VE-Highway

KSCE Journal of Civil Engineering (2010) 14(3):261-271DOI 10.1007/s12205-010-0261-y

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www.springer.com/12205

Construction Management

Performance-Based Value Engineering Application toPublic Highway Construction

Min-Jae Lee*, Jong-Kwon Lim**, and George Hunter***

Received September 8, 2009/Accepted October 27, 2009

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Abstract

Public works sector programs such as highway construction and infrastructure projects are increasingly being criticized fordelivering projects that fail to meet the following objectives: 1) Achieving expected project goals, 2) Achieving project deliverywithin a reasonable amount of time, or 3) Costs within their budgeted amounts. Performance based value engineering methodologycan help to find ways to improve solutions to these problems by providing a measured balance in cost, schedule, and scope via thegeneration of a large quantity of innovative alternatives. This requires a motivated team of multi-disciplined professionals incooperation with well-established project stakeholders who are stimulated and guided by the appropriate process. This study showsthe performance measurement based value engineering method and process, and case study applications. The authors found that theproject can significantly save cost and improve performance of project functions by using the appropriate VE process at theappropriate time. In addition, this study shows an example of a VE case study that applies the performance measurement process,which led to a very innovative, less expensive way to provide innovative toll plaza modification project. Finally, this studysummarizes the benefits and effectiveness of the proposed methodology with recommendations.Keywords: value engineering, performance measurement, highway construction, public project

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1. Introduction

Public works sector programs such as highway constructionare increasingly being criticized for delivering projects that failto meet the following: 1) Perceived/expected project objectives,2) Delivery within a reasonable amount of time, or 3) Costswithin their budgeted amounts. The lack of “project buy-in” is acommon term to denote the project stakeholders’ lack of confi-dence in one or all three of the above-mentioned points. Korea’shighway projects have recently come under this criticism, andAsia’s public works programs may fall under this same sphere ofcriticism. In order to avoid this, care must be taken to achieve areasonable amount of project buy-in on highway projects. Theapplication of performance-based value engineering, modifiedfor public works applications can help achieve this.

A common project management failure on the previously men-tioned projects is the focus on cost overruns and schedule delayswithout the necessary, relevant reference to the project scope.Hence, there is the need for a project management tool thatefficiently identifies and balances the project scope with projectschedule and costs. Furthermore, to ensure project buy-inthroughout the project delivery cycle, project managers need to

identify and analyze a large quantity of project alternatives withappreciable variances in project scope, schedule and costs.

Recently, escalating construction and maintenance costs, com-bined with reduced revenues, led to an increased interest in valueengineering by government transportation agencies. Currently,all national agencies, which invest in capital projects, have nationalregulations mandating that certain projects be value analyzed.Value Engineering (VE) helps to provide a facility that meets thecustomer’s need for cost efficiency within a short timeframe. It isimportant to realize that VE tools focused on the constructionsector, particularly public works construction projects, shouldhave greater emphasis on scoping the project, as this aspect on apublic works project is usually the challenging aspect of projectdevelopment.

VE study finds ways to improve solutions to a problem. It is afunction-oriented, systematic, team approach, used to analyzeand improve value in a product, facility design, system, or service.It becomes a powerful methodology for solving problems andreducing costs while improving performance and quality. VEstudies can provide this necessary, measured balance in cost,schedule, and scope by generating multiple innovative alternatives.This requires a motivated team of multi-disciplined professionals

*Member, Associate Professor, Dept. of Civil Engineering, Chungnam National University, Daejeon 305-764, Korea (Corresponding Author, E-mail:[email protected])

**Infrastructure Asset Management Corporation, Seoul, Korea (E-mail: [email protected])***Vice-President, Value Management Strategies, Inc. 8155 Deseret Avenue, Fair Oaks, CA 95628 (E-mail: [email protected])

Min-Jae Lee, Jong-Kwon Lim, and George Hunter

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in cooperation with well-established project stakeholders stimu-lated and guided by the appropriate process.

The main objectives of this study are to suggest a performance-measurement based VE method for public projects, to showapplication to the highway project as a case study, and finally tosummarize the benefits and effectiveness of the proposedmethodology with recommendations.

