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Financial Implications of Disaster

Value Base Planning Using Value Engineering / Value Analysis / Value Management
Presented By: Fred McAuley, Jr.
July 25, 2002

Value Based Planning Using VE/VA/VM

Financial Implications of Disaster
What is VE / VA / VM? •Value Methodology (also called Value Engineering, Value Analysis or Value Management) is
a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements. •It is a function-oriented, systematic team approach to providing value in a product or service. The value methodology helps organizations compete more effectively in local, national and international markets by:
- Decreasing costs - Improving quality - Saving time - Using resources more effectively - Increasing profits - Expanding market share - Solving problems

“Value methodology easily produces savings of 30 percent of the estimated cost for manufacturing a product, constructing a project or providing a service. The return on investment that public and private organizations derive from implementing VM programs averages 10 to 1. That is, for every dollar invested in a VM study - including participants' time and implementation costs - $10 in net savings results.” - S.A.V.E. International

July 25, 2002

Value Based Planning Using VE/VA/VM

. or supply of an executive agency. service. .S. system. facility.Definition: “. performed by qualified agency or contractor personnel. reliability.Financial Implications of Disaster U. building. and life cycle cost. product. safety.Franklin Rains. •The 1993 Office of Management and Budget‟s OMB Circular A-131 requires federal agencies to use the value methodology as a management tool to reduce program and acquisition costs. improve quality and reduce contract costs. 2002 Value Based Planning Using VE/VA/VM .“ . item of equipment. .S. Office of Management and Budget July 25. [T]the term „Value Engineering’ means an analysis of the functions of a program. Law Mandates VE Use in the Public Sector: •The 1996 Defense Authorization Act (Public Law 104-106) states that each executive agency must establish and maintain cost-effective VE procedures and processes. quality.” •The 1995 National Highway System Designation Act requires states to carry out a VE analysis for all federal-aid highway projects with an estimated total cost of $25 million or more. directed at improving performance. "Value engineering is a proven management tool that can be used by agencies to streamline operations. U. project.

the VM job plan .Financial Implications of Disaster How Does the Value Methodology Work? •The value methodology works through a VE/ VA/ VM study that brings together a multidisciplinary team of people who own the problem and have the expertise to identify and solve it.to review the project. – SAVE International Definition of Value Engineering: “An organized study of functions to satisfy the user’s needs with a quality product at the lowest life cycle cost through applied creativity”.USACE July 25. making sure the team understands customer requirements and develops a cost-effective solution. 2002 Value Based Planning Using VE/VA/VM . . A VM study team works under the direction of a facilitator who follows an established set of procedures .

ANALYSIS PHASE .INFORMATION PHASE . 2002 Value Based Planning Using VE/VA/VM .Critical Judgment IV -.PRESENTATION PHASE .Financial Implications of Disaster “VE Study Job Plan” I -.SPECULATION PHASE .Project Familiarization II-.Creative Brainstorming III -.Develop Alternatives V -.DEVELOPMENT PHASE .Present Alternatives (Continues) July 25.

Diagram” July 25.T.A. 2002 Value Based Planning Using VE/VA/VM .Financial Implications of Disaster Generating a Function Picture Function Analysis System Technique Verb-Noun Function Verb-Noun Function Verb-Noun Function Verb-Noun Function “F.S.

Financial Implications of Disaster How Design Objectives: Basic Function Required Secondary Function Functions that Why “F. 2002 Value Based Planning Using VE/VA/VM .S.T. Diagram” Happen All the Time: Higher Order Function Required Secondary Function Beyond Study Scope When Functions that happen all the time and/or are caused by some other functions Scope of Problem Under Study July 25.A.

2002 Value Based Planning Using VE/VA/VM . for Construction. PE (RSMeans Copyright 1997) July 25. Maintenance & Operations By Alphonse Dell‟Isola. System #2 #1 $$ #1 #1 #1 #1 < < = < = #2 $$$ #2 #2 #2 #2 1 1 6 9 3 4 2 3 7 10 87 89* System #1 System #2 3 3 27 3 8 2 9 3 40 4 3 3 36 4 8 2 12 4 30 3 Cost (LCC) Performance Risk Safety Appearance - Shown in Red Weighted Evaluation Form from: Value Engineering: Practical Applications.Financial Implications of Disaster “Analysis Matrix” Cost (LCC) Performance Risks Safety Appearance A-2 A-3 A-1 C-1 A-1 D-B D-3 B-E C-2 D-2 Weighted Value Evaluation Given: System #1 vs.

