Sample Supplemental Agreement – Value Engineering

WHEREAS: This Contract provides for, among other things, fill in the general project description from the title page of the Contract; and

WHEREAS: This Contract further provides for, fill in the item or type of work that will be affected by the SA; and

WHEREAS: The Contractor has submitted a Value Engineering proposal to fill in the change in accordance with Mn/DOT Specification 1408; and

WHEREAS: The Engineer has approved this Value Engineering proposal.

NOW, THERFORE IT IS HEREBY MUTUALLY AGREED AND UNDERSTOOD THAT:

The Contractor will fill in what work the Contractor will be doing. Include any form of direction such as “as directed by the Engineer”, “in accordance with Mn/DOT Specification XXXX”, etc

Payment for this work will be at the Negotiated unit price(s) as shown in the Estimate of Cost. A Prime Contractor’s Allowance in the amount of 10% of the first $10,000.00 of Sub-contractor work and 2% of the remaining balance of Sub-contractor work will also be paid. use this last only if applicable

A Value Engineering Incentive will be paid in the amount of 50% of the calculated savings as shown in the Estimate of Cost.

Contract time will not be revised except as may be provided in Mn/DOT Specification 1806.

The Contractor will not make claim of any kind or character whatsoever for any other costs or expenses that he may have incurred or that may be hereafter incurred in performing the work and furnishing the materials required by this Agreement.

ESTIMATE OF COST

Item No. Item Unit Unit Price Quantity Amount Group

Decrease Contract Items

Increase Negotiated Items

Net Decrease

Value Engineering Incentive

Minnesota Dept of Transportation
Office of Construction

VALUE ENGINEERING (VE) SUMMARY
Wisconsin Department of Transportation
DT1342 4/2008 (Replaces ED1022)

Project ID
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Date
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Project Title
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Regional Project Manager/Region/Telephone Number
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Project Limits
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Consultant Project Manager (If Applicable)/Consulting Firm/Telephone Number
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Highway/County
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Estimated Project Cost (per Environmental Document)
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Project Description
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Describe Project Need
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Segments or Elements Studied
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Study Dates
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Study Participants (Include Participant’s Name, Agency, Section or Office, and Position Title)
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Comments
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Summary of VE Cost Savings
(From VE Recommendations Summary Sheet)
A1. Number of Proposed VE Recommendations [1]

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A2. Value of Proposed VE Recommendations [1] [2]

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B1. Number of Approved VE Recommendations

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ADVANCE \D 10.0B2. Value of Approved VE Recommendations [2]

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C1. VE Study Contract Cost

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C2. Project Staff Cost [3]

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C3. Total VE Study Costs (C1 + C2)

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ADVANCE \D 10.0D. Net VE Cost Savings (B2 – C3)

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[1] Do not include design suggestions or recommendations applicable only to dismissed environmental alternatives. Hold submittal of this form until selection of the preferred alternative to accurately report potential cost savings.
[2] Cost savings compared to original design.
[3] Estimated WisDOT (and Design Consultant) staff cost to administer & participate in VE study.
ATTACH VE RECOMMENDATIONS SUMMARY SHEET
Submit to Bureau of Project Development, Project Services Section, Room 651, HFSTB

2005 AASHTO Value Engineering Conference Using VE in Design Build
Presented by:
Jerry R. Blanding
Innovative Contracting Engineer
FHWA -NRC
July 21, 2005
Sheraton Gunter Hotel
San Antonio, TX
Using VE in Design Build
Regulatory Definitions

DB Final Rule -History & Application

VE & DB A Federal Perspective

Additional Resources
Value Analysis/ Value Engineering
Why is Design-Build different from Design Bid Build?
23 CFR Part 636 – Design Build
Design-bid-build means the traditional project delivery method where design and construction are sequential steps in the project development process.

Design-build contract means an agreement that provides for design and construction of improvements by a contractor or private developer. The term encompasses design-build-maintain, design-build-operate, design-build-finance and other contracts that include services in addition to design and construction. Franchise and concession agreements are included in the term if they provide for the franchisee or concessionaire to develop the project which is the subject of the agreement.

Value Analysis/ Value Engineering
Design Build Final Rule:
23 CFR § 627.5 (e)

In the case of a Federal-aid design-build
project the (State) shall fulfill the requirement by
performing a value engineering analysis
prior to the release of the Request for Proposals
document.
Using VE in Design Build -Florida DOT Example
All projects with an estimated cost of $20 million or more shall have
a minimum of one VE study conducted during project development.

The estimated cost shall includes all costs associated with the
project including but not limited to:
Design
Right of Way
Construction
Administrative Cost.
Using VE in Design Build -Florida DOT example
The VE study shall be conducted during one of the following
phases of project development:
Initial Concepts
Comparison of Alternatives
Final Design

For Design Build Projects, the VE study shall be conducted prior to
the release of the Request for Proposal (RFP) Document.

The greatest potential for improvement is during the Initial
Concepts or Comparison of Alternatives review period.