2. Literature Review

The Society of American Value Engineers (SAVE) defines VEas the systematic application of recognized techniques that identi-fies the function of the product or service, establishes a monetaryvalue for that function, and provides the necessary functionreliably at the lowest possible cost. Therefore, the purpose of aVE systematic approach is well demonstrated when the user isable to define and segregate the necessary functions from theunnecessary functions and thereby develop alternative means ofaccomplishing the necessary functions at a lower total cost(Miles, 1972).

VE in the construction industry is mainly an organized effort tochallenge the design and construction plans of projects to pro-vide the required facility at the lowest overall costs consistentwith requirements for performance, reliability, and maintain-ability ( Dell'lsolla, 1998).

Assaf et al. (2000) emphasizes “VE Job Plan” as an organizedand systematic approach tool and is the key to success in the VEstudy. The job plan is the road map for defining the required taskin determining the most economical combination of functions tocomplete the task. It is through the job plan that the study iden-tifies the key areas of unnecessary cost and seeks new andcreative ways of performing the same function. Mudge (1988)mentions that various techniques have been used with VEstudies; some studies use only five phases, whereas others mightuse as many as nine phases. Analyzing each phase of the job planin turn shows that some 22 individual techniques are employed.

Zimmerman and Hart (1982) define VE by what is true andwhat is not true about the VE concept. They state that VE is asystematic and multi-disciplined management technique. On theother hand, it is not a design reviewing, cost lowering, or quality-control process. The Function Analysis System Technique (FAST)diagram is a powerful tool that helps to organize the randomlisting of functions by answering the questions: How? Why?What does it do? What must it do? This helps the VE team todevelop many verb-noun functions’ structure and their inter-relationships. Also, FAST diagrams aid in the identification ofbasic function and scope (Parker, 1985).

Computerized system application for VE methodology is curr-ently in development. The US Army Corps of Engineers develop-ed a system called VE-TRIEVAL. This program provides userswith information about stored VE studies using keyword meth-odology (Dengenhardt, 1985). Chansik Park developed VEPRO,a spreadsheet rule-based system with database features thatcomprises models parallel to the VE job plan (Park, 1994).

However, little research has indicated the importance ofperformance-measurement based VE methodology for publicconstruction projects.

3. Performance Measurement Based Value Engi-neering

One of the problems with the VE studies for the public high-way project has been the tendency for studies to be a “cut-cutting” tool instead of a value-enhancing tool. Since only studycosts were reported at the conclusion of each study, there was nomechanism to weighting the value of the project costs that werecut against the project scope and project delivery componentsthat accompanied these costs.

The performance measurement application in VE can help tooptimize a project plan by minimizing cost and maximizingfunction performance. Project stakeholders quantify what andhow well the project delivers a project’s scope, schedule, andcosts by measuring the impact and rating the effectiveness of thealternatives with the performance measurement criteria. Thereasons why we need to measure project performance for publicwork are the following:

1) Brings visibility to all project issues with the project stake-holders.

2) Handles “conflicting” project criteria.3) Addresses technical issues using quantitative or qualitative

parameters.4) Saves project development time.5) Builds consensus with the project stakeholders.6) Improves the probability of delivering a project that serves

the community with optimal project value.

There are two ways to improve value in a given cost. First is“adding desirable functions” and second is “improve the perfor-mance of the project’s current functions.” The most cost-effec-tive and reliable way to accomplish this is to focus more on theperformance of the required project functions. Below, the for-mula shows the relationships between value, performance, andcost with modification of traditional definition of value whichinclude change F(function) to P(Performance).

(1)

Where, V: Value improvementP: Performance ∆ (of given functions)C: Cost (life cycle cost)

This study develops a process to measure the performance of aproject. The following list of steps and Fig. 1 show the detail ofthis procedure:

1) Identify key project performance criteria.2) Determine the hierarchy/impact or weight of each criterion. 3) Establish the baseline of the current project performance.4) Identify the change in performance of newly generated pro-

V = PC----

Performance-Based Value Engineering Application to Public Highway Construction

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ject alternatives. 5) Measure the aggregate effect of alternative concepts relative

to the baseline project’s performance.6) Relate the performance measurements to project costs to

determine the project-value improvement.

