http://books.google.com.sg/books?hl=en&id=kTuMHcT9s04C&dq=value+engineering&printsec=frontcover&source=web&ots=4O2Jioo5G_&sig=pzmeV-ka2x3kEsyydUWhj7VFHWM
http://books.google.com.sg/books?hl=en&id=V5fp-UQDjVwC&dq=value+engineering&printsec=frontcover&source=web&ots=1H7VqxU9SO&sig=2EhYJUGjbTKqxyHOMExe2oL7L4A
Value engineering is a systematic method to improve the "value" of goods and services by using an examination of function. Value, as defined, is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements. [1]
价值工程，又称价值方法，是一种用来提高产品和服务价值的系统手段。
价值，被定义成产品或者服务的功能同其成本的比值。提高产品的功能或者减少成本都可以提高其价值。在价值工程中，有一个很重要的原则是质量不能因为价值的增加而降低。
在美国，价值工程被公众法104-106明确指出，其中提到：每一个执行机构都要建立和保有性价比价值工程程序和过程。
价值工程有时候在项目管理或者工业工程的课程中教授，作为一种最优化系统输出价值的技巧。在大多数情况下，价值工程识别并且剔除不必要的消耗，从此增加了产品的价值。
价值工程使用直觉逻辑（一种特别的“怎么样”－“为什么”质询技巧）以及功能分析来识别可以用来提高价值的各种关系。它被认为是一个数量性的技巧，一种科学化的手段。运筹学，建模技巧经常被用来识别或者优化产品价值。
In the United States, value engineering is specifically spelled out in Public Law 104-106, which states “Each executive agency shall establish and maintain cost-effective value engineering procedures and processes." [2]
Value engineering is sometimes taught within the project management or industrial engineering body of knowledge as a technique in which the value of a system’s outputs is optimized by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.
VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun)and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis".[3]
Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis - conclusion to test relationships, and operations research, which uses model building to identify predictive relationships.
Value engineering (VE) is also referred to as or "value management" or "value methodology" (VM), and "value analysis" (VA)[4]. VE is above all a structured problem solving process based on function analysis—understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.
The Origins of Value Engineering
Value engineering began at General Electric Co. during World War II. Because of the war, there were shortages of skilled labour, raw materials, and component parts. Lawrence Miles and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved the product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique “value analysis”.
The Job Plan
Value engineering is often done by systematically following a multi-stage Job Plan. Larry Miles' original system was a six-step procedure which he called the Value Analysis Job Plan. Others have varied the Job Plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps:
PREPARATION
INFORMATION
ANALYSIS
CREATION
EVALUATION
DEVELOPMENT
PRESENTATION
FOLLOW-UP
Four basic steps in the Job Plan are:
Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do?
Alternative generation (Creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function?
Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great will the cost savings be.
Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision.
How it works
VE follows a structured thought process to evaluate options.
Gather information
1.What is being done now?
Who is doing it?
What could it do?
What must it not do?
Measure
2.How will the alternatives be measured?
What are the alternate ways of meeting requirements?
What else can perform the desired function?
Analyze
3.What must be done?
What does it cost?
Generate
4.What else will do the job?
Evaluate
5. Which Ideas are the best?
6. Develop and expand ideas
What are the impacts?
What is the cost?
What is the performance?
7. Present ideas
Sell alternatives
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TO THE HEADS OF EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS
SUBJECT: Value Engineering
1. Purpose
2. Supersession Information
3. Authority
4. Background
5. Relationship to other management improvement processes
6. Definitions
7. Policy
8. Agency responsibilities
9. Reports to OMB
10. Inspectors General audits
11. Related Guidance
12. Effective date and Implementation
13. Sunset review
14. Inquiries
1. Purpose. This Circular requires Federal Departments and Agencies to use value engineering (VE) as a management tool, where appropriate, to reduce program and acquisition costs.
2. Supersession Information. This Circular supersedes and cancels OMB Circular No. A-131, Value Engineering, dated January 26, 1988.
3. Authority. This Circular is issued pursuant to 31 U.S.C. [[section]]1111.
4. Background. For the purposes of this Circular, value analysis, value management, and value control are considered synonymous with VE. VE is an effective technique for reducing costs, increasing productivity, and improving quality. It can be applied to hardware and software; development, production, and manufacturing; specifications, standards, contract requirements, and other acquisition program documentation; facilities design and construction. It may be successfully introduced at any point in the life-cycle of products, systems, or procedures. VE is a technique directed toward analyzing the functions of an item or process to determine "best value," or the best relationship between worth and cost. In other words, "best value" is represented by an item or process that consistently performs the required basic function and has the lowest total cost. In this context, the application of VE in facilities construction can yield a better value when construction is approached in a manner that incorporates environmentally-sound and energy-efficient practices and materials.
