Value Engineering

*What Value Engineering Is!

An organized study of FUNCTIONS to satisfy
the USER’S NEEDS with a QUALITY
PRODUCT at the LOWEST LIFE CYCLE COST
through APPLIED CREATIVITY
 Definition of Value Engineering

Terms used to describe “Value Engineering”

*Value Methodology
This is the “official” term used by SAVE International. It
describes the overall body of knowledge.
*Value Analysis
This was the first term used when the process was originally
developed for manufacturing
*Value Engineering
The term “engineering” was used to identify the process as it
is applied to design and construction
*Value Management
This less commonly used term refers to its application to
business processes
 Definition of Value Engineering

*The value of a function is defined as the relationship

of cost to performance

Performancemax
Valuemax =
Costmin
 Definition of Value Engineering

*“Good” Value is the lowest cost to reliably

provide the required function with essential
performance.

*Value is always increased by decreasing costs

while maintaining essential performance.

*Value may also be increased if the customer

needs, wants, and is willing to pay for greater
performance.
 Range of Application

*VE applies to everything because every

project or process has a function
*VE can be applied at any point of the
design or process
*VE is a problem solving technique
*VE can be used as a technique for
developing design criteria
 Reasons for Poor Value…

*Lack of and/or poor  Not enough time for

coordination among project formulation
designers and/or design
*Failure to network
with customer –
poor definition of  Failure to utilize
needs and wants latest technologies
*Design based on
habitual thinking or
mistaken beliefs  Negative attitudes
 Reasons for Poor Value…

*Poor communication in developing project scope

*Lack of consensus among project stakeholders with
regard to project scope
*Outdated or inappropriate design standards
*Incorrect assumptions based on poor information
*Fixation with previous design concepts
*Honest wrong beliefs
 Common Misconceptions
*“VE is something we do all the time.”
* No it isn’t.
VE requires the application of a specialized
body of knowledge at the right time with the right
people.
*“VE degrades project performance.”
* If applied properly, its should maintain or improve
project performance.
*“VE is just another management fad.”
* VE was developed in 1943. It is required by federal
and many state laws. It has a professional society and
maintains professional standards and accreditation.
*“VE is really just cost cutting.”
* Really?
 VE vs. Cost Cutting/Reduction
*VE seeks to maintain or *Cost reduction seeks to
improve performance cut INITIAL costs, often
while reducing TOTAL e at the expense of
costs. project quality.
*VE is a pre-planned e
*Cost reduction is usually
a reaction to budget
allocation of time and overruns.
e
effort.
*VE is a highly structured *Cost reduction is an
process using a formal e informal process.
methodology.
*VE utilizes an objective, e *Cost reduction generally
multi-disciplined team involves only a few
and a trained facilitator. management personnel.
*VE provides an organized *Cost reduction does not.
follow-up,
implementation and
Value Engineering Quality
Value Engineering is a tool/method
to enhance QUALITY
 Potential Value Engineering Cost Savings

Potential
Savings

$
Cost to
Change

*Timing the VE Effort

Planning
Design Final Design /
Construction
Development Bid Documents

Project Life Cycle

 Some VE Study Objectives

*Performance Improvement
*Significant Cost Savings/Avoidance
*Optimization of Resources (Time & Money)
*Review (Technical, QA) – Optional Objective
*Coordination (In- House & Users)
*Transfer Innovative Technologies
*Have Fun!
The Value Engineering Job Plan

*Provides a systematic
approach
*Divides the study into
distinct work elements
 Value Engineering Is:
Step 1 – Preparation/Organization

Step 2 - Information
Step 3 – Function Analysis

Step 4 – Speculation/Creativity

Step 5 – Evaluation

Step 6 - Development

Step 7 – Presentation/Report

Step 8 – Implementation & Audit

 Information Phase
Purposes

*To determine user needs

*To gather and tabulate information
concerning the item as presently designed
*To build team knowledge and understanding
of the project
*To completely understand the specific use
of function requirements of the item
*To visit the site (preferable)
*Process continues throughout remainder of
the study
 Information Phase
Techniques
*Get all the facts from the best possible sources (e.g.
design team)
*Develop cost models
*Determine and evaluate the function(s) of the
present design
*Prepare a FAST diagram
*Identify & define project Performance Criteria
*Develop project Performance Ratings
*Determine present design objectives & constraints
*What does the customer want?

