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  • 1. VALUE ENGINEERING Analysis and Methodology DEL L. YOUNKER Value Consulting Winter Springs, Florida, U.S.A. MARCEL MARCEL DEKKER, INC. NEW YORK • BASEL Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 2. Although great care has been taken to provide accurate and current information, neither the author(s) nor the publisher, nor anyone else associated with this publication, shall be liable for any loss, damage, or liability directly or indirectly caused or alleged to be caused by this book. The material contained herein is not intended to provide specific advice or recom- mendations for any specific situation. Trademark notice: Product or corporate names may be trademarks or registered trademarks and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress. ISBN: 0-8247-0696-X This book is printed on acid-free paper. Headquarters Marcel Dckker, Inc., 270 Madison Avenue, New York, NY 10016, U.S.A. tel: 212-696-9000; fax: 212-685-4540 Distribution and Customer Service Marcel Dekker, Inc., Cimarron Road, Monticello, New York 12701, U.S.A. tel: 800-228-1160; fax: 845-796-1772 Eastern Hemisphere Distribution Marcel Dekker AC, Hutgasse 4, Postfach 812, CH-4001 Basel, Switzerland tel: 41-61-260-6300; fax: 41-61-260-6333 World Wide Web http://www.dekker.com The publisher offers discounts on this book when ordered in bulk quantities. For more infor- mation, write to Special Sales/Professional Marketing at the headquarters address above. Copyright © 2003 by Marcel Dekker, Inc. All Rights Reserved. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming, and recording, or by any information storage and retrieval system, without permission in writing from the publisher. Current printing (last digit): 10 9 8 7 6 5 4 3 2 1 PRINTED IN THE UNITED STATES OF AMERICA Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 3. COST ENGINEERING A Series of Reference Books and Textbooks Editor KENNETH K. HUMPHREYS, Ph.D. Consulting Engineer Granite Falls, North Carolina 1. Applied Cost Engineering, Forrest D. Clark and A. B. Lorenzoni 2. Basic Cost Engineering, Kenneth K. Humphreys and Sidney Katell 3. Applied Cost and Schedule Control, James A. Bent 4. Cost Engineering Management Techniques, James H. Black 5. Manufacturing Cost Engineering Handbook, edited by Eric M. Malstrom 6. Project and Cost Engineers' Handbook: Second Edition, Revised and Expanded, edited by Kenneth K. Humphreys 7. How to Keep Product Costs in Line, Nathan Gutman 8. Applied Cost Engineering: Second Edition, Revised and Expanded, Forrest D. Clark and A. B. Lorenzoni 9. Managing the Engineering and Construction of Small Projects: Practical Techniques for Planning, Estimating, Project Control, and Computer Applications, Richard £. Westney 10. Basic Cost Engineering: Second Edition, Revised and Expanded, Ken- neth K. Humphreys and Paul Wellman 11. Cost Engineering in Printed Circuit Board Manufacturing, Robert P. Hedden 12. Construction Cost Engineering Handbook, Anghel Patrascu 13. Computerized Project Control, Fulvio Drigani 14. Cost Analysis for Capital Investment Decisions, Hans J. Lang 15. Computer-Organized Cost Engineering, Gideon Samid 16. Engineering Project Management, Frederick L Blanchard 17. Computerized Management of Multiple Small Projects: Planning, Task and Resource Scheduling, Estimating, Design Optimization, and Project Control, Richard E. Westney 18. Estimating and Costing for the Metal Manufacturing Industries, Robert C. Creese, M. Adithan, and B. S. Pabla 19. Project and Cost Engineers' Handbook: Third Edition, Revised and Ex- panded, edited by Kenneth K. Humphreys and Lloyd M. English 20. Hazardous Waste Cost Control, edited by Richard A. Selg Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 4. 21. Construction Materials Management, George Stukhart 22. Planning, Estimating, and Control of Chemical Estimation Projects, Pablo F. Navarrete 23. Precision Manufacturing Costing, E. Ralph Sims, Jr. 24. Techniques for Capital Expenditure Analysis, Henry C. Thome and Julian A. Piekarski 25. Basic Cost Engineering: Third Edition, Revised and Expanded, Kenneth K. Humphreys and Paul Wellman 26. Effective Project Management Through Applied Cost and Schedule Control, edited by James A. Bent and Kenneth K. Humphreys 27. Cost Management of Capital Projects, Kurt Heinze 28. Applied Cost Engineering: Third Edition, Forrest D. Clark and A. B. Lorenzoni 29. Planning, Estimating, and Control of Chemical Construction Projects: Second Edition, Revised and Expanded, Pablo F. Navarrete and William C. Cole 30. Value Engineering: Analysis and Methodology, Del L Younker Additional Volumes in Preparation Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 5. Preface In today's economy, businesses, whether public or private, are striving to improve the value of products, projects, programs, processes, systems, and