Introduction
One of the major policy issues identified in the scope of work as part of the Council review of Corps of Engineers? (Corps) mainstem fish passage capital construction program is "What means are available to obtain independent engineering review of the Corps? engineering design, scheduling, cost estimation and construction practices for mainstem capital fish passage improvement projects?" Put another way, are there efficiencies and cost savings that can be effected both in the design and installation of mainstem fish passage facilities? This issue paper explores the Corps? engineering review processes to identify ways to further improve fish passage project design and function while helping to control or reduce project costs, maintain schedules and enhance oversight.
Background
To begin addressing this issue, central and some state staff have met several times with representatives from engineering consulting firms in Portland to scope and refine this issue. In addition, the Council's Fish and Wildlife Committee began an initial discussion of this issue with Corps of Engineers? representatives on February 12, 1998.
As a result of the Fish and Wildlife Committee meeting, staff was directed to prepare an issue paper reviewing the Corps? existing processes for independent technical/engineering review, value engineering and project partnering concepts, including suggestions, if any, to improve such processes. Over the last three years, the Corps has spent an average of $83 million of Congressionally-appropriated funds to implement its Columbia River Fish Mitigation Program (CRFM Program). The overall objective of these engineering review processes is to improve fish passage project design and function while helping to control or reduce project costs, maintain schedules and enhance oversight.
Council staff has received background information on this issue from both engineering consulting firms and Corps of Engineers staff. The consultants provided information on current engineering industry review standards and processes, and how these processes are used to provide independent review of capital construction projects for clients. In addition, they provided insight on where Corps review processes may diverge from industry norms.
The Corps identified and provided detailed information on three different review processes they utilize currently to provide quality control in the review of their engineering products (design memoranda, plans and/or specifications, engineering cost estimates, etc.) prepared for the mainstem fish passage capital construction program. These three processes, Value Engineering, Technical Review and Project Partnering, are currently applied to all Corps decision and implementation documents whether prepared in-house by Corps engineers or by private consulting engineers. These review processes, as used by the Corps and others, are described in more detail below.
Discussion
Value Engineering
The first review process used by the Corps is called value engineering (VE). VE is an engineering review process where a small team of independent, objective and qualified engineers evaluates the initial design work, cost estimates, and functionality of a project developed by the design team for a specific project or process. It is used by the Corps (or clients of private consultants) to improve project efficacy and reduce costs. The objective of a VE study is to maintain the required project function at a minimum of cost, without sacrificing the necessary quality of the end product.
Value engineering is a standard and accepted engineering review practice that is used extensively in the private sector and by federal, regional and local governmental agencies including the Corps of Engineers, U.S. Department of Transportation, U.S. Bureau of Reclamation, U.S. Environmental Protection Agency, Tri-Met and the City of Portland, among others. The VE concept originated in the 1940s at the General Electric Company; the Corps initiated its own VE program in 1964, and has been implementing its version of VE for 34 years. Value engineering has national and international standards, including training and certification of VE engineers and VE team leaders.
In the private sector, VE is typically used in the following manner. A "client," such as the City of Portland, contracts with an engineering firm to design a particular construction project. Once the project design is at the 30 percent completion stage, the City hires a different engineering firm to perform VE on the preliminary design. This firm then works with the design firm to analyze and incorporate the design changes and cost savings identified in the VE study, as needed.
The following questions and answers are intended to provide additional background information on the VE process.
What is a value engineering study?
A VE study is an assessment of a proposed engineering design solution of a project to determine whether alternative design options or revised project requirements will lead to design options for that project which are more practical and feasible. A VE study of a project is typically conducted at the 30 percent (preliminary) engineering design phase to allow investigation of alternative design options before a project progresses into the more detailed engineering plans and specifications phase.
What criteria are used by the Corps to trigger a VE study?
Corps policy requires a formal VE study on all construction projects with an expected construction estimate of $2 million or more, and on supply, service and O&M projects with a cost estimate exceeding $1 million. The Division Commander must approve exceptions to this requirement. For comparison purposes, VE reviews for the City of Portland are mandatory for all construction projects with an estimated construction cost of $5 million or more.
A VE review is a process used to determine if a VE study is warranted on a project. The Corps states a brief VE review is done on projects over $2 million to assure that a VE study should be performed. If the Corps determines that a VE study is not warranted, the project file is documented stating the reasons. A VE review may also be done on Corps projects estimated to cost under $2 million to determine if a VE study is warranted. Corps VE reviews typically are accomplished informally by experienced Corps VE staff.
What are the steps in a typical VE study process?
