EPA-430/9-75-020
PROCEDURAL
HANDBOOK
FOR
VALUE ENGINEERING
DECEMBER 1975
U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF WATER PROGRAM OPERATIONS
WASHINGTON, D.C. 20460
MCD-18
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NOTES
To order this publication, MCD-18, Procedural Handbook for
Value Engineering, write to:
General Services Administration (8FFS)
Centralized Mailing List Services
Bldg. 41, Denver Federal Center
Denver, Colorado 80225
Please indicate the MCD number and title of publication.
This publication should be placed in Part III, Guidelines of
the Municipal Wastewater Treatment Works Construction Grants
Program manual of references.
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PROCEDURAL HANDBOOK
FOR
VALUE ENGINEERING
Municipal Construction Division
Office of Water Program Operations
Environmental Protection Agency
December 1975
MCD-18
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CONTENTS
I. Introduction
A. Background
B. Definition of Value Engineering
C. VE and the designer - Client Relationship
D. Desing review by "other" designers
II. The Value Engineering Program
A. Administrative Procedures
1. Objective
2. Level of VE effort
3. Qualifications requirements
4. Where to find qualified VE specialists
5. Estimating the cost of a VE program
6. Scheduling the VE program
7. Submitting the VE program proposal
B. Pre-VE Study Procedures
1. Documents required
2. VE team composition
3. Liaison with design engineer and Federal,
State and Local authorities
4. Selection of study areas
C. VE Study Procedures
1. Information phase
2. Speculation phase
3. Analytical phase
4. Development phase
5. Proposal phase
6. Adjournment phase
D. Post-VE Study Procedures
1. Preparation of the preliminary VE study report
2. Preliminary report distribution
3. Preliminary report review
4. Distribution of the final VE report
5. Implementation and follow-up
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I INTRODUCTION
A. Background
The cost-effective approach to wastewater treatment manage-
ment is directed in the Federal Water Pollution Control Act Amendments
of 1972 (the Act). Under Section 212 (2)(B) of the Act, the grant ap-
plicant is required to demonstrate that the proposed project is the most
cost-effective alternative to meet the goals of the Act. EPA cost-
effectiveness guidelines (40 CFR 35, Appendix A) provide guidance to
grant applicants for use in making cost-effectiveness studies.
Value Engineering (VE) is a step beyond the traditional
engineering analysis. Experiences have shown that application of the
VE techniques during the design of a project results in significant
cost savings. Reports of the application of VE to municipal waste-
water treatment works show that VE is beneficial to increase cost
effectiveness in the EPA construction grants program. The billions
of dollars required to construct and operate the nation's water
pollution control projects indicates that even a small percentage of
savings would result in substantial dollar savings.
This handbook is intended to provide the administrative
support and management procedures required by grant applicants and
design engineers to conduct a voluntary VE program. Grant applicants
and designers should be aware of potential benefits provided by VE
analysis and are encouraged to use it whenever appropriate.
The VE Job Plan, a detailed description of the VE methodology,
is presented only briefly here because is is assumed that either the
designer has the personnel with the required qualifications to conduct
the VE study or the designer will contract personnel with the required
qualifications to do the study.
B. Definition of Value Engineering
Value Engineering is a systematic and creative approach to
identify unnecessarily high costs in a project in order to arrive
at a cost savings without sacrificing the reliability or efficiency
of the project or increasing operating and maintenance costs.
C. The Effect of the VE Study on the Designer-Client Relationship
The client relies upon the designer to design for him a
facility that most economically will meet the needs of the municipality.
The client should, therefore, encourage the use of new processes and tech-
niques, but he must leave the actions and responsibilities in the hands
of the designer. If this idea is combined with the following from the
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canons of ethics for engineers, a strong case for the use of VE tech-
niques emerges: "He (the engineer) shall engage, or advise his client
or employer to engage, and he will cooperate with other experts and
specialists whenever the client's or employers interests are best served
by such service." Therefore, it seems reasonable to assume that since
VE has been shown to enhance cost effectiveness to the client, the tech-
niques of VE should be an integral part of the design process.
The point sometimes raised by clients is that since they have
already contracted a designer for an economical design, any additional
engineering such as VE is either superfluous or represents an additional
expense. Actually, Value Engineering is an objective second look at a
project. EPA is willing to share the cost of the study effort because
of the demonstrated savings that result. This extra effort is beyond
the scope of the conventional design practice.
D. Design Review by "Other" Designers
The EPA program requires that Value Engineering be conducted
by design personnel not involved with the original design team. This
is because the Value Engineering study is to be an objective second look
at the project design. If the firm has sufficient personnel with the
required qualifications (discussed later in this handbook), the firm
may be able to conduct its own VE study. On the other hand, if it does
not have sufficient design personnel, the VE study will have to be aug-
mented by other personnel, such as from another firm. The reason for
this is to have personnel not technically involved in the original design
so that an atmosphere conducive to an objective study is created.
