GOVERNMENT OF THE

PHILIPPINES

RECOMMENDATIONS ON
VALUBE ENGINEERING
IMPLEMENTATION
IN THE PHILIPPINES

REPORT BY
JUAN CLATDIO DEVINCENTI,
CVS
FOR THE WORLD BANX
MANILA

MANILA, JUNE 21,

2004

CAS INTERAMERICA 5403

WANFTA Rd BETHESDA MD
20$i6 USA cosinterOmericO@/erizO0

nef 301-229-0351

I. INTRODUCTION
The Terms of Reference for an international expert on
Value Sngineering, in an assignment by The World Bank, aim
a) to provide information on international experience with
value engineering analysis, and b) to advise the GPPB on
how this might be applied to infrastructure projects in the
Philippines
In order to accomplish these objectives it was
decided to organize a series of 3 briefings and a two-day
mini-study applying, in a very limited scale, the
techniques of VE.
A.

Briefings at The World Bank

Three briefings were scheduled on June 14, 15 and 18,

2004, at the The World Bank office, and with the
participation of COA, DBM, DENR, DND, DOP, DOH, DOST, DOTC,
DPWH, DTI, GPPB-TSO, NEDA, NIA and OP officials.
During these briefings the basic methodology of VE
analysis was demonstrated, indicating the different
approaches towards its implementation in countries like the
United States, Argentina, Ccsta Rica and Chile.
VE is an excellent tool to identify unnecessary costs
in a project. DifEerent reasons why unnecessary costs occur
were explained, but it was felt from the audience that
corruption is an important factor and that VE analysis
could contribute to diminish it.
The average implemented Value Engineering savings in
international projects ranges from five to ten percent and
higher.
Historically, the return on investment (ROI) in VE
studies ranges from 10:1 and up to well on 30:1.
That is thirty pesos saved for every peso invested in
the Philippines in a VE study.
Several samples of international VE studies on
infrastructure prcjects were shown. Projects ranged from
hiahways to bus garages, airports and hospitals to housing,
with original design costs ranging from US$12 million to
US$ 26 million, and savings in the order of 8% to I3%.

Introduction - Page 1 of 2

For instance, in the case of route 127 in Argentina,

just the use of a new material -geogrids- not known then in
that country, represented a savings of over US$3 million on
a US$54 million project. Total accepted VE study savings
18.42%. See Annex VI.
In another case, the hospital of Alajuela, in Costa
Rica, benefited from a new computer program that identifies
the best location of a building in a site by calculating
cuts and fills for every position. Savings reached over
US$1 million in a US$18 million project. Total accepted VE
study savings 23.7%.
The use of the procurement system in the USA was
introduced, where an amendment to the procurement law
establishes the obligation to use VE in all government
agencies. Copy of this law was distributed, see Annex III.
At the end of the briefings enthusiastic discussions
were held clarifying the concepts and the application of VE
in the Philippines.
B.

Mini-Study at DPWH

At a meeting with authorities of DPWH it was decided

to have a trial by taMing a look to a prolect already
designed, the By-Pass to the city of Cabanatuan.
This two-day exercise on the application of VE to a
local highway project, was carried out at DPWH offices
during June 10 and 11, 2004, with a VE team composed of
DPWH professional personnel.
Sharing the VE Team was a representative of the design
firm, who appreciated the advantages of having a VE study
with the project.
Although the VE team had never been exposed to this
discipline before, under the direction of an expert Team
Leader was able to identify potential savings in the order
of PP200 millions. See Annex V.
This seems to indicate that a more formal VE study, to
develop in a total time of 2 weeks, could render
substantial savings on this project.

Introduction

- Page

2 of 2

II.
A.

CONCLUSIONS AJfD RECOM4ENDATIONS

Conclusions.

As a result of the activities developed during

these two weeks, it appears evident the interest and
convenience of applying VE analysis to all government
capital investment projects, in order to reduce costs.
The response of the audiences during the three
seminars and the easiness with what the Mini-Study was
conducted, as well as its results, confirm this
asseveration.
At this moment there are several infrastructure
projects in the pipeline, offering opportunities for a
fruitful VE analysis work.
B.

Recomendations

Therefore, the principal recommendation of this

report is to commence with a series of case studies,
to demonstrate the advantage of its application,
before embedding it into the normal decision making
process.
An added benefit to the savings generated by
these VE studies -they should cover their expenses
10:1- is to add 6 professionals per study with hands
on experience in VE.
The action suggested by this report now is shown
in the following order of implementation:
1.

To demonstrate the validity of the VE concept

through the development of three VE case studies;
These case studies, consisting basically of three
two-week VE studies will analyze local projects.
Execution:
a.

Contract one Certified Value Specialist,

cVs, or other VE internationally certified
professional, for 2 weeks at every project,

Recommendations

- page 1 of 2

in order to conduct a VE study leading a VE

team of up to six (6) professionals.
b.

2.

Contract up to ;6) professionals to conform

the VE Team, for 2 weeks per every VE study;
they can be either/or from government staff
or private practice. Their professional
background should be related to the VE
project assignment. See Terms of Reference
for the VE Team and the professional VE
Leader in Annexes I and II.

At a latter stage, once the goodness of the VE

analysis is demonstrated, it should be an effort
to review options in order to incorporate VE in
the mainstream of Philippine legal structure
our experience in the United States, after many
unfruitful efforts in the Congress, was to
introduce this requirement as an amendment to the
procurement law.
As a reference, a copy of Public Law 104-106,
passed in 1996, and also of Circular A-131, from
the Office of Management and Budget, are attached
to this report as Annex 711.
Other alternatives are:
a.

Every Department issuing its own

regulations,

b.

Adding VE clauses in construction bids,

c.

Incorporating in every design competition

the services of Value Engineering,

d.

VE in the private sector at design-build

biddings,

The use of some of these alternatives may require

establishing a VE Program. Guidelines on how to
organize and operace such program are presented in
Annex IV.

Recommendations - Page 2 of 2

LiU AMtSi

GOVERNMENT OF THE PHILIPPINES

RECOMMENDATIONS ON
VALUE ENGINEERING IMPLEMENTATION
IN THE PHILIPPINES

ANNEX

I - TERMS OF REFERENCE VE STUDY

- TERMS OF REFERENCE VE TEAM LEADER
III - LAWS, POLICY AND GUIDANCE
IV - THE VE PROGRAM
V - SUGGESTIONS FROM A 2-DAY MINI-WORKSHOP
VI - BRIEFING GUIDELINES
II

BY JUAN CLAUDIO DEVINCENTI, CVS

FOR THE WORLD BANK MANILA

MANILA, JUNE 21, 2004

CAS INTERAMERICA 5403 WANETA Rd BETHESDA MD 20816 USA casirnteromeric@_venwn,net 301-229-0351

Annex I - TERMS OF REFERENCE FOR VE STUDIES

I.

