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Value Engineering

FY 2009 Value Engineering Summary Report

Best Practices

The following discusses the best practices that were provided by the State Departments of Transportation (DOT) with the FY 2009 Accomplishment Report:

VE Program Management and Monitoring:

Marketing the VE Program includes collecting information on the results of VE analyses and effectively communicating these results throughout the transportation agencies administering the program.  In addition to the information provided to the FHWA, the Georgia DOT provides annual reports to the Governor’s Office and the State Legislature to further highlight achievements.  Similarly, the Kentucky Transportation Cabinet noted that presentations to the Cabinet leadership help raise visibility with the VE Program. 

The centralized or de-centralized structure of the States’ transportation departments can play a role in the success of the VE Program.  The Indiana and Wisconsin DOTs manage the VE Program at the “central office”, ensuring uniformity in program implementation.  Caltrans also has found that centralizing their program through HQ Design is the most effective practice for managing aspects of the program.

Several agencies reported on their successful use of data bases as recommendation tracking mechanisms.  We monitor the success of VE studies in the field and interact with construction to confirm the application of VE recommendations.  The Alabama DOT’s program management team indicated that building and sustaining a positive and proactive working relationship with their Construction team is crucial to confirm the application of VE recommendations

Training and Education:

As reported in FY 2009, a total of 494 professionals received training in Value Engineering - 448 State DOT representatives; 16 FHWA representatives; and 30 professionals from other organizations. The most commonly described approach to conducting training was either through the National Highway Institute's VE workshop, or through short-duration orientation presentations for technical staff and short-duration workshops.  Several states indicated that these workshops are regularly scheduled (annually or biennially) to maintain a substantial list of trained VE participants.  The Georgia and Indiana DOTs both explained that to ensure that the VE process is best understood and appreciated by the design staff, they regularly train their Project Managers in the VE technique.

Scheduling, Planning and Coordinating VE analyses:

The first phase of the VE Job Plan is project selection, and the States are encouraged to establish processes for the identification of candidate VE projects.   The Arkansas Highway Transportation Department noted success in using the updates to their Statewide Transportation Improvement Program as a way to keep their VE Program updated as well.  The Tennessee DOT’s Project Management System is reviewed every two months to identify all prospective study projectsElsewhere, the Texas DOT’s Design Division coordinates with the Finance Division to obtain a breakdown of all projects (by district) scheduled in the next few years that meet or exceed the Federal thresholds to flag to the district that VE analysis will be needed for a particular project.

The Minnesota, Oregon, and Pennsylvania DOTs each noted that in 2009, the VE-related project activities have been incorporated into their pre construction/design scheduling programs, ensuring that the analyses are scheduled and completed in as timely a manner as possible and also offer the highest potential for quality improvements and cost savings.

Composition of VE Analysis Teams:

States continue to indicate benefits by using both consultants and in-house resources to conduct VE analyses—as was the case in FY 2008, approximately 60% of the analyses conducted utilized consultants.  One common benefit noted for utilizing consultants is the ease with which analyses can be planned and coordinated.  The Wisconsin DOT noted a practice of using both consultant and in-house expertise on VE teams to provide diversity of perspective. Caltrans also contracts out the Team Leader role in the VE analysis. By contracting out, Caltrans can hire Certified Value Specialist (CVS) that are experts in delivering a successful VE analysis.

Timing of Studies:

The FHWA’s 2010 VE Policy states, “For maximum benefit, VE analyses should be conducted as early as practicable in the planning or design phase of a project, preferably before the completion of preliminary (30-35%) design”.  This is the noticeable trend with an increasing number of states—approximately 60% of the VE analyses completed in 2009 were conducted before completion of preliminary design.  The Wyoming DOT succinctly described the challenges associated with achieving the “perfect” schedule for the VE analysis:  “If a project was evaluated late in the design phase, it has been found that the number of viable recommendations is reduced. Too early in the design phase limits that number of viable recommendations because of the lack of solid data.”  The responses from other states provide valuable insight regarding their preferred timing of analyses.

Caltrans identified the bulk of their cost savings by conducting analyses in the Environmental phase of the project. Out of the 31 studies performed during the environmental phase, Caltrans achieved a 9% savings.  The Colorado DOT and several other states also perform VE analyses in the NEPA stage to facilitate the ease with which recommendations can get incorporated. 

