Publication Number: FHWA-RD-01-060
Date: January 2001

Value Engineering Improves Quality, Cuts Costs

Using a process known as value engineering (VE), States are saving hundreds of millions of dollars each year on highway infrastructure projects. This process means that when a State is developing a highway project, the transportation agency and the contractor reviews the project's features and looks for ways to improve quality, foster innovation, and control costs. In fiscal year (FY) 2000, States collectively saved approximately a billion dollars as a result of performing VE studies, up from $880 million in FY 1999.

"Value engineering fosters teamwork by involving construction, design, and maintenance staff," says Donald Jackson, Federal Highway Administration's (FHWA) VE Coordinator. "It allows States to build highway projects at the lowest cost while still maintaining the desired function and keeping or improving the quality." A VE job plan typically includes a number of different phases, including:

• Selecting and investigating a project;

• Analyzing the project's function and cost;

• Brainstorming and developing alternatives to the existing design plan;

• Presenting and implementing the alternatives when they are considered advantageous; and

• Auditing the results.

While value engineering has been around for decades, its use by the highway industry has greatly increased in recent years. Much of this upswing came from a 1995 Congressional regulation mandating the use of VE on all Federal-aid highway projects of $25 million or more. FHWA has also increased the amount of VE training and technical assistance it provides to States (see sidebar) and more and more States have established their own VE programs.

Three States-California, Florida, and Washington-were recognized by FHWA in 1999 for their "exceptional accomplishments in applying and promoting value engineering." California was the first State highway agency to demonstrate the benefits of VE, having started its program in 1969. From 1994 to 1999, California conducted more than 200 VE studies, resulting in over $400 million in savings. The DOT has also put together two guides on VE: Value Analysis Team Guide and Value Analysis Report Guide. Both guides can be found on the Web at www.dot.ca.gov/hq/oppd/value/. A value analysis procedure manual and concept manual are also currently in the works.

Florida DOT started its VE program in the mid-1970s and now has the largest program of any State highway agency. From 1994 to 1999, the State has conducted more than 320 VE studies and saved in excess of $100 million each year. Washington State's program, meanwhile, began in 1984. Between 1984 and 1995, Washington State DOT performed 121 VE studies, realizing a net savings of more than $15 million. Following improvements made in 1996 to its VE program, the DOT saw a marked increase in VE implementation. Between 1996 and 1999, the agency conducted 48 studies and saved $132 million. The DOT has also started a Cost Reduction Incentive Proposal (CRIP) program, which is aimed at increasing the use of VE. Contractors can submit a CRIP to the DOT for their projects, with those using VE to achieve cost reductions eligible for 50 percent of the savings generated.

The American Association of State Highway and Transportation Officials (AASHTO), in cooperation with the U.S. DOT and California DOT, will be holding a Value Engineering Conference on July 10-13, 2001, in San Diego, California. The conference will feature sessions on starting and maintaining a VE program and advanced tools and techniques for VE, as well as case studies from different States. For more information on the conference, contact Earl Burgess at California DOT, 916-653-4436 (fax: 916-653-1527; email: earl.burgess@dot.ca.gov).

For more information on value engineering, contact Donald Jackson at 202-366-4630 (fax: 202-366-3988; email: donald.jackson@fhwa.dot.gov).

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