feed from the field must be approximately equal to the process feed at any given time. A spare can be warehoused. o Any required blending can be done at the port.14. then 8. Not only is the cost to process this material lost the first time. check product quality new feed will never be processed continuously.000 bbl tank as the contents are not well mixed. So why not feed the plant directly? A booster pump may need to be run to do this. - By-products: Send these directly to the port. if a reliable on-line analyzer exists andlor through frequent sampling. to catch feed if the process is down. The feed stock tank is available to catch off-spec.

VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: Refinery Projects CombineiReduce Size Storageport Tanks Original Layout Case Study Three Refinery Facility NO. P-36 .

VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO. P-36 Refinery Projects Cornbine/Reduce Size StoragerPort Tanks Proposed Layout I=-.------ 1 Case Study Three Refinery Facility .

E. ...Weighted Evaluation Project: Refinery Facility Combine /Reduce Size Storage /Port Tanks How Important: - 4 Major Preference 3 -Above Average Preference 2 -Averacre Preference $-slight Preference -Letter/ Letter -No Preference -Each Scored One Point Criteria Criteria Scoring Matrix . Proposed . . 7. ... . ...... .... Analysis Matrix Alternatives 1. .. 3..... 4.. .. 'Arbitrarily assigned a score of 1 to keep in evaluation.. -- Reliability ~-- - -~ F.... .~ c.. . 6....... ~... 5 -Excellent 4 -Very Good Case Scudy Three Refinery Facility 3 -Good 2 -Fair 1 -Poor .. -.. Operability -- -- .--.C Energy Costs B. . G.. ........ 5. .. Original 2. ...- Maintainability D.. . .. .. .

COST WORKSHEET PROJECT: ITEM: VE RECOMMENDATION NO. P-36 Refinery Projects CombineReduce Size StorageIPort Tanks Unit Cost ORIGINAL DESIGN Tanks & spheres ~ P S VRS Bulks & associated equipment (OSBL) Pk's to port (unit 90-91) Electrical (guess from 80-88) bbls Is bbls PC dia-in kw Subtotal Markup Total PROPOSED DESIGN Tank Pumps (increase ISBL head) VRS Bulks & associated equipment (OSBL) 5-l/2 pc PfL's to port (unit 90-91) Electrical (orig = 18 pumps) bbls Is bbls 1s dia-in P-PS Subtotal Markup Total SAVINGS $25.183 Case St& Three Refinery Facility .

500 24.51 830 7. cost 0 0 ANNUAL COSTS Operations 8.629 .100 27.200 2.100 Factor costs INITIAL COSTS Construction Working capital 1 1 Total initial cost REPLACEMENT COSTS Not included Total repl.200 2.900 60.234 Total Annual Costs Total Annual Costs (PW) TOTAL PW COSTS LIFE CYCLE PRESENT WORTH SAVINGS Case Study Three Refinery Facility 67.NO.334 $39.900 60.400 11. costs costs 49. P-36 LIFE CYCLE COST WORKSHEET RECOMMENDATION PROJECT: ITEM: Refinery Projects CornbineReduce Size StoragePort Tanks Discount Rate: Economic Life: 10% 20 years PRESENT WORTH ANALYSIS Original Estirn.900 24. PW (Costs all $ x 1.000) Proposed PW Estirn.063 145 1.900 27.500 49.963 28.400 11.

300.3 hto the main substation. The VE team feels above ground would be less expensive and is suitable for an industrial area. A waiver should be requested to implement this proposal.300. PROPOSED DESIGN Install the 115 KV plant feed above ground.000 $ 2.VALUE ENGINEERING RECOMMENDATION PROJECT: ITEM: NO.047.000 Salvage Annual O&M $ $ $ % S NA $ NA $ 4.000 Case Study Three Refinery Facility .347. E-3 Refinery Projects Revise 115 KV Plant Feed from Underground to Above Ground ORIGINAL DESIGN A 115 KV plant feed is to be installed underground from the power company substation 4. LIFE CYCLE COST SUMMARY Original Proposed Savings LIFE CYCLE (PW) SAVWGS Capital S 6. (See attached) DISCUSSION Local utility requires 115 KV installation underground.000 S 4.

696 Care Study Three Refinery Facility .240 30 ea 5000.COST WORKSHEET VE RECOMMENDATION NO. 3" cable ea (use $25/1ffcable x 6 units) 84. 3" cable ea (use $lOAf/cable x 6 units) Towers at 500' spacing Installation (use $1 Ollf) Subtotal Markup indirects (3) Total $-2.047.8) Total PROPOSED DESIGN 2 feeders. E-3 PROJECT: Refinery Projects ITEM: 115 KV Plant Feed item Ouan.624 If 10. Meas.000 Installation (use % 1001lf) Subtotal Markup indirects (.00 150.00 2.00 846.624 If 25.115.600 84.104 SAVINGS % 4. Unit Cost Total ORIGINAL DESIGN 2 feeders.299.


It took months to The Selection Process Aresearch and gather the top consultants available at the time and place of the selection.0 ver the years.the . availability. The PM team collected a dozen RFPs from large projects in abroad. These criteria were incorporated into the request for proposal and were listed under Part 11. and shopping complex.) The competition evaluation criteria were developed by the PM. and creative input from the project management (PM) team. The selection process was modified and adopted for use in VE. the author has had the opportunity to participate in several international design competitions. (See the discussion of weighted evaluation in Chapter Seven. Jury members representing the top professionals in the major areas of the project were chosen. and developed the competition RFP using these documents. such as experience. cost is not always the dominant criterion in selecting alternate design concepts. Over the years. the author developed a weighted evaluation process for selecting the A/E for major projects that would moderate the solely cost-oriented approach of VE.I-J.S. However. concurrent task involved the selection of jury members. This process weighed cost against other factors. and modified by the owner and selected jury members through an exercise in group dynamics. taking advantage ofthe resources offered by the American Institute of Architects' library -. . the project management (PM) team conducted research into RFFk for similar projects. and it was implemented in this competition."Procedural Rules. and staff. -.*~*f:~ - . or estcem. Originally. In general. In 1995. (See Chapter Six for further Case Study Four Master Planning Competitlon i " JC. and he served on the jury for the following competition enuy: a large $1 billion hotel. he was a consultant in the RF'P development for the Master Plannine Competition. cost.' The competition offered an opportunity to apply value engineering concepts and techniques. . apartment.and files. The development of the RFP was in line with underlying VE methodologies. AIA data. which is included in this case study. - Devemnt f' Request for Propal Using the techniques of the Information Phase of the VE Job Plan. VE concepts were often unable to temper results with criteria other than cost. . The agenda was developed according to the Delphi Method and the VE philosophy of applying an organized approach to problem solving. value is defined in terms of use." of the RFP Table of Contents. exchange.

Saudi Arabia.) Descriptia Pqe 275 Request for Proposal Table of Contents 277 Jury Report Table of Contents 278 Section I: Overview and Results Section 111: Jury Agenda 284 'The author would like to thank the Abdul Latif lameel Real Estate Investment Co.) The costing exercises used the budget systems developed in the VE process. Creativity and brainstorming were encouraged throughout. (The Table of Contents on page 275 is one of the excerpts and refers to some documents not listed here or shown in the section. In particular. - Case Study Four Master Planning Competition . the exhibitors (the design teams). The process was well organized. and the project manager. General Manager Mohammed Ibrahim Al-Abdan and Engineering & Projects Director Mohammed M. The principal comrnen~generated were as follows. of Jiddah. for the opportunityto work for them. Ltd.. The results of the process were acclaimed by the owner. Cae Study E h r s The items listed below and shown in this case study have been excerpted from an actual VE report. and group dynamics and sensitivity to human factors were key instruments in optimizing the efforts and results. Abdul Qadir were exceptional people to work with. covered all of the essential elements. and resulted in the fairest competition for participants. based on a set of requirements that was well thought out.discussion of the Delphi techniques.

.''' Selected excerpts appear in this case study.. Cost and Schedule. .. . Submission Requirements F.. Mix Development Overview B. .1 1-2 1-2 11: Procedural Rules A. Key Requirements F.-+ +.. Case Study Four Master Planning Competition . Calendar C. General B. "!. . .'.Opo&~~: t . Milestone Schedule IV-57 IV-58 iV-58 IV-61 IV-69 1V-73 .$ contRltr . Objectives of the Competition B.. T b y i. .Request for Proposal Hotel. Competition Rights and Obligations t. . .' .:h r w. R p & &fdr.":'. .. .. Selection Process D.... and Shopping Center Development Project Table of Contents I: Introduction A.Limits 111-25 111-27 111-45 111-54 IV: Scope of Services A.:p. .. . Registration Form Formats 111: Master Planning Guidelines A.~ h p . . . . List of Illustrations Section 1-1 I. Definitions B.. The Competition E. .:.. Program Evaluation C. '. Description of Designated Services E. . Pedestrian & Vehicular Assessment D. <. Site Evaluation D.. ~ . Post-Competition Activities H.. . . .. The Project C. . . Program Statement C.fib. Apartment."y'yA>L '4..-. Key Requirements G. L P.. Structure of the Document D... Evaluation Criteria J.

. Apartment.a.. . Evolution C.. Existing Site Infrastructure D. F.>y~~."d. Article 10: Miscellaneous Provisions Appendices A. * :is:G T .. Article 4: Owner's Responsibilities E. The Context D.:~~:&g.~w~>*>*-'. and Shopping Center Development Project Table of Contents (Continued) Section V-75 V-76 V-82 V-84 V: Site and Vicinity A..:'Tf& f:?. Prepared by the Owner of the Project Site Photographs y...>*r~~.. Property Limits Video A.'&)&!:."4~."F-..~ .h&n .<. Article 5: Payment to the kl/P F.. Zoning Regulations VI: Agreement Between Owner & MIP A.~b~fi&rit. Article 7: Use of Documents H.~!?:~~ : " > ?*. Case Study Four Master Planning Competition . Article 3: Additional Services D. History B... Article 9: Termination and Suspension J..Requestfor Proposal Hotel.->tG 1 Selec~dexcerpts appear in -this case study.. Article 8: Dispute Resolution I.+~~p. Topographic Map C. Article 1: M/P's Responsibilities B.><.$. ~~. Article 2: Scope of W s Services C. . Article 6: Construction Cost G. Profile & Brochure of the Owner B..

Jury Members Procedure Technical Advisory Report 11: Narrative Reports and Findings* Narrative Reports Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E IU-7 111: Attachments Agenda * Not included in the excerpts Case Study Four Master Plannmg Compet~t~on 8 " i* *ir* . and Shopping Center Development Table of Contents Section 1-1 1-1 1-2 1-3 1-4 1-5 I: Overview and Results Summation and Recommendation Review of Exhibits Table 1: Technical Evaluation Criteria Overview -. Apartment.Jury Report Master Planning Competition for Hotel.

Architectural Planning and Image E. The evaluation matrix was developed from the key points outlined in the Request for Proposal (RFP). The "scores" on the matrix were "weighted" to provide the following evaluation criteria and weights: Part I: Master PlanningIConceptDesign A. and their representatives. E D 010 454 364 805 57. Response to User Needs and Comfort C. 2. Site Planning and Image D. General Owner Requirements B.9* 55 Placement not selected 2 not selected *Judged a tie by unanimous decision of the Juiy members.Section I: Overview and Results 1. consistent with the following Evaluation Summary: Exhibit A B C Reference # 721 973 000 111 I00 001 Score 51 58. the Jury presented the results of their deliberation to the Owner. Summation and Recommendation In October. LayoutIStaff Operational Efficiency Weights 10 10 12 16 12 Case Study Four Master Planning Competition .9* 65 2 1 Review of Exhibits Table-1 is the evaluation matrices of the five (5) submittals.

Primary focus on land utilization and site planning. Good = 3. Subsequently. As per the Agenda. Primary focus on local urban and master planning. Subsequently. Very Good = 4.4 times the points. using Excellent = five (5) as total points. prima& focus on space planning and economic valuation. the Jury members initially met with the Owners for overall project objectives. Primary focus on marketing. Poor = 1. a weighted value was calculated by multiplying the points for each criteria by its rank.2 times the points. Overview Jury Members The Jury for selection of the master planner for the proposed project convened in October.8 times the points. Primary focus on trafic/transportation engineering and parking. Very Good = four (4) as 0. and Poor = one (1) as 0. operation and development.Part 11: Technical A. 1995. Fair = 2. C. the Case Study Four Master Planning Competition . using Excellent = 5. 2) 3) 4) 5) 6) 7) Primary focus on architectural and planning of hospitality projects. B. The Jury members' disciplines and areas of expertise were: 1) Primary focus on building systems and value engineering. E.6 times the points. The scoring consisted of ranking each of the 46 sub-areas. Cost/Constructability Building Engineeringloperations and Maintenance Schedule Planning Safety OrganizationallManpower Approach Weights 11 12 5 4 8 The above major criteria areas were further subdivided into forty-six (46) sub-criteria. Procedure The agenda followed by the Jury is attached as Figure 2. Fair = two ( 2 ) as 0. Good = three (3) as 0. - 3. Sponsor Representatives: The two (2) representatives from the sponsor that participated during the Jury deliberation as non-voting members were as follows: 1) General Manager 2) General Manager of Projects 4. D. The scores listed in Table 1 represent the average of the seven (7) Jury members' individual scorings.

