Federal government adopts Value Engineering policy to improve program and project value to the taxpayer

The U.S. Office of Management and Budget (OMB) has issued the final revisions to Circular No. A-131, Value Engineering. The Circular was published in the Federal Register on December 26, 2013.  Program and project management professionals should take interest in this development as Value Engineering is a proven process that can significantly improve program and project value of all kinds.

What is it?

OMB Circular A-131 provides guidance to support the sustained use of value engineering (VE) by Federal Departments and Agencies to reduce program and acquisition costs, improve performance, enhance quality, and foster the use of innovation. Agencies are required to maintain policies and procedures to ensure VE is considered and integrated, as appropriate, into the planning and development of agency programs, projects, activities, as well as contracts for supplies and services, including performance based, architect-engineering, and construction contracts.

Value engineering, which is also referred to as value analysis, value management, value planning, or value control, is a methodology for analyzing functions of an item or process to determine “best value,” or which is represented by an item or process that consistently performs the required basic function at the lowest life-cycle cost while maintaining acceptable levels of performance and quality. VE contributes to the overall management objectives of streamlining operations, improving quality, and reducing or avoiding costs. VE challenges program and project managers, and organizations that provide support to them, to continually consider if they have properly identified the right need, and provides a disciplined and tested process for making changes to plans, contracts, and other documents used to carry out agency missions. The results of VE may indicate that best value requires an initial expenditure of funds in order to meet basic functions at a lower cost over the life of the project, program, or system.  The circular can be viewed in its entirety at:

http://www.whitehouse.gov/sites/default/files/omb/assets/OMB/circulars/a131/a131-122013.pdf

How can I learn more about VE?

If you are interested in receiving training, VMS can help. We are accredited by SAVE International and also a Registered Educational Provider through the Project Management Institute (PMI).  VMS offers classes in both e-Learning and traditional face-to-face training formats. Please contact Rob Stewart at rob@vms-inc.com or by phone at (760) 741-1155 for more information.

Just the Facts… about VE

VMS Certified Value Specialists Mark Watson and Greg Brink were presenters at Association of General Contractors Construction Leadership Council’s (CLC) 2014 Estimating Academy in Kansas City, Missouri in February. The CLC provides an open forum to foster a strong network among construction peers, educating others, and developing members to become future leaders in the construction industry. They annually host an Estimating Academy in conjunction with the Heartland Chapter of the American Society of Professional Estimators (ASPE) which is hosted by The Builder’s Association.

Mark and Greg’s presentation focused on changing the construction industry’s preconceived, and sometimes misguided, ideas about the Value Methodology. VM, often called Value Engineering, has been widely (and often rightfully) considered the means reduce project costs, especially in the local construction industry over the past few years. Many times, unfortunately, this has been synonymous with project “cheapening” through scope reductions, material substitutions, or other forms of cost cutting. However, when applied and executed properly, the VE tools and techniques utilized by VMS can be highly effective for balancing user/owner requirements with ever-decreasing project budgets, all the while aiding a growing number of stakeholders in making sound, value-based decisions. Additionally, VMS has made a number of enhancements to the core VM principles, including techniques to analyze and quantify performance and cost and schedule uncertainty. These techniques, when combined with traditional techniques of Financial Modeling and Analysis (including initial and life-cycle cost estimating) and Schedule Analysis, provide a proven means for improving projects, products, and services by focusing on total value optimization.

Their presentation was well received by those in attendance, including the local construction contractor market such as employees of JE Dunn Construction, Turner Construction, and Rand Construction, but also included representatives from the U.S. General Services Administration, U.S. Environmental Protection Agency, U.S. Army Corps of Engineers, and design firms of U.S. Engineering and Burns and McDonnell.