Presented to the

1
Overview of ProposedValue Engineering Program
U.S. Department of Energy

• Presented to the
• 2nd Annual Program and Project Management
  Workshop
  
• Presented by Terry J. Brennan
• Center for Acquisition and Business Excellence

2
What is Value Engineering?

• Value Engineering (VE) is defined as 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, quality,
  reliability and safety.

Source OMB Circular A-131, Value Engineering,
May 23, 1993
3
What is Value Analysis, Value Management Value
Control?

• The terms value analysis, value management, and
  value control are considered synonymous with VE.
  
• 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.

Source Society of American Value Engineers
(SAVE) International
4
Why should DOE perform Value Engineering?

• Since 1993, federal agencies and departments have
  been required to use value engineering as a
  management tool to ensure realistic budgets,
  identify and remove nonessential capital and
  operating costs, and improve and maintain optimum
  quality of program and acquisition functions.
• This requirement was established by
• Public Law 104-106, Section 4306 - Value
  Engineering for Federal Agencies,
  
• OMB Circular A-131 Value Engineering, and the
• Government Performance and Results Act (GPRA) of
  1993.

5
History of VE at DOE

• DOE Order 4010.1A - Value Engineering, 5/14/92
• Implements OMB Circular A-131 Requirements
• DOE Order 430.1A - Life Cycle Asset Management,
  10/14/98
  
• Cancels DOE O 4010.1A, requires Process Tool,
  such as VE, be used to improve efficiency and
  cost-effectiveness
  
• DOE Order 413.3 - Program and Project Management
  for the Acquisition of Capital Assets, 10/13/00
  
• Requires use of VE to derive the lowest
  life-cycle cost of a capital asset

6
VE Program Assessment

• 1998 OIG audit report, titled The U.S.
  Department of Energys Value Engineering
  Program, stated
  
• The Department had not fully developed and
  implemented an effective VE program.
  
• The Departments success with VE was limited by
  inadequate policy and procedures lack of annual
  plans, goals and objectives lack of training in
  VE methodology inadequate personnel devoted to
  the program and insufficient management support
  for the program.
• Application of VE should be expanded beyond
  construction projects.

DOE/IG Report HQ-B-98-01
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VE Program Assessment

• 2001 OIG audit report, titled Follow-on
  Inspection of the Department of Energys Value
  Engineering Program, stated
  
• The Department had not fully developed and
  implemented the requirements of OMB Circular
  A-131.
  
• 1998 OIG Audit Recommendations not fully
  implemented.
  
• Guidance and criteria not clarified regarding use
  of VE.
  
• VE Program goals, objectives, and performance
  measures not developed.
  
• VE Cost Savings/Avoidance not reported.
• Use of VE not expanded beyond construction
  projects.

DOE/IG Report IG-0536
8
DOE Management Decision

• OMBE/CFO will establish the Departments VE
  Policy
  
• That meets the requirements of OMB Circular A-131
  and is applicable to all the Departments
  systems, equipment, facilities, services, and
  supplies.
• Under Secretary for Energy, Science, and
  Environment and the Administrator, National
  Nuclear Security Administration will
  
• Designate a senior official who will be
  responsible for implementing and executing the
  Departments VE Policy for programs and projects
  under their cognizance.

Management Decision dated December 6, 2001 to DOE
Office of Inspector General
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VE Program Philosophy

• The Secretary of Energy has placed increased
  emphasis on limiting-the overall expenditures of
  the DOE to the minimum necessary to achieve the
  capability to fulfill its mission.
• VE has become recognized as an effective
  contributor to this objective.
  
• Improved Program Project Management Practices
  will actively include VE techniques and
  processes.
  
• The VE program is an integral part of the overall
  program or project delivery process and is not a
  separate entity designed to second-guess the
  Integrated Project Team or design authority.

10
VE Program Objectives

• To help DOE live up to its responsibility to
  deliver capital assets on schedule, within
  budget, and fully capable of meeting mission
  performance and environmental, safety, and health
  standards.
• To conform to the letter and spirit of Public Law
  104-106, National Defense Authorization Act For
  Fiscal Year 1996 and OMB Circular A-131.
  