Case Study Four Master Planning Competition .

A compilation in tabulation form of each exhibit was submitted to the Jury. During the initial sessions. Their estimates were adjusted after their clarifications were received. second-. These were: * * * * Architectural features Landscape and Environmental Transportation and Pedestrian Flow Building Systems. Technical Advisory Report The three (3) days prior to the Jury deliberation. Costs Development of a baseline cost model (UniFormat) using some eighteen (1 8) major cost drivers. The critiques are included in Section TI. Table 1. 5. The technical advisor then developed their own evaluation of each exhibitor's estimate and constructability aspects. the Jury members elected Jury Member #I as Chairman. each Jury member developed a ranking for each exhibit. as well as compared to one another. for review of submittals. Jury Member #3 overviewed marketing and sales aspects. each individual again evaluated results. and Jury Member #5 discussed the local custom impact of each exhibit. The iterations were repeated until a final consensus was reached. and third-place winners from among the Master Planning concepts submitted. Because of the wide variety of the submitted figures. Case Study Four Master manning Competition . during which the group discussed each project. Again the group was reconvened and differences in evaluations were discussed. Reimbursable fees were allocated according to the Jury rankings. who presided over and served as the Jury leader during the judging process. The discussion included an overview of each exhibit by the designated specialist in the key areas. Jurors applied their professional expertise and personal judgment in the prudent deliberation in selection of first-. Subsequently. A jury member was assigned the responsibility to oversee the ranking and development of a narrative for one (1) exhibit. Subsequently. Assisted by Jury Member #6. the technical advisor started development of the following aids for the jury evaluation: a. Costs & Schedule Jury Member #2 Jury Member #4 Jury Member #7 Jury Member # 1 In addition.Jury developed an evaluation matrix. The Jury evaluated the submittals following the Delphi method. The baseline model was compared to each exhibit. exhibitors were faxed to send clarifications of their estimates. he prepared the Jury Report. Jury Member #6 overviewed the general programming elements. The final day. the selected Jury member developed a Narrative Critique of their assigned Exhibit. He ensured that Jury deliberations proceeded in a fair and orderly manner. The procedure consisted of an initial group discussion.

as some drawings were difficult to ascertain the correct numbers. during the final evaluation of the exhibits. diverse building elements. c. Electrical Systems A computation was assembled of each exhibitor's approach to electrical. and special systems including security. Mechanical Systems A compilation was assembled of each exhibitor's approach to HVAC. Structural During the Jury deliberation. - e. a compilation and technical assessment was made by the project manager's structural engineer. emergency power. Clarification was reauested from the exhibitors in the number and types of elevators and escalators. The table broke down the local and national firms' labor projections. including power and distribution. and energy conservation. f. However. water storage requirements. Note: It is pointed out that all during the Jury deliberation the technical advisor's staff was available for additional data collection or clarification of collected data. Case Study Four Master Planning Competition . This data on each exhibit was used by the Jury for their edification. the technical advisor reviewed each schedule and developed comments as to the accuracy and feasibility of each exhibitor's submittal for Jury guidance in evaluations. water heating systems. lighting. g. a table of each Exhibit's submitted data was developed assuming some eighteen (181 . During the workshop. the Jury acted alone in their deliberation. . a baseline labor projection of phases I through 6 was developed by a technical advisor for Jury guidance in evaluating each Exhibit's projections. Schedule Each exhibitor's schedule was listed in a table and compared to the RFP milestone dates and with one another. Technical Report Contents Again. d.b. During the workshop. Man-month Input Schedule A table listing all five (5) Exhibits and their man-month projection was developed. including type of plant. fire protection concepts.

364 805 for Exhibit E. 364 805) was selected as No. Conclusion In conclusion. The following are the key criteria used in arriving at this selection: Top quality/clarity of submittal Best adjudged marketability of design Optimum response to user needs and comfort Very good site pfanning/image and best ranked pedestrian circulation and landscape approach Ranked No. Exhibit E (Firm No. 1 by the Jury. Section 11: Narrative Reports and Findings (Not included in the Case Study) Case S d y FW Master Planning Competition . 1 for architectural planninglimage Best overall response to layout/staff operatianal efficiency Most comprehensive organization/manpower approach The Jury unanimously recommended that the Owner award the design of the proposed hospitality development complex to Firm No.6.

) * Technical 04:30 PM Group Iteration of Evaluations Master Planning/Concept Design 06:OO PM Adjourn Case Study Four Master Planning Competition . DAY TWO 08:30 AM Conclude Formal Group Review of Exhibitors 10:30 AM Individual Evaluation * Master Planning/Concept Design 12:OO Noon Lunch 02:OO PM Individual Evaluation of Findings (Cont.Section 111: Attachment Jury Agenda Master Planning Competition Hotel. DAY ONE 08:30 AM Jury Orientation and Debriefing 09:OO AM Introduction/Agenda/Introductiongiven by Professional Advisor 10:OO AM Formation of Jury Team * Selection of the Chairperson * Breakdown of Jury 10:30 AM General Overview of the (5) Exhibitors 12:OO Noon Confirm Sponsor's Objectives 01 :00 PM Lunch 02:OO PM Technical Advisor Overview * Schedule * PlanningProgramming * Costs * Financial Projection 04:30 PM Group (Jury) Review of Exhibitors * Master PlanningIConcept Design * Technical 2. Apartment and Shopping Devetopment Project 1.

) 04:OO PM Develop Preliminary Evaluation O5:OO PM Adjourn 7-9 PM Sales & Marketing Brainstorming Session (Night Session) * DinnertDiscussion 08:30 AM 4. DAY FOUR Review and Finalize Findings -.3. Dinner with the Client 08:30 A M 5.Group * Master Planning/Concept Design * Technical 12:30 PM Lunch 02:OO PM Develop Findings * Outline Presentation of Findings Client Briefing of Tentative Findings 05:OO PM 07:OO PM Adjourn 08:OO-9:30 Sales & Marketing Brainstorming Session. DAY FIVE 08:30 AM Group Discussion * Finalize Results * Select Winners 10:30 AM Presentation to Owner 1230 PM Lunch 02:OO PM Preliminary Report Preparation * Narrative Reports of Exhibitors 05:OO PM Adjourn Case Study Four Master Planning Competition . DAY THREE Jury Iteration of Evaluation (Cont.) * Technical 10:30 AM Individual Re-evaluation of Rankings * Master PlanninglConcept Design 12:OO Noon Lunch 02:OO PM Individual Re-evaluation of Ranking (Cont.


Compared to the traditional design review.000.000 (US. experienced team of noninvolved professionalsconducted the review. and agenda were followed. the VE modified effort returned to the owner benefits worth several times the cost involved. it also documented potential value enhancements. the author assembled a team and conducted a design review using a two-week formal workshop structured around the VE Job Plan.500 people when complete Study objective: To assure that the submittal drawings conform to the owner's requirements and to offer value-enhancement suggestions.500. The key differences were: An established scope of work. low-rise office area./Complex . The VE modified design review was well organized. such as total cost. and constructability improvements. Project Description: Headquarters/complex (including office tower. The team studied 15% design-stage submittal drawings as part of the project management input for a large government agency headquarters/complex in Saudi Arabia estimated at $125. and auditorium) Gross building area: 1. During the review. who were following the traditional approach.).000 S. time.I n 1996. schedule. Case Study Five Application to Design Review of Govt. effective. parking structure. and resulted in an improved facility. The review team not only looked for typical design review items. Maximum effectiveness was realized when the VE team was composed of professionals who had performed a previous study.E Accommodate 2. quality. Hdqtrs. the VE team implemented methodologies that differed from thme typically used by the designers/owners. A multidisciplinary.

Hdqtrs.CaSeStudy E h n u The items listed below and shown in thk case study have been excerpted hom an actual submitted report.) p%e Description Table of Contents (from original Design Review Report) Section I: Introduction Section 11: Procedure Workshop Agenda Section 111: Conclusion Section IV: Design Review Comments (Selected Pages) General Conveying Syste&echanical Site Work 289 290 291 293 295 296 297 298 Case Srudy Five Application to Design Review of Govt. (The Table of Contents on page 289 is one of the excerpts and refers to some documents not listed here or shown in the section./Cornplex .

Design Review Report

Table of Contents & List of Figures
Section I

Project Description

Section II


Section Ill

Contract Submittal Issues
Approval Process
Future Concerns

Section IV

Review Comments
Exterior Closure
Interior Construction
Conveying System
General Conditions & Profit
Site Work

(Selected Comments Only)

(Not included in case study)
A. 1. Memo dated April 07, 1996
2. Memos dated April 03, 1996
B. Traffic Study
C. Elevator Study
List of Figures
Ground Site Plan
Workshop Agenda
List of Documents

(Not included in case study)
(Not included in case study)



This is tfie T& of Contents from the actual VE repon.
Sekcted excerpts appear in this case study.
Cnse Sardy Five Application to Design Review of Govt. Hdqtrs./Complex

, <.*.

",. .a


, ",

Section I

I . General
The design review (DR) team conducted its review on the 15% design stage submittal
drawings. The review was conducted at the designer's offices. The objective of the
review was to assure that the submittal conformed to the owner's requirements and
offered value-enhancement suggestions.

2. Project Description
The proposed project is a building that will be used primarily for the offices of all
corporate executive and administrative levels. A large area will be devoted to marketing.
The main elements of the project are the following: office tower, low-rise office area,
parking structure, and auditorium. The facility is designed to accommodate a total of
2,500 persons when it is completed. For the sake of convenience and in view of the
future needs of the building, the project is divided into three (3) phases A, B, and C
and the construction drawings and bid will be presented in three packages.


Site: Attached is Figure 1.1


- General Site Plan (Not included in case study.)

comprising the
Buildings: The gross building area is approximately 1,500,000 S.F.,
lower main building, twin towers, auditorium with adjacent training center, cafeteria,
lower parking structure, recreation area, warehouse, and utility building.
Design Image and Quality: The proposed building should represent the
modern-technology image of the high-level corporate organization and should be
functionally efficient. The exterior of the building is designed to be clad in stonelprecast
panels. The total image should portray one of the most modern designs in the region.

Care Scudy Five Application to Design Revlew of Govt. Hdqm./Complex

Section II
The design review was conducted as part of a continuing program of design review services
provided by the Project Manager (PM) for the Owner. This effort represented the first formal
project review of the design development (approximately 15%) documents. The agenda for the
formal review is attached (see Workshop Agenda). The design review team was comprised of
the following professionals:
Design Review Team LeaderICivillCosts

. Project DirectorlElectricaI/Costs

Architectural Designer
Architectural/ Construction Specialist
Mechanical Engineer
Structural Engineer
Administrative SupportlGraphicsSpecialist

The workshop began with introductions and an explanation of the workshop procedures. This
was followed by an overview of the project documents by the Owner and design review team.
Following is a list of the twenty-four (24) personnel who were in attendance.
Project Manager
Structural Engineer
Review Team Leader
Mechanical Engineer
ElectricallProject Director
Structural/Asst. Project Director
Director of Design
Report Writer/lllustrator-M.E.
Project Manager
Manager of Design Dept.
Director of Engineering
Head of Technical Services
Manager of Q.S. & Estimation

Case Study Five Application to Design Review of Govt. Hdqtrs./Complex


Head of Structural Dept.
Head of Electrical Dept.
Head of Plumbing Dept.
Head of HVAC Dept.
Project Architect
Manager of Landscape Architect
Civil Engineer
Senior Architect


The team broke out into discipline areas, and members reviewed details with their design
counterparts. The second day was devoted to review of documents and collection of
comments. On the third day, comments were collected, reviewed, and discussed with the
designlowner team. Discussions as required for clarification, as well as suggestions for
potential enhancements to the proposed design, were conducted throughout the formal review
process. In addition, the design review team evaluated the project estimate for accuracy, since
an estimate should represent a reasonable cost for the proposed project. The team developed
comments and suggested changes to improve the overall accuracy of the estimate. These
changes were reviewed and discussed with project (NE)estimators, and the estimate was
adjusted. Finally, the comments were documented and plans marked appropriately for
evaluation in the report.
During the sessions, considerable time was spent evaluating the net to gross of the design.
Because of the two-tower concept and use of atria, the calculated net to gross (65%) was
below industry standards. For example, the table below illustrates the ratio goals of the largest
building concern in the world, the General Services Administration (US.).
Table 3-11Minimum Net to Gross Ratios
Bullding Type
Office Building

Minimum Ratio

Source: Data from Chapter 3, Architectural and Interior Design, June 14, 1994, PBS-PQ1OO.l, pages 3-15.

