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Got a Federal or state value study to perform? We can help.
The Federal government created the name of Value Engineering (VE) to describe their application of the Value Method process. Due to the influence of the Federal sector, this is the most common
name that is used to describe the process. The Federal government application was originally done voluntarily. They wanted to decrease cost requirements. But only a couple of organizations applied it fairly consistently. Those that consistently used it were
very successful in reducing costs and billions of dollars were saved each year. But even with its audited and verified success, many agencies started and dropped its application with little thought. In 1995, less than 5-percent of all Federal activities were value studied.
Since the Federal Value Engineering application has helped many agencies save so much money, and few of us like the level of taxation we deal with for governmental services, a growing
movement has been present to force agencies to use Value Engineering more. The purpose behind this is that Value Engineering helps the agency improve its performance of its mission and reduces the costs associated with its performance.
General
Federal Law Requiring VE Application
Due
to its success in private industry, and the limited amount
that it has been applied in government, in February 1996 the
US Congress passed a law that requires the "establishment
of effective programs to apply the practice of Value Engineering"
in all executive agencies. The requirement was buried in the
1996 funding authorization for the defense department. Here
is a copy of the sections in that law that relate to Value
Engineering:
Public Law 104-106, National Defense Authorization
Act For Fiscal Year 1996
Page 110 STAT. 186
TITLE
XLIII--ADDITIONAL REFORM PROVISIONS
Subtitle
A--Additional Acquisition Reform Provisions
SEC.
4306. VALUE ENGINEERING FOR FEDERAL AGENCIES.
(a)
Use of Value Engineering.--The Office of Federal Procurement
Policy Act (41 U.S.C. 401 et seq.), as amended by section
4203, is further amended by adding at the end the following
new section:
``SEC.
36. VALUE ENGINEERING.''
``(a)
In General.--Each executive agency shall establish and maintain
cost-effective value engineering procedures and processes.
``(b) Definition.--As used in this section, the term `value
engineering' means an analysis of the functions of a program,
project, system, product, item of equipment, building, facility,
service, or supply of an executive agency, performed by qualified
agency or contractor personnel, directed at improving performance,
reliability, quality, safety, and life cycle costs.''.
Page
110 STAT. 666
(b)
Clerical Amendment.--The table of contents for such Act, contained
in section 1(b), is amended by adding at the end the following
new item:
``Sec. 36. Value engineering.''.
(c)
Regulations.--Each Secretary shall prescribe regulations to
carry out this section. Such regulations shall be prescribed
in consultation with the Director of the Office of Management
and Budget (see the OMB regulation discussion below).
(Full
text of this law is available from the House of Representatives
Law Library Internet site.)
Other
Federal Laws
Some
other notable general legislation relating to the agencies
and value engineering is its stipulation that it can be used
as a "performance parameter." Some of the laws related
to this are: "Budget Enforcement Act of 1990,"
"Omnibus Budget Reconciliation Act of 1993," "Government Performance and Results
Act of 1993," and the "Federal Acquisition Act
of 1994."
Some
specific activity types of legislation has been present for
many years. For example, since the 1970's every water and
waste water treatment plant to be issued a Federal grant of
$10 million or more has had a requirement that Value Engineering
be performed before funds could be released for the construction
activity. This has helped many municipalities to discover
the benefits of the Value Engineering process for their other
activities.
The
inclusion of a requirement for Federal grantees continues
to gain momentum each year. In 1992, Congress directed the
Federal Highway Administration to generate a policy regulation
establishing value engineering for themselves and those that
receive Federal funds. After several years with limited
movement, Congress bypassed what some members of Congress
specified as agency dawdling by passing a law that stipulates
that all grantees of Federal funds of $25 million or more
from the highway fund perform Value Engineering on that project.
Notable
Regulations
OMB Circular A-131
In
an apparent effort to avoid passage of a law, since Reagan's
time, every US President has issued executive orders and directives
issued that specify that application of the Federal Value
Engineering version of the Value Method is encouraged or required.
The most notable of these is the Office of Management and
Budget (a part of the executive office directly under the
President) Circular A-131. First issued in 1988, it was last
updated in 1993 and is due to be revised in 1998-1999. This
directive has specific application and the establishment of
a value program requirements to be addressed. This includes
agency goals, performance standards, and responsibilities.
In addition, it requires a summary report of the agency's
performance in meeting those goals be forwarded to the OMB
at end of each year and an independent Office of the Inspector
General (OIG) audit of the results be performed every three
to five years.
FARs
Federal
Acquisition Regulations (FARs) are the Federal governments
regulatory specification of how they plan to meet legislation
requirements contained in laws passed by Congress. The Federal
government procures massive amounts of services and materials.
The FARs stipulate how they are to do it within the laws.
The main series of FARs that related to Value Engineering
is the Value Engineering Clause that is to be present in any
contract over $100,000. This clause allows a contractor to
submit a change to the contract that saves money for the government
while maintaining the performance characteristics. This
is called a Value Engineering Change Proposal (VECP). To give
everyone an incentive to go to the trouble, both the contractor
and government share the savings. It is a true win-win. A
more detailed discussion about this is available within this
site on other web pages.
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