The steps in a typical VE study process include: 1) decide what project is going to be designed; 2) select the design team and begin the engineering design process; 3) at about 30% completion of the design phase, an independent VE team leader and team are selected and a VE study of the project is performed; 4) the VE team reviews the preliminary design drawings and cost estimates and holds a workshop to discuss the 30% plans and specifications with the design team; 5) the VE team develops its own list of engineering assumptions, design alternatives, and estimated cost savings and submits its report to the project owner and the lead design engineer; 6) the design team engineers review and develop their responses to VE findings, issues and recommendations and submit their responses to the VE study team leader; 7) the design team responses are reconciled by the VE study team working with the design team; and 8) an action plan for future design work on the project is then prepared from the final VE study report.
How long does it take to complete a VE study? How much does a VE study cost?
As can be seen from Attachments 1 and 2 provided by the Corps, it usually takes between 3-5 working days to complete a Corps VE study. Depending on the detail and scope of the review process, VE studies for recent CRFM projects range in cost between about $10,000 and $76,400, for projects budgeted from $175,000 up to $28 million. For comparison purposes, VE was performed on the Portland area westside light-rail construction project (excluding the tunnel) in 10 working days at a cost of $75,000, for a project budgeted at $300 million.
What is the Corps? overall VE cost savings goal?
Both Walla Walla and Portland Districts? VE savings goal is to achieve 6 percent savings annually on each District's entire construction general budget. The Walla Walla District also has a goal of achieving a 10:1 net return on investment [ Net return on investment is defined by the Corps as net project VE savings divided by the cost of the VE study.] for its VE studies. According to the Corps, this savings goal has been met or exceeded in 4 of the last 5 years in the Walla Walla District, and in each of the last 5 years in the Portland District.
According to the engineering consulting firms contacted, the private sector usually achieves VE savings ranging from 8 to 12 percent per project. One consulting firm quoted an average VE savings of 13 percent.
While the attachments provided by the Corps attribute large VE cost savings, it is unclear where the savings on some projects may have been achieved. For example, the John Day Dam smolt monitoring facility was originally budgeted by the Corps to cost about $8 million, but due to the use of inaccurate foundation test borings, the cost jumped by an additional $8 million. Also, the juvenile fish bypass improvements at Bonneville Dam first powerhouse, including the outfall, were originally budgeted at about $46 million, but omission of contingency costs and inaccurate project cost estimates found just prior to awarding the contract escalated these costs to $62 million, delaying some of the work into out-years.
What is the difference between VE during design and VE during the construction phases of a project?
VE can be used to evaluate the design or construction phases of a project or it can also be used to evaluate a process [ An example of VE used to evaluate a process is the June 1997 SAIC/HDR engineering review report of Corps? processes for constructing fish passage projects.] . In a VE review during the design phase, it is an assessment of a proposed engineering design solution of a project to determine whether alternative design options or revised project requirements will lead to design changes for that project which are more practical and feasible. In the construction phase, in a typical Corps construction contract, there is a VE Change Proposal clause. In essence, this clause allows the construction contractor to propose changes to the contract that provide the same function as the original contract, but result in an "instant" contract savings. The Corps states these changes are typically substitution of less expensive materials. Usually, VE methodology is not used, and it is difficult to make major changes that have significant cost savings during construction.
What are the advantages of conducting VE studies?
Besides the obvious advantages of improving efficacy and incurring significant cost savings in designing and constructing a project as noted above, additional value is realized by reducing project risk, project schedule slippage and cost overruns. As project risk is reduced, the level of contingency cost assigned to a project can also be reduced. Private engineering consulting firms maintain that contingency costs in the 10-20 percent range are typical during the preliminary design stages of a project. However, as a project moves through detailed design and is ready for construction bid, contingency costs should decrease. Industry standards typically identify contingency costs of less than 10 percent. High contingency costs in the 40-50 percent range are an indication that a project has not been well planned or understood. Contingency costs for Corps projects vary widely; Corps staff provided figures ranging from 6 to 25 percent.
What teams are used to conduct Value Engineering studies?
VE reviews are usually conducted by a team of independent, certified value engineers from a variety of engineering disciplines. A VE team typically consists of a certified VE team leader, who assembles the team from engineers with the appropriate training/expertise necessary to review the proposed project. This could include engineers experienced in operations, construction, project cost estimation, as well as all the major engineering design disciplines.
The Corps uses a variety of teams, including in-house engineers, private engineering consultants, Office of the Chief Value Engineering Study Team (OVEST), or any combination of experienced professionals having specific knowledge in the type of project being evaluated. The Corps maintains that project customers, users and other stakeholders should be included in the VE study, if feasible. A VE study is facilitated by the team leader, and the results of the VE study are recorded in a VE report on the project, which typically averages 30 to 50 pages in length. VE studies that have been accomplished on CRFM Program projects by both the Walla Walla and Portland Districts over the last 5 years are shown on the attached spreadsheets (see Attachments 1 and 2).
