Example Exam 2: Value Engineering
Name:
ID:
You should answer three (3) questions. You may answer all four questions, in which
case your best three marks will be used to compute your grade. Each question is equally
rated.
Question 1: Cost / Energy Modeling
You are responsible for conducting a Value Engineering exercise on a Shopping Mall
project. As part of the study, your team develops a life-cycle cost model to help them
determine which elements of the shopping mall would be most productive for Value
Engineering. Draw the Cost Model, and complete any one of the branches with example
cost parameters.
Remember, this is a life-cycle cost model so make sure you handle initial costs in an
appropriate way.
Note, this question could consider initial costs, life cycle costs or energy. In addition, it
could consider any of the following projects:
Single-Family Home,
Shopping Mall, or
Parking Garage.
Answer:
See Figure 3-4 handed out in class.
Question 2: Decision Tree Analysis.
GatorBuild (a developer) has a sum of money to invest in the development of a facility at
a site in Gatorville. Using Value Engineering techniques they identify three alternative
facilities that they could build at the site, which would provide a significant return on the
investment. These are:
A. A Leisure Facility
B. A Shopping Mall
C. An Office Block.
Taking into account the following data, develop a decision tree of the problem and
determine which facility the developer should construct.
The local government is considering improving the transportation infrastructure between
Gatorville and the nearby city of Crocton. The infrastructure development options the
local government is considering are:
i.
ii.
iii.
iv.
Upgrade the highway between the two cities;
Improve the public bus system between the two cities
Construct a light railway between the two cities;
Do nothing to improve the transportation system between the two cities.
The NPV of the cash flows over the next 20 years (NOT including the initial cost of
construction) are all positive, and are shown in the following table, for each of the
proposed facilities and for each of the possible transportation improvement scenarios.
Strategy\Outcome
Leisure Facility
Shopping Mall
Office Block
Highway
$38,000,000
$23,000,000
$28,000,000
Bus System
$31,000,000
$32,000,000
$27,000,000
Light Rail
$27,000,000
$27,000,000
$26,000,000
Nothing
$23,000,000
$35,000,000
$27,000,000
The initial cost of construction for each scheme, is as follows:
i.
ii.
iii.
Leisure Facility construction costs = $12,000,000
Shopping Mall construction costs = $10,000,000
Office Block construction costs = $9,000,000
The probabilities of the local government adopting each of the transportation
improvement schemes are as follows:
probability of
occurrence
Answer: (next page)
Highway
Bus System
Light Rail
Nothing
0.2
0.5
0.2
0.1
20.0%
Highw ay
38000000
Bus System
50.0%
31000000
A: Leisure Facility
FALSE
Chance
-12000000
18,800,000
20.0%
Light Rail
27000000
10.0%
Nothing
23000000
GatorBuild Investment Decision
Decision (Shopping Mall):
9,500,000
20.0%
Highw ay
23000000
Bus System
50.0%
32000000
B: Shopping Mall
TRUE
Chance
-10000000
19,500,000
20.0%
Light Rail
27000000
10.0%
Nothing
35000000
20.0%
Highw ay
28000000
Bus System
50.0%
27000000
C: Office Block
FALSE
Chance
-9000000
18,000,000
Light Rail
20.0%
26000000
Nothing
10.0%
27000000
Question 3: FAST Diagram.
Develop a FAST Diagram for a Single Family House, identifying the basic and secondary
functions, the critical path, and the scope lines.
Note: projects that could be considered in this question are:
Single-Family House,
Shopping Mall, or
Parking Garage.
Answer:
The essential part of the FAST diagram is shown below, showing the critical path. Note,
the primary objectives are the first to the right of the first scope line.
Question 3 (2nd example): Utility Functions.
(a) You are responsible for the VE study for a proposed 4 floor parking garage to be
located in downtown Gainesville. Identify what you consider to be the 6 most
important criteria for evaluating the performance of alternative overall designs for
the parking garage. For each criteria, draw neatly and to scale a utility function
graph. The graphs must be properly labeled, and identify the boundaries of the
function. Assume reasonable input values for each utility function and derive the
resultant utility values.
(b) In a paragraph, note the role of utility functions in Value Engineering.
Answer:
This question will be covered in the class review.
Question 4 Proposal Phase
Write an essay identifying what makes a good Value Engineering proposal. The essay
should include an identification of what must be accomplished by the proposal, what
problems may be encountered in this phase, and how you can overcome or avoid these
problems
Answer:
See relevant section of course notes. Hints on structuring a good essay will be given in
the class review.