Background

Value Engineering, VE, also known as Value Analysis,

Value Management, is an organized effort directed to
analyze the function of a project goods and services, with
the objective of obtaining the necessary functions at a
minimum cost, maintaining the essential characteristics of
the project. This activity is consequent with the present
policies of rationalization and maximum efficiency in
capital investments of the Government of the Philippines.
With this end in mind, it has been a manifested
interest in the preparation of VE studies in order to
identify alternatives that represent lower construction,
operation and maintenance costs of projects to-build. The
following described services intent to support this effort.
II.

Objective

The objective of the services to provide by the Value

Engineering Team, VET, will be:
1.

To identify, qualify and quantify functmonal

alternatives to present projects that represent cost
reductions and lower operation and maintenance
expenses during the life cycle of the projects.

III. Scope of work

The VE study will consist of a study to be executed by
a multidisciplinary VET of minimum six professionals. The
VET will follow the five-step job plan, internationally
recognized by SAVE, the Society of American Value
Engineers. The VE report must cover all the recommendations
from the VET, with cost estimates, life cycle analysis and
graphs, as needed for a clear and concise presentation.
These VE studies must
opportunity, preferable at
concurrent with the normal
the Department and without
preparation schedule.

be executed at the best possible

the feasibility phase of design,
design revision processing by
causing delays in the project

With this objective, and in reference to the mentioned

project, the VET under the direction of a VET Leader will:

lof4

1.

Review plans, reports and all material available

related to the project, in reference to concepts of
planning, design, materials and labor, construction
techniques and other relevant characteristics.

2.

Review the construction costs for the job, based on

the data derived from the design for all line items.

3.

Advise, using VE techniques, on the identification and

evaluation of alternatives to the principal job
components and prepare a cost estimate identifying
respective potential savings.

4.

List recommendations about feasibility, efficiency and

opportunity of the alternatives identified in the
previous item.

5.

Present to the consideration of the authorities a

draft of a VE final report after 8 working days of
starting its work, to be reviewed, approved and
implemented.

6.

Prepare final report incorporating draft comments,

after 10 working days of starting its work.

7.

In the conduction of this work, the Leader of the VET

will work in close collaboration with the assigned
professional personnel.

IV.

Composition of the VE Team under the VE Team Leader

The VE team will be selected comprising the following

professional personnel:
a.
b.

c.
d.
V.

Leader of the VET.

Between five and seven professionals -from the
public or private sector- specialized on the
topic of the project to be evaluated
Cost estimator
Secretarial support

Background of the Team Leader

Each team for a VE study rust have a leader, who will

be responsible of conducting the revision of the assigned
project within the established procedures for the practice
of VE.

2 of 4

The team leader will have a formal VE education and

will be certified as CVS, Certified Value Specialist, by
SAVE International, the Society of American Value
Engineers, or an equivalent organization recognized by SAVE
International.
Being experience a very important factor in the
development of VE, the leader will have a minimum of ten
(10) years of practicing VE.
VI.

Final product

As a final product the Leader of the VET will present

a report with findings and recommendations to improve
and/or reduce the costs of the project.
The report to present will have the following
information:
a.

Table of contents

b.

Brief description of the final project evaluated

and of the requirements of the project.

c.

Summary of the VS recommendations

d.

A summary sheet with cost estimates at the

current stage of design.

e.

VE Cost model

f.

Functional Analysis System Technique evaluation,

or FAST diagram.

g.

Each recommendation will be presented and

described as:
i.

'before and after" the VE study,

ii.

it will carry a cost estimate of the savings

achieved,

iii. a discussion on the advantages and

disadvantages of the VE idea, and its impact
on the evaluated function,
iv.

a technical justification of the developed

VE idea,

3 of 4

v.

life cycle analysis when appropriate, and

vi.

sketches when needed.

vii. all other supporting material.

h.

The report will have the following format:

i.

it will be systematically organized,

ii.

it will be short and concise, but with

enough information for decision making,

iii. the document will be in letter size, printed

on one side for easy reproduction,
iv.

pages are to be sequentially numbered.

4of4

Annex II
I.

- TERMS OF REFERENCE FOR VE TEAM LEAfDER

Background

Value Engineering, VE, also known as Value Analysis,

Value Management, is an organized effort directed to
analyze the function of a project goods and services, with
the objective of obtaining the necessary functions at a
minimum cost, maintaining the essential characteristics of
the project. This activity is consequent with the present
policies of rationalization and maximum efficiency in
capital investments of the Government of the Philippines.
With this end in mind, the Government has manifested
interest in the preparation of VE studies in order to
identify alternatives that represent lower construction,
operation and maintenance costs of projects to build. The
following described services intent to support this effort.
II.

Objective

The objective of the services to provide by the Value

Engineering Team Leader, will be:
1.

Lead the VE Tewm to identify, qualify and quantify

functional alternatives to present projects that
represent cost reductions and lower operation and
maintenance expenses during the life cycle of the
projects.

fII.

Scope of work

The VE Team leader will direct the study to be

executed by a multidisciplinary VET of minimum six
professionals. The vE Team leader will follow the five-step
job plan, internationally recognized by SAVE, the Society
of American Value Engineers. The VE Team leader will
prepare a report which must cover all the recommendations
from the VET, with cost estimates, life cycle analysis and
graphs, as needed for a clear and concise presentation.
These VE studies must be executed at the best possible
opportunity, without causing delays in the project
preparation schedule.
With this objective, the VET Leader will:

lof4

and all
review plans, reports
for
Direct the VET to
project,
the
to
related
labor,
and
material available
design, materials
concepts of planning,
relevant
other
and
construction techniques
characteristics.
costs as derived
the VET the construction
Cost
with
Review
2.
and prepare a Construction
from available data,
Model.
to
of alternatives
functional analysis
VET
the
respective
Direct
3.
components and reviewof FAST
the principal job
using the technique diagramming.
potential savings,
System Technique)
Analysis
(Functional
and
feasibility, efficiency
about
the
in
List recommendations
4.
alternatives identified
opportunity of the
previous item.
a
of the authorities
consideration
the
to
starting
of
Present
days
5.
report after 15
draft of a VE final
and implemented.
approved
its work, to be reviewed,
comments.
incorporating draft
Prepare final report
6.
Leader of the VET
of this work, the
conduction
the assigned
the
In
with
7.
collaboration
will work in close
professional personnel.
VE Team Leader
VE Team under the
Composition of the
IV.
the following
he selected comprising
The VE team will
professional personnel:
-from the
Leader of the VET.
a.
seven professionals
in
Between five and
specialized
h.
sectorprivate
government or the
project to be evaluated.
the topic of the
Cost estimator.
c.
Secretarial support.
d.

1.

Team Leader
Background of the
a leader, who will
study must have
Each team for a VE
of the assigned
conducting the revision for the practice
be responsible of
procedures
established
project within the
of VE.

