F A C I L I T I E S DESIGN - VALUE ENGINEERING ANALYSIS
VERSUS
ECONOMIC ANALYSIS/LIFE CYCLE COST STUDY
J u l i a n J . P e n n e l l o , P.E.
Value Engineering O f f i c e r
Corps o f E n g i n e e r s , Sacramento D i s t r i c t
Sacramento, C a l i f o r n i a
I n v a r i a b l y a c l i e n t r e q u e s t s t h a t an economic
a n a l y s i s (EA) o r l i f e c y c l e c o s t study (LCCS) be
performed p r i o r t o commencing t h e d e s i g n o f a
s t r u c t u r e or f a c i l i t y .
The purpose of t h i s paper
i s t o demonstrate t h a t t h e money spent f o r EA's o r
LCCS's c o u l d be used more e f f e c t i v e l y i f a p p l i e d
toward t h e f u n d i n g o f a v a l u e e n g i n e e r i n g a n a l y s i s
(VEA), i f a VEA i s needed a t a l l .
c i t i e s throughout t h e c o u n t r y ; t h e i r a i r p o r t s ,
h o t e l s , i n d u s t r i a l and commercial a r e a s . So why
the EA o r LCCS?
Designer S e l e c t i o n
I n t h e s e l e c t i o n of d e s i g n e r s you look f o r c e r t a i n q u a l i f i c a t i o n s and e x p e r t i s e , p a r t i c u l a r l y
those r e l a t e d t o t h e type of f a c i l i t y t o be b u i l t .
The c l i e n t h a s a c e r t a i n amount o f money a l l o c a t e d
f o r d e s i g n and undoubtedly h a s a few key f e a t u r e s
to be i n c l u d e d t h e r e i n . Assuming you have made a
good " d e s i g n e r " c h o i c e and d e s i g n c o s t s a r e f a v o r a b l e t o both p a r t i e s , t h e d e s i g n e r should*soon i n form t h e c l i e n t , b e f o r e p r o v i d i n g any e x t e n t o f
working drawings, of t h e c o m p a t i b i l i t y o f c o n s t r u c t i o n funds and d e s i g n c r i t e r i a .
I f the c o m p a t i b i l i t y i s f a v o r a b l e I say allow the designer to proceed, l e t him s t r i v e toward t h e end p r o d u c t .
At t h i s p o i n t , b e f o r e I proceed any f u r t h e r , I
want to be e m p h a t i c a l l y c l e a r t h a t a s a member of
the S o c i e t y o f American V a l u e E n g i n e e r s , t h e r e i s
no i n t e n t w h a t s o e v e r t o c r i t i c i z e t h e work of my
a s s o c i a t e e n g i n e e r s . N e i t h e r a r e t h e i r EA's o r
LCCS's c o n s i d e r e d i n a d e q u a t e , nor by t h e a p p l i c a t i o n o f VEA's a r e t h e i r d e s i g n s being s e c o n d guessed.
I t i s j u s t the nature of the " b u s i n e s s " time c o n s t r a i n t s , s c h e d u l i n g , f u n d i n g , s t a n d a r d s ,
h a b i t s , t r a d i t i o n — t h a t a l l o w s t h e VEA p r o c e s s t o
make i t s c o n t r i b u t i o n .
Disadvantages
I am aware o f t h e r e c e n t a r t i c l e s i n d e s i g n
and c o n s t r u c t i o n magazines f e a t u r i n g LCCS's on
HVAC systems - because o f t h e energy s i t u a t i o n .
I
r e g a r d t h e s e s t u d i e s a s a form of VEA b e c a u s e o f
t h e i r apparent a n a l y s i s of a s p e c i f i c system. I n
VEA methodology, we would s a y t h i s was c o n d u c t i n g
a f u n c t i o n a l a n a l y s i s o f t h e HVAC. These s t u d i e s
would be more e f f e c t i v e i f they f o l l o w e d t h e VEA
p r o c e s s . T h i s w i l l be expanded l a t e r i n t h e
article.
o f EA's/LCCS's
When a n EA o r LCCS i s imposed on t h e d e s i g n e r
you l i m i t h i s performance, d e c r e a s e h i s d e s i g n time
and b i t e i n t o t h e d e s i g n fund a l l o c a t i o n . Your own
time and c o s t s a r e i n v o l v e d w i t h t h e r e v i e w and a c ceptance o f t h e s t u d i e s . C e r t a i n l y , he w i l l p r o v i d e
you a s e r v i c e commensurate w i t h t h e e s t a b l i s h e d
"scope o f work." How do you "scope" a n EA o r LCCS?
You have h e a r d t h e e x p r e s s i o n "You want a $10,000
study, I ' l l g i v e you one. You want a $50,000 s t u d y ,
I c a n g i v e you t h a t t o o . "
Why EA's/LCCS's?