Some designers may be reluctant to submit their work for
review by other designers. However, past experience has shown that the
results of VE studies have been beneficial not only to the owners, but
to the original designers as well. Embarrassment to the designers has
not materialized; rather, owners have appreciated the efforts of the
designers to enhance the value of their facilities.
Design disclosure of information which may be of significant
benefit to a potential competitor is largely controllable by the designer.
First of all, any proprietary data or other data which the designer feels
must be protected, can be withheld from the VE review; however, the
designer must justify doing so when submitting his VE program for grant
eligibility. Secondly, the designer may also select other design firms
to submit proposals to conduct the VE study.
E. The VE Program Outline
This handbook covers the entire VE program and describes the
four phases shown below. Where lengthy procedures, techniques or dis-
cussions are required, they are referenced in an appendix.
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1. Administrative Procedures
a. Objective
b. Level of VE effort
c. Qualification requirements of the VE study team
d. Where to find qualified VE specialist
e. Estimating the cost of the VE program
f. Scheduling the VE program
g. Submitting the VE program proposal
2. Pre-VE Study Procedures
a. Documents required for the VE study
(1) Drawings
(2) Cost data
(3) Reports, specifications, and regulations
b. VE study team composition
c. Liaison with designer, and the Federal, State, and
local authorities
d. Selection of study areas
3. VE Study Procedures
4. Post-VE Study Procedures
a. Preparation of the preliminary VE study report
b. Distribution of the preliminary VE study report
c. Preliminary VE study report review
d. Distribution of final VE study report
e. Implementation and followup
II THE VALUE ENGINEERING (VE) PROGRAM
A. Administrative Procedures
1. Objective
The objective of the following administrative procedures
is to provide information needed for submittal of the VE proposal for
eligibility with the Step II grant application or amendment of an ex-
isting Step II grant to include VE. Procedures for submittal of both
the VE proposal and the designer's redesign fee for grant eligibility
are contained in paragraph II.A.7.
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2. Level of VE Effort
The level of effort required to conduct an effective VE
study is a function of the complexity of the project and should be de-
cided by the designer after discussion with the VE team coordinator.
For instance, the level of effort for a project utilizing the trickling
filter process may not require the same level of effort as a project
utilizing the activated sludge process and biological nitrification.
Therefore, the level of effort as stated below is intended to serve
only as a guide. Approval of the actual level of effort proposed lies
with the Environmental Protection Agency and the State, and is part of
the Step II grant-approval process discussed later in this handbook.
A complex wastewater treatment plant (WWTP) may require
multiple team and/or multiple VE studies to adequately review the
project. For example, each of the following areas may require one
team to assure thorough coverage.
a. All processes
b. Plant layout and structures
c. Interface (electrical and piping) and other
related items.
In the above situation, it may be advisable to conduct
the study on the processes first and then follow with studies on the
remaining areas.
If more than one study is to be conducted, the
studies may be conducted at different times during Step II either by
different teams or by the same team(s). In any event, close coordination
between the teams is important.
3. Qualification Requirements of the VE Study Team(s)
The qualification requirements which follow apply whether
the VE study is conducted by the designer, or is subcontracted to an
outside firm. The VE study shall be conducted by teams composed of
experienced technical staff personnel, experienced in the design of
WWTP projects. The size of the team would be approximately five
active members. If it is desired to have more than five men on the
team(s), justification shall be given in the VE program application
for grant eligibility with the Step II grant.
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The VE study shall be directed by either a qualified VE
specialist or an experienced engineer who has completed a construction-
oriented 40-hour VE workshop. This director will be called the VE team
coordinator. For workshops commencing July 1, 1976, or later, the VE
team coordinator must have participated in a minimum of two actual VE
studies on construction projects, preferably WWTP projects. For work-
shops commencing before that date, less experience may be acceptable,
depending on the complexity of the project. The VE team coordinator
shall not be a member of any one VE study team except when only one
team is conducting the VE study. No active member of the team(s) nor
the team coordinator may be a member of the original design team of
the project being studied,( except the cost estimator ).
The VE study shall be primarily project oriented. This
means that every effort should be made to ensure that the VE study of
the project is effectively and thoroughly executed. A training program
may be made a part of the VE study provided it is approved by the State
and EPA. In this case, costs associated with the training program
will not be grant eligible, but costs for VE study of the project are
eligible,
4. Where to Find Qualified VE Specialists
Information concerning qualified VE specialists may be
obtained from the regional office of EPA or regional offices of the
General Services Administration.
5. Estimating the Cost of a VE Program
The cost of a VE program is a function of the level of
effort which, in turn, is a function of the complexity of the project.
Therefore, the level of effort must first be determined considering the
number of teams and the number of workshops. The cost estimate should
then be made based on the entire program, from the administrative phase
through to the post-VE study phase. ( Use EPA Form 57UO-41, February
1976 ).
6. Scheduling the VE Program
The VE program comprises pre-VE study activities, the VE
study itself, and all post-VE study activities including report preparation,
proposal review and completion of the implementation or redesign. There-
fore, the entire VE program should be scheduled for completion no later
than 70 to 80 percent completion of Step II, to ensure the project schedule
will not be delayed. Since the VE program schedule will be conducted
simultaneously with the design schedule, it may be advantageous to time
the actual study to coincide with design reviews.