V.

2of4

The team leader will have a formal VE education and

will be certified as CVS, Certified Value Specialist, by
SAVE International, the Society of American Value
Engineers, or an equivalent organization recognized by SAVE
International.
Being experience a very important factor in the
development of VE, the leader will have a minimum of ten
(10) years of practicing VE.
VI.

Final product

As a final product the Leader of the VET will present

a report with findings and recommendations to improve
and/or reduce the costs of the project.
The report to present will have the following
information:
a.

Table of contents

b.

Brief description of the final project evaluated

and of the requirements of the project.

c.

Summary of the VE recommendations

d.

A summary sheet with cost estimates at the

current stage of design.

e.

VE Cost model

f.

Functional Analysis System Technique analysis, or

FAST diagram.

g.

Each recommendation will be presented and

described as:
i.

"before and after" the VE study,

ii.

it will carry a cost estimate of the savings

achieved,

iii. a discussion on the advantages and

disadvantages of the VE idea, indicating its
impact on the evaluated function.
iv.

a technical justification of the developed

VE idea, elaborating on the functional
concept.

3 of 4

v.

life cycle analysis when appropriate.

vi.

sketches when needed, and

vii. all other supporting material.

h.

The report will have the following format:

i.

it will be systematically organized,

ii.

it will be short and concise, but with

enough information for decision making,

iii.

the document will be in letter size, printed

on one side for easy reproduction,

iv.

pages are to be sequentially numbered.

4of4

Annex III

- LAWS AND POLICIES

Laws,

Policy and Guidance

INDEX:
I. Public Laws
II. Office of Management & Budget (OMB) Circular A-131
III. US Army, Corps of Engineers (HQUSACE) VE Policy
A. Civil Works
B. Military

I. PUBLIC LAWS
PUBLIC LAW 104-106--FEB. 10,

1996

SEC.4306. Value Engineering for Federal Agencies.

(a) Use of Value Engineering--The Office of Federal Procurement Policy
Act
(41 U.S.C. 401 et seq.), as amrended by section 4203, is further amended
by
adding at the end the following new section:
SEC.36.VALUE ENGINEERING.
`(a) IN GENERAL.--Each executive agency shall establish and maintain
cost-effective value engineering procedures and processes.
`(b) DEFINITION.--AS used in this section, the term 'value engineering'
means an analysis of the functions of a program, project, system,
product,
item of equipment, building, facility, service, or supply of an
executive
agency, performed by qualified agency or contractor personnel, directed

at
improving performance, reliability, quality, safety, and life cycle
costs.'
PUBLIC LAW 99-662--NOV.

17,

1986

SEC. 911. During the design of each water resources project which has a

total cost in excess of $10,000,000, which is authorized before, on or

after the date of enactment of this Act and undertaken by the Secretary,
and on which construction has not been initiated as of the date of
enactment of this Act, the Secretary shall require a review of the cost
effectiveness of such design. The review shall employ cost control
techniques which will ensure that such project is designed in the most
cost-effective way for the life of the project.
Conference Report dated October 17, 1986, from the Water Resources
Development Act of 1986, the following is excerpted:
"Section 911 is adapted from both the Senate and House bills and will
require a new cost-cutting review on all projects with a total cost in
excess of $10 million. Although not specified in the Conference Report,
the
type of study to be undertaken is commonly known as value engineering."

II. OMB CIRCULAR NO. A-131, dated May 1993, SUBJECT: Value Engineering
This Circular requires Federal Departments and Agencies to use value
engineering (VE) as a management tool ... to reduce program and
acquisition
costs. The following excerpted paragraph outlines agency
responsibilities:
8. Agency Responsibilities To ensure that systemic VE improvements are
achieved, agencies shall, at a minimum:
a. Designate a senior management official to monitor and coordinate
agency
VE efforts.
b. Develop criteria and guidelines for both in-house personnel and
contractors to identify programs/projects with the most potential to
yield
savings from the application of VE techniques. The criteria and
guidelines
should recognize that the potential savings are greatest during the
planning, design, and other early phases of
project/program/system/product
development. Agency guidelines will include:
(1) Measuring the net life-cycle cost savings from value engineering.
The
net life-cycle cost savings from value engineering is determined by
subcontracting the Government's cost of performing the value engineering
function over the life of the program from the value of the total
savings
generated by the value engineering function.
(2) Dollar amount thresholds for projects/programs requiring the
application of VE. The minimum threshold for agency projects and
programs which require the application of VE is $1 million. Lower
thresholds may be established at agency discretion for projects having a
major impact on agency operations.
(3) Criteria for granting waivers to the requirement to conduct VE
studies,
in accordance with the FAR 48.201(a).
(4) Guidance to ensure that the application of VE to construction

projects/programs and other projects/programs, will include

consideration of environmentally-sound and energy efficient
considerations to arrive at
environmentally-sound and energy efficient results.
c. Assign responsibility to the senior management official designated
pursuant to section Ba. above, to grant waivers of the requirement to
conduct VE studies on certain programs and projects. This responsibility
may be delegated to other appropriate officials.
d. Provide training in VE techniques to agency staff responsible for
coordinating and monitoring VE efforts and for staff responsible for
developing, reviewing, analyzing, and carrying out VE proposals, change
proposals, and evaluations.
e. Ensure that funds necessary for conducting agency VE efforts are
included in annual budget requests to OMB.
f. maintain files on projects/programs/systems/products that meet agency
criteria for requiring the use of VE techniques. Documentation should
include reasons for granting waivers of VE studies on projects/programs
which met agency criteria. Reasons for not implementing recommendations
made in VE proposals should also be documented.
g. Adhere to the acquisition requirements of the FAR, including the use
of
VE clauses set forth in Parts 48 and 52.
h. Develop annual plans for using VE in the agency. At a minimum, the
plans
should identify both the in-house and contractor projects, programs,
systems, products, etc., to which VE techniques will be applied in the
next
fiscal, and the estimated costs of these projects. These projects should
be
listed by category, as required in the agency's report to OMB. VEP's and
VECP's should be included under the appropriate category. Annual plans
will
be made available for OhM review upon request.
i. Report annually to OMB on VE activities as outlined in OMB Circular
A-131, para.9.