In the process, project stakeholders identify the performancecriteria, establish their relative weights, and then rate the currentproject. The project staff establishes the performance of the newalternatives as compared to the current project’s performance,and project stakeholders verify the performance ratings for theVE alternatives.

Determining the project performance criteria is an importantprocess to measure the project functions. Since different projectscan have different performance criteria, each project should haveits own performance-criteria selection process. With many yearsof experience, the research team can determine the main per-formance criteria for highway construction in order to evaluate

the effectiveness of the alternatives developed. Qualitative andquantitative parameters are used to increase the objectivity in theapplication. The criteria usually used for highway constructionare shown in Table 1 with the explanation of the major perfor-mance criteria shown below:

1) Quality and Safety: the ease of quality control and safetymanagement during construction.

2) Constructibility: the ease of construction.3) Public-friendliness: the likelihood of constructing the facility

with minimal impact to the local community, existingsystems, and users.

4) Environmental-friendliness: the minimizing of the impact ofsoil, air, water pollution during the construction.

5) Socioeconomic: the local economic activities and the com-munity affected by the project.

6) Operational efficiency and Maintainability: the ease of oper-ation and maintenance.

Fig. 1. Process of Performance Measurement and Relationship with VE



7) Level of service: the quality of the service provided.8) Project Management: the schedule, ease of project control,

and management.

Once the criteria are established, the VE teams apply the “Ana-lytic Hierarchy Process (AHP)” method to determine weights.The AHP methodology was developed to determine the relativeimportance of multi-variated decision problems by comparingeach variable. Table 2 shows the example of weights determinedby AHP analysis where “Safety” and “Traffic operations” carrythe highest orders of importance.

After the project performance criteria and relative importance(weights) are determined, stakeholders define the performancecriteria parameters by identifying the units of measurement foreach of the performance criteria and by establishing a range ofacceptable values for the performance criteria. This usually pro-vides an objective, quantitative basis to distribute values over a1-to-10 rating scale. The examples of performance parameterdefinitions are in Table 3.

The selected sets of alternatives are compared against theoriginal design concepts using the “Performance Matrix (Table4)”. The total performance rating is divided by the total projectconstruction cost to produce a value index, and the differencebetween the value indices of the original design and the alter-natives is expressed as a “%Value Improvement.” During theprocess, stakeholders review performance ratings of the new

Table 1. Major Performance Criteria for Highway Project

Project Breakdown Performance Criteria

Scope Components

Highway Operations

Traffic Operations (i.e. Level of Service)System CompatibilityQuality ControlHighway SafetyAccessibilityConstruction Highway Operations

System Preservation

MaintainabilityOperational Efficiency Hydraulics IssuesGeotechnical Issues

Environmental Impact

Physical EnvironmentNatural EnvironmentCommunity IssuesCultural Resource Special Status Land Use DesignationsPublic FriendlinessSocioeconomicConstruction Impacts to the Community

Delivery Components

Project ScheduleProject PhaseabilityConstructibility RiskProject Management

Table 2. Weighting of Performance Criteria

PERFORMANCE CRITERIA WEIGHTING MATRIX (AHP)TOTAL %

Safety A A/B A A A 3.5 35%Traffic Operations B B B B 3.5 35%

Construction Sched. C C/D D 0.5 5%Local Property Impacts D E 1.5 15%

Environment E 1.0 10%F

GH

a More Important Ia/b Equal Importance J

10.0 100%

Table 3. Example of Performance Parameter Definitions

PERFORMANCE PARAMETERS MATRIXmin. Performance Ratings max.

Criteria Weight Unit of Measurement 1 2 3 4 5 6 7 8 9 10Safety 35 Accidents per million vehicle miles 2 1.5 1 0.5 0Traffic Operations 35 Level of Service F4 F2 D C B AConstruction Schedule 5 Months of Construction 24 22 20 18 16 14 12 10 8 6Local Property Impacts 15 No of takes of Parcels 12 10 8 6 5 4 3 2 1 0Environment 10 Mitigation Area (acres) 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0


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Table 4. Example of Performance Matrix (Caltrans, 2004)

