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Got a Federal or state value study to perform? We can help.

The Federal government saves billions each year through use of Value Engineering. Yet little of the overall budget is value studied. In 1995-1997, less than 5-percent of all Federal activities were value studied. Take a look at the results of this period and think of how much money we would have for other programs, including tax relief, if just 50-percent were studied. That would be like getting another $200 billion in the bank. Yet, the amount studied appears to actually be reducing over the last few years.


1997 Federal Agency  Savings

In fiscal year 1997, October 1996 to September 1997, the following Federal agencies savings were reported to the Office of Management and Budget:

Federal Department/Agency Dollars Saved Through
Use of the Value Method
Department of Defense
(Excluding Corps of Engineers and VA)
$697,800,000
Department of Transportation $3,210,000
General Services Administration (est.) $27,543,000
US Army Corps of Engineers $84,597,000
Department of the Interior $32,313,000
Department of Agriculture $2,990,000
Justice Department $16,547,000
Veterans Affairs (VA) $3,227,000
Heath and Human Services $4,747,000
Agency for International Development (AID) $4,397,000
State Department (excluding AID) $1,065,000
Treasury $0
NASA $2,665,000
National Archives and Records Administration $379,000
Total Reported $978,475,000

Source: FY1997 OMB Report Summary to Congress And SAVE International


1996 Federal Agency  Savings

In fiscal year 1996, October 1995 to September 1996, the following Federal agencies savings were reported to the Office of Management and Budget:

Federal Department/Agency Dollars Saved Through
Use of the Value Method
Department of Defense
(Excluding Corps of Engineers and VA)
$766,000,000
Department of Transportation (est.) $300,000,000
General Services Administration (est.) $120,000,000
US Army Corps of Engineers $78,521,000
Department of the Interior $25,383,000
Department of Agriculture $5,156,000
Justice Department $3,635,000
Veterans Affairs (VA) $7,745,000
Heath and Human Services $818,000
Agency for International Development (AID) $33,000
State Department (excluding AID) $3,947,000
Treasury $210,000
Total Reported $1,191,448,000

Source: FY1996 OMB Report Summary to Congress


1995 Federal Agency  Savings

In fiscal year 1995, October 1994 to September 1995, the following Federal agencies savings were reported to the Office of Management and Budget:

Federal Department/Agency Dollars Saved Through
Use of the Value Method
Department of Defense
(Excluding Corps of Engineers and VA)
$734,385,000
Department of Transportation $686,374,000
General Services Administration $109,608,000
US Army Corps of Engineers $59,554,000
Department of the Interior $22,428,000
Department of Agriculture $8,764,000
Justice Department $5,990,000
Veterans Affairs (VA) $2,271,000
Heath and Human Services $1,884,000
Agency for International Development (AID) $800,000
State Department (excluding AID) $92,000
Total Reported $1,632,150,000

Source: Interactions, SAVE International, June 1996, page 5
and FY1995 OMB Report Summary

Specific Agency Example

At one Federal bureau (a part of an agency), the results of the application of the Value Method in studies was examined for two years. Less than 25-percent of the operations were subjected to the selection process. This constituted about 80 activities ranging from $0.5 million to more than $70 million in projected cost. Projects were classified as selected for study and studied, selected for study and not studied for cause (such as management decision that selection for a value study was incorrect), and selected but not studied (study refused without cause specification).

More than 70-percent of the projects flagged for study during the selection phase were value studied. The results were sobering. Of the projects value studied, over 60-percent were completed within 10-percent of their original budget, less than 5-percent exceeded their original budget by more than 10-percent, and over 30-percent were completed at a cost under 10-percent of the original budget. Of the projects where management did not agree that the results of the study would be worth the study cost, more than 40-percent was within accepted budget limits and more than 10-percent were completed at a cost of 10-percent under the original budget. However, more than 40-percent had a final cost that was more than 10-percent above their budgets. For projects where no formal decision was made, more than 20-percent were within budget limits and nearly 50-percent exceeded their budgets by more than 10-percent. Surprisingly, about 20-percent were completed more than 10-percent under budget.


Source: Paper written by SAMI staffer and published in SAVE 1997 International Conference Proceedings, Volume XXXI

The cost for the projects value studied were reduced an average of more than 25-percent. Thus, even when considering the projects that were not studied, some of which had completion costs that were as much as twice over their original budget, the final combined cost for all the projects was nearly 8-percent below original estimates. Thus, using the Value Method in their operations helped them meet their overall budget limit.

 




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