VALUE ENGINEERING

TUESDAY, AUGUST 1, 1967

UNITED STATES SENATE, COMMITTEE ON PUBLIC WORKS, Washington, D.C.

The committee met at 10 a.m., pursuant to call, in room 4200, Senate Office Building, Senator Jennings Randolph (chairman of the committee) presiding.

Present: Senators Randolph, Young, Tydings, Fong, Jordan of Idaho, and Baker.

Also present: Richard B. Royce, chief clerk and staff director; M. Barry Meyer, counsel; Richard E. Gerrish, minority staff director; J. B. Huyett, Jr., and Richard D. Grundy, professional staff members.

The CHAIRMAN. Good morning, ladies and gentlemen.

Several members of the Committee on Public Works plan on being present today to share the counsel of certain persons representing private and public sectors of our economy who have experience in the dramatic field of value engineering.

We are working together in this search for the elusive answers to the question of how to get the most for those public funds we allocate. In the Federal Government, the development of operations research as a management tool almost becomes synonymous with the Department of Defense. The concept centers on reducing operating costs while continuing to reach vital objectives.

It is said that in the Department of Defense last year a savings of approximately $500 million was realized. And let me remind you that this is just one agency of our vast Government.

One of the approaches that appears to have special validity is that of value engineering. This is an organized approach to the lessening of the cost of an item without adversely affecting its performance. This, naturally, increases the value of each dollar expended.

We therefore are interested in the elimination or modification of any cost that does not seem to be essential to the basic function, to the general performance, to safety, to appearance, or to the maintenance of any development.

The key to value engineering is said to be in the functional approach. Each item and each method is analyzed in terms of what do we have here and what job must it perform. Next, we inquire what it costs and what less expensive alternatives could be used.

It appears these questions, gentlemen, are simple, but the difficulties involved in obtaining the quantitative answers are most complicated. They are extremely complex.

So, those members of the committee who will find it possible to be present are going to find their time well spent as we examine the conventional cost reduction methods that seem to be augmented by value engineering. The effect is to provide an organized approach which stimulates the development of lower costs for given problems. This approach, as I have earlier said, has an especial attraction with this committee because we are thinking in terms of the programs and the projects which are within the jurisdiction of the Public Works Committee. Particularly this would be true in the area of construction. Through operations research and value engineering, cost-benefit ratios, calculated for individual projects, would serve as a basis for the establishment of priorities on projects and on program funds.

Our witnesses today are representatives of consulting firms. They have had experience; they have stature and they have developed techniques that have been of value to their clients. So, from these individuals today we hope to receive a better understanding of the process that is involved and we would like to think of how we perhaps could help in the implementation or the strengthening of this approach.

Tomorrow we will have persons from agencies within the Government; five are planning to appear. These agencies are the ones that spend large sums and we expect to learn what these agencies' policymaking staffs are doing to embrace this approach.

In conclusion, I would want to say that considerable attention is being given to the concepts we shall be discussing today and tomorrow. We know that those who are coming will help us in establishing guidelines and to gain understanding of the processes and how they can be used effectively.

Mr. Woodward, it is nice to have you here today and we would like for you as the senior staff engineer in charge of value engineering programs for Operations Research, Inc., to come forward and present your statement as the initial witness.

We will not attempt to suggest to our guests who come to give testimony how they should present their statements. Sometimes it is helpful to read the complete statement if it is not too long. In other instances it is best for a witness to place a statement in the record as though read and then comment more extensively on the points that he feels should be stressed.

Mr. Woodward.

STATEMENT OF R. GLENN WOODWARD, SENIOR STAFF ENGINEER, IN CHARGE OF VALUE ENGINEERING PROGRAMS FOR OPERATIONS RESEARCH, INC., SILVER SPRING, MD.

Mr. WOODWARD. Thank you.

Mr. Chairman and members of the committee, it is an honor to have this opportunity to discuss value engineering-VE-with you today. My name is R. Glenn Woodward.

As a senior staff engineer in charge of value engineering programs for Operations Research, Inc., I supervise and participate in the preparation of value engineering clauses for inclusion in defense contracts of both private industry and Government, the review and evaluation of existing programs and design studies to develop alternative lower cost designs, and the preparation and conduct of VE training seminars. By way of background, I am a member of the Society of American Value Engineers and a registered professional engineer. In addition, I am currently serving on an ad hoc committee of the Society of American Value Engineers to study the recent value engineering revision of the Armed Services Procurement Regulation. My previous experience includes serving as president of Value Engineering, Inc., and having responsibility for value engineering programs in Raytheon Co., and with the General Electric Co.

It is on the basis of these various experiences and my longstanding interest in value engineering interfaces within the Government and between Government and industry that I have developed my conviction that value engineering is a necessary management tool.

Value engineering, or value analysis as it was originally called in the earlier stages, is a concept that was developed in response to a growing need to conserve money, materials, manpower, and time. The awareness of this need resulted from the various shortages and the substitutions that occurred during and after World War II.

Many of these enforced changes, in the face of limited alternatives, unexpectedly lowered the costs from 20 to 50 percent without sacrificing performance or other necessary attributes of the products involved. The results of these random improvements encouraged the development of a concept and supporting techniques that could be used to rationalize and systematize this process and to change the random savings to planned savings. This development has been refined and expanded into the value engineering programs of Government and industry that have proven that these concepts can save large percentages of costs on equipment, structures, and services, without decreasing their essential effectiveness.

The CHAIRMAN. Mr. Woodward, when is it correct to state with the haphazard method of the past that we would be faced with the advent of a shortage, our attempt to find an alternate source to take the place of that product often resulted in the loss of great sums of money? Now, where does your approach avoid that sort of procedure? Mr. WOODWARD. Well, many times we have found that in what are considered temporary circumstances-that is, where, in essence, whatever substitute can be found is used-we fail to step back, under the pressure of the time, to determine exactly what is it that we are at