• To not unduly impede the efficient and effective
  delivery of capital assets while meeting DOE
  objectives to obtain quality products, ensuring
  timeliness of performance, controlling costs, and
  mitigating adverse events.

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OMB Circular A-131 VE Requirements

• 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
  and projects with the most potential to yield
  savings from the application of VE techniques.
• Assign responsibility to grant waivers of the
  requirement to conduct VE studies.
  
• Ensure that the funds necessary for conducting
  agency VE efforts are included in annual budget
  requests to OMB.

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OMB Circular A-131 VE Requirements

• Provide training in VE techniques for 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.
• Maintain files on projects/programs that meet
  agency criteria for requiring the use of VE
  techniques. Documentation should include reasons
  for granting waivers of VE studies on
  projects/programs that meet agency criteria.
  Reasons for not implementing recommendations made
  in VE proposals should also be documented.

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OMB Circular A-131 VE Requirements

• Adhere to the acquisition requirements of the
  FAR, including use of VE clauses set forth in
  Part 48.
  
• Develop annual plans for using VE in the agency.
• Report annually to OMB on VE activities, as
  required by the Circular.

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VE Program Implementation Plan

• The department will utilize a two-tiered
  approach, as defined in the Federal Acquisition
  Regulations (FAR), to implement a viable and cost
  effective VE program. The two VE approaches as
  described in FAR Part 48 are the mandatory
  program and the incentive (also known as
  voluntary) program
• In the mandatory VE program approach, the DOE
  requires and pays for a specific VE effort.
  
• In the incentive approach, the contractor
  participates voluntarily and uses its resources
  to develop and submit Value Engineering Change
  Proposals (VECP).

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VE Program Roles Responsibilities

• OMBE
• Develops, maintains, and implements policies,
  procedures and standards to improve the way the
  Department performs VE.
  
• Monitor departments VE Program and coordinate VE
  efforts (crosscutting/lessons-learned
  activities).
  
• Establish minimum requirements for application of
  VE techniques during capital asset acquisition
  activities.
  
• Coordinate input, consolidate data (annual
  planning, VE program accomplishments, future
  budget requirements) and submit annual DOE VE
  Report to OMB.

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VE Program Roles Responsibilities

• Under Secretary ESE and Administrator, NNSA
• Develop criteria and guidelines to identify
  programs or projects with the most potential to
  yield savings from the application of VE
  techniques and execute VE Program.
• Assign responsibility to senior management
  officials to grant waivers of the requirement to
  conduct VE studies.
  
• Ensure funds necessary for conducting VE efforts
  are included in annual budget requests to OMB.
  
• Maintain files on VE activities within their
  organizations.
  
• Execute DOE VE Policy and FAR VE requirements.
• Develop annual plans for using VE in the
  organization.
  
• Report annually to OMBE on VE activities.

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VE Program Roles Responsibilities

• OMBE - Office of Procurement And Assistance
  Management
  
• Develop and issue Acquisition Letter for VE for
  Site/Facility Management Contracts.
  
• The purpose of the Acquisition Letter is to
  provide Contracting Officers guidance on the
  application of VE to site/facility management
  contracts (referred to as major contracts)
• Provide FAR expertise to OMBE and other
  departmental elements.
  
• Implementation of VE program approaches as
  described in FAR Part 48 are the mandatory
  program and the incentive (also known as
  voluntary) program

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VE Program Roles Responsibilities

• OMBE - Office of Training and Human Resources
  Development
  
• 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 funds necessary for conducting VE training
  are included in annual budget requests to OMB.
  
• Report to OMBE annually on the status of
  department-wide VE training activities completed
  and planned in subsequent years.

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VE Requirements DOE M 413.3

• PEP must include
• Determination of whether the projects meet DOE
  requirement for conducting a formal VE Study,
  and
  
• Formal Plans, if required, to conduct formal VE
  studies.
  
• CDR should include on a tailored basis
• Systems Engineering Plan defining Value
  Engineering requirements, and
  
• Assessments of and strategy for Value
  Engineering. For projects having a TPC greater
  than 5M, formal plans and actions are required.

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VE Program Implementation Schedule