III. EQUSACE VE POLICY

POLICY
A. SQUSACE CIVIL WORKS PROGRAM VALUE ENGINEERING
1. References:
Act for Fiscal Year 1996, which
a. The National Defense Authorization
Policy Act to require that
Procurement
amended the Office of Federal
each
Value Engineering.
executive agency establish and maintain
dated 23 DEC 94, Subject:
b. Lieutenant General Williams' memorandum,
U.S.
(VE) Program, which requested
Army Corps of Engineers Value Engineering
commanders support the VE Program.
that
dated 18 AUG 94, Subject:
c. Lieutenant General Williams' memorandum
Value
requested MSC to take steps to
Engineering Change Proposals (VECP) which
to participate in
contractors
encourage
actively
ensure that Districts
the
VECP program.
dated 10 Dec 93, Subject:
d. Lieutenant General Williams' memorandum
U.S.
Program, which endorsed the
Army Corps of Engineers Value Engineering
1993
Circular A-131, and ER 5-7-1 dated
Office of Management and Budget (OMB)
30
Sept 92.
study) shall be performed on all
2. A formal VE study (defined as a team
estimate (CWE) of $2,000,000
working
current
with
construction projects
and
& maintenance projects with
greater and on supply, service and operation
requirement must be
this
to
CWE exceeding $1,000,000. Exceptions
should be limited to
waivers
These
commander.
approved by the division
has been performed,
Study
VE
which a
projects which duplicate another on
industry. A
private
to
comparable
is
cost
and on which the resultant
quarterly.
CEMP-EV
to
list of approved exceptions will be sent
$2,000,000 should be studied,
Construction projects with CWE less than
Public Law requires a VE
that
when cost effective. You are reminded
with CWE of
projects
Works
Civil
all
on
study to be performed
$10,000,000 and greater.
sponsors are to be offered value
3. All Corps of Engineers customers and

Engineering services along with the opportunity to directly participate

as
part of the Value Engineering team. This promotes a partnering
relationship
and is an excellent source of additional information for study
enhancement.
All navigation projects (including operation & maintenance) which fall
within the limits specified in paragraph 2 above, will have formal VE
studies performed, and will include local waterway-Users Board
representatives as members of the VE team.
4. Value Engineering is a command emphasis program, with progress to be
reported to the Chief at quarterly command management reviews.
Therefore,
the Value Engineering officer (VEO) should have direct access to the
Commander, regardless of physical location in the division or district
office. Multiple responsibilities must be limited to ensure that
division
VEO properly monitor district VE performance, and that district VEO
professionally execute the Value Engineering Program. Proper selection
of
qualified VEO's is paramount to program success, and in high workload
districts, the VEO may need a supporting staff. New Value Engineering
Officers should immediately attend the Corps 40-hour VE workshop.
5. Each division VEO should scredule semiannual district staff visits to
review VE activities and suggest corrective actions, when needed.
Regional
Value Engineering conferences may be substituted for one of these staff
visits. Copies of division VEO Staff Visit Reports shall be included in
the
4th Quarter VE Reports and should reflect the required visits to each
district. (Note: Any division VEO who has not submitted FY 95 Staff
Visit
Reports should comply).
6. The OMB circular A-131 required audit is being performed to validate
the
accuracy of agency reported Value Engineering savings and to assess the
adequacy of agency implementation of its circular. This audit should be
completed by summer, 1996 for the Corps. Divisions and districts must
ensure studies are performed and reviewed in a professional manner. Past
audits have commented on the lack of documentation for rejection of
completed VE studies. Documentation will include the technical reasons
for rejection and the name of the individual making the decision.
Reasons such as "adequate project funds available,' or "user rejected,"
are not satisfactory. All VE studies and VECP shall receive the same
level of technical and management review as any other design or

technical modification. Rejections of any individual VE proposals with

potential savings of $1 million or more and rejections on multiple
proposals whose potential savings in the aggregate is $1 million or more
must be approved by the division commander. Proposed rejections will be
sent to the MSC Commander immediately (within 2 weeks) after the
District review of the VE study.
7. The Value Engineering Change Proposal (VECP) Program needs additional
emphasis. This program has historically produced less than 10 percent of
the total Value Engineering Savings. However, proper emphasis can
increase
project quality and result in savings greater than the total cost of the
USACE VE effort. Contractors should be offered a copy of EP 11-1-4,
dated 15 May 1995, encouraged to utilize the VE contract clauses, and
assured that proposals will be given a fair review.
8. All Value Engineering studies shall be completed on the Value
Engineering Report Template (VERT) and the Value Engineering Data
Information System (VEDIS) as a part of the study documentation.
completed reports will be submitted electronically or via floppy disk to
Kansas City District for incorporation into the National Institute of
Building Sciences (NIBS) Construction Criteria Base CD Rom for access by
all Corps Value Engineering Officers, project managers and contractors.
9. Engineering Form 4607-R must continue to be completed for each VE
study
until VLEDIS and VERT are fully utilized. A copy of this form will be
retained with district files and the original sent to the division
office.
Where VE savings exceed $250,000 or the study has USACE-wide interest,
copy will also be furnished to CEMP-EV at HQUSACE.

10. Value Engineering savings shall only be reported through the Value
Engineering Program (Army Ideas for Excellence savings are reported
separately, and VEO should ensure that no double reporting occurs). All
VEO
shall validate/ensure that accepted value engineering proposals are
included in the final design before claiming savings.
11. USACE 40-hour VE workshop training is considered the foundation for
a
strong VE program and offers 3.2 Continuing Education Units (CEU) for
students. The high CEU should help professional engineers & architects
in
professional recertification. VEO should annually update their list of
trained and non-trained personnel. Any Corps employee whose expertise or
position has potential to assist in VE success should receive training.
A

minimum of 15 percent of all eligible, untrained personnel should attend

the 40-hour workshop annually. These personnel should be reminded
annually
(during February/March) to schedule the Huntsville Prospect VE Course.

B. HQUSACE MILITARY PROGRAMS VALUE ENGINEERING POLICY

1. References:
a. The National Defense Authorization Act for Fiscal Year 1996, which
amended the Office of Federal Procurement Policy Act to require that
each
executive agency establish and maintain Value Engineering.
b. Lieutenant General William's memorandum, dated 23 DEC 94, Subject:
U.S.
Army Corps of Engineers Value Engineering Program, which requested that
commanders support the VE Program.
c. Lieutenant General Williams' memorandum, dated 23 DEC 94, Subject:
U.S.
Army Corps of Engineers Value Engineering (VE) Program, which requested
that commanders support the VE Program.
d. Lieutenant General William's memorandum, dated 10 DEC 93, subject:
U.S.
Army Corps of Engineers Value Engineering Program, which endorsed the
1993
office of Management and Budget (OMB) Circular A-131, and ER 5-7-1 dated
30
Sept 92.
2. A formal VE study (defined as a team study) shall be performed on all
construction projects with current working estimate (CWE) of $2,000,000
and
greater, and on supply, service and operation & maintenance projects
with
CWE exceeding $1,000,000. Projects based on standard designs will
receive a
full VE study, and projects to be constructed by request for proposal
(RFP)
type contracts will be subject to a VE study on the required criteria
package prior to request issuance. Exceptions to this requirement must
be
approved by the division commander. These waivers should be limited to