PERFORMANCE MATRIX - ALTERNATIVESExample

Example Project

Criteria Unit of Measurement

Criteria Weight

Performance Rating Total PerformanceConcept 1 2 3 4 5 6 7 8 9 10

System Compatibility

Degree of Impact 21

No Build 3 63

Original Design 8 168

VE Set 1 9 189

VE Set 2 9 189

VE Set 3 9 189

MainlineOperations

Degree of Improvement 18

No Build 1 18


VE Set 1 6 108

VE Set 2 4 72

VE Set 3 5 90

Safety Improvements

Degree of Impact 14

No Build 3 42


VE Set 1 8 112

VE Set 2 6 84

VE Set 3 7 98

Local Access Degree of Impact 12

No Build 4 48


VE Set 1 5 60

VE Set 2 4 48

VE Set 3 5 60

LocalOperations

Degree of Impact 12

No Build 5 60


VE Set 1 9 108

VE Set 2 8 96

VE Set 3 7 84

Schedule Impacts

Degree of Impact 8

No Build 10 80


VE Set 1 4 32

VE Set 2 5 40

VE Set 3 3 24

OVERALL PERFORMANCE Total Performance Total Cost($Million)

Value Index(Performance/Cost)

% Value Improvement

No Build: Maintain existing conditions 311 0.0

Original Design: HOV Widening and CD Road System 476 147.9 3.22

VA Set 1: Modified CD Road (Alt. 1.2, 4.0, 7.1) 609 159.0 3.83 19%

VA Set 2: Split Diamond System (Alt. 2.1, 7.2) 529 128.1 4.13 28%

VA Set 3: Original CD Road Concept (Alt. 3.0, 4.0, 7.1) 545 147.9 3.68 14%

project alternatives and make adjustments. Sometimes, technicalstudies may be requested to corroborate performance values.

Once implementation has been completed, the value index andresulting value improvement (%) is adjusted based on the vali-



dated costs and performance. Consensus for the validity of thealternative is based on performance criteria and cost criteria, andif needed, the project performance can be updated to matchcurrent information.

4. Case Study: Seoul Toll Plaza Project

Recent increases in construction costs on Korean public worksprojects, largely due to change orders caused by poorly elaborat-ed design, became the motivation for applying VE process inKorean construction industry. The “Kyungboo Express Highway”project, recently value analyzed by VE team, demonstrates howvalue engineering helps save time and money and increasesfunctional performance. The objective of this project is to up-grade and expand existing facilities and systems on “KyungbooExpress Highway,” the main artery for the Korean peninsulalinking Seoul to Pusan. The VE study generated several innovatealternatives capable of saving up to 50% of project cost andincreasing performance and value from the baseline project plan.

The “Seoul Toll Plaza” serves as an entrance gate to metro-politan Seoul for motorists traveling on this Kyungboo ExpressHighway. Due to high traffic volumes, the highway users experi-ence approximately 30 minutes of queuing delays at peak periods.With planned highway expansions, this delay time is expected togrow significantly. The current location of the toll plaza severelyrestricts the space available to add new tollbooths. Therefore,innovation was required to solve the project’s objectives to reducethe queue time while maintaining collection of toll revenues.

This project used the performance based value engineeringmethodology to analyze and reduce the traffic delay caused bythe tollbooth. This methodology uses some unique tools that thebaseline project measured, which the project stakeholders de-fined, weighed, and rated for the project performance criteria thatexplicitly measure the project scope and schedule.

4.1 Project Background InformationThe Seoul toll plaza has a total of 32 booths; 19 of them are

pay booths (Seoul direction) and 13 of them are ticket booths(Pusan direction). In addition, 7 out of 32 booths are reversible(pay or ticket) to accommodate peak periods. Also, 10 out of 19

pay booths utilize double booths system to increase their capa-city. Fig. 2 shows the layout of the existing Seoul toll plaza.

4.2 Project Performance CriteriaDuring the information phase, the project stakeholders esta-

blished 7 project performance criteria in order to evaluate theeffectiveness of the VE alternatives to be developed. Qualitativeand quantitative parameters are used to increase the objectivity inthe application. The criteria used are shown below:

• Travel delay(A): The time required to travel through thebooth. Defined by the time that driver began slowing downfrom freeway-operating speed to when driver required free-way-operating speed.