techniques. These efforts can be improved with a well-known, but often unused method called the value methodology. As this material is not new in some areas, it is how the methodology is used that can make strides in improving value. While use of the value methodology can reduce the costs, it can do so much more by improving teamwork, adding value, and developing the right project, process, program, project, system, or technique. A specific area of interest, in addition to learning and practicing the job plan, is the identification of value mismatches between what an item costs and what it is worth. The building of teams through function analysis and practicing good people skills can strengthen the team's use of the job plan to create, select, develop, and present to management solid alternative ways to improve the original concepts. The book emphasizes certain areas that can be focused on during a value im- provement study effort. Value Engineering covers aspects of value improvement studies that can be used as a learning course or as a teaching reference. The life cycle cost and team leader practice situation problems and exams are to be used as a review of the ma- terial and provide tools to help learn the material being covered. Chapters 1-25 provide an introduction to the value methodology. During this course of instruction an actual project may be concurrently used with the read- ing material to conduct a value improvement study on a project, program, process, system, or technique so that the group may demonstrate to management the bene- fits of using this improvement tool. Chapters 26-55 focus on practicing as team leaders to guide the group through example problems provided. As this field continues to grow, more and more professionals may be needed to improve value. We are responsible for finding and using methods such as the value methodology to improve the outcome of each item being planned. As the Association of General Contractors stated a few years ago, we can change our Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 6. future one project at at time, and so can we improve our future one project at a time by practicing the value methodology, well known and used by some, and unknown to others. Value Engineering is intended for interested professionals who want to learn "how to" apply this methodology to improve value and their future plans. It can also be used by others who want to study how to use the step-by-step value meth- odology approach to improving projects, products, processes, programs, systems, or techniques as a team member or team leader. I thank my family and others who have put their hearts into making such great comments, suggestions, and edits. I dedicate this to my brother who did not have a chance to get to see this effort through. DelL. Younker Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 7. Contents Preface Part I. Introduction to the Value Methodology 1. Managing Value Objectives Using the Value Methodology 2. Discovering the Certification Process 3. Cost Overrun Trends 4. Meeting Project Value Objectives 5. Users of Managing Value Objectives 6. Value Objectives Methodology 7. Improving Value 8. Value Project Analysis Criteria 9. Pre-Study Work Plan 10. The Job Plan 11. Team Make Up Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 8. 12. A Sample "Live" MVO Study 13. MVO Study Examples 14. Phase 1: Information Gathering Procedures 15. Phase 2: Creative Brainstorming 16. People Skills During the MVO Study 17. Making Effective Presentations 18. Managing Conflicts 19. Phase 3: Evaluation Techniques 20. Phase 4: Development of Best Ideas 21. Phase 5: Presenting and Reporting Findings 22. Getting Best Results 23. Future Follow-Up and Implementation 24. Blank Sample of Study Format 25. Midterm Exam Part II. Advanced Team Leader Training Techniques 26. Managing Project Objectives 27. Letting the Job Plan Work 28. Tips 29. Project Analysis 30. Creativity Process 31. Types of Functions Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 9. 32. Problem Solvers 33. Adding Value 34. Value Mismatch 35. Managing Time 36. Financial Breakdown 37. Contracting Methods/Decisions 38. Life Cycle Cost Components 39. Cost and Worth Per Function 40. Financially Important Decisions 41. Team Building Skills 42. Function Analysis Diagramming 43. Alternative Ideas 44. Evaluating Best Alternatives 45. Presentations for Management 46. MVO Program Enhancements 47. Solving Technical Problems 48. Breaking the Problem Down 49. Customer Focus 50. Leading a Session 51. Discussion Groups 52. Overall Component Analysis 53. Specific Component Analysis Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.
  • 10. 54. Summarizing Study Results 55. Exam Review Appendix A: Training Information Appendix B: Answers to Chapters 25, 38, and 55 Copyright 2003 by Marcel Dekker, Inc. All Rights Reserved.