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The actual time required for VE change proposal review
and acceptance or rejection, plus redesign and implementation, is difficult
to estimate; therefore, estimates should be based on estimated maximum
amount of post-VE study effort.
The above guidelines stress the latest date of initiation
of the VE program. However, the earliest date should be a function of
several variables such as availability of data required for the VE study
and the type of system being designed. A decision should be made between
starting a VE program with minimum data, and waiting so long that exten-
sive redesign would be necessary. This decision lies with the designer.
7. Submitting the VE Program Proposal
The cost of the VE program is grant eligible; the proposal
should be submitted as a part of the application for Step II grant for
preparation of plans and specifications. Payment for the VE program,
if approved, is intended to be flexible and consistent with the payment
schedule for the main Step II grant. The following guidelines may be
applied when appropriate:
First payment: Completion of the VE study
Second payment: Completion of VE report from the
designer (see post-VE study procedures
and report distribution)
Final payment: Completion of redesign and implemen-
tation and followup process including
submittal of a report by the designer
stating actual savings
The VE program proposal, when it is submitted as a supple-
ment to an existing Step II grant, should be submitted between the start
and 40 percent completion of the Step II grant for plans and specifications.
The designer's redesign fee and implementation cost resulting
from the accepted and implemented VE proposed changes are also grant eli-
gible. Application for the redesign fee and implementation costs should
be submitted with the final report from the designer.
In addition to the standard grant information, the appli-
cation for a VE program shall include:
a. Pertinent information on the project to be studied,
including size, treatment process, current estimated
construction cost, et cetera.
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b. Cost to accomplish the VE program
c. Schedule of proposed VE program. The application
shall indicate the schedule in relation to the pro-
ject design schedule to show that undue delay will
be avoided. The schedule shall also show when the
recommendations will be available to the original
designer and when the VE report will be submitted
to EPA by the designer.
d. Identification of the VE team. The name, professional
background, and VE experience (if any) of each member
of the VE study team(s) shall be given.
e. Level of effort. The level of effort shall be
stated and shall be in accordance with the guide-
lines established in this handbook.
B. Pre-VE Study Procedures
The success of a VE study is greatly dependent on timely and
efficient prestudy preparations. Certain information and documents
should be distributed to the team members as soon as possible before
the study to prepare the study teams for their particular area of study,
and to help the teams determine what reference material to bring.
1. Documents Required
Copies of drawings, detailed cost data, specifications,
reports, and pertinent regulations are required in sufficient numbers
to permit team members to investigate various areas simultaneously.
Documents needed by each team are as follows:
a. Drawings: One complete set of team's area of
study. If the total number of drawings in the
entire set is relatively small (for example,
between 50 and 100), it may be desirable to
have one complete set of drawings per team.
If it is decided that each team will have a
copy of drawings pertinent to only their par-
ticular study area, then it is highly desir-
able to have one or more complete reference
sets for use by all teams. The actual number
of reference drawing sets would be dependent
on the project size.
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b. Detailed Cost Data: The cost data should be
as complete and as detailed as practicable.
c. Copies of the specifications, design criteria,
regulations, and reports.
The above documents are required at least one week (pref-
erably two depending on the size of the project) prior to the first day
of the VE study because the VE team coordinator must:
a. Construct the cost model
b. Determine high-cost areas with the greatest potential
for savings
c. Determine the discipline composition of team members
and assign teams to corresponding study areas
d. Review the drawings, specifications, cost data,
and reports to be thoroughly familiar with the
project
e. Distribute information to the team members as
soon as possible before the first day of the
workshop
The VE team coordinator should request assistance from the
designer during project familiarization. When appropriate, a project
description may be prepared by the VE team coordinator and distributed
to each team member as early as possible before the start of the VE study.
The VE team coordinator should obtain for each team member
reference material on VE methodology. Finally, the VE team coordinator
should prepare an itemized list of equipment and material which each team
member should bring to the study.
2. VE Team Composition
It is not intended that this handbook establish rigid rules
for the composition of VE study teams; rather, it is intended that suffi-
ciently flexible guidelines be presented to assist in the selection of
personnel for the various study areas and projects.
Composition of the teams is a function of the study area;
only the disciplines involved in the study area should be represented on
the team. For instance, the following table illustrates team composition
for different areas of study.
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NUMBER OF MEN
DISCIPLINE PROCESS SITE BLDGS INTERFACE (PIPING. ELEC)
SANITARY
STRUCTURAL
ME (PIPING)
ME (HVAC)
ELEC
COST EST.
ARCHITECT
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
For study teams of fewer than five men, the disciplines
should be selected according to the significance of the study areas.
For instance, a three-man study team for an underground pumping station
might best be composed of structural, mechanical, and electrical engineers.
However, a three-man study team for an above-ground pumping station near
a residential area might be composed of structural and mechanical engi-
neers and an architect.
