Value Engineering: Mistaken Identity?

Value engineering (VE) is an often-misunderstood discipline. Part of the confusion stems from the use of VE in two very different contexts.

A contractor-originated deduct change order on a public project is formally called a value engineering change proposal (VECP). But a VECP should not be confused with the formal VE study, conducted by a certified value specialist (CVS).

A contract to provide the federal government with construction, manufacturing or services costing more than $100,000 is required to have clauses that govern the VECP. This language is enshrined in the Federal Acquisition Regulation (FAR), Parts 48 and 52.

Here, the contractor may come up with a contract change that both the government agent and contractor agree saves money. It need not come from a formal VE study.

The savings are usually divided equally, but sometimes more than half goes to the contractor. The contractor receives a check for its share; the feds reduce the contract by their share. The original contract's fees, however, are not reduced.

The contractor must identify this type of change order as a VECP in order for it to be evaluated as such under the VECP language in FAR; otherwise, the contractor won't receive a share of the change order savings.

A VECP, however, should not be confused with a formal VE study. Invented in 1947 by Larry Miles, VE is a design review process conducted by a CVS—before the construction contract is even let out for bid.

The value engineering profession includes relevant certifications, professional standards and an ethics code. Its governing body, SAVE International (SAVE-I or the Value Society), is an international society recognized in more than 40 countries.

The certification process to become a CVS includes a minimum two years full-time practice of certified value studies using VE's essential tool: the value job plan. The job plan maps out what is typically a 40-hour, five-day working study or seminar and must cover specific materials to be recognized as a VE study.

A VE job plan usually has the six steps listed below, which are preceded by a pre-study and followed up with a post study.

Once an owner—public or private—decides which aspects of a project might be improved, the CVS assembles a team of four or five senior professionals, usually ones who have not been involved in the generation of the design. The VE team will include professionals with expertise in the disciplines under review. For example, a team that is reviewing an unusually high estimate for an office building's drainage system might include a soils expert, a structural engineer, an architect, an owner representative and a mechanical engineer. The VE effort is separately budgeted for and paid as a separate professional service.

VE is the only management methodology required by law for the federal government. There is a complete set of federal regulations for VE in FAR Parts 49 and 52, "Value Engineering." In addition, the Office of Management and Budget (OMB) issued Circular A-131, "Value Engineering," May 21, 1993, to executive agencies and departments describing how to apply VE.

For a more complete description of VE methodology, visit the SAVE-I web site at www.value-eng.org where they will find the "Value Methodology Standard" developed by John Bryant and the Paul Revere Chapter of SAVE-I.

VE often gets a black eye due to the misapplication of its name to contractor cuts in the field. Its proper application, however, should not be abandoned or scorned, as it can ultimately lead to a more satisfying end result than leaving it in a contractor's hands. Conducted in the right way and with the appropriate personnel, VE studies have an excellent track record for reducing project costs while maintaining a quality product.