United StatesDepartment of Energy

Value Engineering CONTRACTOR PERSPECTIVES

Bruce Lenzer, CVSL, FSAVERichard Harrington, CVSL, CH2MHill

HISTORICAL PERSPECTIVE

   1980 – 1987 Programs started at Field Office Levels, little or no central coordination or reporting Some contractor initiated VE due to VE Clauses in

contracts 1987 – 1992 Program expanded with HQ coordination and

support 1990 Some Field Offices implemented VE policy, procedures,

and requirements with their prime contracts 1992 High visibility at the Superconducting Super Collider,

invigorated focus of VE use in Scientific R&D

HISTORICAL PERSPECTIVE

   1993 – 1996 Office of Field Management, (now Office of Engineering and Construction Management) issues DOE Orders: 413.3B “Program and Project Management for Acquisition

of Capital Assets” (includes requirement to perform VE as part of Stage Gate Process at Critical Decision 2)

DOE O 430.1A “Life Cycle Asset Management”

DOE P 413.2 “Value Engineering Policy” For implementing PL 104-106

HISTORICAL PERSPECTIVE

   1996 – 2000

Energy Facilities Contractors Group (EFCOG) published Value Management guide

HQ VE website developed for DOE Office of Engineering and Construction Management Website included links of project reports and cost

savings or avoidance summary dataA DOE HQ Champion utilized CVS VE Specialist to

gather historical reports from 5 – 7 years ~ $750M Savings & ~ $2B in LLC cost avoidance

Several high visibility and successful VE studies Al Gore Golden Hammer Award Customer Partnering Awards from Deputy Secretary

for Facility Management

HISTORICAL SUCCESS

Hanford Nuclear Reservation: 1990 – 1996

Average 48:1 ROI Completed VE Projects contributed to ~$30M

additional contractor award fees

1996 – 2002 Completed VE Projects contributed to ~$1B

additional contractor award fees

HISTORICAL SUCCESS

VE Applications:

Design and Construction

New and Existing Facility & Systems Renovations/Upgrades

Scientific Equipment, Decision Analysis, R&D

HISTORICAL SUCCESSVE Applications – Continued -:

Processes (Soft VE) including: Contract Requirements Supply Chain Configuration Management QA – Corrective Action Management Calibration Program Engineering & Design Processes & Standards Information Systems Project Delivery Systems Work Management Maintenance Fabrication Materials Management Telecommunications

8

SOFT VE – BUSINESS PROCESS RESULTS

Supply Chain Optimization 2000 $ 58M (5yr)

Supply Chain Validation 2001 $ 14M/Year

Integrated: Materials & Supply Chain Mgmt. $ 100M/(5yr)

Work Management & Work Control $ 10M (5 yr)

Predictive, Preventive Maint. & Calibrations $ 30M (5yr)

Quality Corrective Action Mgmt. $ 20M (5yr)

Contract Requirements Value Analysis $ 53M (18yr) Contract Cost Avoidance

ALL RIGHTS RESERVED 2004 Synergy Value Solutions, LLC

HISTORICAL SUCCESS

VE Applications – Continued -:Hybrid Function Diagram:

FH MATERIALS MGMT COMBINED.pdf

PROGRESSIVE STATUS1996 – Present

Decline in VE contract requirements and reporting & use except:…..for use on projects subject to DOE O 413.3B

“Program and Project Management for Acquisition of Capital Assets”

VE Process watered down to punch the ticket Example….one project used VE on Civil & Facility

Engineering, but not technical components. Tech. components comprised 80% of project cost

Required by some contracts, but not as muchFew if any voluntary uses

PROGRESSIVE STATUS Perception of Project Managers that projects will lose

budgets if VE used Fewer VE professionals around the complex 1996 Sunset of OMB Circular

OMB Auditing stopsDiminished HQ supportUntrained, unqualified, uncertifed personnel have

allowed VE to become synonymous with cost cutting 1997 – 2011 VE became synonymous with other

improvement techniquesNon-certified consultants are performing similar

processes, but not VE….Some titled the work as VE

PROGRESSIVE STATUS

Focus on using flavor of the month e.g. SixSigma

Cases where certified VE consultants not using function

analysisPerforming 1 and 2 day studies doing brainstorming

and evaluation only ….. Not true VE Studies

DOE Office of Engineering and Construction Management eliminated VE Website

Loss of champion at DOE HQ and Field Offices…. No succession planning to continue VE program

FUTURE OF DOE VE/VM PROGRAM

2006 EFCOG Executive & DOE Management awarded DOE Complex Best in Class VE Study & Results2012 recent VE success in DOE Department of Environmental Management has drawn attention to the need re-educate DOE Complex on how VE can make a difference to reduce schedule risk, reduce worker exposure, and saving $millionsRe-issuing VE expectations in Public Law 111-350Re-establishment of OMB A-131 Leverage Federal Acquisition Regulation

Part 48 & 52

FUTURE OF DOE VE/VM PROGRAM

Federal Budgets are tight, and expected to be tight, for the foreseeable future

These facts give impetus for resurrecting a complex wide DOE VE program

Timing is good for DOE to reestablish an effective program

FUTURE OF DOE VE/VM PROGRAM

Lawrence D. Miles Value FoundationNew Website

http://www.valuefoundation.org/DOE Process Example