3. Liaison with Design Engineer and Federal, State, and
Local Authorities
It is imperative that some form of liaison be established
with the designer to provide the VE study teams with a constant source
of answers to questions which may arise during the study. This liaison
may be accomplished in any manner suitable to the VE team coordinator
and designer.
In addition, some form of liaison should be established
with Federal, State, and local authorities, by the designer at his
option, or by the VE team coordinator. This liaison might best be accom-
plished by having one or more of the State and local authorities attend
the VE study as consultants or observers.
4. Selection of Study Areas
The selection of study areas should be accomplished without
regard to EPA design guidelines criteria since these criteria may be
challenged if the VE study presents substantial cause. Note, however,
the legal or regulatory requirements (such as permit discharge limitations)
are not to be modified by the VE process. There are other mechanisms for
this purpose and these issues should be resolved before the design is
started. Exceptions to design criteria will take more time for EPA review
and this should be considered. The selection should be based on:
a. The results of the cost model (and any additional
cost analysis conducted prior to the study)
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b. The number of teams available versus the number
of study areas available
c. Information known about the system beforehand
which may influence the selection of study
areas
d. Timing of the VE program, or other factors
which may prohibit or emphasize the study of
certain areas.
Study areas should be selected only after careful consi-
deration of all factors involved. The study areas should be well defined
and known to all teams so that ideas may be coordinated between the teams
during the study.
As soon as the study areas have been selected, specific
teams should be composed and assigned to the study areas. The VE team
coordinator should then contact all team members as soon as possible
and inform them of the area(s) which they will be studying, so that they
can bring appropriate reference books, catalogs, and other necessary
documents.
C. VE Study Procedures
The VE Job Plan
Several authors have described the VE Job Plan using various
phases and titles of phases. Appendix B shows the principal phases of
the VE Job Plan which must be incorporated into the VE study. Sample
forms for the VE Job Plan workbook are also shown in Appendix A. This
handbook does not present the VE Job Plan in detail since VE-trained
personnel will be directing the study.
The VE study may be conducted either by meeting 5 consecutive
days, or by conducting the information phase in the first day and then
waiting for several days before continuing the VE study. In the latter
case, the team and VE team coordinator would have ample time to find
answers to questions raised during the information phase. Also, it is
sometimes advantageous to expose the team to the project and then let
the team dwell on it for several days.
1. Information Phase
A project briefing should be presented by the study team
coordinator. Drawings, reports, cost data, specifications, and other
documents should be distributed and the teams permitted sufficient time
for familiarization.
10
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Project constraints and other design criteria should be
discussed during this phase.
2. Speculation Phase
The team should generate numerous alternative means of
accomplishing the function(s) of the item under study. No attempt
should be made to evaluate the alternatives at this time regardless
of how "far-out" they may appear since these alternatives often lead
to development of the final alternative proposed for implementation.
It is interesting to note that, in many cases, the alternatives gener-
ated during the last half of the creative session were those which were
developed and proposed for implementation.
3. Analytical Phase
This process eliminates those alternatives generated
during the creative phase session which are not considered feasible.
Only those ideas which, after team discussion, appear most promising
should be retained and closely examined for overall advantages and
disadvantages. Consideration must be given to all the design criteria,
including cost, needed performance, efficiency, reliability, quality,
maintainability, desired esthetics, safety, fire protection, environ-
mental and ecological effects, replacement and future expansion plans,
and the probability and cost of implementation. Emphasis should be
placed not only on instant savings cost, but also on maintenance,
operating, and replacement costs.
4. Development Phase
The alternatives remaining from the analytical phase
should be developed to a point where they can be compared with the
original design from the points of view of both feasibility and costs.
This is the phase in which the techniques of Life-Cycle
Costing (LCC) should be used. Those components of LCC which comprise
operation, maintenance and replacement (OMR) cost, and those which
comprise the capital cost segment of the LCC, should be evaluated and
reported separately so that subsequent review of the proposal can
identify these components of the LCC analysis.
A very important function of the development phase is
the development of the cost data for both the as-designed system and
the proposed system. The cost data must be developed systematically
and references shown to which the cost data may be traced. Where
possible, the cost estimates should be prepared by the cost estimators
who prepared the original estimates.
11
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5. Proposal Phase
The proposal phase concludes the VE Job Plan workbook
but not the VE program. The alternatives developed should be presented
briefly and concisely. The items which should be presented are:
a. Total costs and cost savings
b. Brief description and sketches of as-designed
versus as-proposed alternatives
c. The rationale of the proposed alternatives
d. Implementation costs and a brief description of
how implementation is to be accomplished
6. Adjournment of VE Study
Before or immediately after adjournment of the VE study,
it may be desirable to make a copy of each team's workbook for immediate
distribution to all team members, depending on whether teams require
any additional input to the VE team coordinator or for the VE Job Plan
workbook.
D. Post-VE Study Procedures
1. Preparation of the Preliminary VE Study Report
This report is prepared by the VE team coordinator from
the information contained in the VE Job Plan Workbook generated during
the VE study. The report should contain a brief description of the
project and a summary of findings. The VE Job Plan Workbook, calcula-
tions, and other detailed data should be included in an appendix.