VE originated in the industrial community, and it has spread to the Federal Government due to its potential for yielding a large return on investment. VE has long been recognized as an effective technique to lower the Government's cost while maintaining necessary quality levels. Its most extensive use has been in Federal acquisition programs.
An August 1991 recent audit of VE in the Federal Government by the President's Council on Integrity and Efficiency concluded that more can and should be done by Federal agencies to realize the benefits of VE. Reports issued by the General Accounting Office and agency Inspectors General have also consistently concluded that greater use of this technique would result in additional savings to the Government.
5. Relationship to other management improvement processes. VE is a management tool that can be used alone or with other management techniques and methodologies to improve operations and reduce costs. For example, the total quality management process can include VE and other cost cutting-techniques, such as life-cycle costing, concurrent engineering, and design-to-cost, approaches, by using these techniques as analytical tools in process and product improvement.
VE contributes to the overall management objectives of streamlining operations, improving quality, reducing costs, and can result in the increased use of environmentally-sound and energy-efficient practices and materials. The complementary relationship between VE and other management techniques increases the likelihood that overall management objectives are achieved.
6. Definitions.
Agency. As used in this Circular, the term "agency" means an Executive department or an independent establishment within the meaning of sections 101 and 104(1), respectively, of Title 5, United States Code.
Life-cycle cost. The total cost of a system, building, or other product, computed over its useful life. It includes all relevant costs involved in acquiring, owning, operating, maintaining, and disposing of the system or product over a specified period of time, including environmental and energy costs.
Cost savings. A reduction in actual expenditures below the projected level of costs to achieve a specific objective.
Cost avoidance. An action taken in the immediate time frame that will decrease costs in the future. For example, an engineering improvement that increases the mean time between failures and thereby decreases operation and maintenance costs is a cost avoidance action.
In-house savings. Net life-cycle cost savings achieved by in-house agency staff using VE techniques.
Contracted savings. Net life-cycle cost savings realized by contracting for the performance of a VE study or by a Value Engineering Change Proposal submitted by a contractor.
Total Quality Management (TQM). A customer-based management philosophy for improving the quality of products and increasing customer satisfaction by restructuring traditional management practices. An integral part of TQM is continuous process improvement, which is achieved by using analytical techniques to determine the causes of problems. The goal is not just to fix problems but to improve processes so that the problems do not recur. Value engineering can be used as an analytical technique in the TQM process.
Value Engineering. An organized effort directed at analyzing the functions of systems, equipment, facilities, services, and supplies for the purpose of achieving the essential functions at the lowest life-cycle cost consistent with required performance, reliability, quality, and safety. These organized efforts can be performed by both in-house agency personnel and by contractor personnel.
Value Engineering Change Proposal (VECP). A proposal submitted by a contractor under the VE provisions of the Federal Acquisition Regulations (FAR) that, through a change in a project's plans, designs, or specifications as defined in the contract, would lower the project's life-cycle cost to the Government.
Value Engineering Proposal (VEP). An in-house agency-developed proposal, or a proposal developed by a contractor under contract to provide VE services, to provide VE studies for a Government project/program.
7. Policy. Federal agencies shall use VE as a management tool, where appropriate, to ensure realistic budgets, identify and remove nonessential capital and operating costs, and improve and maintain optimum quality of program and acquisition functions. Senior management will establish and maintain VE programs, procedures and processes to provide for the aggressive, systematic development and maintenance of the most effective, efficient, and economical and environmentally-sound arrangements for conducting the work of agencies, and to provide a sound basis for identifying and reporting accomplishments.
8. Agency responsibilities. To ensure that systemic VE improvements are achieved, agencies shall, at a minimum:
Designate a senior management official to monitor and coordinate agency VE efforts.
Develop criteria and guidelines for both in-house personnel and contractors to identify programs/projects with the most potential to yield savings from the application of VE techniques. The criteria and guidelines should recognize that the potential savings are greatest during the planning, design, and other early phases of project/program/system/product development. Agency guidelines will include:
Measuring the net life-cycle cost savings from value engineering. The net life-cycle cost savings from value engineering is determined by subtracting the Government's cost of performing the value engineering function over the life of the program from the value of the total saving generated by the value engineering function.
Dollar amount thresholds for projects/programs requiring the application of VE. The minimum threshold for agency projects and programs which require the application of VE is $1 million. Lower thresholds may be established at agency discretion for projects having a major impact on agency operations.