TRB Task Force A2T51 – Innovative Contracting
January 1988 – 23 representatives of the highway industry participated
Mission of TRB Task Force A2T51
Compile information on contracting practices
Assess how current practices affect quality, progress and cost
Suggest measures for improving contracting practices and promoting quality in construction
December 1991 – TRB Circular #386 -Innovative Contracting Practices
Special Experimental Project No. 14 Innovative Contracting
Initiated 2/13/90
Objective – Evaluate project specific contracting practices which
Maintain product quality
Reduce life cycle cost
Practices proposed for evaluation
Cost-plus-time Bidding
Lane Rental
Warranty Procedures
Design-Build
TEA-21 Design-Build Legislation Section 1307
FHWA implemented the Final Rule in January 2003.

After the final rule, states can use design-build without HQ approval for Qualified Projects
ITS projects > $ 5 million
Other projects > $50 million

SEP-14 will continue for smaller projects unless Congress approves language in the reauthorization bill eliminating this threshold.

In 2005 FHWA will complete the required òReport to Congress’ on the effectiveness of design build.
Existing SEP-14 Design-Build Contracts vs. Qualified Projects

Advantages of Design-Build
Single Point of Responsibility
Quality / Innovation
Potential Time or Cost Savings
Improved Risk Management
Earlier Knowledge of Firm Costs
Lower Incidence of Claims
Reduced Project Administration
Critical Characteristics for Public Sector Design-Build Projects Design-Build Selector Georgia Institute of Technology / University of Colorado www.colorado.edu/engineering/civil/Design-Build/DBS/
Poor DB Projects Don’ t Have:
Well Defined Scope
Shared Understanding of Scope
Owner’ s Construction Sophistication
Adequate Owner Staffing
Established Budget
Established Completion Date

Suitability
NEPA, and major ROW and utility issues must be clear
Should have a Strong design component
Reasons for selection should not be:
Obligation of funds
Compensate for inadequate agency resources
NEPA – RFP Release: Where Does VE Fit?
FHWA Perspective on Using VE in Design Build
VE is a mandate for NHS projects $25 million and over
VE must be performed prior to release of the RFP
Multiple VE’ s may be appropriate for major projects
VE studies are performed to add value to a project, not simply to reduce costs.
All valid suggestions should be included in the study report. Management must determine what impact the VE suggestions may have on the environmental or public hearing agreements.
FHWA Perspective on Using VE in Design Build
VE should be performed on NEPA alternatives or on selected RFP requirements.

FHWA has not objected as long as VE is done prior to release of RFP at a reasonable point with the coordination of the Division Office.

Innovative Contracting Best Practices Web Site
Utah State University
www.ic.usu.edu
Practical information on warranties, A+B, lane rental and design-build contracting
What is it?
Why should you use this?
Criteria for project selection?
Who is currently using it?
Example provisions

Additional Resources on SEP-14 Design-Build Projects
FHWA HIPA-30 web page
www.fhwa.dot.gov/infrastructure/progadmin/contracts/d_build.htm

WSDOT Design-Build Process for Highway Projects
www.wsdot.wa.gov/designbuild/db/dbguidebook.htm

Constructability Reviews Can They Reduce Claims?
March 11, 2010 Presented by the Claims Avoidance & Resolution Committee
Prepared by Constructability Reviews Subcommittee
Constructability Reviews
Constructability Reviews Presentation Goals
What is a Constructability Review?

Why Does Constructability Matter?
Who Performs a Constructability Review
Who should Perform Constructability Reviews
Performed by experienced construction specialists
Construction Managers/Resident Engineers
Construction Superintendents (working/retired)
Inspectors
When to Perform Constructability Reviews?
Constructability Reviews Performed At Key Design Milestones Will Benefit The Project
Constructability Issues at The Planning Stage
Constructability Issues at 30% Design
Constructability Issues at 60% Design
Constructability Issues at 60% Design
Constructability Issues at 100% Design

Constructability Issues at 100% Design

Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Review Results (Lessons Learned)
Constructability Reviews Can They Reduce Claims? YES!