The PM conducted several additional special studies. Because the review team had some
initial concerns, a traffic consultant specialist was called in to conduct a traffic study (reported
in Appendix B not included in this case study), This study, which isolated several points for
further clarification, was given to the owner and designer personnel for their review. Design
review comments deemed appropriate by the team are included in Section Ill.Also, an elevator
consultant was asked to review the data in the technical report and to conduct some
preliminary runs to evaluate the elevatoring of the project. His report, which contained some
pertinent comments that would optimize performance and cost (reported in Appendix C not
included in this case study), was given to the Owner and designer personnel. The A/E used
these recommendations to update ongoing elevator studies.



Care Study Five Application to Design Review of Govt. Hdqtrs./Grnplex

Design Review: Headquarters/Complex
Workshop Agenda
Day 1:
8:30 am

Day 2:
8:30 am

1:00 pm

Case Study Fiwe

Day 3:
8:30 am
Briefing on Procedure
Review of Agenda
By Owner
By Designer
Latest Document Status
Interface with Owner B
Design Team
Design Concepts
Design Analysis
Program & Requirements
Any New Submittals
Conformance with code
Schedule impact &
I.By Disciplines
2. By Team
Overview of Progress

Application to Design Review of Govt. Hdqm./Complex

Day 4:
8:00 am
~ : O Opm


Each Discipline
Evaluation of Comment
Discussion of Review Comments by
Round-Robin Discussions
Group Discussion

Documentation by Discipline
By Group
Breakout Gmup for General
Conditions Review


Day 5:

l:00 prn


Complete Written Comments
Prepare Oral Presentations
Oral Presentations

At the conclusion of the formal workshop, the design review team made a brief summary
presentation of the key comments generated for the Owner and design team representatives.
Following the five-day formal session, the team returned to the PM's office and developed the
final report. During the following week another briefing was held at the Owner's headquarters
building. Personnel in attendance are listed below:
Director General
Director, Projects Department
Project Designer
Design Review Team Leader
Project Director
Managing Director


The design review team would like to thank the designer's personnel for their hospitality and
use of their facilities. Their staff is to be commended for their positive attitude toward the
review process. In particular, we especially appreciated the productive input of the Project
Section IV includes the design review comments that were generated during the formal review.
(Note: This case study presents selected excerpts from the design review comments.)

Case Study Five Application to Design Review of Govt. Hdqtrs./Complex

Section Ill
1. Contract Submittal Issues

The submittal documents were reviewed in detail by the team, and approximately 125 design review
comments were generated. The team concluded that the submittal did not fully meet owner
requirements. The following key areas of concern were isolated:

. The submittal had not been approved by the municipality.

The refined space program needed to be accomplished.
The geotechnical report was not complete but was underway.
A traffic study was necessary to better define access to site and parking as well as site
Major site elements, such as utility building and utility tunnel, thermal energy storage (TES)
system, and water storage tank, needed to be better defined and located.
Especially important--thenet to gross of the office areas and parking needed to be improved
to represent an efficient facility. Reasonable targets for such a corporate structure are a
minimum of 75% net to gross and a maximum of 400 S.F./car for parking spaces.
Also, clarification was needed for the engineering systems, e.g., location of plant rooms, TES,
mechanical penthouse, and required utility shafts.
Current design of tower atriums did not meet the requirements of the Uniform Building Code
Constructability and construction methods needed to be reviewed for the atrium.
Wind test needed to be conducted to determine stresses and noise levels on main building.




As for costs, the design review team evaluated the estimate with the project estimators. After several
additive adjustments, a revised estimate was developed; the design review team concurred that this
represented a reasonable estimate of probable costs. As a further refinement, project estimators
agreed to prepare a new estimate using actual project takeoff items before final approval of the 15%
Note: The project estimate represents the projected cost if all three phases are bid at one time.
Escalation costs of Phase B and Phase C, which may be bid 10 to 15 years after the bidding of
Phase A, may be from 30% to 100% higher.
2. Approval Process

If the comments are evaluated and implemented to meet owner requirements, the design review team
will quickly approve of the submittal.

3. Future Concerns
For future submittals, the design review team would like to have the drawings numbered per
American Institute of Architects (AIA) standards, the cost estimate in UniFormat, and a revised design
schedule with a milestone, master-type project construction schedule.

Case Stwdy Five Application to Design Review of Govt. Hdqm./Complex

Section IV: Design Review



Drawing Number,
Specification Page or
Brief Description
ltem 3a.1.4

Contract requires submittal of construction
methods. None have been submitted.
This requirement should be met, especially
for the construction of the towers. See
structural for more details.

Design Contract Item
3a.l Schedule

Regarding design schedule. Resubml in
accordance with PM letter dated April 7.1996.

Contract 3a.2

No structural drawings were submitted.
Expected drawings are column layout with
approximate sues, foundation concept
should coordinate column location, spans,
shear walls, floor height, foundation details
and coordination with anhitecturai. See
structural for specific basis of design. Report
for mechanical should include sizing
of major equipment, proposed plant and
distribution layout concepts. Major shafts
should be indicated.

Contract 3a.2.6

Basis of design report should include sizing
of major electrical equipment. Location and

Contract 3a.2.1

Municipality written approval must be obtained
before approval of 15% submittal. Also.
resolution of glass problem (obscured glass) for
north and east views needs to be accomplished.

Contract 3a.2.6,7 & 8

Submittal shall include design analysis and
preliminary system selection including materials
for major systems. See PM Letter of April 03. 1996.
Show elevation at ground floor per datum
established for site topography.

Architecture and
Engineering Design
Criteria 15% stage

Basis of Design Report under General refers to
UBC 91 should be UBC 94.

Architecture and
Engineering Design
Criteria 15% stage

Program: Space allocation and program is not
complete. Submittal for Approval required, as well
as subsequent determination of room sizes
for each department. See # G-2- Arch.2


Case S d y Five Application to Design Review of Govt. Hdqtrs./Cornplex

0811 Hot water supply a. Cold water supply Study to use PVC pipe for cold water Check plumbing wde? Outdoor design condition It is suggested that use of Outdoor: DS = 11 I0F. WB = 71°F be studied and modified as per official meteorology temperature records. UniFonnat Elementl Item 4./Complex . not by elevator vendors. 1. Use carpet tiles only at higher traffic areas. b.Section IV: Design Review Conveying SystemlMechanical Headquarters/Complex No. Basis of design and technical report should be clarified. Chapter 4. 3. 0620 Drawlng Number. Case Study Five Application to Design Review of Govt. Revisions to elevator design are in progress. 0701 See Appendix C* elevator consultant's initial submittal Consider elevator analysis by independent consultant. 08 Mechanlcai 1. 'Note: This report was sent to N E and fowarded to their elevator consultant. indicate approximate wsts of such finishes as a whole (can be line items in the detailed cost estimate). Hdqtrs. Possible consideration DB 10SJ°F. WB 77°F. General Atria requires fire-rated partitions. 07 Conveying System 1. 2. Identify skirting proposed for various floor finish areas. Specification Page or Brief Description General Comment(s) Action Show typical finishes for various typical spaces. Use 2-112% line as recommended by ASHRAE (copy given to NE). Granite or other stone tiles use slipresistant design. AR-02 & 03 Evaluate number of doors at elevator lobby. Section 402. as per USC wde. Study the use of UPVC pipes instead of copper pipes for hot and cold water supply. Study the use of individual electric water heaters (for each toilet room on each floor) of adequate capacity instead of centralized floor electric water heaters and instantaneous type for executive areas.

Main plaza pavers shall be slip resistant. Note: Item added to estimate in final validation. RFP Page 4 Item 9 LS . Show typical section. It was added by the designer at owner's instruction. Simplify parking and utility roads around warehouse and proposed utility building. Review sizes and possible combination of visitors parking and auditorium parking lots. UnlFormat Elementl Item Drawing Number. Hdqm. Provide typical wall section. Speclficatlon Page or Brief Description Comment(s) 12 Slte Work Study accesses and parking spaces based on traffic study. This item is not a program element. partial wall elevation and special custom details planned for boundary wall. Recreation area is not physically separated by fencehall from the main headquarters. Suggest evaluation to aHow privacy and less interference with other buildings during off-hours. water requirements and typical special details required for any water features./Complex . There were no costs in the estimate for it.Section IV: Design Review Site Work HeadquartersIComplex NO. Case Study Five Application to Design Review of Govt. which is expensivea high maintenance item.01 Designer has indicated a 500-person amphitheater adjacent to the recreation area. Main plaza walks and pedestrian areas with patterned marble. Adjust road entry to protect future expansion of site at the northwest corner. Review team points out this is an additional program element. No vehicle traffic should occur over these areas.

000.000.T he VE team conducted a 40-hour modified-task team study for the 1" = 100' submittal for a large-city highway interchange project. Cae Sncdy E h t s The items listed below and shown in this case study have been excerpted from an actual VE report. depending on alternatives chosen for the final design.3 Summary of Potential Savings Section 2. Initial cost savings of up to $200.1 Narrative of Potential Cost Savings 304 Section 2 3 Civil (Proposals) C-1-Eliminate Ramp A 307 315 C-&Raise Profile of Northbound Interstate Section 2. Follow. In final implementation. simplification of the highway system.) Description Page 301 Table of Contents (from original study report) Section 1.5 Structural (Proposal) S-4--Use of Strength and Load Factor Design Method in Lieu of Working Strength Design 324 Section 3.on savings estimates may vary from $3.9 Cost Model and Estimate Breakdown 328 Cosflorth M o d e l S o u t h Interchange 330 Case Snrdy Six Highway Project: South Interchange .0 Study Workbooks (selected workbooks only) 304 Section 2. (The Table of Contents on page 301 is one of the excerpts and refers to some documents not listed here or shown in this section.000 resulted from the study. some 10 proposals out of 15 submitted were carried out. The team goals were optimization of the cost impact of design decisions.1 Executive Summary 302 303 Section 1. and achievement of a grade raise for the northbound interstate deeptunnel section.1 Value Engineering Team Section 3.000 to $5.0 Descriptive Information 328 Section 3.000.000 each year.

Case Study Six Highway Project: South Interchange .

2 2.$::Tw<<...Value Engineering Report Highway Project: South Interchange Table of Contents 1. :.0 SUMMARY INFORMATION Executive Summary Description of Study Summary of Potential Savings Creative Idea List 1. . .. !?.d*.~.:.i."T*Z. .<'e+J..*<.<. .1 2.0 STUDY WORKBOOKS Narrative of Potential Cost Savings General (Forms 1 and 2) Civil (Forms 3 through 15) Construction Management (Forms 3 through 15) Structural (Forms 3 through 15) Presentation (Agenda and Form 15) 2. <. T/&. .*f.-: . .?."c 4.'.i'.3 1.1 1.c'on&b-.0 DESCRIPTrVE INFORMATION The Value Engineering Team Project Description Purpose of Submission Description of Submission Design Criteria Deviations Design/Construction Issues Index of Drawings Baseline Materials and Constraints Cost Model and Estimate Breakdown VE Study Meetings :..I . Sekcted eceupts appear in this case study.6 3.2 1..~~.:r-p.$& g .. r ::+. ..3 2.5 2.4 2...: . . <.E\G.~:+....a #"'i~..!.bmrki&JVE. >d~*y~. ?.>2 .A. y.:.4 2. . ...?$. . .... Case Study Six Highway Project: South Interchange : * .

from which ten proposals and five design comments emerged. elimination of Ramp D was recommended. The model indicated some six cost elements as potential areas for savings. In the event of problems. I). In addition. the VE team expressed concerns about the design of the local channel crossing.0 1. Implementation of the above changes would permit raising the profile of the major northbound interstate to reduce expensive tunnel construction. where potential savings targets were isolated through the function analysis performed. Additional potential savings of approximately $10 million were estimated. and the use of sheet piling in lieu of slurry walls at selected locations. The structural recommendations include review of design criteria for sizing of structural members using load (strength) factor design methods in lieu of working strength. modified task team study for the 1 " = 100' submittal for a major highway interchange project. which locates the immersed tubes of the crossing within two feet of an existing tunnel. The principal proposals recommended elimination of Ramps A and B. Acceptance of this recommendation would preclude the ability to raise the profile of the major north-south interstate and to realize the savings ($70 million) for that recommendation. It is recommended that the design be reviewed further to insure that future problems will be avoided. Finally.1 SUMMARY INFORMATION EXECUTIVE SUMMARY The VE team conducted a 40-hour. Case Study Six Highway Project: South Interchange . prenegotiation of labor agreements. and analysis of the materials dredged from the proposed channel crossing. based on rerouting some traffic locally. consider elevating the interstate highway (E-W) over the channel. initial costs by $140 million. Approximately thirty ideas were generated during the creative phase. and elimination of part of M Street. The team developed a cost model (see Section 3. it offers the potential to reduce construction time by two years. and annual operating and maintenance costs by $2 million. While this alternative requires relaxation of design constraints and revision to the design schedule. modification of Ramp C. The design comments include investigation of the bonding availability for disadvantaged business enterprises. The team also recommended elimination of the portion of Main Street that passed over the northbound interstate highway as a high-cost.VALUE ENGINEERING REPORT HIGHWAY PROJECT: South Interchange 1. This proposal would save an additional $70 million and approximately one year of construction time. Savings for the above are estimated at about $80 million. low-value item.