• Safety(B): The number of accidents and aggregate severity ofthose accidents per year.

• Operational efficiency(C): Ease of operation and maintenanceof the pay and ticket booths.

• Air quality(D): The amount of pollution encountered by thelocal community due to congestion caused by the toll booth.

• Socioeconomic(E): The farmland and other economic activi-ties with community affected by the toll plaza (businesses,local transportation system, housing, etc).

• Project schedule(F): The time required to deliver the projectto the public (improvement in delay to highway user).

• Constructibility(G): The ease of construction. The likelihoodof constructing the facility with minimal impacts to the localcommunity, existing transportation systems, and highwayusers. Also, the ease of construction for the contractors.

Once the criteria were established, the VE teams applied theAHP method to determine weights. Table 5 shows the weightsdetermined by AHP analysis, including “travel delay” and “safety”that carried the highest orders of importance.

4.3 Performance Measurement for Original Design Using the established definitions and weights of the performance

criteria, the original design was measured for project performance.The original design scored 475 performance points, out of aminimum of 100 points and an ideal performance of 1000 points.This will be used as a comparison baseline to alternative values.

Fig. 2. Seoul Toll Plaza Details


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Table 5 shows the performance evaluation result for the originaldesign.

4.4 Functional AnalysisThe Technical FAST diagram was developed and used to find

major functions required to support the secondary functions ofthe project, which helped to improve performance of functionsand make creative ideas. The FAST diagram also helped to findrelationships between functions and cost, which helped to makeproper decisions for satisfying stakeholders.

The “Reduce Storage Time” was the basic function identifiedfor this project. Fig. 3 shows the function analysis of Seoul TollPlaza project and its relationship with cost as established on theFAST Diagram.

4.5 Creativity and EvaluationA total of 143 alternative ideas were proposed throughout the

team brainstorming process. In the next step, evaluation andideas with the greatest potential to improve the current designhave to be established.

Table 6 shows some of the “out of the box” ideas that weregenerated in the creativity session, an overhead tollbooth thatdoes not consume scarce and expensive roadbed. The evaluationprocess ranked VE ideas from 5 (significant value improvement)to 1 (significant value degradation) by considering their perfor-mance and cost. The evaluation phase paired down the 143 ideasdown to 26 potential alternatives to be developed. Table 6 shows6 out of 26 alternative ideas.

The 26 surviving alternatives were developed in technical andcost detail in the development phase by the VE teams. As a con-clusion to this development, each alternative had to be comparedback to the baseline performance and cost basis. The value waschecked by using the basic formula (formula 1) while Life CycleCost (LCC) models were applied to the alternatives. This studyused the conventional LCC model, including the initial and sub-sequent maintenance costs. The economic analysis brought all

Table 5. Performance Weights and Evaluations for Original Design

Criteria A B C D E F G Total

Weights 26 23 20 8 5 3 15 100

Ratings 5 4 3 4 6 5 6 33

Performance 156 92 60 32 30 15 90 475

Fig. 3. Function Analysis Diagram for Seoul Toll Plaza

Table 6. Alternative Ideas for Seoul Toll Plaza

No. Alternative Ideas Ranking

S-1 Make additional toll plaza 4

S-3 Change Toll Booth layout 4

S-5 Apply “Hi-Pass” lane (4 lane → 6 lane) 4

S-7 Apply “Touch and Go” system 3

S-8 Double Booth (all booths) 3

S-10 Reorganize lane marking in toll plaza 3



cost to the present, i.e. applied the “present value method” using4.5% interest rate for a 20-year period.

4.6 Combination of AlternativesTo obtain the best value, several alternatives were combined.

This study suggested 8 combinations of alternatives. Table 7 showsthe best two alternative combinations: Set-4 and Set-6.

Set-4 includes S-1 (Create additional toll plazas), S-5 (Apply“Hi-Pass” lane), S-7 (Apply “Touch and Go” system), S-8 (DoubleBooth), and S-10 (Reorganize lane marking in toll plaza).

Set-6 includes S-3 (Change Toll Booth layout), S-5 (Apply“Hi-Pass” lane), S-7 (Apply “Touch and Go” system), S-8 (DoubleBooth), and S-10 (Reorganize lane marking in toll plaza).