The report should include:
a. Overall project description, including project
estimated construction cost
b. Present design, showing cost and sketch
c. Proposed design, showing cost and sketch
d. Implementation costs
e. Implementation procedures and problems, if any
f. Instant contract savings
12
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g. Operations, maintenance, and replacement cost savings
h. Total life-cycle costs
The method of expressing cost savings should be presented
in both present-worth amounts and in annual savings amounts, in accordance
with the cost effectiveness analysis guidelines (See Appendix A). In
addition, the savings should be presented as percent of system and percent
of entire construction costs or total annual costs.
2. Distribution of the Preliminary VE Study Report
Distribution of the report shall be the responsibility
of the VE team coordinator and shall be in accordance with the following:
Recipient Number of Copies
Designer 2
Owner 2
State Pollution Control 2
Agency
EPA, Regional Office 2
(See Appendix B)
3. Preliminary VE Study Report Review
The designer and the owner shall review the preliminary
VE study report submitted by the VE team coordinator. It shall be
their responsibility to accept or reject the proposals of the report.
The designer shall then prepare a final VE study report describing those
VE proposals accepted and those rejected.
For those proposals accepted, an implementation plan and
schedule shall be shown. In addition, the resultant savings shall be
presented in present worth amount and in amortized form, and shall include
the following:
a. Initial cost savings
b. Operating, maintenance and replacement costs savings
c. Implementation costs
For those proposals rejected, justification for rejection
shall be included in the report. Rejection may be based on cost effec-
tiveness, reliability, project delay, unusual operating and maintenance
problems, and other factors that may be critical to the treatment process
or to the environmental assessment.
13
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The designer shall include in this report his redesign
fee associated with the accepted proposed changes.
4. Distribution of the Final VE Study Report
The final VE study report shall be distributed by the
designer as follows:
Recipient Number of Copies
Owner Owner's Choice
EPA, Regional Office 1
(See Appendix C)
State Pollution Control As agreed
Agency
5. Implementation and Followup
The designer should report any deviations from anticipated
results or any problems associated with implementation to the State and
regional EPA authorities. These offices should maintain historical records
of all such reports as reference data for future VE studies.
14
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APPENDIX A
PHASES OF THE VE JOB PLAN
VE JOB PLAN WORKBOOK FORMS
COST EFFECTIVENESS GUIDELINES
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PHASES OF THE VE JOB PLAN
I Information Phase
A. Objectives
1. Provide an Information Base
2. Select Areas of Detailed Study
B. Questions
1. What Is It?
2. What Must It Do?
3. What Does It Cost?
4. What Is It Worth?
C. Techniques
1. Functional Analysis
2. Cost Worth Concept
3. Graphics
4. Cost Modeling
5. Project Briefing
II Speculative Phase
A. Objective
Generate Alternates for Meeting Requirements
B. Questions
What Else Will Perform the Required Function?
C. Techniques
Creative Thinking Processes (e.g., Brainstorm!ng)
III Analytical Phase
A. Objective
Evaluation and Selection of Best Cost-Savings Alternates
B. Questions
1. What Will the Alternates Cost?
2. Will the Alternates Meet the Required Functions?
3. What Proposals Have Greatest Cost Savings?
A-i
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IV Development Phase
A. Objectives
1. To develop cost data in a systematic manner and which is
traceable to reference
2. To define costs of all components of the system being
proposed versus the as-designed system
B. Techniques
Use standard reference documents and available cost data. Show
reference bibliography in footnotes
V Proposal Phase
A. Objective
Presentation of Best Alternates to the Decision Maker
B. Question
How Best to Present Proposals?
C. Techniques
1. Narrative Report
2. Schematic Overlay
3. Graphics
A-2
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-------
Worksheet 2
(Information Phase)
VALUE ENGINEERING TEAM STUDY
INFORMATION
PROJECT
ITEM TEAM NO.
BASIC FUNCTION DATE '_
DESIGN CRITERIA:
DESIGN HISTORY & BACKGROUND:
TEAM MEMBERS:
NAME TITLE TELE. NO.
3.
4.
5.
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FUNCTIONAL ANALYSIS
PROJECT
BASIC FUNCTION
ITEM
DATE
QUAN-
TITY
UNIT
COMPONENT
FUNCTION
VERB
NOUN
BASIC/
SEC.
EXPLANATION
ORIGINAL
COST
WORTH
Worksheet 3
(Information Phase)
-------
Project
Basic Function
GRAPHICAL FUNCTIONAL ANALYSIS
(Prepare bar graph showing cost of Item
each component. Date
aa* A
-------
Worksheet 5
(Creative Phase)
VALUE ENGINEERING TEAM STUDY
CREATIVE IDEA LISTING
PROJECT
ITEM
TEAM NO .
BASIC FUNCTION
Uninhibited Creativity
Don't Evaluate Idea
1 .
.
.
.
5.
.
.
.
9.
10.
I*
1 .