projects which duplicate another on which a VE Study has been performed,

and on which the resultant cost is comparable to private industry. A
list of approved exceptions will be sent to CEMP-EV quarterly.
Construction projects with CWE less than $2,000,000 should be studied,
when cost effective. You are reminded that Defense Environmental
Restoration Program (DERP) projects are subject to ONE VE requirements,
and their VE studies are being tracked in Command Management Review as a
performance indicator.
3. VE is an integral part of the design cycle and will be applied early
(normally at completion of 35% or concept design). Where the parametric
procedure is used, a study will be provided after completion of
approximately 10% of the design (after a detailed cost estimate is
available). This detailed cost estimate is necessary to properly perform
a
study and satisfy the OMB mandate.
4. All Corps of Engineers customers are to be offered Value Engineering
services along with the opportunity to directly participate as part of
the
Value Engineering team. This promotes a partnering relationship and is
an
excellent source of additional information for study enhancement.
5. Value Engineering is a command emphasis program, with progress to be
reported to the Chief at quarterly command management reviews.
Therefore,
the Value Engineering officer (VEO) shoulc have direct access to the
Commander regardless of physical location in the division or district
office. Multiple responsibilities must be limited to ensure that the
division VEO properly monitors district VE performance and that the
district VEO professionally executes the Value Engineering Program.
Proper selection of a qualified VEO is paramount to program success, and
in high workload districts, the VEO may need a supporting staff. New
Value Engineering Officers should immediately attend the Corps 40-hour
VE Workshop.
6. Each division VEO should schedule semiannual district staff visits to
review VE activities and suggest corrective action, when needed.
Regional
Value Engineering Conferences may be substituted for one of these staff
visits. Copies of division VEO staff Visit Reports shall be included in
the
4th Quarter VE Reports and should reflect the required visits to each
district. (Note: Any division VEO who has not submitted FY 95 Staff
Visit
Reports should comply).

7. The OMB Circular A-131 required

audit is being performed to validate
the
accuracy of agency reported Value
Engineering savings and to assess
the
adequacy of agency implementation
of its circular. This audit should
be
completed by Summer 1996 for the Corps
must ensure studies are performed and Program. Divisions and districts
reviewed in a professional manner.
Past audits have commented on the
lack of documentation for rejection
of
completed VE studies. DocumentatiOn
will include the technical reasons
for
rejection and the name of the individual
making the decision. Reasons
such
as "adequate project funds available,"
or "user rejected," are not
satisfactory. All VE studies and VECP
shall receive the same level of
technical and management review as any
other design or technical
modification. Rejections of any individual
savings of $1 million or more and rejectionsVE proposals with potential
on multiple proposals whose
potential savings in the aggregate is
$1 million or more must be
approved by the division commander. Proposed
rejections will be sent to
the MSC
Commander immediately (within 2 weeks)
after the District review of the
VE
study.
8. The Value Engineering Change Proposal
(VECP) Program needs additional
emphasis. This program has historically
produced less than 10 percent of
the total Value Engineering Savings. However,
proper emphasis can
increase
project quality and result in savings
greater than the total cost of the
USACE VE effort. Contractors should Pe
dated 15 May 1995, encouraged to utilizeoffered a copy of EP 11-1-4,
the VE contract clauses, and
assured that proposals will be given
a fair review.
9. All Value Engineering studies shall
be completed on the Value
Engineering Report Template (VERT) and
the Value Engineering Data
Information System (VEDIS) as a part of
the study
'ompleted reports will be submitted electronically documentation.
Kansas City District (CEMRK-VE) for incorporation or via floppy disk to
into the National
Institute of Building Sciences (NIBS)
Construction Criteria Base CD Rom
for access by all Corps Value Engineering
Officers, project managers and
sontractors.
10. Engineering Form 4607-R must continue
to be completed for each VE
3tudy
intil VERT/VEDIS are fully operational.
A copy of this form will be
cetained with district files and the original
sent to the division
)ffice. Where VE savings exceed $250,000
or the study has USACE-wide
Lnterest, a copy will also be furnished
to CENP-EV at HQUSACE.

11. Value Engineering savings shall only be reported through the Value
Engineering Program (Army Ideas for Excellence savings are reported
separately, and VEO should ensure that no double reporting occurs). All
VEO
shall validate/ensure that accepted value engineering proposals are
included in the final design before claiming savings.
12. USACE 40-hour VE workshop training is considered the foundation for
a
strong VE program and offers 3.2 Continuing Education Units (CEU) for
students. The high CEU should help in professional recertification. VEO
should annually update their lists of trained and non-trained personnel.
Any Corps employee whose expertise or position has potential to assist
in VE success should receive training.

Annex IV -

PROGRAM TO IMPLEMENT VE ANALYSIS IN A

GOVERNMENT AGENCY

A.

General considerations

1.

Purpose and Application

The purpose of the VE program is to improve the
quality and productivity of projects, promote
technical innovations, delete design elements that are
costly and unnecessary, requiring the application of
VE in the design of selected projects.
The Value Engineering Program will define minimum
requirements and provide leadership to establish,
manage and control the program.
The Program should be able to exclude certain projects
-such as those financed with funds for planning,
research and development, certain emergency projects,
and others- from the phase of project selection for VE
studies.

2.

Definitions
a.

Function.
Function is the purpose or use of a system or
thing.

b.

Life cycle cost.

The total cost of an item computed during its
useful life. This includes the initial capital
costs (highway right of way, planning, design,
construction), plus the costs of operation,
maintenance, modifications, replacements,
demolition, financing, taxes and disposition
associated with the project during its life
cycle.

c.

Value Engineering
Value Engineering is a professionally applied,
function oriented, creative and systematic team
approach, used to analyze and improve value in
construction - a powerful methodology for solving

Annex 4 - Page 1 of 8

problems and/or reducing costs.while improving

performance and quality requirements.
d.

The job plan

An organized plan of action to complete a VE
study, dividing the study in different phases.
The plan recognized for most agencies includes
five to seven steps.

e.

Value
An estimate of the most economic way to comply
with a function, independent of its application
to the project.

B.

Program procedures for VE Studies.

The VE Program will include procedures to assure that

the VS process be actively applied.
The VE procedures will require the identification of
those projects candidates for VE studies at the beginning
of the development of the annual investment program.
The VE program will establish specific criteria and
guidelines for the selection of projects to be VS
evaluated. Special consideracion must be givert to those
projects that have:
a.

recently shown substantial cost increases;

b.

complex designs or construction phases;

c.

large structures;

d.

specifications, standards or processes

particularly unique or experimental;

e.

repetitive elements;

f.

high land values;

g.

high maintenance costs;

The VE Program may allow some projects not to be

considered for VE analysis when the possibilities for
improvement and/or savings are very low.

Annex 4 - Page 2 of 8

The VE studies must follow a systematic process to

resolve problems, such as the Job Plan for VE. The VE
studies must be carried out by a consistent team of expert
professionals in the different disciplines that relate to
the project to be evaluated.
The procedures to establish in the VE program will
respond to the following general criteria:
1.