C-l C-2 C-3 C-6 C-10 C-l 1 C-12 C-I 9 DESCRIPTION INITIAL COST SAVINGS (000) ANNUAL O&M COST SAVINGS TOTAL PW COST SAVING (000) TBD TBD TBD 1 million TED TBD TBD 2 million Eliminate Ramp A Eliminate Ramp D Eliminate Main St.3 SUMMARY OF POTENTIAL COSTS NO. . Connector Elevate E-W Interstate over Channel and Railroad Yard Proposals C-6 and C-12 are mutually exclusive.400 DESIGN COMMENT NIA 29. Overcrossing Raise Profile of N-S Interstate Combine Ramps E and C Eliminate Ramp B Delete Main St.400 . CONSTRUCTlON MANAGEMENT CM-I Review insurability of channel crossing CM-2 lnvestigate bonding availability for minority contracts CM-4 Review toxic level and disposal of channel dredgings DESIGN COMMENT S-1 S-2 DESIGN COMMENT S-3 S-4 Review channel crossing Change structural design criteria for elevated structures Interlocked sheet piling in lieu of sluny walls Use of strength and load factor design methods in lieu of working strength Case Study Six Highway Project: South Interchange DESIGN COMMENT DESIGN COMMENT 29.VALUE ENGINEERING REPORT HIGHWAY PROJECT: South Interchange 1.

and removes an obstacle to allowing a grade raise for the northbound interstate.5 (Structures). C-3 Eliminate Main Street Overcrossing The VE proposal recommends elimination of the M Street overcrossing and the associated ramp.10 Combine Ramws E and C The VE proposal recommends elimination of Ramp C and combines this function with a realigned Ramp E.VALUE ENGINEERING REPORT HIGHWAY PROJECT: South Interchange 2. C-2 Eliminate Ram0 D This proposal eliminates Ramp D. (2) simplification of the system through greater reliance on local streets to move local traffic. respectively. and removes one obstacle to a grade raise for the northbound interstate tunnel section. eliminates several undesirable traffic movements. The estimated savings in initial costs is $69. and rerouting local traffic. Case S d y Sir Highway Project: South Interchange . The estimated savings is $64. Detailed workshop material and data are included in Study Workbooks Sections 2. and C-12.g. C..73 million. 2. 2. C-10.0 million. and 2. Implementation depends on acceptance of other proposals. relieves a congested area.1 million.4 million. The VE effort for the south interchange area concentrated on (1) cost savings precipitated by budgetary pressures. and (3) the underlying goal of achieving a grade raise for the northbound interstate deep-tunnel section. This proposal provides an estimated cost savings of $26. C-3.3 (Civil).13 million.4 (Construction Management). C-6 Raise Profile of Northbound Interstate This proposal raises the profile of the northbound interstate by passing over railroads. The savings associated with it is $1 1. then passing under the main railroad station connector. which only serves as an emergency by-pass ramp for westbound north-south traffic.0 STUDY WORKBOOKS 2. e. C-1 Eliminate Ramp A This proposal eliminates Ramp A.1 NARRATIVE OF POTENTIAL COST SAVINGS The following is a narrative description of each of the recommendations presented by the VE team.2 (General). Traffic from south of the city to the northbound interstate may use the shorter and faster route via local Avenue N. This proposal estimates a cost savings of $9.

structural model of the existing tunnels depicting the soil-structureinteraction of the tunnel linings. and rerouting local traffic via a local street. As such.C-l I Eliminate Ramp B The VE proposal recommends elimination of Ramp B. With other local projects running concurrently. CM-4 Disposal of Local Channel Dredpinrrs VE teams recommend the analysis of proposed dredging to ascertain the nature of the substance(s). rather than tunnel in it.4 million in initial savings. the team feels it would be better to bridge over the existing channel. redesign.Local Construction The VE team expressed concern over the ability of the proposed design of the local channel crossing to insure the integrity of the existing tunnels. If problems arise. over $500 million in DBE set-asides will be required. rerouting local traffic via another street. The team believes that there is a high probability of the discovery of contaminated material. taking into consideration the long-term. three-dimensional. Consideration of the VE alternates (see C-19) may be appropriate. C-12 Main Street Connector This proposal recommends the elimination of the Main Street connector between the northbound interstate and local streets.35 million. these situations may require an alternative profile for E-W Interstate. CM-1 Contractor Liabiliw -. The state needs to resolve the problem before serious consequences result. the ability of the contractors to realize reasonable liability and property damage insurance coverage should be verified. This recommendation was estimated at $145. The primary benefit of this proposal is removal of an obstacle to allowing a grade raise for the northbound interstate. S-1 Review of Local Channel Crossing In order to avoid the sensitive design and construction problems associated with assuring the watertightness and structural integrity of the existing tunnels. Present methods for securing bonding would be unable to meet the needs in an economical manner. Case Study Six Highway Project:South interchange . assess the stress and strain conditions of the tunnel linings through the various stages of construction. Disposal and costs (not included in estimate) could adversely impact both the costs and the schedule in this segment. This proposal provides an estimated cost savings of $4. time-dependent effects. Using the above model. the team recommends undertaking the following investigations prior to adoption of that scheme: Develop a realistic. C-19 Raise Profile of East(E)--West(WI Interstate The VE team has some environmental concerns about construction at the local channel as well as construction feasibility concerns about the impact on the environment of existing tunnels. CM-2 Disadvantaged Business Enterprise (DBEs) Bonding The team recommends initiation of augmented efforts to ensure the ability of DBEs to realize required bonding. If it is necessary to proceed w3h the tunnel scheme as outlined. in their as-built condition. in both transverse and longitudinal directions.

for a total of $40. An examination of the site conditions reveals that extraordinarily long spans would not be required. such as the proximity of a high-rise building. First Edition (1 986). of slurry walls at a unit price of $69." and the "AREA Manual.F. use the strength design method in accordance with ACI-318. the most economical alternate design can be selected.71 per S. "AASHTO Bridges.650 S. use the load and resistance factor design method in accordance with the AISC Manual of Steel Construction.600.800. reinforced concrete.000 for reinforcing steel.200.000 for structural steel. the order of magnitude of the cost saving is estimated at: $16. use the load factor design method in accordance with "AASHTO Bridges. $4.If the investigation proves. The previous designer's estimate assumed an 8-112 inch reinforced concrete deck slab supported by A588 structural steel members. or intended function.000. $24. 5-3 Use of Steel Sheet Pilina in Lieu of Slum/ Walls The previous designer's estimate contains 579.F.000. S-4 Use of Strength and Load Factor Desim Methods in Lieu of Working Stress Desin Utilizing applicable national codes and design standards. box-type deck structures." instead of the working stress design method for steel structures at grade. a construction scheme to minimize risk should be developed. unless aesthetic considerations force the issue. Case Study Six Highway Project: South Interchange . structural integrity. An examination of the site conditions leads to the conclusion that. This results in an approximate total savings on the order of $45. except at very few locations. support of excavation could be accomplished with interlocked steel sheet piling.000. beyond any doubt. that the watertightness and structural integrity of the existing tunnels can be assured.600.' This will effect a cost saving without sacrificing serviceability.000 for concrete. Therefore.400.000. it is recommended that instead of the working stress design method for reinforced concrete structures. Using the figuresshown in the present estimate. S-2 Structural Design of Elevated Structures The reference materials provided for this study indicated that: The cross sections depicted multicell. span lengths could be optimized for both concrete and steel alternates." instead of the working stress design method for steel structures subjected to highway loadings. This could effect a savings on the order of magnitude of $29.

Left-hand exit undesirable for local traffic movement. I . Traff~cwill be minimal since local avenue routing is shorter and faster. DO NOT EVALUATE IDEAS NOW. - Direct return movement is missing. AND NUMBER IDEAS CONSECUTIVELY. Case Study Six Highway Project: South Interchange . USE SEPARATE PAGE FOR EACH FUNCTION. REFINEMENT COMES LATER. Traffic assignment is negligible.C-1 Eliminate Ramp A FORM 7 SHEET 1 OF 8 HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE SPECULATION PHASE IDEA LIST LIST ALTERNATIVE IDEAS FOR EACH FUNCTION.traffic to use local avenue to northbound interstate. 1 (from Form 6) Connect (verb) {west) bound to (north) bound (noun) Premises Constructing Ramp A under local road and tunneling under railroad is costly. Driver decision points for ramp take-off are too close. Alternative Eliminate ramp A entirely -. FUNCTION NO.


and under railroad tracks and east-west interstate).C-1 Eliminate Ramp A HIGHWAY PROJECT STUDY TD: SOUTH INTERCHANGE FORM 11 SHEET 3 OF 8 DEVELOPMENT PHASE RECOMMENDED ALTERNATIVE . Case Study Six Highway Project: South Interchange .VE TEAM SKETCH AND DESCRIPTION Narrative of Provosed Changes The current revised proposed action includes the addition of Ramp A connecting westbound interstate with northbound interstate as part of the interchange. left-hand exit off the roadway. Negligible traffic is estimated to use Ramp A. Also truck traffic from city to northbound interstate can utilize the connector road and the haul road. Ramp A introduces an undesirable. connecting westbound interstate and southbound interstate with decision points only 300 feet apart. double. The ramp includes costly construction (a tunnel under the border road northbound. more direct route to the northbound interstate. since a shorter route (local avenue) is available. The VE proposal eliminates this separate ramp and combines its function with use of local avenue--a shorter.

ITEM 2.7 million 0 $64. BEFORE 4. SAVINGS 6. DESCRIPTION 3. TRADEOFFS OF MODIFICATIONS C-1 Eliminate Ramp A $64.C-1 Eliminate Ramp A HIGH WAY PROJECT STUDY ID: SOUTH INTERCHANGE FORM 12 SHEET 4 OF 8 DEVELOPMENT PHASE VE COST COMPARISON COSTS lmillions (M)I 1.7 million Eliminates emergency alternate. Case Study Six Highway Project: South Interchange . AFTER 5.

such as elimination of Ramp A.C-1 Eliminate Ramp A HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE FORM 13 SHEET 5 OF 8 DEVELOPMENT PHASE NOTES AND DISCUSSIONS USE THIS PAGE FOR DISCUSSION. Any steps that can be taken to simplify the ramp configuration. COMMENTARY ON AGENCY APPLICATION OF STANDARDS.000 foot long tunnel. Case Study Six Highway Project: South Interchange . LIFE CYCLE COST CALCULATIONS. TRAFFIC PROJECTIONS. The multiplicity of ramps with closely spaced takeoffs will make signage difficult. lighting and maintenance costs for the 2. ETC. SPECIFICATIONS. ADDITIONAL NOTES This major highway interchange is a $1 billion complex connecting two major interstate routes as well as supplying local access to the city. Life cycle cost savings will be achieved through elimination of tunnel ventilation. will improve operations and safety for future users.

C-1 Eliminate Ramp A


Eliminate Ramp A.
Traffic from south of the city to northbound interstate will use the shorter and faster route via
local avenue.





$ 64.73 million OR 6




IDENTIFIED = $64.73 million OR




Improves alignment for heavily used Ramp I (1200 vehicles/hour (VPH) in A.M. peak)


(Form continued on next page.)

Case Study Six

Highway Project: South Interchange

C-1 Eliminate Ramp A

FORM 14 (cont.)



C-l Eliminate Ramp A
Project Manager agrees with the VE team that Ramp A, as shown on the Revised Proposed
Action Plan, includes design features that are somewhat undesirable and costly.
The year 2010 traffic forecast for Ramp A shows A.M. and P.M. peak volumes of 350 VPH and
850 VPH, respectively. These volumes indicate that the ramp would be operating under capacity
and may not--alone--justify the movement. However, the movement is justifiable if one
considers the positive impact of reducing the over-capacity volumes of ramps in the adjoining
project area.
Currently under consideration are design refinements that relocate and improve the design of
Ramp A at a substantially reduced cost.

Case S d y Six Highway Project: South Interchange

C-1 Eliminate Ramp A


The department feels that a successful highway design must include movement from the west on
the E-W interstate to the north on the N-S interstate, in order to facilitate commercial activity
from the city's industrial area with a desire to go north. Because of the implementation of
another proposal that recommends raising the N-S interstate profile, a more direct and
substantially less expensive connection was made possible. Therefore, the Project Manager
agrees with both the VE team and the design team. However, it still supports the west to north
movement, as accomplished in the new alignment.

Case Study Six Highway Project: South Interchange

C-6 Raise Profile of Northbound Interstate



2. NO.



At Grade
Boat Section
Deep Tunnel Section

TOTAL Northbound Interstate Segment


Deep Tunnel Section

Case Study Six Highway Project: South Interchange

$105.63 M

$100.41 M

C-6 Raise Profile of Northbound Interstate






(northbound) traffic

Constructing a northbound interstate under the 5 main line railroad tracks approaching
the main railroad station will be extremely costly and time consuming, requiring careful
The resulting deep tunnel, also passing under the E-W interstate, will require extensive
ventilation and will have high annual operation and maintenance costs.
A high-profile crossing over the railroad and E-W interstate will be less costly to build and less
disruptive to rail operations.