12.
13.
14.
15.
16.
17.
18.
19.
20.
Date
- Idea Refinement is Later
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
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EVALUATION CHART
Worksheet 6
(Judgment Phase)
PROJECT .
ITEM1.
BASIC FUNCTION
Ideas Selected
from Worksheet 5
Potential
Advantages
DATE
TEAM NO.
Potential
Disadvantages
Idea
Rating
-------
Weighted Constraint" Inarl
IDEAS
Worksheet 7
(Judgment Phase)
4 ---Excellent
3 ---Good
2 ..-.fair
1 Poor
Project
Date
-------
Worksheet 8
(Development Phase)
COST BREAKDOWN WORKSHEET
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SYSTEM:
SUBSYSTEM:
UNIT:
UNIT
QUANITY
COST
TOTAL
COST
-------
Life Cycle Cost Analysis
Worksheet 9
(Development Phase)
Project
System or Item
Date
TEAM NO.
CO
b
o
o
_j
<
i-
2
-t
<£
b£
S o
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tr co
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o
1 . Base Cost
2. Interface Costs
(a)
(b)
3. Other Initial Costs
(a)
(b)
4. TOTAL INITIAL COST
LIFE-CYCLE EXPENDITURES
5. Year O % Amount
Present W<">rth of Future Replacement Cnst
6 Year 6> % Amnimt
Present Worth of Future Replacement Cost
7 Ye^r © % Amount
Present Worth of Future Replacement Cost
SALVAGE VALUE
8 Year (3) % Amount
Present Worth of Salvage Value
ff Year © % Amount
Present Worth of Salvage Value
ANNUAL OWNING & OPERATING COSTS
CAPITAL RECOVERY OF THE TOTAL COSTS
10 Amortberi Initial Co<:t © % Year
Initial Factor ( )
1 1 . Capital Recovery of the Present Worth of the
Replacement Cost
(a) Year
(h) Year
(c) Year
12. Annual Costs
(a) Maintpriancp
(h) Operations
(c)
13. TOTAL ANNUAL OWNING & OPERATING
14. Annual Salvage Value Credit (Amortized)
(a)
(b)
15. Net Annual Owning & Operating Cost
16. Annual Difference
17. PRESENT WORTH OF ANNUAL DIFFERENCE
18. Present Worth of line 15
ORIGINAL
ALT. #1
ALT. #2
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Weighted Constraints Chart
Worksheet 1
(Development Phc
WEIGHT
IDEAS
4 — Excel 1 ent
3 — Good
2 — Fair
1 —Poor
Project
Date
-------
Worksheet 11
(Presentation Phase)
VALUE ENGINEERING PROPOSAL
PROJECT DATE
ITEM TEAM NO.
Summary of Change (Brief Description of "before" and "after".)
ESTIMATED COST SUMMARY (ATTACH COST ESTIMATES IF NECESSARY).
No. of Unit Total
LINE NUMBERS REFER TO WORKSHEET 9 Units Cost
A. Original. . . (Total Initial Line 4)
B. Proposed. . . (Total Initial Line 4)
C. Initial Savings. . . A-B
D. Life Cycle Costs Annual Savings Line (16) . . .
E . Present Worth of LCC Annual Savings (Line 17)
Percent Savings Instant (C 7 A)
Percent Savings LCC,Annual(DT line 15 of original design)
-------
VALUE ENGINEERING REVIEW
Idea Listing
(Use this worksheet to list ideas which have potential but which
you do not have time to pursue during this workshop.)
Worksheet 12
Description
Est. Potential Saving
Initial
Life Cycle
Remarks
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24639
Title 40—Protection of the Environment
CHAPTER I—ENVIRONMENTAL
PROTECTION AGENCY
SUBCHAPTER D—GRANTS
PART 35—STATE AND LOCAL
ASSISTANCE
Appendix A—Cost-Effectiveness Analysis
On July 3, 1973, notice was published
in the FEDERAL REGISTER that the En-
vironmental Protection Agency was pro-
posing guidelines on~ cost-effectiveness
analysis pursuant to section 212(2) (c) of
the Federal Water Pollution Act Amend-
ments of 1972 (the Act) to be published
as appendix A to 40 CFR part 35.
Written comments on the proposed
rulemaking were invited and received
from interested parties. The Environ-
mental Protection Agency has carefully
considered all comments received. No
changes were made in the guidelines as
earlier proposed. All written comments
are on file with the agency.
Effective date.—These regulations shall
become effective October 10, 1973.
Dated September 4,1973.
JOHN QUARLES,
Acting Administrator.
APPENDIX A
COST EFFECTIVENESS ANALYSIS GUIDELINES
a. Purpose.—These guidelines provide a
basic methodology for determining the most
cost-effective waste treatment management
system or the most cost-effective component
part of any waste treatment management
system.
b. Authority.—The guidelines contained
herein are provided pursuant to section 212
(2) (C) of the Federal Water Pollution Con-
trol Act Amendments of 1972 (the Act).
c. Applicability.—These guidelines apply
to the development of plans for and the
selection of component parts of a waste
treatment management system for which a
Federal grant is awarded under 40 CFR,
Part 35.
d. Definitions.—Definitions of terms used
In these guidelines are as follows:
(1) Waste treatment management sys-
tem.—A system used to restore the Integrity
of the Nation's waters. Waste treatment
management system Is used synonymously
with "treatment works" as defined in 40
CFR, Part 35.905-15.