Technical review
The second process used by the Corps, called technical review, is an independent review of an engineering product by a team of technical experts. Technical reviews are conducted by Corps District personnel as part of the Corps? normal business practices on all planning, environmental and engineering design products produced by the Planning and Engineering Division, which includes all CRFM Program work. Technical review is a relatively new practice required by the Corps as part of its quality control procedures. It is typically conducted at the later stages in the project design phase, such as at the 90 percent completion level. It is used to confirm the proper selection and application of established criteria, regulations, laws, principles, and professional engineering procedures have been applied to a project to ensure a quality product is produced. Technical review is also intended to confirm the constructability and effectiveness of the final engineering product, as well as the use of clearly justified and valid assumptions for a project that are consistent with established Corps policy.
Technical reviews conducted by the Corps are performed by teams comprised of various resource options (or combinations thereof) as follows: a) in-house (District) personnel; b) Division office personnel; c) other District/Division personnel; d) Designated Centers of Expertise within the Corps; e) other sources throughout the Corps including labs, research facilities, etc.; and f) engineering consultants or industry experts. Selection of a technical review team depends on the nature of the work to be evaluated, staff availability and schedule. The technical review team is usually comprised of professional engineers having the same design disciplines as the project design team, i.e., engineers with training/expertise in hydraulic, structural, mechanical, electrical, geotechnical, etc. disciplines. Technical review includes both an in-progress review of a project as well as a review of the final product.
The Corps maintains that whenever in-house staff is used for a technical review, independence of the review is assured by using team members that have not been involved in the project development or design process. Technical review team findings are typically documented in writing by the Technical Review Team leader and supplemented by signature concurrence of the District's senior management. The Technical Review Team leader forwards the review findings and comments on the project design to the design team leader. The design team leader, together with the design team, must then respond to all comments prepared by the technical review team. This is typically a 3-week process. At the completion of this process, a technical review certification document is prepared. This document certifies that a technical review has been accomplished for a particular project. Attached to this document are all of the issues that were raised and resolved during the technical review process.
Most large capital construction projects, public or private, call for some version of technical design review at the 90 percent completion point of the design phase.
Project parenting
The concept of partnering was developed by the Corps to save costs on projects by improving communication and reducing conflict between the project owner/engineer and the architectural/engineering firm (AE) or construction contractors. Partnering is a process whereby the stakeholders in an endeavor agree to set personal interests aside for the benefit of the project as a whole.
It is not a contractual or legal agreement, rather it is a relationship-based process. Each stakeholder in a project strives to understand the interests of the others and all seek a mutually acceptable outcome. In essence, it creates a means to resolve conflicts through development of a partnering agreement as opposed to using litigation. It is a successful technique and one the Corps uses routinely.
Partnering has focused on relationships between the District and AE contractors during the design phase and between the District and construction contractors during the construction phase. As the Corps Operations Division is typically the "operator" of completed civil works projects, that division also participates in the partnering process. When AE firms are involved in the design of a project, they are also included in the partnering process during project construction. Rather than the fishery managers, Corps personnel responsible for coordination and communication with the regional fishery agencies and tribes represent the interests of the resource in this process.
Once a project enters the construction phase, partnering allows early visibility of potential schedule changes and cost impacts and the opportunity to pursue alternatives that may mitigate for those changes or impacts. However, project partnering does not waive nor supersede contractual requirements or remedies. If the construction contractor is entitled to additional compensation or time under the provisions of the contract, the Government is obligated to make an equitable adjustment to the contract.
The Corps' experience with partnering confirms its positive benefits. Litigation, with its expense, time and risks, has been avoided and contracts are typically completed to the satisfaction of regional stakeholders. In numerous cases, partnering has offered the opportunity to develop alternatives that have mitigated significant delays and cost growth in contract performance.
Issues for consideration and comment
1. How to obtain regional agreement on project scope and schedule early in the process.
Annual prioritization of, and identification of biological criteria for, CRFM Program projects is the subject of extensive discussions between the Corps and regional fishery agency personnel in regional forums such as the System Configuration Team (SCT) and the Corps? Fish Facility Design Review Work Group (FFDRWG) which focus on these issues, respectively. Once a particular project is identified and selected for funding and execution, usually in the SCT forum, the Corps asserts that lack of regional agreement or buy-in on a project's scope and/or schedule can be a major stumbling block during the design process. The Corps maintains that considerable time can be lost and increased design costs incurred because regional interests fail to participate fully in the FFDRWG and SCT forums and/or continue to revise the project scope or schedule during the design phase.
