4.3.19.3. Value Engineering
4.3.19.3. Value Engineering
Value Engineering (VE) is an organized, systematic technique that analyzes the functions of systems, equipment, facilities, services, and supplies to ensure they achieve their essential functions at the lowest life-cycle cost consistent with required performance, reliability, quality, and safety. In today’s environment, many systems remain in inventory for a longer time than initially envisioned. Budgetary realities (i.e., affordability) often dictate extending a system’s operational life through major modifications or upgrades (e.g., block changes or preplanned product improvements), rather than acquiring a new system. Therefore, opportunities for large VE savings extend well into sustainment.
A VE analysis is a type of process improvement. Key steps include:
- Scoping the issue, improvement targets, and evaluation factors
- Identifying specific areas/functions for evaluation
- Collecting and analyzing data
- Exploring alternative approaches
- Developing and presenting specific recommendations
- Implementing directed changes
By following this process, the Program Manager can analyze the functions of an item or process to determine best value, identify and reduce unnecessary costs, increase productivity, enhance quality, and improve system and program performance. VE supports most aspects of the Better Buying Power initiative:
- Affordability and cost growth: VE critically compares the cost and value of every requirement to focus the program on providing only necessary functions at a minimum overall cost. This represents a systematic approach for attaining return on investment.
- Promote competition: Program Managers can employ VE to identify technical data describing required functions of system elements, enabling multiple suppliers to bid.
- Provide incentives for productivity and innovation: VE provides industry with an incentive to reduce costs; the developer receives a share in the savings if the Government implements a VE change.
Federal Acquisition Regulation (FAR) Parts 48 and 52 mandate inclusion of a VE clause in many Government contracts. This clause allows the developer to receive a share of the cost savings generated from Value Engineering Change Proposals (VECP). (See SD-24 Value Engineering: A Guidebook of Best Practices and Tools for additional details.)
Roles, Responsibilities, and Activities
Program Managers and Systems Engineers should encourage both in-house VE and VECP-based studies and trade-offs on every activity or contract with a value exceeding the simplified acquisition threshold. While a common misconception is that VE applies only to production, successful introduction of VE may occur at any point in the life cycle. The most opportune time to apply VE is early in the life cycle, before production begins, before preparation of field or technical manuals, and before finalizing logistics support plans.
Program Managers and Systems Engineers should consider applying VE principles throughout their program. They should investigate VE saving for:
- Hardware, software, or human components
- Development, production, test, or manufacturing
- Specifications and standards
- Facilities design and construction
- Contract requirements
- Other program documentation
The following examples are potential areas in which the application of VE and VECP may provide a benefit:
- The Analysis of Alternatives and associated cost-effectiveness studies can use VE to evaluate functions and essential requirements, and develop possible alternatives offering improved value
- VE analyses can support the process for transitioning technology from the technology base into program-specific preliminary design efforts; the Program Manager and Systems Engineer can compare the function, cost, and worth of each requirement and the derived specifications
- As part of the development and refinement of the functional and allocated baselines, VE can help:
- Identify the necessary top-level functions for each of the missions considered
- Identify technical approaches to the missions
- Identify necessary lower-level functions for each technical approach
- Evaluate each function in terms of technical feasibility
- Estimate the cost of various functions
- VE can contribute to SE activities during production and deployment by devising alternative means for achieving required functions and developing alternative designs to meet functional needs
- VE evaluations can improve manufacturing processes, methods, and materials
- After fielding, VE can examine advances in technology or changes in user requirements to assess potential savings
Additional resources available to the Program Manager and Systems Engineer to learn more about VE as a tool to reduce costs include:
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