25-04-2014, 11:06 AM
VALUE ENGINEERING PROGRAM MANAGEMENT GUIDE
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History
Value Engineering (VE) emerged from the industrial community during World War II when many critical
materials were difficult, if not impossible, to obtain. This problem forced many manufacturers to use
substitute materials and designs. The General Electric Company, found that many of the substitute
materials were providing equal or better performance at less cost and initiated an effort to improve product
efficiency by intentionally developing substitute materials.
In 1947, Lawrence D. Miles, a staff engineer for General Electric, began the task of investigating this
possibility. He developed a number of ideas and techniques to enable this type of change to be performed
intentionally rather than accidentally. In effect, Mr. Miles took an old attitude about the search for value
and developed a successful methodology designed to assure value in a product. The concept quickly spread
through private industry as the possibilities for large returns from relatively modest investments were
recognized. Value Engineering, whether called "value analysis," "value improvement," or any other name,
was formally implemented in the Department of Defense (DoD) in 1961. In addition to in-house use of the
system, the DoD applied the concept in defense procurement. Contractors who previously had no financial
incentive to propose specification or design changes in order to reduce costs, were now not only encouraged
to make changes, but were offered an attractive opportunity to share in the savings.
Definition and Description
VE Defined. In the Army, VE is defined as an organized effort directed at analyzing the functions of
systems, equipment, installation, operation, maintenance, repair, replacement, facilities, procedures, and
supplies to achieve only the necessary function(s) at minimum overall cost without degradation of the
system function. It involves an objective appraisal of functions performed by parts, components, products,
equipment, procedures, services, etc. - in short, anything that costs money.
VE is not primarily centered on a specific category of the physical sciences, but it incorporates available
technologies, as well as the principles of economics and business management, into its procedures. When
viewed as a management discipline, it utilizes the total resources available to an organization to achieve
broad management objectives. Thus, VE is seen as a systematic and creative approach for enhancing the
function to cost of components, weapons systems, facilities, procedures, and materiel acquired and operated
by the Army. VE is concerned with acquiring good value by investigating what the product or service does
in relation to the money spent on it.
Program Objectives/VE Program
Program Objectives. The basic VE concept is that "anything which provides less than the
performance required by the customer is not acceptable; anything providing more should not result in
additional cost". The VE Program objective is to reduce the Government's acquisition and ownership costs
(operational costs, maintenance costs, training costs, etc.) while maintaining the necessary level of
performance, reliability, safety, quality, and maintainability. This objective may be achieved by promoting
the use of VE techniques by Government personnel and by encouraging contractors to respond to the VE
clauses in DoD contracts.
VE Opportunities and Benefits
VE Opportunities. In 1965, the DoD conducted a study to determine the predominant sources of
opportunity for VE. The aim of the study was to obtain an indication of range and degree of application.
From a sample of 415 successful VE changes, the study identified seven factors which were responsible for
about 95 percent of the savings achieved. The seven factors in order of percent of total savings were:
advances in technology, excessive cost, the questioning of specifications, additional design effort, changes
in user needs, feedback from test/use, and design deficiencies. However, the study revealed that a single
factor was rarely the basis for a VE action.
Summary
VE has become recognized as an effective tool for reducing DoD costs. Employed in an organized effort, it
is a systematic procedure for analyzing requirements and translating these into the most economical means
of providing essential functions without impairing essential performance, reliability, quality,
maintainability, or safety. Experience has shown that the beneficial impact of VE is not limited to economic
improvement. Significant improvements also occur in other areas which are not always readily measurable
in monetary terms, such as performance and ease of use.