The Georgia DOT explained their preference to do VE analyses either during the Environmental phase or the 30% Design phase. Planning phase analyses are preferred for projects with multiple alternates, as the VE Team can give “pros” and “cons” for each alternate, although it is more challenging to provide accurate savings with only planning cost estimates. When VE Studies are done during the Environmental phase, cost estimates are usually more defined, an alignment has been identified, and the VE Team has enough information to provide recommendations and projected savings. It is easier to accept recommendations because the plans are still very preliminary at this point. When VE is conducted up to the 30% Design phase, the VE Team has a well defined cost estimate, and the plans have enough detail that the team can create acceptable alternate designs.

The New York State DOT’s experience echoes that expressed by the GA DOT:   Proper timing helps to ensure that recommendations generated through a VE study do not cause significant impact on the project schedule. In general, the earlier VE is applied, the greater the potential for savings.

Other responses addressed both the drawbacks and the benefits to completing VE analyses later in project development, citing applications when a later VE can be effectively scheduled.  The Georgia DOT indicated that their VE Studies done beyond the 60% stage often focus more on constructability, staging and specification issues. Conducting a VE analysis towards the end of Preliminary Design (60%) has typically been beneficial for the Louisiana DOT since it coordinates well with our already established Plan-in-Hand" meeting which gives most of the design team members an opportunity to respond to the VE Recommendations.

The Montana DOT conducts VE analyses in later design phases generally when the projects are not likely to be immediately funded due to high project costs.   When this is the case, the “late design” VE analysis can help identify evidence of “scope creep” and propose ways the design can be refined to better meet the available budget.

Several other states referenced their concerns that when studies are performed late in the design phase and close to the letting date, it is more difficult to implement recommendations.  Interestingly, the Virginia DOT has conducted reviews to compare cost savings and quality improvements resulting from studies being conducted at various stage of project development.   The VDOT found the results to be comparable.

Application of VE in Design-Bid Projects:

As was reported with the 2008 Accomplishment Report, VE analyses conducted prior to the issuance of the Request for Proposal (RFP) document typically review a 30% complete set of project documents.  Project milestones other than 30% are also mentioned.  The Massachusetts DOT aims to develop the design-build project to a level of about 20% design prior to issuing the RFP. At that stage the project has a defined concept, scope and estimate, as well as, the permitting process nearing final approval. Adequate level of documentation is available at this stage of design to conduct an effective VE analysis.

Similar to responses received last year, agencies including the Utah DOT, the Washington DOT, and the Eastern Federal Lands Highway Division, all indicate that a successfully conducted VE analysis can greatly improve the quality of the RFP document itself. 

The Louisiana DOT conducted VE analyses on Design/Build projects for the first time in 2009. In one VE Study involving two similar D/B projects, we found it particularly useful to do the two side by side so that we could compare and contrast the two RFP's. This helped in spotting additional recommendations for both RFP's.

Project Performance Factors and Measures Evaluated During VE:

VE recommendations are implemented because they enhance the performance of the project with zero or minimal increase to cost, or, in the best instances, enhance performance at reduced cost. As previously mentioned, the FHWA’s VE Accomplishment Report highlights the number of approved recommendations that directly benefit typical performance indicators such as Safety, Operations, Environment, and Constructability.  The States were asked to describe how these project functions are typically addressed during the Investigation, Speculation and Evaluation phases of the VE analysis, and to identify other factors and measures normally used.  Generally speaking, the VE teams have the latitude to investigate project factors to best meet the needs of the projects being analyzed, but several states provided specific details.

The Caltrans’ VE Process defines five standard functional performance measures:   Mainline Operations, Local Operations, Maintainability, Constructability, and Project Schedule.  The VE team expends a great deal of effort to quantify these functions. During the Pre-study and Investigation phases, the importance of each function is determined based on details specific to the project being studied, and a percentage is assigned using paired comparisons. Then during Development and Evaluation, the alternatives are measured against the baseline functions to determine the Value (Performance divided by Cost) of the alternative.