4.7 Comparison of VE Sets’ Performance and CostAfter forming the combination of alternatives, the performance

of the sets was determined. The VE sets were measured againstthe criteria and weights established for the baseline project.

Table 8 indicates that VE Set4 provides a 44% improvementwhile VE Set6 provides a 19% improvement in its comparablebase design performance.

After the comparison of performance, we need to considerLCC costs for different ideas.

Because of the uncertainties and noisiness of input variables,this study applied Monte Carlo Simulation (MCS) method. Fromthis analysis, we found that VE Set4 has 12% and that VE Set6has 31% lower LCC costs compared to the original plan. There-fore, the result shows VE Set6 is better in cost.

Table 9 shows the comparison of LCC cost between basedesign and alternatives. Notice that the spread between the originaland proposed VE recommendations were narrowed when themaintenance costs were accounted for.

4.8 Comparison of Alternatives’ ValuesFinally, this study compares the values between the original

plan and the alternatives. VE Set6, based on established perfor-mance measurement and cost differences, is identified as thebetter value choice. Table 10 shows the comparison of valuesbetween the original design and the VE alternatives.

The change in spread between the LCC analyses, indicated inTable 9, and the Value Indices, shown in Table 10, can be ex-plained by the more comprehensive list of attributes accountedfor in the performance measurements. This delineates the differ-ence in approach in project analysis using value indices versuslife-cycle cost. The project performance measurements are wellsuited for project-decision making in the earlier project develop-ment stages to define and measure large variances in projectscope and schedule.

Fig. 4 shows the layout of recommended design (VE Set6) for

Table 7. Example of Combined Alternatives

Combination of Ideas

Baseline Extend From 32 toll booths to 46 toll booths (Pusan direction: 16, Seoul direction: 30)

VE Set4 S-1 + S-5 + S-7 + S-8 + S-10

VE Set6 S-3 + S-5 + S-7 + S-8 + S-10

Table 8. Comparison of Performance

Baseline VE Set 4 VE Set 6

Total Performance 449 645 532

% Change - +44% +19%

Table 9. Comparison of LCC (Billion won)

Baseline VE Set 4 VE set 6

Initial cost 315 242 157

% Change I.C. - 23% 50%

Maintenance cost 133 151 154

NPV 448 393 311

% Change NPV - 12% 31%

Table 10. Comparison of Alternative Values

Baseline VE Set 4 VE Set 6

Performance 449 645 532

Initial Cost 315 242 157

% Change - 23% 50%

Value Index (P/C) 0.14 0.27 0.34

Value % Change - 87% 138%

Fig. 4. Recommended Design


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upgrading the Seoul Toll Plaza Project. The VE design increased theperformance of the project by adding 8 pay booths and 2 ticketbooths over the existing design by the parallel separation of thetoll plaza. Other changes included improving the lane markingsand locating the tollbooth zigzag. The solution stresses thatprojects can be improved not by just removing project costs butalso by improving performance of the project objectives.

In conclusion, the authors found that alternative ideas obtainedfrom VE analysis provided up to 50% of project cost comparedto the baseline project plan while significantly increasing theperformance of the project functions.

5. Benefits through VE Study for Public Projects

Government agencies that apply VE to their construction pro-grams can achieve the following benefits:

1. Resolve Technical Problems on Complex Projects: VE studies place the qualified, experienced technical expertsin an environment that overcomes breakdowns in humancommunications and relationships and then analyzes in depththe problem with functional analysis and other VE tools, andprovides an opportunity for creativity, all the while measur-ing the results of the project before and after. This approachcan obtain very impressive results on complicated projects.In fact, the more complicated the problem, the greaterapplication there is for VE methodology.

2. Offer Addition of Technical Expertise: Placing technical expertise, unavailable within governmentorganization, on a VE study is a very effective way to utilizespecialized technical expertise on demand in an efficientmanner.

3. Emphasize Efficient Use of Resources: The duration of a VE study is very short as compared to themany man-hours required within the project developmentprocess. VE studies never take more than a few weeks,whereas many projects are in development for years. Theimprovements to the project that can be obtained in thisshort amount of time are an efficient and intelligent use ofresources.