Unless there is an Equal or Greater Increase in Function. 2002 Value Based Planning Using VE/VA/VM . Delay Schedules or End Project Implementation July 25. Performance and Quality Must Meet the Owners Minimum Requirements •“Best Value Worth “ can be Defined as the Least Cost to Accomplish the Function to an Acceptable Degree •Note that Increased Costs Lowers Best Value Worth . Performance or Quality •Also note that Funding Limits and Shortfalls May Stop Progress.Financial Implications of Disaster What are We Defining – Cost. Worth or Value? Function + Performance + Quality Best Value Worth ≈ Cost •Function.

Financial Implications of Disaster Aransas National Wildlife Refuge – •Can a Value Engineered Project Capture a National Honors Award? Yes! •Do Environmental Projects have Risk? Yes! July 25. 2002 Value Based Planning Using VE/VA/VM .

2002 Value Based Planning Using VE/VA/VM .000 Years High Winds Break Barge Tows – Barge is Run Aground .Financial Implications of Disaster Aransas National Wildlife Refuge Environmental and Commerce Interests Partner to Protect Habitat – What‟s at Risk? ~120 Pairs of Whooping Cranes – ANWR is Sole Winter Habitat 13 Miles of Gulf Coast Intercoastal Waterway Pass through ANWR Risk Assessments Identify Probability of Petro-Chemical Spill at Once in 8.at Risk Spilling Contents during VE Study VE Study Identifies Alternative Means of Responding to Spill Risk (Alternative Protective Boom Anchoring System and Support by Hazard Response Contractor) July 25.

Embassy Nairobi. and $4. Kenya •Very Prescriptive and Risk Based Criteria & Schedule Driven •New American Embassies Undergo VE Studies Capturing Both Improvements and Savings: $2.2 for Dar es Salaam. 1998 July 25. 1998 New U. Embassy Dar es Salaam August 7. Dar es Salaam $50 Million & Nairobi $80 Million .Financial Implications of Disaster Can Tightly Controlled Projects be VE‟ed? U. Kenya August 7.S. Embassy Nairobi.S. 2002 Value Based Planning Using VE/VA/VM . State Department.4 Million for Nairobi New U. Embassy Dar es Salaam •Additional VE Studies Performed on Design/Construction Contracts U.S.S.Using an Accelerated Design/Build Procurement U. OFB – Two New East African Embassies.S.

Benefit $‟s > Cost $‟s Accident Costs Justify Capital Improvements –Guardrails. CVS.92) Construction Cost 39% Accident Damage/Loss 53% Construction Supervision 1% Engineering Maintenance 1% 6% Credit: Steve J. Taylor.. M. 2002 Value Based Planning Using VE/VA/VM . SAVE International . P.82 Million (Accident Damage/Loss Cost $82.Proceedings 1999 (*These Next Two Slides) July 25. . . Rock Cuts & Side-slope Cut/Fill. Eng.Eng.Financial Implications of Disaster What Color is Your Money? – •Can a Capital Construction Project Consider other Economic Interest? •Enhance Public Safety and Address Risk Cost to Construction Cost for Whole Economic Picture •Does this Capture Total Net Savings? Yes. Totten Sims Hubicik Assc. Grades and Curves Life Cycle Highway Safety Cost Model Total First Cost $72.. ..

2002 Value Based Planning Using VE/VA/VM .Financial Implications of Disaster Rock Line – Original Grade 10M Clear Zone Standard Rock Excavation Face 10M Clear Zone Earth Fill Over Rock Face Rock Line – Original Grade VE Proposed Rock Excavation Face Original Design and VE Proposed Design (Net Savings $4 Million – Accident Loss Reduction) July 25.

the Manhattan Engineer District (MED) and the Atomic Energy Commission (AEC) from the 1940s through the 1960s •The waste at FUSRAP sites consists mainly of low levels of uranium. 1950s. Much of this residual radioactive material resulted from processing ore to recover uranium and thorium during the 1940s. 2002 Value Based Planning Using VE/VA/VM .Financial Implications of Disaster Old Problems are New Problems: Formerly Utilized Sites Remedial Action Program (FUSRAP) •Created to address radiological contamination at sites used by DOE‟s predecessor agencies. of Energy •VE Studies Addresses Risk Based Cleanup of Sites and Saves $56 Million July 25. radium and thorium on building surfaces and in soil. and 1960s •The Army Corps of Engineers assumed control of the Formerly Utilized Sites Remedial Action Program or FUSRAP in October 1997 from the Dept.

