FACTORS INFLUENCING VALUE ENGINEERING OUTCOMES
- GEOLOGICAL, SOCIO-ECONOMICAL AND SOCIO-POLITICAL -
By
Mr. Charles Nickel, PE
Mr. Ramesh Kalvakaalva, PE, CVS
and
Mr. Charles McDuff, PE, CVS-Life, LEED AP
CONTENTS
 What supports or goes against VE Results
 Factors influencing development/execution of projects:
 Geological & Topographical
 Socio-Economic
 Socio-Political
 Impacts on Value Engineering Outcome
 Role of Risk Analysis / Life Cycle Cost Analysis
 Case Studies
 Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
 Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Case 3: DoD Base – Djibouti
 Case 4: DoD Base - Guam
 Modeling Risk vs. Major item cost variations
 La. DOTD Project Management Website
 ITEM BID HISTORY TOOL
 Monte Carlo Analysis TOOL
FACTUAL
BC Comics (Sunday Paper)
What supports or goes against VE Results
 The following mind map voices the simple truths but these truths need to kept in
mind for each VE study performed.
 Cultural, Geographic and Sociological differences are always there.
 How these differences are handled means everything in terms of having positive
results from a VE workshop.
 When addressing cultural differences, we are not necessarily talking about a VE
done in a foreign country.
 There can be immense cultural differences from state to state within the U.S.
What supports or goes against VE Results
What supports or goes against VE Results
 At first glance, it appears that the negative influences far outnumber the positive
influences.
 However, the negatives can generally be handled readily by emphasizing the
positives. This means:
 Employ a CVS team leader and team members that have not only excellent
technical skills but also have great interpersonal skills
 These same people must have a thorough acquaintance with the local
business and sociological cultural ways
 Early in setting up the VE workshop, communications must be tested and
appropriate steps taken to make sure that the lines of communications are
very workable and good will and understanding of objectives is clear
 If you are a team leader from New York and leading a study in Alabama, you
will likely need a translator
FACTORS
Factors influencing development/execution of projects
Geological & Topographical
FACTORS
Factors influencing development/execution of projects
Geological & Topographical
FACTORS
Factors influencing development/execution of projects
Socio-Economic







Local Economic Conditions – Urban vs Rural
Availability of Skilled Labor
Revenues from Tax Bases
Projected Revenues (funding)
Advent of Fuel Efficient Vehicles
Longevity of Job Creation
Historic Preservation
FACTORS
Factors influencing development/execution of projects
Socio-Political




Political Divide
Local (Vested) Political Interests
Periodic Changes in Government
Resistance from Locals
Impacts on Value Engineering Outcome
General Positive Outcome Determinants
 The Owner is motivated
 By belief in the methodology
 By fear
 By need for an another pair of eyes to strengthen confidence
 The team leader and the team are solid professionals
 The team leader and the team have a good “bedside manner”
 Top management fully supports VE and places high expectations on the
workshop
 The project delivery schedule includes a set aside time for VE and
implementation
 The project delivery team embraces the process
Impacts on Value Engineering Outcome
Hurdles to Be Overcome
 During an early VE study in Saudi Arabia (1982) the team leader found that
several hurdles had to be overcome
 The Owners had never heard of Value Engineering
 The Owner had no fear of failure and the possibility of exhausting the
budget was not even a question
 The requirement for VE was from the USACE and no one was sure what the
outcome, if any, would be
 In a VE study for the U.S. Navy in Italy, the Italian architect could not understand
that anyone would dare to question his design, in even the most insignificant
aspect.
 In Turkey, a VE alternative calling for reducing the concrete wall and elevated
slab thicknesses fell on its face because the U.S. VE team did not understand
that the batch plant turned out poor quality concrete – which necessitated
greater thickness and more steel.
Impacts on Value Engineering Outcome
Hurdles to Be Overcome
 From Culture to Culture there is a difference in how quality is defined.
 The focus on “cost savings” on projects has led to a bad reputation for VE:
 The culture within a professional field has often led to rejection of VE as a
useful tool. The phrase “We were VE’ed” having a very negative
connotation.