The studies can be carried out any time in the design

process, but is preferable at the feasibility level
(35% completion1), in order to be able to implement
valid VE recommendations without delaying the project.

2.

Each study must finish with a formal report defining

the functional options and recommendations of the VE
team to improve the project and reduce its total cost.
As part of the report's formal process, there will a
presentation of the recommendations from the VE team
to the client of the VE study, and the documents of
this presentation should be included in the final
report.

3.

4.

The VE program will also include procedures to assure

that an adequate documentation is kept of:
a.

the accepted -as well as the rejectedrecommendations;

b.

the projected or actual savings associated with the

recommendations;

c.

the total costs involved in the realization of the

VE studies.

VE Coordinators
The Program will have adequate personnel professionals trained in VE- to effectively coordinate
and control the VE effort.
The professional coordinators assigned to manage and
control the VE program, will have sufficient authority
to assure the implementation of the program, and to be
actively involved in all the phases of the study,
including the development of a VE annual plan.

Annex 4 - Page 3 of 8

S.

Use of consulting firms

The VE Program may contract specialized and
experienced consulting firms to conduct VE studies on
some projects and/or elements of the projects to
study.
The members of the consulting firm team must be
experts in their field, have preferable completed a
recognized VE workshop, and have previously
participated in similar VE studies.
The team facilitator must be an expert in VE, have
completed the requirements to comply with his
certification as a VE expert, or an equivalent
certification by a recognized organization.

Definitely, the VE Program will never contract a

consulting firm that is involved -directly or indirectlyin the design of the project.
It is recommended that a knowledgeable member of the
consulting design firm participates as member of the VE
team.
6.

Eligibility for financial support

The cost of zhe study of VE is related to the project

design and preparation, therefore is eligible -as local
contribution or direct technical assistance- for financing
within the financial programs of international development
organizations, such as The World Bank, that support this
type of activity.
7.

Format to be used for the VE reports.

The format of any VE study must shown:
a.

Cover of the study with information,

b.

History of the project, background,

c.

Potential areas of analysis,

d.

Sources of information and investigation,

e.

Existing design,

f.

Basic and secondary functions, FAST diagram,

Annex 4 - Page 4 of

Cost

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Potencial de reducci6n de costos y

costo de los cam)ios

CONSTRUCTION ADMINISTRATION S5RVICES

5403 WANETA RD

BETHESDA MD 20816 USA

301 229 0351

C.

g.

Actual method for cost estimates,

h.

Identification of alternative ideas,

i.

Cost estimates for the alternatives,

j.

Evaluation matrix,

k.

Proposed or suggested design, and

1.

Findings, detailed analysis and specific

recommendations.

Project Selection.

It is important to select projects that offer the

maximum opportunity to improve the value of the investments
through initial capital savings and savings duting the life
of the project. The same concept applies to the elements to
be studied within a project.
Figure 1 shows the time lapse considered most
appropriated to do the VE study or studies, as a function
of the potential savings and the implementation cost of the
suggested alternative.

Figure 1. opportunity of a VE study

Annex 4 - Page 5 of S

Another accepted and useful approach to project

selection and the items to be studied within the project,
is based in the curve of Pareto, known as the "Law of
distribution".
This curve is based on the principle that, in general,
a small percentage of the elements of a project approximately 20%- is responsible for almost 80% of its
costs.
It can be established then, that these elements (20%
of the project total) contain the most potential to improve
their value.
Not all the projects will be candidates for a
successful study of Value Engineering. The process of
project selection involves not only how the projects are to
be identified, but also the establishment of parameters
related with the VE objectives.
D.

Factors to be considered for project selection

The significant factors in the process of project

selection to be analyzed, are the following:
1.

Phase of design in which to do the VE study

Although a VE study can be done at any scage in a
project, selected projects should preferable be -as
much as possible- in the feasibility phase of design.

2.

Revision of the tentative work plan

Review the Work Program identifying as potential
candidates of VE evaluation those projects where the
cost of construction and the acquisition of land add
to more than three hundred (300) million Philippine
pesos.

3.

Authority to select the projects.

The Program of Value Engineering will have the
responsibility of identifying and developing the VE
annual work plan, consistent with the recommendations
here presented.

4.

The annual work plan may require to give priority to

the VE projects. The following criteria may be used to
determine such priorities:
Annex 4 - Page 6 of a

a.

All projects with an estimated initial cost of

construction that exceeds PP300 million,

b.

All projects that substantially exceed the

initial cost estimate,

C.

All those projects that involve multiple and

complex items, equipment or processes that
provide unique but expensive functions.

d.

All projects with items that use critical,

special or very expensive materials, the use of
materials available only as imports, or those
where their volume of production do not answer
the demand.

e.

Projects with items that require construction or

procedures of difficult manufacturing; those
projects that require special treatment of soils,
as in the case of expansive or collapsible soils.

f.

Projects with items that simply appear very

expensive to build, operate or maintain. Here it
is important the experience of the professional
that selects the projects to VE.
g.

Projects with important, complex structures, for

instance bridges, tunnels, retaining walls, etc.

Value Engineering techniques can be used to improve

the value of the 'Internal Rate of Return" at each aspect
of the Work program, including preliminary engineering,
traffic operations, maintenance, plans and specifications,
and design criteria.
S.

E.

Other concepts to be aware of for the selection and

grouping of the projects to VE are:
b.

projects with similar regional localization,

ideally with the same topographic and physical
conditions.

i.

projects of the same type of work or the same

nature

The Annual VE Work Plan

The Annual VE Plan will be dynamic, defined by the

general process of advance and development of the projects
Annex 4 - Page 7 of 8

in the pipeline. As a consequence, the Plan will require a

constant revision and actualization.
Significant factors that affect the Annual Work Plan
are the following:
1.

Activation dates
The Annual VE Work Plan should be effective on a
fix date to be determined

(it may be January

and to be in relation with the fiscal year.

"L)

It should also be interconnected with he

disbursement program of international development
organizations in the Philippines.
The process of project selection of-plans and
programs could then start around November 1St,
with the approval and final acceptance estimated
for the first of the year, each year.
2.

Plan update
The VE working plan should be updated every three
months.

Annex 4

- Page 8 of 8

Annex V -

SUMMARY OF A TWO-DAY

STUDY

FINDINGS

The following ideas were generated in a brief VS

exercise, using the brainstorming technique, on the
Cabanatuan By-Pass project. only a few functions were
tested.
#t

suggested Ideas

Function: Transfer Loads

1.
2.
3.
4.
5.
6.
7.
S.
9.
10.
13.
18.

Thickness redesign
Asphalt pavement
Asphalt concrete
Use composite
Treated cement
Soil cement
Reduce calculus coefficients
Lower pavement throughout*
Use geogrids
Lower pavement only on one way
Provide box culverts
Use asphalt in lieu of concrete pavement*

Function: Move vehicles

11.
12.
14.
16.
17.
19.
22.
43.

