RD423 - Value Engineering of State Agency Capital Outlay Projects for Fiscal Year 2019 – September 6, 2019

Executive Summary:

I. Introduction

The Director of the Department of General Services is required by Section 2.2-1133 of the Code of Virginia to report to the Governor and the General Assembly on or before September 15 of each year, the following:

(i) the number and value of the state capital projects where value engineering (VE) was employed

(ii) the identity of the capital projects for which a waiver of the requirements of Section 2.2-1133.B was granted, including a statement of the compelling reasons for granting the waiver.

II. Projects

Eight (8) projects with a combined estimated construction value of approximately $159 million were reported by Agencies as undergoing the Value Engineering process during Fiscal Year 2019. The requirements for Value Engineering are defined in Section 2.2-1133 of the Code of Virginia. The associated administrative procedures are provided in the Commonwealth of Virginia’s Construction and Professional Services Manual.

III. Savings / Cost

Estimated savings for owner-accepted VE items were provided for these projects by the applicable agencies and institutions. The estimated savings recommended by the value engineering teams and accepted by state agencies for these projects totaled approximately $12.1 million. The average VE savings were 7.6% of the estimated construction value.

The average cost of a VE Study was $26,000. The average savings in construction value was $1,508,000. The aggregate costs of the VE studies as a percent of aggregate savings were 1.7%. This is equivalent to a payback ratio of 58:1 for employing the VE process.

IV. Waivers Granted / Projects Excluded

Fifteen (15) reported projects were granted waivers or otherwise excluded from the VE process, thirteen (13) of which were CM or Design-Build and are identified in Table 3. The remaining two (2) projects and the associated reasons for exclusion are identified in Table 4. Projects approved for procurement using the Design Build methodology are excluded from the standard VE process as the Design Build Contractor provides a lump sum fixed price prior to design and contract award. Projects procured using Construction Management at Risk (CM at Risk or CM/GC) are also exempted from the VE process. The average “value" savings reported by agencies as being incorporated in the design for these waived/excluded projects was 3.6% of the estimated construction value.

Projects procured under the provisions of the Public-Private Education Facilities and Infrastructure Act of 2002 (PPEA) are exempted from the value engineering requirements defined in Code of Virginia Section 2.2-1133.