4. Improve Project Performance and Cost Savings: Project performance measurements quantifies the quality ofthe project’s objectives and the timeframe in which they aredelivered, which in turn allows the project value to be deter-mined. Through the VE program use in the public sector,significant improvement in project performance and costsavings has been experienced. Improving the relationshipbetween the project performance and project costs has beena major benefit to public project managers. These savingshave been re-circulated into other public projects, a real valuefor the taxpayer.

5. Provide Significant Return on Investment: Former VE studies paid back 205:1(capital savings: studycosts), i.e. for $1 invested in a VE study, there were $205dollars in capital savings generated, on the average, for the

public projects (US Departments of Transportation Agencies(DOTs) as identified on the FHWA, 2008). Study cost in-cludes all pre-study, study, and implementation phase costs,such as the VE Program Administration cost, the ConsultantVE Team Leaders cost, the In-House Team Members cost,and the Consultant Team Member (Specialists) cost. Thisstudy found that VE study costs less than 1% of the projectcosts, especially studies that are led by in-house VE teamleaders, which saves the cost of the consultant to lead anddocument a study in a preliminary and final report.

Most importantly, in addition to these benefits, VE expeditesproject delivery because it creates a consensus-building found-ation. VE studies carried out in the public sector have allowedfor the development of consensus on what the project scope,budget, and delivery should be. This consensus has taken placewith the project stakeholders, such as the local governments andtransportation agencies, the regulatory agencies and the com-munities.

6. Effective Timing of VE Study for Public Projects

VE studies are appropriate and beneficial at any of thefollowing stages in the project development process, if the studyscope is adjusted to the project development phase.

a) Project Development Phases:1. Feasibility study phase, program the capital requirements, set

a rough project schedule, and project resources. Typicallyjust one or two alternatives are known at this time.

2. Project Approval & Environmental Document (PA&ED)phase in which the environmental document leads to theselection of the economically feasible, least damaging en-vironmental project alternative to be designed in the PS&Ephase. The Environmental Document must describe thefinal alignment and the footprint and impacts to the highwayuser, surrounding community, fauna and flora.

3. Plans, Specifications, & Estimate (PS&E) of the final design.

b) Preferred study timing:Public project experience has established the following as theideal time for a VE study: after the completion of thefeasibility study document, yet early enough in the PA&EDphase when there is a rough project scope, budget andschedule but no real work has started by on the technical andenvironmental analysis. During this time the FAST Diagramcan be used to define the project functions (the need andpurpose of the project) and also the project performancemeasurements that can help further define the project scopeleading to the development of alternatives that can be includedin the feasibility study document. The emphasis is on a widerange of alternatives and alternative comparisons. The scopeof the study during this phase is very unrestricted at this time.The VE alternatives developed during this time can beincluded in the environmental analysis leading to a preferred



alternative selection that can then be carried forward intodesign.

7. Function Analysis Techniques for Public Projects

This study recommends that all of the public project studiesmust utilize both functional analysis (including the FAST dia-gram) and the measurement of how well the project functions arebeing delivered, i.e. with the use of project performance mea-surement.

Applying functional analysis, especially if combined with pro-ject performance measurements, can lead to innovative solutionsthat break away from traditional approaches. The way a problemis defined leads the path to its solutions, and the purpose of theFAST diagram is to describe the solution in terms of the project’sfunctions and to describe these functions from higher order (i.e.,more abstract) to lower order (i.e., less abstract). Many publicproject VE practitioners do not fully practice functional analysis,i.e. development of the FAST diagram, in their highway VEstudies. This omission is often because many VE studies occur inthe later phases of project development (i.e., near 100% FinalDesign). However, from the experience of many public projects,this omission is unwarranted, as the application of the FASTdiagram at this time simply means that the higher order functionson the FAST diagram are not as likely to be changed; however,the FAST diagram is still a valuable tool to understand the pro-ject and focus on alternative solutions.

Applying functional analysis on a typical highway project is

not very time consuming and can lead to a greater understandingof the problem under study. The recommendation is always toapply functional analysis, specifically FAST diagramming andproject performance measurements.