Engage Consultants Add VE / VA / VM to Your Process – Resolve Problems and Reinvest Savings – Net Optimized Solutions July 25. 2002 Value Based Planning Using VE/VA/VM .Financial Implications of Disaster Where Do I Get Help Identifying Risk? How Do I Respond? Identify Vulnerability & Risk Develop Schedules & Plans – Commit Resources Addressing Risk Seek out Training for Staff.

Financial Implications of Disaster Plan for VE . 2002 Value Based Planning Using VE/VA/VM .Why is Earlier Better? Resistance Curve Cost or Savings Savings From VE Proposal Implementation Net Loss Acceptance Curve Early Plan PreDesign Design Development Construction Dwgs & Documents Construction O&M When VE is Performed July 25.

. Recapture Contingencies. . . . . and Costs • • • • • • • Scope ~ Build it. . . . Users and Community Needs Must Be Met! Life Cycle O&M Too! Total Integration and Creative Opportunities for Project Changes are Identified Costs ~ Reassessment of Baseline Costs. . . .VE Reports to OMB and Congress. . Builds Public Confidence.Financial Implications of Disaster Why Do You Plan Programs and Projects Using VE / VA / VM? • • Demonstrates Compliance with Law . that Supports the Decision Process Significant Cost Savings/Avoidance ~ Reinvest First Cost Savings as Life Cycle Savings Problem Solving & Review (Quality Assurance & Transfer Innovative Technology) Better Coordination (Designers . . Shows Respect to Taxpayers. . . . . . . . Performance. . . . . Good Use of Resources Advertises Costs Effectiveness. Demonstrates Compliance with Law VE Validates Scope. with End-Users & Operators) July 25. Optimization of Resources Assures Schedule and Project Execution Level of Performance is Identified ~ Impact and Risk is Defined for Proposed Change. they will come. . .Consultants & In-House. 2002 Value Based Planning Using VE/VA/VM . .

2002 Value Based Planning Using VE/VA/VM .Financial Implications of Disaster Plan Ahead for Effective VE / VA / VM Efforts •Schedule Time. Personnel and Commit Resources •Select the Best People for Your Team •Empower the VE Team to Gain Momentum – Create Opportunities Put Your VE / VA / VM Team to Work For Your Program and Projects!!! Keep A Positive Attitude to Change!!! “OPPORTUNITYISNOWHERE” July 25.

General Engineer USACE / OVEST 100 W.m.mcauley@sas02. GA 31401-3640 Telephone: 912-652-5715 (FAX 5956) fred. Jr.usace.army. Oglethorpe Avenue Savannah. 2002 Value Based Planning Using VE/VA/VM .mil July 25..Financial Implications of Disaster “How to Contact Me” Fred McAuley.

dot.htm (US Army Corps of Engineers) http://www.hq.gov/cgibin/query/C/c104:.gov/valuprog/home.html (OMB Circular A-131) http://www.mil/cemp/e/ev/policy.army.gov/mine/index.Financial Implications of Disaster VE/VA/VM Points to Contact: http://www.whitehouse.thomas.doi.htm (Department of Transportation.gov/ve1.html (SAVE International) July 25.value-eng.loc.temp/~c104MIXp0Y (Public Law 41 USC 432 .Thomas Law Library ) http://www.usbr. 2002 Value Based Planning Using VE/VA/VM .fhwa.mrps.gov/omb/circulars/a131.htm (Department of Interior.org/vmbenefits.html (Department of Interior. Federal Highway Administration) http://www.usace. Bureau of Reclamation) http://www. Office of Managing Risk and Public Safety) http://www.

Any Questions? Value Based Planning Using VE/VA/VM July 25. 2002 .Financial Implications of Disaster Thank You.

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