?Companion Guide to Video
?www.fhwa.dot.gov/federal-aidessentials
Project Development
Design
Value Engineering Requirements for Federal-aid Projects
August 2013
???Value engineering requirements on Federal-aid projects help reduce costs and improve quality
Imagine you are back in time and responsible for designing one of the most impressive transportation engineering icons — the Golden Gate Bridge. It is a massive and complex project, and there are teams assigned to various components and
deadlines to meet. Each team is working hard to make the design decisions that will eventually be used in construction.
Let’s examine this project more closely and focus on the decisions and recommendations that the design teams came up with. If you invited an independent team to evaluate those recommendations and suggest ways to improve, you stand a good chance of adding value to the project. For example, the foundations of the Golden Gate Bridge are planted deep under water in the San Francisco Bay, making them a challenge to construct. They make great candidates for this independent team to review and find better, faster or cheaper ways to build these massive foundations. This independent team is doing something called “value engineering,” a process proven to produce huge benefits for projects both large and small.
The Federal-aid Highway Program has requirements for value engineering. In this short presentation we will
define what value engineering is and when it is required, explain how it works, and illustrate its benefits. Value engineering has proven to be a
sound approach that can reduce project costs, improve project quality, eliminate unnecessary design elements, foster innovation, and improve productivity. Value engineering is a process that can reap hefty benefits for your organization, customers, and stakeholders.
In general, value engineering, or VE for short, is the systematic application of recognized techniques by an independent, multi-disciplined team to identify the function of a product or service, establish a worth for that function, and generate alternatives. We’ll go into details to make this easier to understand, so let’s start by looking at what the value engineering study process can accomplish.
There are several objectives that the value engineering study process focuses on beyond achieving the desired level of quality at the lowest cost. The value engineering study process may also look for ways to reduce construction time or make construction easier to accomplish. This process considers all project objectives, such as safety, operational, and environmental commitments, while trying to reduce total ownership costs. Value engineering recommendations may suggest using innovative technologies
that improve the finished quality and should consider long- term or life-cycle costs.
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?Federal-aid Essentials for Local Public Agencies
?The value engineering study process can be broken down into four core components:
• When a value engineering study is required
• Who makes up a value engineering team
• Following a procedure called the VE Job Plan
• Reporting recommendations
Let’s look at each of these in more detail. A value engineering study is required on any Federal-aid project under the following circumstances:
• The project is located on the National Highway System and has an estimated total cost of $50 million or more.
• The project is considered a bridge project, located on or off the National Highway System, with an estimated total cost of $40 million or more.
• The project is considered a major project, located on or off the National Highway System with a total cost of $500 Million or more.
• A change in project scope or design after the final design and prior to letting for construction causes the project cost to exceed the $50-million threshold for projects on the National Highway System, or $40-million threshold for bridge projects on the National Highway System, or the $500 – million major project threshold.
• Or any other project the Federal Highway Administration (FHWA) determines to be appropriate.
The value engineering team is comprised of:
• A multi-disciplinary group of individuals who are not directly involved in the planning or design of the project
• Someone trained and knowledgeable in value engineering techniques to serve as the facilitator and coordinator
The value engineering team follows a procedure, called a Value Engineering Job Plan, which has seven phases:
• In the Information Phase, project information is gathered, including project commitments and constraints.
• The Function Analysis Phase analyzes the project to understand the required functions.
• In the Creative Phase ideas are generated on ways to accomplish the required functions, improve the project’s performance, enhance its quality, and lower project costs.
• The Evaluation Phase involves evaluating and selecting feasible ideas for development.
• The Development Phase takes these selected ideas and turns them into fully supported recommendations.
• The Presentation Phase presents the value engineering recommendations to the project stakeholders.
• The Resolution Phase is when these recommendations are evaluated, approved or denied. These decisions are documented and all approved recommendations are then implemented.
The value engineering study culminates with a formal written report documenting the following:
• The analysis approach following the Value Engineering Job Plan
• The proposed recommendations and decisions made
?
?Federal-aid Essentials for Local Public Agencies
The content of this document is not a substitute for information obtained from State departments of transportation, appropriate FHWA Division Offices, and applicable laws. Scenarios have been simplified for emphasis and do not necessarily reflect the actual range of requirements applicable to the scenario or this topic. This document was created under contract number DTFH61-11-D-00024 by the Federal Highway Administration, U.S. Department of Transportation, and is offered to the public to heighten and focus awareness of Federal-aid requirements within the local public agencies community and reinforces the importance of these necessary policies, procedures, and practices.
This companion resource is the script content for the video production of the same name.
Additional Resources
• FHWA regulation and policies on value engineering and other helpful guidance
www.fhwa.dot.gov/ve/
• FHWA’s policy on value engineering www.fhwa.dot.gov/legsregs/directives/orders/13111a.htm
• Questions and answers about FHWA’s new value engineering regulation in effect since April 16, 2012
www.fhwa.dot.gov/ve/finalruleqa.cfm
• MAP-21 – Moving Ahead for Progress in the 21st Century Preconstruction Provisions Question and Answers on Value Engineering www.fhwa.dot.gov/map21/qandas/qapreconstruction.cfm
??????A value engineering study normally takes three to five days to complete, depending on the project’s complexity, followed by a formal report documenting the study team’s recommendations. The study should be conducted as early in the design process as possible to maximize potential value engineering recommendations. Being prepared to review and then approve or reject recommendations in a timely manner will help ensure changes to the project can be quickly incorporated into the project design. Once these decisions have been made, maintain a copy of the report for at least three years after the project has been closed out.
Whether your Federal-aid project barely exceeds the monetary threshold for a value engineering study or is as large as the Golden Gate Bridge, the value engineering process can help improve quality and value.
Remember, if your agency has a Federal-aid project and a value engineering study is required, start the process early, consider the recommendations we’ve just outlined in this presentation, and make sure you comply with all Federal regulations.
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