Use three lanes in lieu of four

Eliminate shoulders
Raise side roads
Keep same pavement level
Use metal culvert
Reduce width of carriageway
No by-pass, use existing highway
Reduce with of center island*

Function: Move people

15.
44.

Redesign pedestrian bridge

Bridge in lieu of tunnel

Function: Improve safety

20.
21.
23.
24.

Redesign pavement markers

Use barriers
Eliminate accesses and use for by-pass only
Eliminate trees in center island

Annex V - Page 1 of 2

Suggested Ideas

Function: Improve safety (cont.)

25.
41.
42.

Improve road signage

Use gravel in lieu of paved shoulders*
Eliminate frontage road*

Function: Span river

29.
30.
31.
32.
33.
34.
35.
36.
37.
3$.
39.
40.

Lowering bridge*
Stage construction
Steel in lieu of trusses
Use metal culverts
Shorter spans
Larger spans
Reduce shoulders at bridge
Use different foundation*
Narrower bridge
Delete one of the two parallel bridges
Combine two bridges
Build one three-lane bridge

Some of these ideas have been further evaluated anc

indicated their potential for substantial savings.

Annex V - Page 2 of 2

Annex VI - BRIEFING'S GUIDELINES

What is YE,
Value Engineering?

Value Engineering, or Value Analysis, is a

professionally applied, function oriented,
creative and systematic team approach,
used to analyze and improve value in
construction - a powerful methodology for
solving problems and/or reducing costs while
improving performance and quality requirements.
By enhancing value, Value Engineering
increases customer satisfaction and adds
worth to investments. VE applies to any business
or economic sector, including infrastructure,
transportation and building construction.
VE reduces construction costs by preventing
unnecessary items, focusing on obtaining the
required project characteristics and improving

functionality while reducing total cost. The final

objective is to provide a balance of quality,
performance and functionality minimizing
construction, operation and maintenance
costs. It is applied to a wicle variety of private and
public projects in the USA and the world.
Public Law 104-106, signed in 1996, requires
from each executive agency "cost-effective
VE procedures and processes"; annual
savings in federal projects averaged more
than $2 Billion, a 3 to 5% of total
investment costs.
SAVE International, is the professional society
devoted to the advancement and promotion of VE.
CAS is a recognized member of SAVE and its
principal and main associates are all Certified
Value Specialists, CVS, registered by SAVE in the
United States of America.

Why do Cost
Overruns exist
in a Project?

The perfect project does not exist; the ten best

professional firms, facing the same problem and with
the same parameters, will develop ten different
projects with ten different costs; every one of these
projects could improve with the ideas of the others.
Projects can be improved, because they
always carry unnecessary components.
Some of the recognizable causes why variations in
costs occur are due to differences in:
* planning and development criteria and philosophy;
* amount of time allowed to developing the project;
* organizational capabilities, in house coordination;
* honest misconceptions, biased thinking;
* habitual thinking, tendency to use proved designs;
* assumotions made at various times during the
design process;
* creative thoughts affected by lack of intellectual
and/or professional stimulus;
* difficulty in being scientificaliy "up to date"
*

political circumstances

project approval by owners, users, banks, etc.;

and many more impossible to enumerate here.
All projects are subject
objective of the studies
is to improve a project
eliminating unnecessary

to Improvement; the
of Value Engineering
by reducing or
costs.

Value Engineering
methodology

The main difference between Value Engineering

and the traditional methods of cost reduction, is its
focusing on functional analysis.
The essence of the VE discipline isthe eva!uation of
the functions of a system or product, that is to
analyze what this system or product supposes to
do or perform under which circumstances.
After identifying the different functions, the
methodology of Value Engineering develops,
through creative techniques, alternative ways of
reaching the same function at the lowest
possible cost, maintaining or improving at the
same time the performance of the project.
If we apply the Cost-Benefit analysis
equation to the project, Value Engineering
increases its internal Rate of Return by
reducing costs while keeping or adding
benefits.
This approach requires valid and concrete responses
to the six following questions:
V/hat
* What
* What
* What
* How
* What
* How
a

is It?
does It do?
must it do?
is it worth?
much does it cost?
else will do the same function?
much will it cost?

Value Engineering requires a team effort by

managers, professionals, technicians, speciallsts and
all those who participate in the decision making
phase of the construction process.
CAS

a few samples of our work ...

the following ideas are the result of Value Engineering studies performed by CAS;
given their ingenuity and efficiency, they appear as simple and obvious, however
were evident only after a methodical and rigorous functional analysis
(the names of the affected parties are protected)

AS DESIGNED

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VE ALTERNATIVE

Samples of Value
Engineering alternatives
suggested by CAS
*

Regional Garage
Chicago, Illinois, U.S.A.

a) As Designed
X

Building occupies two blocks;

main sewer line lies through
the site and requires to be
relocated.

Cost as designed:
$4,444,540
this is the cost of the sewer
relocation.

b) VE Alternative
*

Separate the building

according to its functions,
keeping the garage on the
West side, and the
administratibrn, maintenance
and repairs on the Eas, side;
main sewer line remaihs on
its original position.

Cost of alternative:
$146,847
this is the cost of building
new exterior walls and
connectors between the two
wings of the building.

c. Advantages
* Savings in initial
investment of
$4,297,693
*

Reduced total construction

time and eliminates a trade.

Better fire protection

separating the garage from
the administrative functions,
lower insurance costs.

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Samples of Value
Engineering alternatives
suggested by CAS
Maintenance

Hangar

Maryland, U.S.A.
a) As Designed
* The plane rolls on its own
wheels into the hangar; it
requires 24,437 square feet
of covered area, with a 180
foot wide hangar door.
Cost as designed: $3.900,050
this is the cost of building an
addition to the existing
hangar of 24,437 square feet
and installing a 180' door.

b) VE

Alternative

The plane is introduced to the

hangar at a- angle, resting
its wheels on specially
designed carts on rails; it
requires 11,842 square feet
of covered area and a 160'
wide hangar door.
Cost of alternative:
$2,945,417
this is the cost of building a
smaller addition and
installing a smaller hangar
door.
c. Advantages
*

Savings in initial
investmant of $954,633

Present value of savings

during life cycle, due to
lower maintenance area,
$1,367,090

AS DESIGNED

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Samples of Value
Engineering alternatives
suggested by CAS
*

General

Hospital

Costa Rica, Centroamerica.

a) As Designed
.

General hospitai complex for

360 beds, designed on a
rectangular grid placed
parallel to the main street
and at an angle with
topographic lines (grading)

Cost as designed:
$2,345,517
this is the cost of earth
moving - filling and
excavation - needed.

b) VE Alternative
grid counterclockwise
31 placing it parallel with
the topographic lines
(grading) and at an angie
with the main street to the
front.