Unfortunately, many of the fish and wildlife management entities do not have the resources or the appropriate technical staff to participate in the FFDRWG and SCT forums in a meaningful way, if at all. Few, if any, have enough engineers on staff or the resources to employ more on a regular basis. This inability to participate on an equal basis with the Corps has frustrated many of the fish and wildlife managers; the lower river tribes no longer participate in the SCT forum.
The Corps proposes to use the Charrette process to address this problem. This is a process which attempts to seek consensus among regional stakeholders in establishing a project's scope and schedule before beginning project design. Under this process, all stakeholders in the region would be more fully involved in developing the project scope and schedule. This should result in reducing the lost time and cost of design caused by revising the scope and schedule during the design process.
Under this proposal, once a CRFM project has been identified for design, regional interests could enter into a "partnering agreement," which would attempt to develop mutually agreed-upon project objectives, identify each parties? objectives, at what level various conflicts will be resolved, and how to communicate progress on the project. Such agreements have the potential to enhance communication among parties, provide a forum to resolve disputes, and should allow the regional oversight and technical coordination teams (the SCT and FFDRWG) and design teams to better understand issues that arise in a timely manner.
A potential disadvantage to this process is that it requires additional participation of limited agency staff resources and a greater time commitment from all regional parties in the conceptual development of projects. To obtain greater agency participation and buy-in in this "partnering agreement" process, one option might be for regional fishery agency and tribal representatives to charge their time against a particular project during development of that project's scope and schedule. Such charges could be offset by potential savings in design costs and schedule slippage due to implementation of the partnering process.
2. How to provide truly independent engineering review of Corps CRFM projects.
As stated above, both the VE and technical review teams should be comprised of a small group of independent, objective and qualified engineers to evaluate the work done by design engineers on a specific project. It has been suggested the key to successful VE and technical reviews is to have a reviewing team that is not influenced by the policies or organizational constraints of either the design team or the organization. Not only does the reviewing team need to feel free to test all of the engineering assumptions being used by the design team, but it also should be outside the institutional influence and policies of the design team's organization.
The Corps maintains that whenever in-house staff is used during a VE or technical review, independence of the review is assured by using team members that have not been involved in any way in the project development or design phases. However, based on the information provided in Attachments 1 and 2 by both Corps Districts concerning recent VE studies, most (58-78 percent) of the VE team members have been in-house Corps personnel from the Portland and Walla Walla Districts, and another 19-24 percent were in-house Corps VE officers or from the Corps? OVEST office. In other words, the vast majority of recent VE team members have been Corps of Engineers personnel. In the Portland District VE studies, only 17 percent of VE team members were selected from outside the Corps or from engineering consulting firms, while only two team members in all the Walla Walla studies were non-Corps ? one from the Bureau of Reclamation and the other from an engineering firm.
One alternative to ensure independence in VE and technical review processes is for the review teams to be selected by an outside agency such as the Council or NMFS, not by the Corps. Under this option, the overseeing agency would, with the assistance of the Corps, prepare and send out RFPs to accomplish a VE or technical review of a Corps fish passage project. After receiving proposals from interested engineering firms and the Corps, the overseeing agency would review the proposals, the team member composition and qualifications, and then rank and select the review team.
A second option is the review teams could be selected by a team of project customers, including the Corps. Under this option, a team of project customers, including members with engineering experience from such parties as NMFS, the Council and/or the fishery agencies and tribes, would work with the Corps and/or the private sector to develop and send out the RFPs. Then, after receiving proposals from interested engineering firms and the Corps, the team of project customers would review the proposals, team composition/qualifications, and participate in the review team ranking and selection process.
A third option is to continue with the status quo procedure, whereby the Corps puts together and selects its own VE and technical review teams, comprised of engineers from both within and outside of the Corps District offices. While this option has the advantage of not having to develop a revised contracting process, some parties have questioned the independence of the VE and technical review teams.
Public comment
[The comment period ended July 24, 1998.] The Council invites comment on the issues raised in this paper. Written comment may be submitted to Mark Walker, Director of Public Affairs, Northwest Power Planning Council, 851 SW Sixth Avenue, Suite 1100, Portland, OR 97204-1348, or fax comments to (503) 795-3370. Opportunities for oral comment will be provided at the Council's June 10 work session in Spokane, the June 30-July 1 Council meeting in Helena, and the July 22 work session in Portland. Please call the Council's Public Affairs Division at 1-800-452-5161 or (in Portland) 222-5161 to arrange a time for oral comment. All comments should be submitted by Friday, July 24, 1998.
The Council plans to compile the comments received on this paper, and use the comments to identify issues and options that merit further exploration. The Council welcomes reactions and comments related to the two issues identified above, as well as the options proposed.
See Attachments 1 and 2
