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|                   | Independent Engineering Review of the      U.S. Army Corps of Engineer's Mainstem Capital Construction Program
**May 12, 1998 **|**  document 98-6**

Links:
- Attachment 1  (10k PDF)
- Attachment 2  (10k PDF)
**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.
DiscussionValue 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(both 10k PDFs)
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