*Rotate

Cost of alternative:
$476,673
this is the cost of fillings and
excavations needed after
rotating the basic grid,
computed as the optimum
position.

c. Advantages
*

Savings in initial
investment of
$1 ,888,844

* Important reduction in soil

erosion, smaller impact on
the environment.

VE ALTERNATIVE

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AS DESIGNED

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A T

VE ALTERNATIVE

Samples of Value
Engineering alternatives
suggested by CAS
a

Housing Development
Puerto Rico, U.S.A.

a) As Designed
*

Individual townhouses with

common walls at 600 with
the front building line;
average length of common
walls is 60'.

Cost as designed: $61 6,265

this is the cost of the common
walls at 60'.

b) VE

Alternative

Keep the townhouse layout,

but with common walls at
800 with the building front
line; length of common walls
is now 14.40 meters.

Cost of alternative:
$493,012
this is the cost of building
shorter common walls at 80
with the front line.

c. Advantages
* Savings in initial
investment of $123,253
*

it reduces the length of curb

per dwelling unit and
therefore the extension of
water, sewer, electricity,
gas and telephone lines.
i keeps the shadow effect
it
manifested by the architects
with similar breaks between
dwelling units.

Samples of Value
Engineering alternatives
suggested by CAS
.

National Highway

N0 127

Sector Mioiones-La Hierra

Entre Rios, Argentina.
a) As Designed

. Granular soil 15 cm,

granular subbase 15 cm and

base 15 cm.

Cost as designed: $31i.08/m2

this is the cost of the base and
subbase as estimated.

b) VE Alternative
*

Use a high tension structural

geogrid (Tensar) to reinforce
the granular base and
subbase.
Cost of alternative:
$29.00/m2
this is the cost of reduced

WM

fi

~~thickness

__________

base and subbase

pluszahthe= cost
. fi ofllithe
|
geogrid.
a>otlx
stm

C. Advantages
////.

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_ ' i , , Savings in initial

investment of $635,041

C,l,WA,;TA

ru

Reduced total construction

time allowing an earlier use
of the road sur face.

Reduced thickness of base and

subbase, with the consequent
reduction in volume of
enbankments and drains.

Structural geogrids allow tha

reduction in the thickness of
base agregate layers with no
loss in capability.

RPTH"CAFA AAr)orxsA

owrnifltoKbcsro

mm

VE History
Beginnings
Be94.nningS

Value Engineering had its origin during

World War II at General Electric Company,
where it was noticed that many of the
substitute materials (forced by wartime
shortages for war critical materials)
being used in equipment reduced costs,
yet maintained, or in some cases
improved, the performance of the product.
At that time, Harry Erlicher, who
observed many of these occurrences,
thought that perhaps such substitutions
in the product could be made in a
methodical and deliberate manner rather
than as a result of material shortages or
other compulsory changes.
Erlicher called on Lawrence Miles, who
worked for him, and gave him the task of
answering this question.

Larry Miles

By education and training a professional

engineer, during the second world war he
was charged with procuring material for
manufacturing products that had a
relative low milita-y priority.
Being not able to obtain the parts needed
through traditional methods, he decided
to start specifying the materials needed
based on their function rather than on
their physical description.
Be noted that, free from the confines of
a named part, people were being
innovative in the selection of products.
On the other hand, he observed that the
cost of the parts thus specified was
lower; they performed sometimes better
and were readily available - which was
the first consideration.
This concept is similar to the "Regulate
by Results" concept utilized in some
building codes and zoning regulations.
Instead of defining the characteristics

of the product, the product needed is

defined by its use, or 'function."

Functions

See Lawrence Miles Curriculum vitae in

Appendix
The decision to use functions rather than
named components was producing beneficial
results.
It produced the required results of
reducing costs while retaining (or
improving) the required functions of the
product.
Lawrence Miles took the first steps into
the Value Analysis process and GE decided
to foster its early development, sharing
this initial effort with others and
forming a research group headed by Larry
Miles; a function based decision making
process was started.
Mr. Miles initially intended to use this
process for procurement decisions and
generation of manufacturer products but
GE considered it as a possible management
standard practice.
Subsequently, Mr. Miles developed what is
known today as value engineering.
It is said that he did not know how to
call this technique and not named it. His
manager said let's call it Value
Analysis.
Today, Mr. Lawrence (Larry) Miles is
considered the father of the value
Methodology.

THE

JOB

PLAN

THE SEVEN PHASES

ORIENTATION

1. INFORMATION

2. SPECULATION

3. ANALYSIS

4. DEVELOPMENT

5. PRESENTATION

6. IMPLEMENTATION

7. FOLLON-UP

ORIENTATION

PROCEDURE

SUBMIT IDEAS FOR PROJECTS

EVALUATE THEIR POTENTIAL FOR RETURN ON INVESTMENT AND FOR
TIME TO IMPLEMENT RESULTS
SELECT PROJECTS FOR PLANNING
PLAIT THE SPECIFIC PROJECT
APPOINT THE TEAM
ALLOCATE RESOURCES
SET GOALS
SET MILESTONES
RECONFIRM PROJECT POTENTIAL
ESTABLISH PRIORITY
APPROVE PROJECT START

Figure 5.0 - Orientation Phase of the Job Plan

1.

INFORMATION PHASE

QUESTIONS
WHAT IS IT?
WHTAT DOES IT DO?
WHAT MUST IT DO?
WHAT DOES IT COST?
WHAT IS IT WORTH?

PROCEDURE

USE GOOD HUMAN RELATIONS

GET ALL THE FACTS
GET INFORMATION FROM THE BEST SOURCES
OBTAIN COMPLETE INFORMATION
PERFORM FUNCTIONAL EVALUATION
DEFINE FUNCTIONS
DETERMINE COST
DETERMINE WORTH
COMPUTE VALUE INDEXES

pigure 5.1 - Phase 1 of the Job Plan

Law nmo mandates Value Engineering

Public Law 104-106 was signed on February 10, 1996. It reads as

follows:
VALUE ENGINEERING FOR FEDERAL AGENCIES

SEC.

4306.

(a)

USE OF VALUE ENGINEERING.

- The Office of Federal Procurement

401 et seq.),

Policy Act (41 U.S.C.

as amended by section 4203,

is further amended by adding at the end the following new

section:
"SEC. 36 VALUE ENGINEERING
- Each executive agency shall establish and maintain
cost-effective value engineering procedures and processes.

(a) IN GENERAL.

"(b) DEFINITION. - As used in this section, the term 'value

engineering' means an analysis of the functions of a program.,
project, system, product, item of equipment, building, facility,
service, or supply of an executive agency performed by qualified
agency or contractor personnel, directed at improving
performance, reliability, quality, safety, and life cycle
costs."

(b)

CLERICAL ANENDMENT.

- The table of contents for such Act,

contained in section l(b),

following new item:

is amended by adding at the end the

"Sec. 36.

CONSTRUCTION ADMINISTRATION SERVICES

Value Engineering."

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