(2) Cost-effectiveness analysis.—An analy-
sis performed to determine which waste
treatment management system or compo-
nent part thereof will result in the minimum
total resources costs over time to meet the
Federal, State or local requirements.
(3) Planning period.—The period over
which a waste treatment management sys-
tem Is evaluated for cost-effectiveness. The
planning period commences with the initial
operation of the system.
(4) Service life.—The period of time dur-
ing which a component of a waste treat-
ment management system will be capable of
performing a function.
(5) Useful life.—The period of time dur-
ing which a component of a waste treat-
ment management system will be required to
perform a function which Is necessary to
the system's operation.
e. Identification, selection and screening
of alternatives—(1) Identification of alter-
natives.—All feasible alternative waste man-
agement systems shall be Initially identified.
These alternatives should include systems
discharging to receiving waters, systems
using land or subsurface disposal techniques,
and systems employing the reuse of waste-
water. In identifying alternatives, the possi-
bility of staged development of the system
shall be considered.
(2) Screening of alternatives.—The iden-
tified alternatives' shall be systematically
screened to define those capable of meeting
the applicable Federal, State, and local
criteria.
(3) Selection of alternatives.—The
screened alternatives shall be initially ana-
lyzed to determine which systems have cost-
effective potential and which should be fully
evaluated according to the cost-effectiveness
analysis procedures established in these
guidelines.
(4) Extent of effort.—The extent of effort
and the level of sophistication used In the
cost-effectiveness analysis should reflect the
size and Importance of the project.
f. Cost-Effective analysis procedures—(1)
Method of Analysis.—The resources costs
shall be evaluated through the use of oppor-
tunity costs. For those resources that can be
expressed In monetary terms, the Interest
(discount) rate established in section (f) (5)
will be used. Monetary costs shall be calcu-
lated In terms of present worth values or
equivalent annual values over the planning
period as defined in section (f) (2). Non-
monetary factors (e.g., social and environ-
mental) shall be accounted for descriptively
in the analysis in order to determine their
significance and Impact.
FEDERAL REGISTER, VOL 38, NO. 174—MONDAY, SEPTEMBER 10, 1973
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24640
The most cost-effective alternative shall be
the waste treatment management system.
determined from the analysis to have the
lowest present worth and/or equivalent an-
nual value without overriding adverse non-
monetary costs and to realize at least identi-
cal minimum benefits in terms of applicable
Federal, State, and local standards for ef-
fluent quality, water quality, water reuse
and/or land and subsurface disposal.
(2) Planning period.—The planning period
for the cost-effectiveness analysis shall be 20
years.
(3) Elements of cost.—The costs to be
considered shall include the total values of
the resources attributable to the waste treat-
ment management system or to one of its
component parts. To determine these values,
Jl monies necessary for capital construction
< osts and operation and maintenance costs
thall be identified.
Capital construction costs used in a cost-
effectiveness analysis shall Include all con-
tractors' costs of construction including over-
head and profit; costs of land, relocation, and
right-of-way and easement acquisition;
design engineering, field exploration, and en-
gineering services during construction; ad-
ministrative and legal services including
costs of bond sales; startup costs such as op-
orator training; and interest during con-
struction. Contingency allowances consistent
with the level of complexity and detail of the
cost estimates shall be Included.
Annual costs for operation and mainte-
nance (Including routine replacement of
equipment and equipment parts) shall be
Included In the cost-effectiveness analysis.
These costs shall be adequate to ensure ef-
fective and dependable operation during the
planning period for the system. Annual costs
shall be divided between fixed annual costs
and costs which would be dependent on the
annual quantity of wastewater collected and
treated.
(4) Prices.—The various components of
cost shall be calculated on the basis of mar-
ket prices prevailing at the time of the cost-
effectiveness analysis. Inflation of wages and
prices shall not be considered in the analysis.
The implied assumption is that all prices
Involved will tend to change over time by
approximately the same percentage. Thus,
the results of the cost effectiveness analysis
will not be affected by changes In the gen-
eral level of prices.
Exceptions to the foregoing can be made
If their is justification for expecting signifi-
cant changes in the relative prices of certain
items during the planning period. If such
cases are identified, the expected change in
these prices should be made to reflect their
future relative deviation from the general
price level.
(5) Interest (discount) rate.—A rate of 7
percent per year will be used for the cost-
effectiveness analysis until the promulgation
of the Water Resources Council's "Proposed
Principles and Standards for Planning Water
and Related Land Resources." After promul-
gation of the above regulation, the rate
established for water resource projects shall
be used for the cost-effectiveness analysis.