Care Study Six Highway Project: South Interchange

C-6 Raise Profile of Northbound Interstate





( northbound) traffic







Raise profile to pass over
railroad and E-W interstate.

Reduces costs.
Must eliminate two local
Easierlfaster to construct.
Reduces vent. Requirements. Must reroute two ramps.
Permits lower profile for
adjacent northbound interstate
elevated structure.


Reroute Ramp C,
combining with Ramp E.

Maintains access, but longer
Avoids conflict with
northbound interstate.

Case Study Six Highway Project: South Interchange



Longer ramp.

C-6 Raise Profile of Northbound Interstate




Narrative of Prowsed Changes

The Revised Proposed Action Plan includes a long, low-level tunnel for the northbound
interstate from the vicinity of Main to the northern limit of the south interchange. A long 5.9%
downgrade approaches the tunnel from the vicinity of West Street. The VE proposal
recommends raising the mainline profile to cross over the railroad tracks and over the
north-south interstate. The northbound interstate roadway would then descend a 5.0%
downgrade, passing under the main railroad station connector and under a crossing street,
rejoining the proposed profile and passing under the railroad line. The profile change would
permit the north-south interstate structure south of West Street to be lowered as much as 20
feet. This change will avoid the costly underpinning of the railroad tracks, as well as eliminating
ventilation of 1,200 feet of a 3-lane tunnel.
(Note: This recommendation would require the rerouting of two adjacent streets and one ramp.)

Case S d y Six Highway Project: South Interchange

C-6 Raise Profile of Northbound Interstate






Raise profile of
interstate northbound.

Case Study Six Highway Project: South Interchange

COSTS (000)





Must remove
some ramps
and streets.

LIFE-CYCLE COST CALCULATIONS. SPECIFICATIONS. Case Study Six Highway Project: South Interchange . Reroute Ramp C to take off local traffic and merge with Ramp E in the vicinity of Main Street. right-hand entrance. Eliminate M Street. ADDITIONAL NOTES To accommodate the raised profile of the northbound interstate.C-6 Raise Profile of Northbound Interstate FORM 13 SHEET 6 OF 9 HIGHWAY PROJECT STUDY ID: SOUTH TNTERCHANGE DEVELOPMENT PHASE NOTES AND DISCUSSIONS USE THIS PAGE. TRAFFIC PROJECTIONS. joining eastbound interstate with a single. Eliminate Ramp B. the following changes would also be required: Eliminate adjacent streets northbound. NOTE: This VE recommendation will not be feasible if the alternative recommendation (C-19) for raising the profile of E-W interstate is implemented. COMMENTARY ON AGENCY APPLICATION OF STANDARDS. ETC. FOR DISCUSSION. AS APPROPRIATE.

C-6 Raise Profile of Northbound Interstate FORM 14 SHEET 7 OF 9 HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE DEVELOPMENT PHASE SUMMARY AND RECOMMENDATIONS CONCLUSIONS AND RECOMMENDATIONS Raise profile of northbound interstate to pass over railroad tracks.4 Million $ $ $ TOTAL POTENTIAL SAVINGS IDENTIFIED = $69. then pass under the railroad station connector and crossing street. 9% OF TOTAL PROJECT OTHER OPPORTUNITIES FOR VALUE 6bIMPROVEMENT'y: There will be a reduction in the number of ventilation fans required in the ventilation building.) Care Study Six Highway Project: South Interchange . SUMMARY OF SAVINGS CATEGORY I = CATEGORY I1 = CATEGORY 111 = CATEGORY IV = $ 69. IMPLEMENTATION PLAN: (DISPOSITION RECOMMENDED BY PROJECT MANAGER) (Form continued on nextpage.4 Million OR OR 6 .9% OF TOTAL PROJECT OR -% OF TOTAL PROJECT OR -% OF TOTAL PROJECT OR -% OF TOTAL PROJECT 6 .

the profile of the northbound interstate would work only as a tunnel. due to the Main Street bridge and M Street overcrossing. Previously. These items--C-3 and C-12--have been accepted. Case Study Six Highway Project: South Interchange . allowing this recommendation to be implemented. as the VE report pointed out.C-6 Raise Profile of Northbound Interstate FORM 14 (cont.) SHEET 8 OF 9 HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE DEVELOPMENT PHASE SUMMARY AND RECOMMENDATIONS IMPLEMENTATION PLAN: (DISPOSITION RECOMMENDED BY PMDESIGNER) C-6 Raise Profile of Northbound Interstate Project Manager agrees with the VE report and design refinements currently under consideration to raise the profile of the northbound interstate.

and an M Street connection to Frontage Road would enhance urban design potential. Case S d y Six Highway Project: South Interchange . Although a Main Street connection between Frontage Road and Albany Street is desirable.C-6 Raise Profile of Northbound Interstate HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE FORM 15 SHEET 9 OF 9 IMPLEMENTATION PHASE POSITION STATEMENT FINAL DISPOSITION BY STATE DEPARTMENT OF PUBLIC WORKS @PW) The department concurs with this recommendation. the savings realized by this design change is significant enough to warrant its approval.

6 million. or on the order of $16.S-4 Use of Strength and Load Factor Design Methods in Lieu of Working Strength Design FORM 1 1 SHEET 1 OF 4 HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE DEVELOPMENT PHASE RECOMMENDED ALTERNATIVE VE TEAM SKETCH AND DESCRIPTION -- A. The savings could be on the order of 7% for a saving of approximately $4. The savings could be on the order of 10% for the concrete in sizes and quantity being contemplated. For design of reinforced concrete structures. Similarly. Case Study Six Highway Project: South Interchange .8 million. For design of highway steel structures. strength design method could be used in accordance with ACI-318. C. by using these design methods.2 million. and the area manual. B. The total savings for this proposal are approximately $45. savings are estimated on the order of 25% in amount of reinforcement or $24. AASHTO design specifications for bridges.6 million. load factor design method could be used in accordance with AASHTO design specifications for bridges.

S-4 Use of Strength and Load Factor Design Methods in Lieu of Working Strength Design FORM 14 SHEET 2 OF 4 HIGHWAY PROJECT STUDY ID: SOUTH INTERCHANGE DEVELOPMENT PHASE SUMMARY AND RECOMMENDATIONS CONCLUSIONS AND RECOMMENDATIONS A. C.6 million OR OR 4.5% of the total project.&: (DISPOSITION RECOMMENDED BY PROJECT MANAGER) (Form continued on nextpage. Use strength design method for sizing up reinforcement required in concrete structures.000 or 2.600.9 % OF TOTAL PROJECT OTHER OPPORTUNITIES FOR VALUE "IMPROVEMENT": IMPLEMENTATION PL. SUMMARY OF SAVINGS CATEGORY I = $ 45.) Care Study Six Highway Project: South Interchange .9 % OF TOTAL PROJECT OR -% OF TOTAL PROJECT OR -% OF TOTAL PROJECT OR % OF TOTAL PROJECT - 4. Use load factor design method for sizing structural steel for elevated highway superstructures. Savings: $4.800.8% of the total project. Savings: $16. Use strength design method for sizing concrete structures. B.6 million CATEGORY I1 = $ CATEGORY Ill = $ CATEGORY IV = $ TOTAL POTENTIAL SAVINGS IDENTIFIED = $45. Savings: $24.200.000 or 1.6% of the total project.000 or 0.

) SHEET 3 OF 4 HIGHWAY PKOJECT STUDY ID: SOUTH INTERCHANGE DEVELOPMENT PHASE SUMMARY AND RECOMMENDATIONS IMPLEMENTATION PLAN: (DISPOSITION RECOMMENDED BY PROJECT MANAGERIDESIGNER) S-4 Use of Strength and Load Factor Design Methods in Lieu of Working Strenah Design Project Manager agrees with the VE study that the strength and load factor design methods are appropriate for structural elements of this project. Case Study Six Highway Project: South Interchange . The Design Criteria is being revised. as cited.S-4 Use of Strength and Load Factor Design Methods in Lieu of Working Strength Design FORM 14 (cont.

working strength for tunnels is currently under review.S-4 Use of Strength and Load Factor Design Methods in Lieu of Working Strength Design HIGHWAY PROJECT STUDY ID: SOUTH MTERCHANGE FORM 15 SHEET 4 OF 4 IMPLEMENTATION PHASE POSITION STATEMENT FMAL DISPOSITION BY STATE DEPARTMENT OF PUBLIC WORKS (DPW): The department concurs with the use of load factor design for all bridgefviaduct structures. Case Study Six Highway Project: South Interchange . all indications to date suggest that working stress design is favored. The use of load factor vs. The department has established that working stress design will be used for buildings and ancillary structures. Design criteria now reflects this. whether steel or concrete.

This estimate was then reviewed. From the model and creative idea listing. HOV. and others. These figures were placed in the Cost Model. a function analysis was performed and target worth figures developed. Ramp A was added in the time since the original estimate was compiled.. compared with the original project estimate. main lines.0 DESCRIPTIVE INFORMATION (Selected data only) 3. Case Study Six Highway Project South Interchange .VALUE ENGINEERING REPORT HIGHWAY PROJECT: South Interchange 3.9 COST MODEL AND ESTIMATE BREAKDOWN From the cost estimate provided by the design team.1 THE VALUE ENGINEERING TEAM The value engineering team was organized to provide background and experience in VE and design of related projects.2 through 3. The VE team members and their assignments are as follows: Assignment VE Team Leader Structural Engineer Structural Engineer Civil Engineer Civil Engineer Mechanical Engineer Areals of Expertise VE methodology & life cycle costing Bridges and structures Geotechnical & underground structures Highway & traffic engineering Highway construction & costs HVAC & utilities 3. Using the same line items as the estimate. e. the VE team rearranged the cost to be more responsive to the VE methodology application. The costs were assembled using the unit costs provided to the team (not included in study) and quantities taken kom the site drawing. The costs were broken out into functional line items. and its cost has been added into the VE Cost Model (see attached Figure 3. The team reviewed the plans and preliminary data for the current design and followed the general guidelines established by the Job Plan.1). ramps. and adjusted.8 are not included in this case study. Frontage Road.g. the following areas of potential savings were isolated: 1) Main lines N-S 2) Main lines E-W 3) Ramp A 4) Ramp F 5) Ramp E 6 ) Ramp C 7) Ramp H Note: Sections 3.

replacement. etc.600/L.000fL. Structures Tunnels Care Study Six Highway Project: South Interchange 1% of capital expenditurelyr 5% of capital expenditurelyr .F.F. $52.F.F.000/L. and the VE Cost Estimate Breakdown are attached (not included in study). $10. the Cost Model. $ 500L.A copy of the Masters Schedule Revision 1.000/L. Gross number for LCC follow-on cost for maintenance.F. $ 5. operational. Unit Prices for VE Studv UNIT PRICES FOR VE STUDY Average Unit Prices Tunnels Boat Section Viaduct ML On-Grade Road Deep Tunnel N-S l Way 1 Way l Way 1 Way 2 Lanes 2 Lanes 2 Lanes 2 Lanes $29.

15 10.16 Ramp FF 3.18 0.29 Main Line Lanes 22.36 Ramp E 10.00 138.97 17.54 .08 3.29 18.00 5.15 Main Line Lanes 132.00 Ramp FF Ramp KK 16.00 31.12 0.51 Access Road B 95.51 16.12 Bypass Road A 17.Legend: CostMlorth Model Project: South Interchange Location: Phase of Design: Schematic Date: VE Target: ActuallEstimated: Notes: Frontage Roads HOV Lanes E-W Lanes N S Lanes Frontage Roads I~ a i Line n Lanes I I Ramp K It?amPD I 18.97 Connector A Ramp Q 30.00 HOV Lanes 0.08 Ramp C Ramp U 20.

5 million gallons per day (MGD) to 9. which required an increase in output from 4. (The Table of Contents on page 333 is one of the excerpts and refers to some documents not listed here or shown in the section. Initial cost savings were calculated at $15.000/year were estimated again.I n July 1993 a value engineering study was conducted on a proposed wastewater treatment plant (WWTP) Phase 2 expansion program.' As such. The author thanks both the owner. Regional Municipaliq of Halton.000 based on progression of the design and related estimates. for their permission to use this project as a case study. and MacViro. local consultants.) Description page 333 Table of Contents (from original study report) Executive Summary 334 Summary of Approved Recommendations Table la: Current Phase 337 Table lb: Future Phase 339 Section 2: Project Description 341 Section 3: Value Engineering Analysis Procedure 342 350 Section 4: Summary of Results Appendix B: Value Engineering Recommendations (Selections only) 351 L-1 1Cogeneration Upgrade 355 L-58 Revise Sludge Handling Design F-12 Revise Hydraulic Gradient in New Plant 358 360 F. the projected total saving exceeded the estimate for the initial upgrade. Follow-on annual savings of over $1.28 Initiate a Water Conservation Program 1. Savings from the water conservation efforts were not included in these totals.0 million gallons per day (MGD).000. CaSeStudy E h 6 The items listed below and shown in this case study have been excerpted from an actual VE report. Case Study Seven Wastewater Treatment Plant . Public Works Department of Ontario. based on final design. Several reviews with the owner and designer (see Tables l a and l b ) showed that most of the team's proposals were implemented. Canada. The study also evaluated a larger planned expansion up to 88 MGD.000.