8. VE Application for Public BTL Projects

Recently in Asia, many of the public civil infrastructure pro-jects were planned to be delivered by BTL (Build-Transfer-Lease)to apply private sector’s experience and finance initiatives. BTLis one of the PFI (Private Finance Initiatives) delivering methodsused for boosting SOC (Social Overhead Capital) development.First, it helps to solve the government’s budget restriction pro-blems. Second, the project members have the advantage oflearning from private sector’s experience and knowledge.

Since the characteristics of BTL project, creative ideas for theproject function and performance and its LCC (Life Cycle Cost)may be more critical for public work projects clients. VE canhelp to improve these needs for the BTL project. Because ofthese needs and characteristics, VE becomes the key methodo-logy that should be used for these kinds of projects. This studyintroduced the “VA Job Plan” application techniques for BTLproject and suggested the process. Developed VA Job Plan forBTL project application helps to improve the decision-makingprocess and value improvement.

Fig. 5 shows how VE was applied for BTL project and itsprocess and effectiveness. The BTL project usually includes a 3-Phase, 10-step process. The first phase is for feasibility study and

Fig. 5. BTL Project Procedures and Their VE Job Plan


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investment planning. The second phase is for actual projectplanning, and the third phase is for construction. Fig. 5 showsthat the Value Analysis can be applied to the first and secondphases of BTL project and their job plan.

9. Conclusions

The quality and costs of highway and other public work sectorprojects can benefit by the application of well-elaborated VEmethodologies. Specifically, the VE methodology provides a soundmethodology for analyzing the project objectives and attributes,which, in turn, focuses the development of alternatives in thevalue study. Authors offer the following suggestions to implementa successful value engineering program in the public works sector:a) VE responsibilities must be clearly delineated within the organi-zation, b) VE guidelines and manuals should be developed, used,and maintained, c) VE training should being provided, d) VEspecialists and consultants should be utilized, and e) Programevaluation and auditing must be provided.

Three main issues must always be involved in a VE study: a)Function analysis must be done, b) The basic systematic step-by-step process described by the VE job plan must be employed onthe study and carried out by a qualified team leader, and c) Itmust involve multi-disciplined team members. Those are veryimportant to obtain high quality VE outcomes. To make the bestuse of the VE methodology, it is essential to establish a VEprogram that helps the public works agencies deliver the bestcombination of project scope, cost, and schedule. Many VEstudies are not very effective because of a failure to completelyanalyze all of the project management issues (i.e. scope, cost,and schedule) and this is usually the scope portion. Also a goodVE program must join seamlessly into the agencies’ projectdevelopment procedures. The above two issues, the comprehen-sive project management tool and the integration of the VEprogram into the agencies’ project development procedures, willensure that the VE program assists the public agencies’ projectmanagers in delivering good value in their projects. Particularattention must be paid to the implementation procedures.

This study demonstrates how performance-based value engineer-ing methodology can improve value, not focusing on cheapen-ing. The authors found that the project can significantly save costand improve performance of project functions by using the ap-propriate VE process at the appropriate time. In addition, thisstudy shows an example of a VE case study that applies theperformance measurement process, which led to a very innovative,less expensive way to provide delay-time improvements at thistoll plaza modification project.

Acknowledgements

This paper was developed based on the data collection of VEworkshop results for Korea Highway Corporation (KHC) project,and special thanks go to engineers who participate and provideideas for this study.

References

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Dell'lsolla, A. J. (1998). Value engineering in the construction industry,3rd Ed., Smith Hinchman & Grylls, USA.

Dengenhardt, G. (1985). “VE-TRIEVAL, a corp of engineers valueengineering information retrieval system.” Proceeding of the 1985SAVE International Conference, Texas, pp. 14-25.

Miles, L. D. (1972). Techniques of value analysis and engineering, 2nd

Ed., McGraw-Hill, New York, pp. 1-24.Mudge, A. E. (1988). Value engineering: A systematic approach, 5th Ed.

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construction projects, PhD Dissertation, School of Engineering,University of Florida.

Parker, D. E. (1985). Value engineering theory, Lawrence D. MilesValue Foundation, Washington, D.C. pp. 62-64.

Zimmerman, L. W. and Hart, G. C. (1982). Value engineering, a prac-tical approach for owners, designers and contractors, Van NostrandReinhold, New York, pp. 1-31.

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