Criteria for granting waivers to the requirement to conduct VE studies, in accordance with the FAR 48.201(a).
Guidance to ensure that the application of VE to construction projects/programs and other projects/programs, will include consideration of environmentally-sound and energy efficient considerations to arrive at environmentally-sound and energy efficient results.
Assign responsibility to the senior management official designated pursuant to [[section]]8a above, to grant waivers of the requirement to conduct VE studies on certain programs and projects. This responsibility may be delegated to other appropriate officials.
Provide training in VE techniques to agency staff responsible for coordinating and monitoring VE efforts and for staff responsible for developing, reviewing, analyzing, and carrying out VE proposals, change proposals, and evaluations.
Ensure that funds necessary for conducting agency VE efforts are included in annual budget requests to OMB.
Maintain files on projects/programs/systems/products that meet agency criteria for requiring the use of VE techniques. Documentation should include reasons for granting waivers of VE studies on projects/programs which met agency criteria. Reasons for not implementing recommendations made in VE proposals should also be documented.
Adhere to the acquisition requirements of the FAR, including the use of VE clauses set forth in Parts 48 and 52.
Develop annual plans for using VE in the agency. At a minimum, the plans should identify both the in-house and contractor projects, programs, systems, products, etc., to which VE techniques will be applied in the next fiscal year, and the estimated costs of these projects. These projects should be listed by category, as required in the agency's annual report to OMB. VEP's and VECP's should be included under the appropriate category. Annual plans will be made available for OMB review upon request.
Report annually to OMB on VE activities, as outlined below.
9. Reports to OMB. Each agency shall report the Fiscal Year results of using VE annually to OMB, except those agencies whose total budget is under $10 million or whose total procurement obligations do not exceed $10 million in a given fiscal year. The reports are due to OMB by December 31st of the calendar year, and should include the current name, address, and telephone number of the agency's VE manager.
The report format is provided in the Attachment.
Part I of the report asks for net life-cycle cost savings achieved through VE. In addition, it requires agencies to show the project/program dollar amount thresholds the agency has established for requiring the use of VE if greater than $1 million. If thresholds vary by category, show the thresholds for all categories. Savings resulting from VE proposals and VE change proposals should be included under the appropriate categories.
Part II asks for a description of the top 20 fiscal year VE projects (or all projects if there are fewer than 20). List the projects by title and show the net life-cycle cost savings and quality improvements achieved through application of VE.
Part III requires agencies to submit a detailed schedule of year-by-year cost savings, cost avoidances and cost sharing with contractors for each program/project for which the agency is reporting cost savings or cost avoidances. The aggregate total of all schedules shall equal the totals reported in Part I.A. of the annual report.
10. Inspectors General audits. Two years after the issuance of this revised Circular, Agency Heads shall ask the Inspectors General (IGs) to audit agency value engineering programs to (1) validate the accuracy of agency reported value engineering savings and (2) assess the adequacy of agency value engineering policies, procedures and implementation of this revised Circular. Periodically thereafter, agency IGs shall audit agency reported VE savings as the need arises.
11. Related Guidance. In general, value engineering investments should have positive net present value when discounted with the appropriate interest rate, as described in OMB Circular No. A-94, section 8.c. For detailed guidance on value engineering, refer to the appropriate sections of the Federal Acquisition Regulations.
12. Effective date and Implementation. This Circular takes effect within 30 days of its publication in the Federal Register. Heads of departments and agencies are responsible for taking all necessary actions to assure effective implementation of these policies, such as disseminating this Circular to appropriate program and other staff, developing implementation strategies and initiating staff training. Since these policies must be implemented in the Federal Acquisition Regulation (FAR), agencies should not duplicate the development of implementing procurement regulations being undertaken by the Federal Acquisition Regulatory Councils. However, implementation of these policies in the FAR must be accomplished within the time period specified below, with inclusion in agency solicitations and resulting contracts, as appropriate, to occur immediately thereafter.
Pursuant to subsections 6(a) of the Office of Federal Procurement Policy Act, as amended, (41 U.S.C. 401 et seq.), the Federal Acquisition Regulatory Councils shall ensure that the policies established herein are incorporated in the FAR within 180 days from the date this Circular is published in final form in the Federal Register. Promulgation of final FAR regulations within that 180 day period shall be considered issuance in a "timely manner" as prescribed in 41 USC 405(b)."
13. Sunset review. The policies contained in this Circular will be reviewed by OMB five years from the date of issuance.
14. Inquiries. Further information about this Circular may be obtained from the Office of Management and Budget (OMB), 725 17th Street, NW, Washington, DC 20503, Telephone (202) 395-6803.
Leon Panetta
Director
Attachment
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