(6) Interest during construction.—In cases
where capital expenditures can be expected
to be fairly uniform during the construction
period, interest during construction may be
calculated as IX'/i PXC where:
I=the interest (discount) rate In Section
f(5).
P = the construction period In years.
C = the total capital expenditures.
In cases when expenditures will not be
uniform, or when the construction period
will be greater than three years, Interest dur-
ing construction shall be calculated on a
year-by-year basis.
(7) Service life.—The service life of treat-
ment works for a cost-effectiveness analysis
shall be as follows:
Land Permanent
Structures 30-50 yearS
(Includes plant buildings,
concrete process tankage,
basins, etc.; sewage collec-
tion and conveyance pipe-
lines; lift station struc-
tures; tunnels; outfalls)
Process equipment 15-30 years
(includes major process
equipment such as clarlfler
mechanism, vacuum filters,
etc.; steel process tankage
and chemical storage facili-
ties; electrical generating
facilities on standby service
only).
Auxiliary equipment 10-15 years
(includes instruments and
control facilities; sewage
pumps and electric motors;
mechanical equipment such
as compressors, aeration sys-
tems, centrifuges, chlori-
nators, etc.; electrical gen-
erating facilities on regular
service).
Other service life periods will be acceptable
when sufficient Justification can be provided.
Where a system or a component is for
Interim service and the anticipated useful
life is less than the service life, the useful
life shall be substituted for the service life of
the facility in the analysis.
(8) Salvage value.—Land for treatment
works, Including land used as part of the
treatment process or for ultimate disposal of
residues, shall be assumed to have a salvage
value at the end of the planning period equal
to Its prevailing market value at the time of
the analysis. Right-of-way easements shall
be considered to have a salvage value not
greater than the prevailing market value at
the time of the analysis.
Structures will be assumed to have a
salvage value if there is a use for such struc-
tures at the end of the planning period. In
this case, salvage value shall be estimated
using stralghtllne depreciation during the
service life of the treatment works.
For phased additions of process equipment
and auxiliary equipment, salvage value at the
end of the planning period may be estimated
under the same conditions and on the same
basis as described above for structures.
When the anticipated useful life of a facil-
ity is less than 20 years (for analysis of In-
terim facilities), salvage value can be claimed
for equipment where It can. be clearly dem-
onstrated that a specific market or reuse
opportunity will exist.
[FR Doc.73-19104 Piled 9-7-73;8:45 am]
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APPENDIX B
ADDRESSES OF THE REGIONAL OFFICES OF THE
ENVIRONMENTAL PROTECTION AGENCY
-------
ADDRESS OF THE REGIONAL OFFICES OF
THE ENVIRONMENTAL PROTECTION AGENCY
Regional Administrator, Region I
John F. Kennedy Federal Bldg.
Boston, Massachusetts 02203
Regional Administrator, Region II
26 Federal Plaza
New York, New York 10007
Regional Administrator, Region III
6th and Walnut Streets
Philadelphia, Pennsylvania 19108
Regional Administrator, Region IV
1421 Peachtree Streets, N.W.
Atlanta, Georgia 30309
Regional Administrator, Region V
230 S. Dearborn Street
Chicago, Illinois 60604
Regional Administrator, Region VI
1600 Patterson Street
Dallas, Texas 75201
Regional Administrator, Region VII
1735 Baltimore Avenue
Kansas City, Missouri 64108
Regional Administrator, Region VIII
1860 Lincoln Street
Denver, Colorado 80203
Regional Administrator, Region IX
100 California Street
San Francisco, California 94111
Regional Administrator, Region X
1220 Sixth Avenue
Seattle, Washington 98101
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APPENDIX C
GLOSSARY OF VE TERMS
-------
Glossary of VE Terms
Value Engineering (VE)
A specialized cost control technique which is based on
a systematic and creative approach to identify unnecessarily
high cost in a project in order to arrive at a cost saving
without sacrificing the reliability or efficiency of a project.
VE Team Coordinator
A person who is qualified to direct and conduct a VE
study on a waste treatment project. The VE team coordinator
must have sufficient VE background to meet the qualifications
specified by the Environmental Protection Agency.
VE Study or VE Workshop
A project study or review session where the objective is to
review an actual project to propose cost saving alternatives to
the designer. The workshop is performed by a VE team or teams
chaired by a VE team coordinator. Each team session may take
40 hours or less depending on the size and the complexity of the
project. Sometimes, a review session may be divided into 2 or
3 sub-sessions of 8 to 24 hours each.
VE Training Workshop
A workshop where the major objective is to provide at least
40 hours of academic training in VE methodology with application
of the methodology to example or actual projects.
Life Cycle Costs
Ownership costs for the functional life of the project.
It includes cost for design, construction, operation, mainte-
nance and replacement.
Implementation Cost
Costs incurred for implementing the VE recommended changes.
This normally includes costs for reviewing the VE change proposal,
final report writing and project redesign (if required).
Cost Effectiveness
The economy and effectiveness of performing a required
function in terms of life cycle cost.
itU.S. Government Printing Office: 1976-677-877/299 Regions
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