USE GOOD HUMAN RELATIONS

*You can’t always get what you want!
*You can’t always get what you want!
*You can’t always get what you want!
*BUT – if you try, somehow you just might
, from time to time, get what you need!
*Function Analysis defines user’s needs
through verb-noun pairings

Why is Functional Analysis

Important?
 Function – The
*Specific purposes or intended use of an item (What is
this? What is it supposed to do? What else can it
do?)
*Function is that which makes a product, process or
project work or sell.
*All cost is for function.
*Primary functions posses value and are required to
make a product work or sell.
*Secondary functions have no value and are present
due to the current design of the product.
*That characteristic that makes a product or service
have value
*Determine by considering the user’s actual needs
 FAST Diagram
Function Analysis System Technique
How Why

Verb-Noun Verb-Noun Verb-Noun Verb-Noun

Function Function Function Function

Generating a Function Picture

Scope Line Scope Line

The Purpose of a FAST Diagram is

*Show specific relationships of all

functions with respect to each other
*Deepen the understanding of the
problem to be solved
*Promote discussion and information
gathering – team building
*Support the process of creativity
 FAST Diagrams

HOW? WHY?
Design “All The Time”
Objective Function

Higher Order Primary Secondary Secondary Assumed

Function Function Function Function Function WHEN?
Required
Secondary
Function
* Fuel Storage System

Steel

*Function Analysis
Sacrificial Tank
Excavation
Anode &
Backfill
* Identify the functions

Store

*Function Analysis
Protect Fuel
Tank Hide
Tank
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Tanks
Bins
Silos
Primary Pools
Boxes
Function Sacks
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Manufacture
Purchase
Recycle
Primary Trade
Generate
Function Mine
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Primary
Function
 Function Analysis

* Identify the “scope”

HOW? WHY?

Complete Perform Create Dispense Store Obtain

Task Work Energy Fuel Fuel Fuel

Pump
Pipeline
Conveyor
Primary Siphon
Cable
Function Microwave
 Speculation Phase
Purposes

*To generate a large number of

alternatives that provide the
item’s basic function(s)
without considering their
practicality
 Speculation Phase
Techniques

* Use creative thinking

* No rules – no limits
* Forget about scope, speculate on the FUNCTION - not on
the item
* Don’t let regulations or people control your thinking
* If you don’t look for the second right answer, you won’t
find it
* Eliminate/simplify: modify and/or combine alternatives
* Think – get out of the comfort zone and enjoy it!
* Keep talking, keep generating, let the juices flow!
* Its about CHANGE!
USE GOOD HUMAN RELATIONS
 We’all’in’s never done it that
way before!!
? ?


Regulations What will
and my boss
Guidelines think?
are sacred!

? What if it doesn't work? ?

Creativity
 Creativity
Brainstorming Rules & Objectives…

*Criticism/evaluation is prohibited (at this time)

*Free-wheeling is welcomed and encouraged – be
uninhibited and think as a child
*Be spontaneous – rapid fire ‘gut feels’
*Quantity is desired over quality – cover the walls
*Combine and add to ideas
*Build upon another person’s ideas
*How do others solve similar problems
*Record all ideas
 There Are No Dumb
Ideas!

OK, so some of the ideas were dumb!

Which leads us to…….
 Analysis Phase
Purposes

* To evaluate, criticize, and rank alternatives

* Identify advantages and disadvantages as compared to the
baseline project
* Which alternatives offer the best combination of:
* Design-ability
* Construct-ability
* Operational ease
* Quality assurance
* Customer satisfaction
* And… low life-cycle cost
* To develop alternatives that offer the greatest increase in
value
 Analysis Phase
Techniques
*Prior experience
*Collective ‘Gut” feels
*Stakeholder input
*Use cost references
*Apply matrix techniques
*Define performance
measures
*Weight and rank measures
*Evaluate alternatives
*Make sketches
*Consult experts
*Use your own judgment
USE GOOD HUMAN RELATIONS
 You gotta also consider…
Life Cycle Cost Analysis!
(LCC)
* A definition…
“The systematic evaluation of alternative designs and
the comparison of their projected development/design,
construction, operation/maintenance and disposal costs
or salvage value over a specified time period.”
* Simply put… Consider all the costs!
* Total LCC = Initial Cost + Ownership Cost +
Salvage value/disposal costs
* Deceptive… For example, security was
typically a minor cost, but can now be a
major consideration.
* LCC gives decision makers a complete
awareness of Big Picture

In other words, LCC is…

 Development Phase
Purposes

*To select the best

alternative(s)
*To develop complete written
and oral proposals
 Development Phase
Techniques
*Recommend specifics, not generalities
*Make sure your report describes the disadvantages as
well as the advantages
*Gather convincing facts
*Assure technical adequacy
*Spend your client’s money as you would your own
*Complete order-of-magnitude cost estimate w/LCC
*Prepare Proposal
*Finalize FAST diagram for proposal
*Sell the idea through the justification
*You are selling something
uncomfortable to most people – CHANGE!
*Misteaks will cast doubt on your validity
USE GOOD HUMAN RELATIONS
 Presentation Phase
Purposes

*To present value engineering study

proposal(s) to the decision makers/stake
holders
*To obtain approval/support
*To enhance potential implementation
 Presentation Phase
Techniques

*Again, you are selling CHANGE!

*Your enthusiasm will sell your proposal
*Use FAST diagram as a communication tool –
Are the most important functions satisfied?
*Be brief, pertinent and convincing
*Keep it simple

USE GOOD HUMAN RELATIONS

 Presentation Phase
Techniques

*Anticipate/remove road blocks – understand

their point of view
*Network with people and gain support
*BUT – you can’t please everybody
*AND – don’t overload the cart with too much
information

USE GOOD HUMAN RELATIONS