 VE team leaders were guilty of pressing for “savings” at the expense of
quality or reliability.
 In short, there is a need to overcome the image of VE and highlight the
many successes.
 Some emerging cultures have much to learn about financial ventures. In
Vietnam there was a move afoot to construct a tollway from Vung Tau to Ho Chi
Minh City. A quick review of the business model and the planned alignment
indicated some key weaknesses in underlying assumptions. The result was that
the project was setback for years and initial investors were greatly damaged. An
early VE study on the concept might have helped.
Impacts on Value Engineering Outcome
Hurdles to Be Overcome
 Language does have a way of confounding the possibility of success
 Some humor does come out of these differences:
 For road construction in the former British Colonies, highway guardrails and
signage are known as “Road Furniture”
 Being a Certified Value Specialist has a down side in England. Certified refers to
being judged as crazy or mentally unstable.
 John F. Kennedy spoke at the Berlin Wall at the height of the Cold War. To voice
solidarity with the people of Berlin he said, “Ich Bin ein Berliner”. This meant “I
am a Berliner”. In Germany, a Berliner is a jelly donut. Fortunately, the Germans
have a great sense of humor and they greatly admired Mr. Kennedy.
CASE STUDIES
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
Case 2: Louisiana State Highway 1 (LA 1) Improvements
Case 3: DoD Base – Djibouti
Case 4: DoD Base - Guam
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
 Description
 Existing Almonaster Avenue Bridge is a Strauss Heel-Trunnion Bascule built
around 1910
 Bridge owned, operated, and maintained by the Port of New Orleans
 Carries two mainline CSX railroad tracks and two lanes (one East and one
West) of vehicular traffic along Almonaster Avenue over the Inner Harbor
Navigation Canal (IHNC)
 The vehicular lanes closed to traffic due to the damage from Hurricane
Katrina
 Sufficiency rate (SR) of the existing bascule below 50 for the past twenty
years resulting in the need for its replacement
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
 Need and Purpose
 Existing bridge over the IHNC serves three functions:
 Marine navigation facilitation;
 Vehicular transportation;
 Railroad transportation.
 The roadway serves as a connector for Almonaster Avenue, an urban
arterial roadway providing a vehicular connection across the canal
 The purpose of the proposed project is to replace the existing bridge
structure and address the existing deficiencies
 The need for the proposed project considers vehicular, maritime and
railroad movements; business and community interests; system linkage;
roadway capacity; transportation demand; social demands; economic
development; and safety considerations
 IHNC is being widened and deepened and this bridge is currently a
bottleneck
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
Existing Bascule – 92’ Horizontal Clearance
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
Proposed Bascule – 204’ Main Span, 52’
Track Girder Span
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
VE Study Results
<5% Acceptance
Case Studies
Case 1: Almonaster Avenue Bridge over IHNC (New Orleans)
VE Study Results
<5% Acceptance
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Description
 Construction of a 17 mile length of a four lane elevated highway
 Generally paralleling existing LA 1
 Extending from Highway 3235 (LA 3235) west of Golden Meadow to
Louisiana Highway 3090 (LA 3090)
 Terminating at the intersection with LA 1 north of Port Fourchon
 LA 1 is included as part of the National Highway System (NHS
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Need and Purpose
 Designated as the principal arterial of the NHS
 Deemed critical for :
 Economy
 Defense
 mobility of the nation providing access to major ports, airports, rail
stations, public transit facilities, border crossing and,
 not in the least, hurricane evacuation routes.
 The Department of Transportation and Related Agencies Appropriations Act
of 2002 amended ISTEA, adding LA 1 from Grand Isle to its intersection with
US 90 as High Priority Corridor No. 44.