Care Study Seven Wastewater Treatment Plant .

3'.. ..&. .Th..-.. ......* . -.r *. > .. i. .:. ... .. . . .'> . Case Stwly Seven Wastewater Treatment Plant . Selected' excerpts appear in this case study. .... ..'. .*..*.Wastewater Treatment Plant Expansion Project Table of Contents Section Description LIST OF ILLUSTRATIONS ES-I EXECUTIVE SUMMARY INTRODUCTION General The Design Team The Value Engineering Team Project Briefing and Site Visit VE Workshop Agenda PROJECT DESCRIPTION Scope of Work Estimate Ultimate Site Development VALUE ENGINEERING ANALYSIS PROCEDURE General Prestudy Preparation VE Job Plan Life Cycle Cost Model Economic Factors SUMMARY OF RESULTS General Value Engineering Recommendations Additional Cost Savings Ideas Basis of Cost Summary of Savings and Design Suggestions APPENDICES Creative/Evaluation Worksheets Value Engineering Recommendations Ultimate Site Layout .. ?... . ..'dVE.~.<'"...:: -. :.& .lr::* T&of..r. ....... ..r... .

In addition. and seasonal versus continuous disinfection.000. Case Study Seven Wastewater Treatment Plant .0 million gallons per day (MGD). including about 25 design suggestions.000 to $400.000 in potential savings for the present Phase 2 expansion. reduce size of plant through water conservation. renegotiate Certificate of Approval to reduce need for nitrification and lessen effluent quality criteria. convert existing storage tank to a digester. The study was conducted on site in the spring of 1993. improve handling of grit by using a compactor and auto bagger. reduce aeration tank modules from 4 to 2. use vortex grit removal units.haul sludge to centralized sludge storage. Some 25 proposals recommended additional costs primarily oriented toward life cycle savings. These were: raise hydraulic profile in the northwest plant. In addition. offset by some $500. performance and life cycle improvements. For the future expansions beyond 9 MGD. over $10.000 in potential savings for future expansions beyond 9.000 in costs for performance or life cycle improvements. VE Proposals Principal proposals for the Phase 2 plant expansion are: . thicken digested sludge.000 of suggested additions for meeting anticipated new standards. recover digester sludge heat. The two major objectives of the study were to conduct a VE review of the Phase 2 expansion as recommended in the 1992 Environmental Study Report and to develop a maximum site utilization plan. These savings would be offset by approximately $13.Wastewater Treatment Plant Expansion Project Executive Surnmarv A value engineering study was conducted on a proposed wastewater treatment plant (WWTP) Phase 2 expansion from 4. and build storage at CSSF. from which the team developed approximately 72 proposals.000 per year were identified. use deeper aeration tanks. raising liquid level in aeration tanks. delete additional primary tanks by increasing aeration capacity and adding fine screens. Over 180 ideas were developed during the study. such as buying a new boiler to utilize plant digester gas.0 MGD were identified. Life cycle cost savings of $300.5 million gallons per day (MGD) to 9. several other significant proposals were generated.000. the team generated several significant proposals. These proposals offer over $5.000.

use chlorine gas vs. utilize BNR technology.Phase 2 Expansion Group 1: Recommended Actions Group 2: Regional Follow-up Actions Group 3: Certificate of Approval Negotiations Table l b -. evaluate alternative digester designs. Table 2 shows the cost estimates developed by the VE team.utilize maximum size tanks. Cost estimates for the various expansion phases are summarized in Table 3. incorporating the impact of the approved VE recommendations that are detailed in Table 1 a under Group 1. Cost Estimates (i) Phase 2 Expansion (4.000 (see pages 3-4). The team also recommended the following design suggestions to optimize future expansions beyond Phase 2: procurement of adjoining land for future expansion. conversion of inlet building for greater usage. thicken waste-activated sludge. or consider using ultraviolet irradiation. reduce need for odor control through utilization of foul air for aeration. Table 2 also shows the differences in capital costs and the annual operations and maintenance savings. and utilization of larger 5. as follows: Table l a -. This plan indicates that an 88 MGD plant.0 MGD) The cost estimates for the originally proposed Phase 2 expansion.000. prepared by another firm. Tables l a and l b summarize the VE proposals that were approved by the team and that are recommended to the region for implementation. The proposals have been grouped under four headings. are summarized in Table 2. Care Study Sewn Wastewater Treatment Plant . In July 1993 the draft of this report was reviewed by all VE team members.change to centrifugal blowers for aeration. In addition. a staged construction program using 11 MOD expansion modules is recommended. resulting from these recommendations. as noted in Appendix C. with reasonable provisions for possible new standards. appears feasible.5 MGD to 9.0 MGD to 55.5111 MGD expansion modules. However. (ii) Expansion from 9. Appendix C provides the narrative backup and the proposed plan.Future Expansion for 9 MGD to 55 MGD Group 4: Recommended Actions Ultimate Site Cavacity The team combined several applicable ideas and developed a proposed ultimate site development plan. .5 MGD to 55 MGD are estimated at approximately $140. It can be seen that the total estimated costs for the staged construction program for the 55 MGD plant exceed the estimated costs of a single expansion program. hypochlorite.0 MGD Construction costs for a single plant expansion program from 4.

0 MGD expansion modules would be estimated as shown in Table 3.000 Case Study Seven Wastewater Treatment Plant .300.030. $11. 0bservations The following obserations can be made on the VE review of the current Phase 2 expansion: Cost estimate of the originally proposed Phase 2 expansion The impact of the VE recommendations on the cost estimate include: Cost savings Costs of additional features to improve operations and reduce annual operations and maintenance costs Update of original cost estimate Base cost estimate of the VE recommended Phase 2 expansion The base cost estimate includes provisions for off-site sludge storage at the central sludge storage facility.500 +480.000 Total annual operations and maintenance cost savings (per year) .000 Conclusions The VE recommendations for the current Phase 2 expansion include the following: Total capital cost savings $4.0 MGD plant expansion.$69.677. These costs are based on estimates for similar modules for the 55.5 MGD to 88.presented to'introduce.0 MGD Construction costs for a single expansion program from 4.000. a contingency aliowance of 10% should be included. staged construction program beyond 55.400 +356.977.000. Total cost estimate (budget) $8. on a preliminary basis.Costs shown for Phase 3 and beyond are of an order-of-magnitude level only.100 $7. the various construction phases into the region's capital works program.0 MGD would be approximately $230. (iii) Expansion to 88. They are. However.000 -5.0 MGD.730 For budgetary purposes. under a continued. additional 11. They are based on the VE workshop cost model (pages 3-4) and are prepared by scale-up procedures and/or other data available to the team members during the workshop week.513.

Table I n Summary or Approved VE Recommmdatio~o tor Curreat P h ~ r a2 Expansion Case Study Seven Wastewater Treatment Plant .

9 MGD .850.000 significant savings Case Seudy Seven Wastewater Treatment Plant .425.Additional 46 MOD 12567.MX) 10.000 continuous disinfection -Ssasonal 9 MGD .800 949. Consider land purchase sab of Pumping Stntion for new potable wnter trucment plant F37 Consider privatimhn of wastewater opsXati0~ 0 - f2lmd Certifiate ol &prowl Aetiong PE7 PG3 EL4 F25 Reduce need for nitrification .957.9 MOD .000 1@&= 1.450.000 28368.000 750.000 1 F36 Purchase land on eastern boundary.000 8.733.000 0 4.000 (7swm) VSD.847.733.000 - 185.000 153934.Additional 46 MGD 1.000 1.400 6.000 90105.additional 46 MOD ra. - Lessen suingem effluent quality criteria 2.42T.sludge from Oakvie WPCP to Mid-Halton I .rn) 3.000 4.

55 MGD se pr- concrete c Care Studj Seven Wastewater Treatment Plant .Tebk l b Summary of Approved VE RecommendPtions for Future Expansion from 9 .

0001 1Q - 9.945.000 557.Provide for interconnectionof P( and potable water ickening of waste aetivited positive displacement F39 Consider digested sludge hear recovery - Appeadix B Dwg F2 Ultimate Site Development Plan 0 200. Case Study Seven Wastewater Treatment Plant .000 Design suggestion Summaw GMUD 4 Savings Improvemenls Total 10.937.760.008.MM 23.000 32.180.000 + Note: Chlorine gas PlternatiCe used in summary.000 u3.

all mechanical.Project Description The value engineering study included two main subjects.000 m3/d. prepared by another firm. The original master plan. Case Study Seven Wastewater Treatment Plant .000. as follows: I.500 m3/d to 41. is attached as Figure 2-1 @age 2-10).500 m3/d module consists of the following: Two (2) primary clarifiers Four (4) aeration cells Two (2) air blowers Two (2) final clarifiers New return activated sludge and waste-activated sludge systems Improvements to the existing cogeneration system One primary and one secondary digestion tank One sludge storage tank Facilities to receive leachate from the waste management site and sludge hauled fiom other plants in the area Site work. CURRENTLY PROPOSED EXPANSION PROGRAM (as recommended in the 1992 Environmental Study Report) Scope of Work Expand the plant from its current capacity of 20. Copies of the estimate pages A-2 to A-8 are included in this section as pages 2-3 to 2-9. The proposed addition of one 20. ULTIMATE SITE DEVELOPMENT Determine the maximum plant capacity that can be accommodated on the existing site and develop an ultimate site development plan. The wastewater treatment plant criteria used during this study are included on pages 2-11 to 2-13. and ancillary items Estimate In October 1992 a firm prepared itemized cost estimates for a total construction cost of $1 1. including roads and landscaping All associated instrumentation and control systems for integration jn the existing SCADA system. Value engineering of the currently proposed expansion 11. 11. Preparation of an ultimate site development plan I.Wastewater Treatment Plant Expansion Project Section 2 -.977. electrical.

(3) Judgment Phase. Information and documents furnished by the owner and designer were distributed to the team in advance of the workshop to prepare them for their area of study. The actual recommendations derived from the analysis are identified in Section 4 of this report. (6)Report Phase. VE JOB PLAN The VE study was organized into six distinct parts comprising the VE Job Plan: (1) Information Phase. A multidisciplinary team approach. The numbers in the upper portion of each box Case Study Sewn Wastewater Treatment Plant . The prestudy effort for this project included the following activities: Identification of constraints to the VE study Review of project design documentation Finalization of arrangements for the workshop The VE team received excellent support from the owner and designer in the way of information. organized approach whose objective is to optimize the life cycle cost and/or performance of a facility. Participants were briefed on their roles and responsibilities during the study. It was the team's objective to analyze the project. (5) Presentation Phase.Value Engineering Analysis Procedure GENERAL Value engineering is a creative. Other criteria were also used to assure that proposed recommendations did not sacrifice essential functions and timely completion of the project. and (2) to explain the approach that we applied to the study. (4) Development Phase. find high cost areas.Wastewater Treatment Plant Expansion Program Section 3 -. recommend alternatives. was used to analyze the project design. In this section we have outlined the procedure followed for the study (1) to present a clear description of our assessment of the project in terms of cost and energy usage. PRESTUDY PREPARATION The success of a VE study is largely dependent on proper preparation and coordination. and estimate initial and life cycle costs for the original design and for each proposed alternative. the VE team prepared a cost/worth model for the proposed expansion (see Cost Model 1). The model was broken down by systems and subsystems representing major functions of the project. (2) Creative Phase. Information Phase Early in the Information Phase. utilizing applicable value engineering techniques.