I n o r d e r to d e f i n e an e q u i t a b l e f e e f o r an EA
or LCCS t h e c l i e n t and d e s i g n e r must have an a g r e e ment on t h e "scope o f work." I n EA's and LCCS's i t
s i m p l y b o i l s down t o "how many systems o r combinat i o n s t h e r e o f s h a l l be a n a l y z e d ? " I n t h e c o n s t r u c t i o n i n d u s t r y , t h e r e a r e l i t e r a l l y hundreds o f them.
The c l i e n t h a s a c e r t a i n amount o f money a v a i l a b l e
f o r t h i s e f f o r t and t h a t amount w i l l determine t h e
extent of the study.
When I was i n t h e p o s i t i o n of n e g o t i a t i n g f o r
such s e r v i c e s , I o f t e n wondered why t h e c l i e n t was
r e q u e s t i n g them. I c o u l d a p p r e c i a t e LCCS's i n
a e r o s p a c e , a v i a t i o n , n u c l e a r and o t h e r c o m p l i c a t e d ,
hardware-dominated f i e l d s .
I n m i s s i l e s and a e r o s p a c e , hardware had t o perform r e p e a t e d l y i n h o s t i l e atmospheres (-400°F t o 200°F) and p r e c i s e l y
w i t h i n thousandths o f a second. LCCS's were n e c e s s a r y t o c o n f i r m r e l i a b i l i t y and a f f o r d a s s u r a n c e
t h a t s e a l s , v a l v e s , mechanisms e t c . , would f u n c t i o n
250,000 m i l e s from e a r t h , even m i l l i o n s w i t h s p a c e
probes.
As t o EA's, I concluded t h a t t h e c l i e n t
used them t o s a t i s f y h i g h e r e c h e l o n t h a t t h e o p t i mum d e s i g n was b e i n g o b t a i n e d f o r t h e money. Was
it really?
D e f i n i n g t h e l i m i t s of EA's and LCCS's c r e a t e s
an a d v e r s e e f f e c t . You s h a c k l e t h e i m a g i n a t i o n o f
the d e s i g n e r , you impede h i s i n g e n u i t y , you c u r t a i l
h i s t a l e n t s . You s e l e c t e d him i n t h e f i r s t p l a c e
f o r h i s e x p e r t i s e and r e l a t e d p a s t performance.
Now you a r e dampening t h a t c a p a b i l i t y .
The EA/LCCS
scope h a s t o be a c c u r a t e l y d e f i n e d so t h a t a r e a sonable e s t i m a t e of t h a t s e r v i c e c a n be prepared
and t h e d e s i g n e r i n t u r n c a n do t h e same. A f a i r l y
good s t a r t i n g p o i n t now e x i s t s t o m u t u a l l y d e t e r mine an e q u i t a b l e f e e f o r t h a t e f f o r t . What w i l l
t h i s s e r v i c e r e a l l y buy f o r t h e c l i e n t ?
I s a y you
a r e b e t t e r o f f t o f o r g e t t h e whole t h i n g , a p p l y t h e
e x t r a funds t o t h e d e s i g n f e e , g a i n t h e e x t r a des i g n time, and have t h e d e s i g n e r b e n e f i t from t h e s e
e x t r a s t o g i v e you a b e t t e r j o b .
B e f o r e you d e l v e i n t o r a t i o n a l i z i n g t h e needs
f o r an EA o r LCCS, you have t o r e a l i z e t h a t a des i g n e r , p r i v a t e , governmental o r o t h e r w i s e , i s obl i g a t e d per t h e p r o f e s s i o n t o observe s e v e r a l
schemes o r a combination t h e r e o f a s a m a t t e r of
h i s d e s i g n a n a l y s i s . A d d i t i o n a l l y , whether you
a r e b u i l d i n g a r e s i d e n c e , an i n d u s t r i a l f a c i l i t y ,
warehouse, h o s p i t a l e t c . , I contend t h a t you t h e
c l i e n t o r c l i e n t s know q u i t e g e n e r a l l y what you a r e
seeking.
I f you a r e o f t h e e n g i n e e r i n g and/or cons t r u c t i o n background you s h o u l d be even more c o n f i dent o f t h e end product d e s i r e d because o f your
f a m i l i a r i t y and exposure t o t h e i n d u s t r y , new
products, b u i l d i n g t r e n d s , i t s achievements.
You
a r e bound t o observe them a s you v i s i t t h e major
Value Engineering
Proposal
My p r o p o s a l i s s i m p l y ; " L e t t h e d e s i g n e r p r o ceed w i t h t h e d e s i g n . "
I f you g e t i n t o t r o u b l e ,
perform a VEA. I f you a r e n o t too s u r e of t h e end
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product d e s i r e d o r of how much your money w i l l buy,
have him submit c o n c e p t s o r a p r e l i m i n a r y d e s i g n .
With t h a t s u b m i t t a l however, o b t a i n t h e b e s t e s t i mate a v a i l a b l e a t t h a t p o i n t of d e s i g n .
Question 1 - i s the design submittal s a t i s f a c tory?
Question 2 - a r e there c e r t a i n undesirable
features?
Q u e s t i o n 3 - a r e c o s t s too h i g h ?
