Value Evaluation and Risk Evaluation

Value Evaluation: Value Engineering and Value Analysis

Many times a job is specified a certain way because “that’s how it has been done in the past,” or because the designer or owner is more comfortable with a particular type of design. But just because a design works, doesn’t mean it’s the best option or the cheapest. Or the proposed design actually may not be appropriate for the site-specific conditions and, therefore, is risk prone from serviceability and/or potential failure considerations. Or the Return on Investment (ROI) can be improved. With the advent of new policies and procedures, e.g., AASHTO LRFD, there can be cases where the designers are not fully conversant with the latest standards and have proposed designs simply because they are used to it or have seen them done by others.

The most value for a project at the overall level, and also at the element (e.g., wall, bridge, roadway, etc.) level, is obtained when the design and construction processes are tailored to specific geometry and the environment (conditions) expected over its specified lifetime. Often considerable cost savings and/or mitigation of risk can be realized by all parties (owner, contractor, tax payer, etc.) involved if alternative designs specific to the project- and site-specific conditions are considered, a process referred to as “value engineering.” Independent (third-party) evaluation of viable alternatives during the design phase is sometimes referenced as “value analysis.” Regardless of the terminology, a critical evaluation of risk aspects is an integral component of any value evaluation endeavor.

The first step in value evaluation is to review the existing designs, and to identify alternative designs that might work given the project constraints and performance criteria. Then calculations and other design work must be done as well as a detailed cost estimate for each alternative. On large jobs, savings of a few pennies per unit (sq. ft., cubic yd., etc.) can mean millions on the entire project!

One of the key aspects of value evaluation is working with the owner and other relevant parties to convince them of the technical and financial merits as well as risk aspects (discussed next) of a particular alternative. These situations really give NCSG a chance to shine; examples of this are the SR264 Second Mesa: GeoFoam wall or the Kino Parkway: Veterans Memorial Overpass. We can use our technical expertise not to confuse but to enlighten the owner, and explain whether accepting the value engineering or value analysis proposal is in their best interests or not. And our background and contacts with the FHWA and various departments of transportation help us to understand the reasons and history for their policies and specifications, and work within them, and when appropriate, make a case for variances that could save millions. In summary, the value evaluation processes by NCSG result in engineering solutions that maximize of Return on Investment (ROI) with realization of lowest life-cycle cost.

Contact Us for a value evaluation of your project to see if there are better ways to achieve more value while minimizing risks and meeting or exceeding performance goals.

Risk Evaluation: Risk Assessment and Risk Management

As per ISO 31000:2018, risk is “The effect of uncertainty on objectives” whereas risk management is “coordinated activities to direct and control and organization with regard to risk”. Many risk related terms are formally defined in ISO 31000 and its associated document ISO 31010 which “describes a range of techniques that can be used for gaining a better understanding of risk so that uncertainty is taken into account in decisions and actions are based on a sound understanding of risk.”

The ISO and similar documents from other sources have a plethora of jargon related to risk. However, at its most basic level an evaluation of risk inevitably involves some sort of an assessment of the probability of occurrence of an event in future, whether formal (using probability theory or Delphi process) or informal (e.g., “I think this might happen”). Regardless of the way the probability is assessed, risk evaluation involves an explicit acknowledgement of future uncertainties that will have consequences (e.g., serviceability issues, failure, etc.). The cost associated with a risk (“risk cost”) may be expressed in terms of the probability of occurrence times the monetary value associated with the consequences. Sometimes, the value of consequences may be non-monetary, e.g., political, public relations, change in policies that may preclude use of certain cost-effective technologies, etc. For a given project, the value evaluation (engineering or analysis) process is essentially related to a systematic study of the risk costs associated with the selection of a design concept and consideration of its alternatives. The risk costs are not only related to the construction cost but the process of development, implementation, and performance of an alternative over the service and design life of the structure and other structures in its vicinity. NCSG specializes in risk evaluation (assessment and management) by using a systematic process to identify, analyze, prioritize and mitigate the risks by proactive strategies and tactics during design, construction and long-term performance phases of a project or program.

Understanding of the concepts of risks (assessment and management) allow for a better value evaluation. This, in turn, leads to better Asset Management, which is another service that NCSG provides and one that is often forgotten by personnel involved in risk and value evaluation processes, i.e., not considering the long-term implications of a decision to implement a measure that may appear to result in short-term savings. In summary, risk should not be evaluated with a narrow focus for a given element in the short-term only, but the overall long-term and asset management aspects must also be considered. NCSG approaches risk evaluation processes with an integrated approach that include risk, value, and asset management considerations.

Contact Us for a risk evaluation of your project to see if there are better ways to achieve and exceed performance goals while minimizing risks.