As the model indicates. (Cost Model 2). the VE team analyzed the project documents and prepared a function analysis for the different project components.400. Worth is determined by experience of the VE team member.000 $200.represent the design estimate of the cost of construction of the system functions. During this time.000 Overall. Creative Phase This step in the value engineering study involves the listing of creative ideas. and historical parameter cost data. The cost model. The cost/worth model helped to isolate areas of higher potential savings so the VE team could concentrate on those areas. the VE team saw a potential cost savings goal of approximately $4 million from the estimated cost of construction. Preparing the function analysis helped to generate many of the ideas that eventually resulted in recommendations. The numbers in the lower portion of each box represent the VE team's evaluation of the worth of the system functions. the major potential for savings occurs in the following areas: Solids handling Architectural Pipinghlechanical Primary Tanks Electrical $2. This was done to develop savings estimates for W e r site development and for budget-planning guidance for the owner. Next.000. Case Study Sewn Wastewater Treatment Plant . The value engineering team is looking for quantity and association of ideas which will be screened in the next phase of the study. From this model. The term worth is defined as the lowest cost means possible to achieve an individual function without regard to other systems or functions.000 $470. the value engineering team thinks of as many ways as possible to provide the necessary functions at a lower initial and/or life cycle cost.000 $250. It isolated areas of potential savings and provided backup data to the worth areas selected in the costlworth model. The functions of any system are the controlling elements in the overall VE approach. was developed. a total savings potential from VE was targeted at some $20. the team collected data on costs and developed an estimate for a plant of 55 MGD.000. This function analysis for the project is included as Worksheet 1. judgment of the ideas is restricted. with a broad target savings across the total plant. use of data from similar construction.Concurrently. During the creative phase. This procedure forces the participants to think in terms of function and the cost associated with that function. This list may include ideas that can be further evaluated and used in the design.000 $200.

the value engineering team judged the ideas resulting from the creative session. These interactions were quite important for developing a full site utilization approach. They are grouped and numbered by discipline or study team in the following sequence: L P F Layout Process Future 59 ideas 87 ideas 39 ideas In all. It was important that the value engineering team convey the concept of each recommendation to the designer. some 185 ideas were listed. (LCC-I). Ideas found to be impractical or not worthy of additional study are disregarded. with help from the owner. life cycle cost consideration. The value engineering team ranked the ideas according to the following criteria: State of the art Probability of implementation Magnitude of savings Redesign effort Schedule 1-10 0-10 0-10 0-10 0-10 New--existing technology Low--high chance Small--large savings Large--minimal effort Large--no impact Advantages and disadvantages of each idea are quickly considered and recorded.The creative idea listings are included as Appendix A in this report. J u d ~ m e nPhase t In this phase of the project. and a descriptive evaluation of the advantages and disadvantages of the proposed recommendations. where Case St& Seven Wastewater Treatment Plant . each cost item on the LCC model was explored to determine its importance. The development consisted of the recommended design. created a life cycle model (LCC) to develop a long-range profile for the project. Through interaction with the owner. The remainder of the format provided in Appendix A was used for this phase and results are included on the right side of the worksheet. and those ideas that represent the greatest potential for cost savings are then developed further. Therefore. The VE team. The LCC model. each recommendation was presented with a brief narrative to compare the original design method to the proposed change. many of the ideas were expanded into workable solutions. illustrates the categories addressed by the VE team during the VE workshop. Development Phase During the Development Phase of the value engineering study. The costs shown are estimated annual costs and the amortized (PP) initial financial expenditure. Sketches and design calculations.

implemented savings should be greater than 50% of the savings identified. Economic data and assumptions made for the life cycle cost comparisons were as follows: Discount rate (for LCC only) Analysis period Equivalence approach Inflation roach Present worth annuity factor PP Year 30 Periodic payment (PP) factor Desired payback period Case Study Sewn Wastewater Treatment Mant 6% (compounded annually) 30 years Present worth converted to annualized method Constant dollars 13. Im~lementationPlan In accordance with the schedule. We appreciated the presence of key regional management officials at the oral briefing. annual savings of $2.t~of their study are attached as Appendix C. In addition.0726 3 to 5 years .000 were projected which included several areas of additional expenditures of process and life cycle improvements. Annual savings of over $3.000/yr were projected if all proposals were implemented. For the future ultimate site utilization of 88 MGD. some proposals made at the presentation may have been deleted from the report and some may have been added. The resu1. The major VE recommendations were summarized and presented to the owner and designer at the conclusion of the workshop. As a result of that review.000/yr were also identified. and before final preparation of this report. an implementation meeting was held on July 1993. At the conclusion of the workshop. each VE recommendation was again reviewed. are included in this report with the corresponding recommendations. Based on previous similar studies.500. As for the ultimate site layout. representing some 33%. ECONOMIC FACTORS During the value engineering study.000. The individual VE recommendations are included as Appendix B to this report. construction cost and life cycle cost summaries are prepared for each element of the project. Presentation and Reaort Phase The last phase of the value engineering effort was the presentation and preparation of recommendations. At this meeting.76 0.appropriate. a break-out team was set up and a concurrent studygenerated. annual savings of up to S500.to9 MGD of some $4 million. we reported a savings for the proposed Phase 2 expansion.

Case Study Sewen Wastewater Treatment Plant .

COST MODEL 2 Case Study S e w n Wastewater Treatment Plant .

- 785 410 1.slructures -equipment .- 600 350 950 waste was* was* - .665 2.403 620 1.PROJECT: ITEM: BASIC FUNCTION: Wastewater Treatment Plant Expansion Wastewater Treat Waste 4.195 treat hold treat .smctures equipment transmit process waste waste Solids Handling .26 Use one large primary tank with bridgetypecollector 873 859 850 859 1.05 1.333 460 1.67 Use existing digesters pump off-site access RS 113 100 1.35 Use rectangular tanks B waste waste equipment RS B RS 4.31 1.13 RS Seration Cells structures -equipment transmil treat waste waste RS Final Clarifiers .00 Design aeration tank for plug flows only Delete cross walls 1.5 MGD COMPONENT DESCRIPTION FUNCl'ION Verb Noun FUNCTION ANALYSIS WORKSHEET - - COST KIND WORTH (~1000) (x1WO) -- Primary Clarifien smctures - 1.17 1.architectural hold treat enclose Site Work .03 1.400 1POO 1.mads & landscaping provide - Worksheet 1 .943 1.39 1.126 1.72 1.400 COMMENTS RS = Required Secondary m i o n S -Secondary Function B Basic Function COST1 WORTH RS B B S .

000 CHEMICALS $300.LIFE CYCLE COST MODEL 11 MGD PLANT MODULE $325.000 FINANCIAL EW.300. Case Study S e w n Wastewater Treatment Plant 7% .000 LABOR Assuming utilization of digester gas in new boiler and pumping to central sludge storage facility.000 ELEC - 49.000 MlSCEI $2. 50% $740.000 MAINTENANCE 7% 520.000 HAULAGE $81.

as shown below.450.500.925. Following is an effective strategy for evaluation of VE study reports: Locate acceptable areas within a recommendation and apply those parts to the final design. that represented approximately $7.000 $3.Summary of Results GENERAL This section of the value engineering study summarizes the results and recommendations for the study. time constraints prohibited preparation of recommendations for every savings item possible.000 175. Recommendation Reference No.000 72 $7. including some alternates for the same idea. The VE team attempted to develop the most significant items.000 Future F 26 2. Often there is a tendency to disregard a recommendation when concern is raised about one portion of it. but. proposals have been separated into groups. Ideas that were developed are submitted here as recommendations for acceptance.300.000 in value. VALUE ENGINEERING RECOMMENDATIONS The value engineering team developed 72 proposals for change.000 TOTALS ADDITIONAL COST SAVINGS IDEAS Both the owner and designer should carefully review the idea listing provided in Appendix A.000. Category Code Proposal Total Initial Savings Total Annual Savings Layout L 27 $4.000 $300. Case Study Seven Wastewater Treatment Plant . when reviewing the results of the VE study.000 3.000 Process P 19 800. For clarity. It is important.Wastewater Treatment Plant Expansion Project Section 4 -. to consider each part of a recommendation on its own merits.300.

with 1.2 x lo6BTU) natural gas fired hot water boilers as backup on the grade floor of the same building. There appears to be a serious problem with the operability in regard to engine robustness (speed too high at 1800 rpm) and corrosion of engine internals from excessive hydrogen sulphide (2. copper tubes are unsuitable for corrosive digester gas.S to an acceptable level. L11 VALUE ENGINEERING RECOMMENDATION PROJECT: Wastewater Treatment Plant VE ITEM: Cogen Upgrade ORIGINAL DESIGN Two (2) 150 KW digester--gas engine--generatorsets. suitable for digester-gas firing.2 x 10' BTU exhaust gas boilers (hot water) in the basement of the Energy Building. and add a gas scrubber to reduce H. using enhanced controls.000 ppm to 3. Sell two (2) existing 150 KW engine-generator sets for natural gas firing only. Case Study Seven Wastewater Treatment Plant $ $ .000 ppm) in the digester gas supply.Add Boiler Add new small boiler fired by digester -. (Avoid modifying an existing boiler with a new digester gas burner. Note: Scrubber not required for this alternative. (Alternative design proposals are continued on the next page. naturally -. PROPOSED DESIGN Alternative A -. or replace one existing natural gas fired boiler with a digester gas fired unit.Upprade Coeen Buy new 300 KW engine generators of robust design (1200 rpm. These units also provide emergency power in the WWTP. Alternative B -.) Plan the installation of improved cogeneration for the next increment.aspirated). Two (2) 1235 KW (4.gas.NO.) LIFE CYCLE COST SUMMARY Original Design Proposed Design Savings CAPITAL ANNUAL O&M $ $ $ $ $ $ PRESENT WORTH (PS)ANNUAL O&M COST LIFE CYCLE (PW) SAVINGS See attached Life Cycle Costs Analyses.

2.000KR Heat Savings 250 KWH x 3410 BTUKW x 1/1000 CFIBTU x 7. On this basis. When the plant reaches the stage that it is developing enough methane gas to support a new 300 KW cogen unit. 3.U v ~ r a d eCogen Gross Power Savings Maintenance Cost 150 KW x $540KW YR = $81. the following are recommended.VALUE ENGINEERING RECOMMENDATION No. The wastewater treatment plant's best option is to provide replacement upgraded boiler in the initial phase (see attached LCC based on 150 KW Cogen Unit) and upgrade the cogen at subsequent phases when the gas generation is closer to allowing continuous operation.00ONR Proposed Alternative B -. suitable for digester gas firing and scrubber. DISCUSSION The cogen units are important for energy conservation opportunities involving load-displacement of power and heat at the plant. In lieu of the region replacing the engine-generators.000 HRIYR x $3.000 HRA" = 21. the savings would be significantly greater for upgrading cogen than for operating the digester gas fired boiler.O2KW x 7.58O/YR Care Study Sewen Wastewater Treatment Plant . GI1 (Continued) Alternative C Buy 350 KW cogeneration generators of robust design. the cogen system could be privatized with a specialist firm for reduced capital outlay and operating staff labor commitment. O&M COSTS Proposed Alternative A -. if required for Skyway WWTP presently generating gas and not cogenerating. A cogen installation at Skyway WWTP would be more suitable based on higher capacity (20 MGD)and existing pressurized gas storage. The existing units can be retained for standby power service using natural gas fbel. 1.00O/YR 150 KW x $O.9OO/YR Total Savings $78. This could sustain a 350 KW unit.50/1000 CF = $20.90O/YR Maintenance Cost $2.Smaller Boiler Based on same gas input as Cogen Gross Savings Maintenance Total Savings at design flows $3 1 . 0 0 0 ~ Total Average Savings $16.

500/KW Sell 300 K W at $400/KW Scrubber Installation and Miscellaneous Subtotal Total Proposed Alternative B .S exSpecial burner Digester gas piping Subtotal Total Note: Use existing cogen as a natural gas emergency unit. Care Srwly Seven Wastewater Treatment Plant QTY. UNITCOST TOTAL . L-11 COST WORKSHEET PROJECT: Wastewater Treatment Plant VE ITEM: Cogen Upgrade ITEM UNIT - Pr~posedAlternative A Upyade Cogen Buy 300 K W at S1.VE RECOMMENDATION NO.

000% ALT.m 1 .0000 o= o= 0 td.--1111 Eat.I . L-11 Data PROJECT UF~CYCLEWEAR~I DISCOUNT RATE {PERCENT) ALT. Capital CM A) Initial Costa Bl c1 Q) 550000 - 8 Fl PW bt.D00% 0. A Cogan Updam Iw/acrubbsrl 10 6.360 7.360 7. ~ m o(PW Costs 0 0 0 0 0 0 0 0 o= o= 0 0 0 - 0 --I-1 = I 1 1 1 II-I- . c8ah flow) 1.oooo 1.1-~=911----1-I11=-111==-=1--1=19.380 Total O p a t i o n l M a i m .- DEVELOPMENT PHASE UFE CYCLE COST (PMmWorth Mathodl - Cogen Updma Roposai No.000% 7.1 1-91 1 1 1 1 1 1 . 150000 670000 0 0 o= o= 0 0 - 0 0 - PW 870000 0 0 0 0 0 Other Initial Costs Totar Initial Cast Impact IIC) Initial Coat PW Savings - Al - - 8) Cl D) 8 F) - G) Salvage (nag. C) Heat Ravenw D) Heat Maint.0000 1. 550000 150000 0 0 PW kt.360 7..000% 0.1 1 . 8 Small Boiler Iwlo scrubber) ALT.oooo 1.0000 1.-=- Opc~ati~~lM~fttenanCO C M Al Power Rswnw B) Power Maim. o m 1 .000% O. = = 111 -6lOgO -598187 21000 154562 -20900 -153828 2900 21344 0 0 0 0 -34300 -252461 3300 24288 25000 184002 -21000 -184002 -574087 -228163 425807 -9OOOO 882408 SO00 38800 -1111-1~=1*11111-1. :o= :- 0 0 1 ---.woo 1 .11=-=.--=IIII--9~I-=-*1II-~-~--1--*=--=--~~11 Total h s e m Wonh tifa Cyde Casts Life Cycle (PW) Savings - PW Present Wofih -24087 24087 -78163 78163 44393 -44393 - PWA Resem Wwth of Annuity Case Study Seven Wastewater Treatment Plant . C Skyway Iwlscrubbar) 111111~9111111111. % PWA 0.