I f the
answer t o q u e s t i o n 1 i s y e s , f i n e - l e t him proceed
f u r t h e r , i f not to completion. I f y e s i s the answer t o q u e s t i o n s 2 and 3, perform a VEA.
The VEA i s a 10-step p r o c e s s i n v o l v i n g ( 1 )
g a t h e r i n g of a l l p e r t i n e n t i n f o r m a t i o n , w h i c h d i c tated the r a t i o n a l e f o r the present design; (2)
a n a l y z i n g t h e major c o s t i t e m s o f t h e j o b ; ( 3 )
f u n c t i o n a l l y analyzing c e r t a i n items w i t h i n the
major c o s t a r e a s ; ( 4 ) t h i n k i n g c r e a t i v e l y t o seek
a l t e r n a t e ways t o a c h i e v e b a s i c f u n c t i o n s , perhaps
e l i m i n a t i n g f u n c t i o n s ; ( 5 ) r a t i n g of a l t e r n a t e s o l u t i o n s d i s c o v e r e d ; ( 6 ) c o s t comparing o r i g i n a l
system w i t h a l t e r n a t e systems; ( 7 ) e v a l u a t i n g p o s s i b l e s o l u t i o n s by a w e i g h t e d c o n s t r a i n t c h a r t ; ( 8 )
r e - e v a l u a t i n g proposed a l t e r n a t e s ; ( 9 ) c o n d u c t i n g a
l i f e c y c l e c o s t a n a l y s i s on t h e o r i g i n a l i n c o m p a r i son w i t h t h e a l t e r n a t e s , and; (10) recommending a
solution.
As t o q u e s t i o n 2, t h e u n d e s i r a b l e f e a t u r e i s
a l r e a d y i d e n t i f i e d and t h u s t h e VEA p r o c e s s i s app l i e d t o t h a t i t e m . As t o c o n d i t i o n 3, VEA a p p l i e s
o t h e r t e c h n i q u e s t o r e s o l v e t h e problem. I t a p p l i e s
P a r e t o ' s Law (20% of t h e c o s t i t e m s r e p r e s e n t 80% of
the c o s t s ) . A n a l y s i s of t h e 20% i t e m s w i l l guide
the VEA team i n t h e r i g h t d i r e c t i o n . VEA a l s o p e r forms a c o s t model. T h i s b r e a k s t h e j o b down i n t o
major a r e a s s u c h a s s i t e work, g e n e r a l c o n d i t i o n s ,
s t r u c t u r a l , a r c h i t e c t u r a l , m e c h a n i c a l and e l e c t r i cal areas.
The major a r e a s a r e broken down further,
w i t h i n t h e m s e l v e s and t h e s q u a r e f o o t a g e c o s t , a s
d e r i v e d from t h e c u r r e n t e s t i m a t e , i n d i c a t e d f o r
each a r e a and s u b a r e a . The m u l t i d i s c i p l i n e d V E
team examines each " c o s t " and a t t e m p t s to i n d i c a t e
i t s "worth" a s determined by h i s t o r i c a l c o s t d a t a ,
e x p e r i e n c e and comparison w i t h s i m i l a r s t r u c t u r e s .
I f " c o s t " d i v i d e d by "worth" i s g r e a t e r t h a n one, a
p o s s i b l e VEA s t u d y a r e a e x i s t s .
You may a r g u e , "We w i l l l o s e time d o i n g a VEA."
A good VEA c a n be o b t a i n e d i n one o r two weeks and
as I s t a t e d e a r l i e r , you reduced t h e d e s i g n time a l ready when you funded t h e EA o r LCCS. What would
you do i f you d i d n ' t r u n a VEA? You u s u a l l y compromise scope, extend d e s i g n time, and i n c r e a s e d e s i g n
c o s t s t o pay f o r t h e r e d e s i g n .
The r e d e s i g n c a n
a l s o r e s u l t i n c o m p l i c a t e d s e t s o f p l a n s and s p e c s ,
i n v o l v i n g numerous a d d i t i v e i t e m s , i n d u c i n g h i g h e r
b i d s and i n t h e w o r s t c a s e , l e a v i n g t h e c l i e n t w i t h
l e s s t h a n a 100% f a c i l i t y .
Summary
I contend that an EA o r LCCS does n o t n e c e s s a r i l y g u a r a n t e e a n optimum d e s i g n w i t h i n a v a i l a b l e
f u n d s . On t h e o t h e r hand, i f i t i s needed, a VEA
s h o u l d be performed and by p r o f e s s i o n a l s o r by t h e
o r i g i n a l d e s i g n e r s t h e m s e l v e s , p r o v i d e d they have
had 40-hour VE workshop t r a i n i n g and VE s t u d y e x perience.
This w i l l bring the design w i t h i n l i m i t s
w i t h o u t d e c r e a s i n g q u a l i t y , r e l i a b i l i t y and p e r f o r m ance. D e s i g n e r s who have VE background s h o u l d be
an a s s e t t o t h e c l i e n t .