 Only corridor servicing both local and through traffic
 Studies deemed the existing corridor should be enhanced to ensure year
round usability
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Experience from Construction of Phase I
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Experience from Construction of Phase I
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
 Experience from Construction of Phase I
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
Case Studies
Case 2: Louisiana State Highway 1 (LA 1) Improvements
VE Study Results
>25% Acceptance
Case Studies
Case 3: NAVFAC Base – Djibouti
 Guidance to Navy Facilities Engineering Command to enhance accuracy of
construction cost estimates for future projects at Camp Lemonnier in Djibouti
 Location provides a unique challenge to construction project delivery teams,
logistical managers and construction contractors
 Unique insight into local conditions to facilitate the work of all
Case Studies
Case 3: NAVFAC Base – Djibouti
 Factors Influencing Cost Estimate
 Weather
 Annual rainfall only averages about four (4) inches
 Seismicity
 Fairly frequent quakes on the order of 6.7 on the Richter scale
 Local Taxation
 Non-resident businesses are tax exempt but paucity of local labor
 Pavement Requirements
 No certified materials testing laboratories in Djibouti
 Difficulty in meeting stringent NAVFAC criteria/standards
 Labor Availability and Costs
 Friction associated with necessary import of labor from locals
 Structuring of the Contract
 Success in local business model to have the incentive to go on
 Isolation
 Logistical difficulties for imported labor, equipment and materials
 U.S. flagship requirements
Case Studies
Case 3: NAVFAC Base – Djibouti
 Price Drivers
 Material Delivery
 Cost of shipping support equipment and materials to the job site is
considerable
 Shipping costs could easily add fifteen percent (15%) to the normal
cost of materials
 shipments to Djibouti on U.S. flagships is more difficult to arrange
 Work progression is slower than normally experienced in the States
 Necessity to avoid conflicts with military operations
 highly variable sources/quality of labor
 Site access is a problem
 Security policies that affect the movement of contractor personnel,
vehicles and materials
 U.S. citizens must escort foreign laborers – resource time consumption
Case Studies
Case 4: DoD Base - Guam
 Case Studies
 Case 4: DoD Base - Guam
Case Studies
Case 4: U.S. Military Base - Guam
Case Studies
 Guidance to the U.S. military on how to enhance the accuracy of construction
cost estimates for future projects on the Island
 Location provides a unique challenge to construction project delivery teams,
logistical managers and construction contractors
 Unique insight into local conditions to facilitate the work of all
Case Studies
Case 4: U.S. Military Base - Guam
Difficult Conditions
 Weather
 Frequent typhoons and super typhoons
 Very high temperatures and a copious amount of rain
 Seismicity
 The Island is subject to frequent tremors and has experienced earthquakes
up to 8.2 on the Richter Scale
 Almost everything for construction must be shipped to the Island. Typically, this
is done in 40’ containers on board U.S. Flag Ships
 Local, skilled labor is able to handle up to a certain load of construction needs.
Beyond that, a critical mass is reached and workers must be brought in from
other nations. When labor must be imported, it is a necessity to carefully
consider the logistics associated with housing, meals, medical care, etc.
Modeling Risk vs. Major item Cost Variations
La. DOTD Project Management Website
ITEM BID HISTORY TOOL
Monte Carlo Analysis TOOL
Modeling Risk vs. Major item Cost Variations
La. DOTD Project Management Website
http://wwwsp.dotd.la.gov/Inside_LaDOTD/Divisions/Engineering/Project_Management/
Pages/default.aspx
Modeling Risk vs. Major item Cost Variations
La. DOTD Project Management Website
http://wwwsp.dotd.la.gov/Inside_LaDOTD/Divisions/Engineering/Project_Management/
Pages/default.aspx
Modeling Risk vs. Major item Cost Variations
ITEM BID HISTORY TOOL
Modeling Risk vs. Major item Cost Variations
ITEM BID HISTORY TOOL
Modeling Risk vs. Major item Cost Variations
ITEM BID HISTORY TOOL
Modeling Risk vs. Major item Cost Variations
ITEM BID HISTORY TOOL
Modeling Risk vs. Major item Cost Variations
ITEM BID HISTORY TOOL
Modeling Risk vs. Major item Cost Variations
Monte Carlo Analysis TOOL
Modeling Risk vs. Major item Cost Variations
Monte Carlo Analysis TOOL
Modeling Risk vs. Major item Cost Variations
Monte Carlo Analysis TOOL
Questions?