The NJDOT utilizes priority rankings from their various management systems (Bridge, Drainage, Congestion, Pavement, Safety, etc.) for project problem statements. These problem statements are generally revisited during the selection phase of the VE analysis.

The Ohio DOT provided two detailed examples of project factors and evaluation measures: 
Maintenance of Traffic during construction

  • Time delays from lane or ramp closures
  • availability of a detour
  • inconvenience to traveling public
  • shortened construction period

Addition/Removal of an Interchange

  • Economic impacts to the adjacent areas
  • distance to next available interchange
  • maintenance cost savings to the DOT
  • safety to the traveling public,
  • traffic volumes

As part of the safety factor, states including Montana DOT and New Mexico DOT measure pedestrian and bicycle-related crashes in addition to vehicular incidents.  In other areas, Montana measures road user costs with their “traffic flow” factor, while New Mexico focuses on a reduction of land takings with a right-of-way factor.

Integration of VE with Other Analysis Techniques

The FHWA VE Accomplishment Report for 2007 identified a number of states that were integrating the VE technique with other project quality and cost review processes.  As was reported at that time, the Washington DOT continues to experience success with the combining of Cost Risk Assessments and Value Engineering Analyses.  Other agencies including the Florida, Louisiana, and Utah DOTs and the Eastern Federal Lands Highway Division are each employing risk analyses to support VE analyses.

Other Applications for VE

The VE technique need not be applied exclusively to the design of a transportation project. The 2009 Accomplishment Report provides examples from several states that demonstrated the successful application of VE to a variety of programs, processes and standards. Each of these applications also can have a broader positive influence on the successful delivery of the Federal Aid Program.

In 2009, Caltrans conducted two VE analyses on their Document Retrieval System (DRS), an archive database storing project As-Built data that is widely used by the agency.   The first analysis focused on determining “The Value of DRS” and the second evaluated how, why and who is responsible for the DRS support, both technically and financially.  These analyses determined that DRS continues to remain valuable to Caltrans and may be utilized to update other Caltrans information management policies. 

The Missouri DOT conducted a study of the bid letting process with the purpose of identifying and correcting process inefficiencies and unnecessary redundancies.

The New York State DOT conducted a VE Study dedicated primarily to Work Zone Safety. This study varied considerably from more traditional VE studies in that savings were not measured in dollars, but rather safety consideration/enhancements. Team participation included representation from NYSDOT, construction industry and the State Police.

Value Engineering Change Proposals

In concert with sharing nationwide best practices and success in implementing VE during design, the States were again asked to share information regarding their successful practices that encourage effective implementation of Value Engineering Change Proposals (VECP) after award of the construction contracts.

From a program coordination standpoint, the Alabama DOT and the Kentucky Transportation Cabinet each cited that sustaining close working relationships between the VE Coordinators and their construction offices is essential to effectively promote the advancement of VECP recommendations.  The Pennsylvania DOT formed a cost containment team with the contracting industry and the FHWA to discuss issues with VECPs that led to changes in the timeliness of processing and an appeals process.   The New Hampshire DOT noted that, on oversight projects, having a representative from the FHWA Division office participate in the VECP review was beneficial as it assisted in providing hands-on training and provides a level of oversight for the processes used.   Their Construction Bureau is proactive in ensuring an adequate number of other contacts are established in the Department and Division office (Bridge, Environment, Materials, Traffic, etc) for each VECP.

At project Pre-Construction meetings, the Delaware, Florida, and South Dakota DOTs each highlight the VECP program and encourage successful bidders to submit proposals for the states’ review.  Because the schedule to review and make decisions on implementing VECPs can critically impact the projects’ construction schedule, the Louisiana DOT utilizes an electronic submittal and review process to provide more timely responses to the contractors proposing the changes.  As part of a “check and balance”, the Missouri DOT requires that the authorization for rejection of a VECP is housed at a higher level within their organization than the authorization for approval.   

To foster as many innovative proposals as possible, the Georgia and New Jersey DOT have revised their specifications to remove restrictions and provide further flexibility as to what VE Change Proposals will be considered.

More Information

Contact

Ken Leuderalbert
Office of Program Administration
317-226-5351
E-mail Ken

 
 
Updated: 07/16/2014
 

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United States Department of Transportation - Federal Highway Administration