000 PRESENT WORTH (PW) ANNUAL O&M COST LIFE CYCLE (PW) SAVINGS* *See attached LCC analysis. Lower cost. Convert existing storage tank to secondary digester.235.5 m dia.000 $54.800lyr x 13.200 $223.9 rn SWD 37 m dia. LIFE CYCLE COST SUMMARY Original design Proposed design Savings CAPITAL $7. DISCUSSION Advantages: No haulage (truck traffic) to central storage.218. 6.000 $6.2 m SWD 27. Revised July 1993 Case Study Seven Wmewater Treatment Plant ANNUAL O&M $278. Build storage tanks at CSSF. 6.9 m SWD PROPOSED DESIGN Convert existing secondary digester to primary digester.800 $3.035. L-58 VALUE ENGINEERING RECOMMENDATION Wastewater Treatment Plant VE Revise sludge handling design PROJECT: ITEM: ORIGINAL DESIGN Construct: 1 1 1 primary digester secondary digester digested sludge storage tank 27. Annual savings: 233.000 PWA Frees up area at northwest comer of site for additional plant capacity.76 = 3. 6.000 $3.5 m.079.000 . Take advantage of lower construction costs and site availability at central facility. Build pump station and force main to central sludge storage facility. Pumping facilities at central sludge storage facility for supernatant return.200. Disadvantages: Pumping cost for sludge.NO.000 $4.107.

L 5 8 COST WORKSHEET PROJECT: Wastewater Treatment Plant VE ITEM: Revise sludge handling design ITEM UNIT QTY. roofs Mechanical Instructional Electrical Architectural Subtotal Total Proposed D e s i ~ n Convert seclprimary tank Convert storage seclprimary tank Force main. UNIT COST TOTAL Original Design Excavation Backfilling Structural concrete Process equipment Misc. 10 km Pumping facility Storage tank (9. metal.000 m3)* Subtotal Total SAVINGS *Use $2OO/m3 Revised July 1993 Case Snrdy Seven Wastewater Treatment Plant .VE RECOMMENDATION NO.

PWA -. cash flow) .5584 0. PW Est. 1 Revised Design ORIGINAL Original Design 30 6.t~3-~-~PI==== Est.000% -=r=a-=3n=irr~i-__=-. M M --=a= n 10000 10000 5583 3118 n 1 .oooo Total Replacement/Salvage PW Costs -- 0 0 0 8701 3826623 746054 11061623 4954755 6106868 = P I - Operation/Maintenance Cost A) Maintenance 81 Operations C) Labor D) Pumping Costs Fsel cY. -L-58Date PROJECT LIFE CYCLE (YEARSI DISCOUNT RATE (PERCENT) ALT.UUUU 1 .LIFE CYCLE COST [Present Worth Method) Revise Sludge Handling Design Proposal No. 7235000 7235000 4200000 Capital Cost A1 lnitial Costs - PI PW 4200000 n Other lnitial Costs Total lnitial Cost Impact (1C1 Initial Cost PW Sevings Replacement/Salvage Costs A) Equipment 8) Equipment Year Factor 10 20 0.Present Worth of Annuity Revised July 1993 Care Study Seven Wastewater Treatment Plant .. Total OperationlMaintenance (PWI Costs ====P--315=PIP=-t=--3~===1--.=-====f Total Present Worth Life Cycle Costs Life Cycle (PWI Savings - PW Present Worth PWA .DEVELOPMENT PHASE .31 18 PI - UI Salvage tneg.


NO. F-12

PROJECT: Wastewater Treatment Plant VE
Revise hydraulic gradient in new plant

Hydraulic losses through the existing 4.5 MGD plant is approximately 25 feet.
Raise plant foundation by 5 feet. This raises hydraulic gradient at effluent weirs by 5 feet.
Design for a hydraulic loss through the expanded plant of approximately 6 feet.
Lower hydraulic gradient at inlet works by 14 feet.
New plant assumed to be built to a depth of 5 feet less in shale.
Typically a loss of 6 feet should be enough for the 66 MGD plant.
A rise in tanks (primary, aeration, and final) of 5 feet would save cost of rock

Savings in energy $22,25O/yr, based on reduced head for raw sewage pumps.

Original Design
Proposed Design

$ 762,000



Case Srudy Seven Wastewater Treatment Plant


PROJECT: Wastewater Treatment Plant VE
Raise hydraulic gradient in new plant


6500 x 1.524 = 9906 m2










500 x 1.524 = 8832
13,000 x 1.524 = 19,812


Case Study Seven Wastewater Treatment Plant




NO. F-28

PROJECT: Wastewater Treatment Plant VE
Initiate a Water Conservation Program

Original plant design is based on projected capital-population flow calculations, using
previously established flows.

Augment efforts to implement a water conservation program. Assume 15% reduction in flow to
the plant. Reduction will increase strength concentrations to process. Design now for 35 MGD
instead of 50 MGD.

Savings will be minimally offset by investment in a water conservation program
(implementation via community).
Note: Although a 30% reduction in household consumption has been achieved in many areas,
the team suggests use of a more conservative factor of 15%. This factor is suggested because
infiltration, irrigation, etc., will not be reduced by the water conservation efforts.

Original design
Proposed design

$1 18,536,000
$ 17,780,000


$3 1,540,000

Cae S t d y Seven Wastewater Treatment Plant


- LlFE CYCLE COST (Present Worth Method)

Consider Water Conservation and Design for 35 MGD
proposal No. -F-28Date


ALT. 1
35 MOD Plant

50 MGD Plant


118536000 118538000 1007550(10 100755000

Capital Cost
Initial Costs

Other Initial Costs

Total lnitial Cost Impact (IC)
Initial Cost PW Savings

- Costs




Salvage (nag. cash flow)

Total ReplacementlSalvagePW Costs

OperationIMaintenance Cost
Maint. & Operations

Escl. %




Total OperationJMaintenance(PW) Costs


Total Present Worth Life Cycle Costs
Life Cycle (PW) Savings


- Present Worth


- Present Worth of Annuity

Cate Study Sewn Wastewater Treatment Plant


6666666 91765532

5666666 78000701






he Value Engineering orkbook is designed to guide practitioners
through the applicatio of the VE Job Plan. The blank forms and
spreadsheet templates, , rganized according to the structured phases
of the Job Plan, provide a framework to assist the team as it works through the VE
study process. A list of key questions, techniques, and procedures precedes the
forms for each phase, highlighting the objectives and methods for each part of
the plan.
A n additional feature of this book is a C D with a system of electronic, integrated
foms and spreadsheet templates that interface with rhe workbook. The author
developed these digital formats over the course of more than 500 major project
VE studies. The CD also includes tools for advanced practitioners, developed
especially for use in the VE process. These applications include a parameterbased cost-estimating system tied to the Cost Model and life cycle costing system.
The CD is easily used on IBM-compatible computers with Lotus 1-2.3
or Excel.

VE Workbook Value Engineering Workbook

VE Wmkbook Value Engineering Workbook .

Value Engineering Workbook VE Workbook Value Engineering Workbook .

Value Engineering Workbook Study Title Date Study No. Team VE Workbook Value Engineering Workbook .

The worksheets are to be used only as necessary for the specific projects. The list of forms and their projected usage follows: VE Wmkbook Value Engineering Workbook .Value Engineering An organized approach! Job Plan Phases 0 Orientation (Project Selection) 1 Information 2 Function 3 Creative 4 Analysis 5 Recommendation - m = = 6 Presentation and Implementation - Time VE Study The purpose of this workbook is to guide you through application of the VE Job Plan while performing your study. They may be added to. deleted from or modiied as necessary. Feel free to add additional pages of data to the workbook as you collect information.

life cycle costs.Buildings For use in VE studies for initial cost modeling using the UniFormat System. WS 11 FAST Diagram For use as a form to do a FAST. contributors. - PHASE 2 . VE Wurkbook Value Engineering Workbook . WS 9 Function Analysis .Buildings For performing a function analysis for buildings using the UniFormat Costing System. space. 377 Cost/Worth Model . Form can be linked to WS 6 . 376 General Purpose Model For use in modeling: initial costs.Diagram. 375 Cost Summary For general purpose cost sheet to record cost data for information phase of workshop. 382 WS 10 FAST Diagram . interface meetings. May be expanded as required. Form can be linked to WS 6 CostIWorth Model.Function Phase 380 WS 8 Function Analysis For use as a general purpose sheet to do a function analysis. DESCRIPTION Attendance For initial briefings.Procedures For guidelines on how to prepare a FAST Diagram. and brief description of team study ma. Information Phase WS 2 WS 3 WS 4 WS 5 WS 6 WS 7 Value Engineering Team For listing of team members. 374 Consultation and Document Record For recording all significant input from consultants/outside experts during the workshop. etc.Cost/Worth Model. WS 1 PAGE NO. and presentation. energy.LIST OF FORMS FORM NO. 378 Construction Cost Summary For use in developing building budget or actual estimate using parameter costs in 379 UniFormat. 373 PHASE 1 -.

PAGE NO.DESCRIPTION FORM NO. 400 WS 17 Summary of Potential Cost Savings For preparing a summary of all the proposals and their costs. 401 - PHASE 6 Presentation & Implementation Figure 2 Outline for Team Presentation For assisting the team in preparing the verbal presentation. WS 14 Example: Weighted Evaluation For an example of the use of the form. PHASE 4 . - PHASE 5 Recommendation 398 WS 15 Value Engineering Recommendation For writing up proposals. WS 16 Cost Worksheet For generating the original design and proposed alternative/s costs. WS 13 Example: Life Cycle Cost (F'resent Worth Method) For an example of the use of the form. Note: a fully automated version of the forms is included in the attatch~dCD.Analysis/Judicid Phase Analysis/Development Phase 389 390 WS 13 L i e Cycle Cost (Present Worth Method) For a comparative evaluation of the total cost of alternatives over a given 391 life cycle and interest rate. 387 Figure 1 Idea Stimulator Checklist For aiding in the creativity efforts. VE Wmkbook Value Engineering Workbook 402 403 . - PHASE 3 Creative Phase WS 12 Creative/EvaluationWorksheet For listing ideas generated during creativityhrainstonning phase. AnalysisfEvaluation Phase 395 WS 14 Weighted Evaluation For selecting the optimum choice of competing alternates using weighted 396 criteria and an analysis matrix for ranking.

Attendance Project: Location: Item: Date: No. Page: Name Company Position Telephone Number VE Workbook Value Engineering Workbook .

W Set target worth. 8 Select functions for value improvement. 8 Develop Models: Initial Costs. space. W Identify all the constraints. Energy. Quality. Space. Determine costs.Phase 1 Information Phase Key Questions W What is it? W What does it do? W What must it do? W What does it cost? 8 What is the budget? W What is it worth? Procedures W Get all the facts. quality parametem W Identify functions. Life Cycle. VE Workbook Value Engineering Workbook .

Describe Problem To Be Studied(existing procedure. I. Team Name Position Telephone Number Turn Ixsder Tam Manbsn Ptrt Tune Cantributar 11.Value Engineering Team Projed: Location: Study Title: Team No. system) VE Workbook Value Engineering Workbook . design. Study Date: Sheet No.

Consultation & Document Record InformationPhase Project: Location: Study Title: INFORMATION SOURCE Name. or Reference Document Phone No. of Apphcable) W O R POINTS O F DATA - GET INFORMATION FROM THE BEST SOURCES VE Workbook Value Engineering Workbook . Title. Organuatlon.

Cost Summary Project: Location: Study Title: Check one. use separate sheet for each Conshuction Cost 0 0 g r ~ ~ o s t P ReplacementCosts New Estimate GET COST FROM THE BEST SOURCES ws 4 VE Wmkbook Value Engineering Workbook .

VE Wurkbook Value Engineering Workbook .

CostlWorth Model Legend: Value Engineering Study AcUia~imated VE Target 1 NOTES: TotalCaaWorth Bldg. Type: Area: (SQM) Area: (SQM) VE Floors: I I I I I .

. hfntouro- .mp I I !\. VE Workbook Value Engineering Workbook W J I .'otl-: . Area: m. .'. :~ .rca1costpmgrnni. % ::ksb .y. . .. > ' ? h * $"\ A A % / i m ~ s l fm[:r& ' t ? I .f~r dodoping i.~timatesis included it?the I..-In E. < -y Q i i l c ~ a.-. .utlcepfvnl building e.S& % * % e r ~ l 0 $ ..~kene. .E foolssertion of'//~i: ottilCI~eddi.. <%Ty . .Construction Cost Summary Project Name: Location: Date: : hU . . ' -. / .. ..:.