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Value Engineering Program

Frequently Asked Questions — FAQs

Yes, if it is a construction, repair, rehabilitation, or renovation project with an estimated project cost of $1,000,000 or more. Projects between $500,000 and $1,000,000 require value study unless excluded by proper authority.

Public Law 104-106, Section 36 reads, in part "(a) Each executive agency shall establish and maintain cost-effective value engineering procedures and processes." OMB Circular A-131 reads, in part "This circular requires Federal Departments and Agencies to use value engineering (VE)" and "Senior management will establish and maintain VE programs, procedures and processes to provide for the aggressive, systematic development and maintenance of the most effective, efficient, and economical and environmentally-sound arrangements for conducting the work of agencies, and to provide a sound basis for identifying and reporting accomplishments."

2. Why is it mandatory?

Probably because there are occasional Federal projects, programs, and activities strongly ridiculed by the American public for being grossly wasteful (highly overpriced or inefficient). Congress may have selected Value Engineering (also called Value Analysis and Value Planning) as a remedy because it has been well documented to have significantly improved hundreds of projects, programs and activities in private industry and Federal Government.

3. Isn't the value program really a burden, adding to the professional work load we already have?

It may be a matter of perspective. The time, expense and effort to conduct a study are real. So are the benefits of approved value study proposals. In some cases, individual studies have led to multi-million dollar savings. In other cases they have led to no savings. On average the benefits have outweighed the costs by 20:1.

4. What happens if we don’t do it?

In compliance with OMB Circular A-131, 10., Reclamation has been audited by the Office of the Inspector General every three years. The audit report is copied to the Department of Interior. Kudos go to the achievers, reproofs to the underachievers.

Also, DM 369-1 states, in part, "Meeting VE goals shall be a performance measure of bureau/office heads and appropriate managers responsible for the mandatory program." So, "if we don’t do it" managers and heads would receive poor performance measure ratings for failing to meet the VE goals. Even if these measures are a minor part of the overall rating, it might not be a popular thing to get a low rating.

5. What’s the difference between value planning, value engineering, and value analysis?

A value study of a construction or O&M project before a preferred alternative has been selected (or even thought of) will typically concentrate on identifying project objectives, and developing functional components and general approaches to meet project objectives. Such a study is normally termed a value planning study. Value planning studies are appropriate for most projects, programs, or activities at a very early stage of design or development.

A value study of a construction or O&M project after design alternatives have been developed (and maybe a preferred alternative selected) will typically focus its time and use many techniques to quantify and compare alternatives for selected project components. Such a study is normally termed a value engineering study. Because more is known about a project as the design process advances, the level of detail reached in engineering studies is greater than in planning studies.

Value studies of administrative procedures, organizational structures, management systems, or similar activities are normally termed value analysis or value management studies. These studies use the same job plan and similar or the same techniques as the value engineering and value planning studies.

6. How long does it take to conduct a value study?

Requesting manager(s) or team leaders need to budget time for the study and time to assemble the team. Value studies bring together, in a high performance team environment, 5 to 7 people for an intense study of the project, program, or activity lasting about a week. The last phase of each study is a presentation of the study teams findings to the requesting managers/leaders. A draft report is included as part of the presentation, is usually finalized shortly thereafter.

7. How much does a study cost?

The average cost of a study done in-house is about $25,000, but costs vary considerably with the scope of the project, program, or activity being studied. The cost of the study is usually charged to the project, program, or activity being studied. The savings, if any are usually credited to the project, program or activity being studied, often recovering the costs and much more.

8. Why are so few value study proposals implemented?

There are several reasons. Recent years reports show that only about one quarter of study proposals were fully accepted. In some cases study proposals that were not accepted were mutually exclusive from one that was accepted. It is common for a study to have several proposals that are mutually exclusive with each other.

Some proposals are not accepted by the design team because, after more detailed review by the design team, assumptions made by the study team don’t pan out and the benefits of the idea are reduced or lost. Some proposals may be practical and sound, but the design team is unable to obtain client support due to subjective reasons.

9. We used to be able to waiver construction projects over $1 million if we felt there was little chance of improving the project. What changed?

Reclamation practices are being brought into compliance with OMB and Department criteria and policy. OMB Circular A-131 established the requirement to study all projects estimated to cost $1,000,000 or more. The current 369 DM 1 (1.7, A.) Establishes a lower, $500,000 limit and allows exclusions for only those projects between $500,000 and $1,000,000 with proper justification, approval, and reporting.