OMB Directs Agencies to Embrace ‘Value Engineering’

pedrosek/Shutterstock.com

In its first such update in two decades, the Office of Management and Budget has revised long-standing guidance instructing agency managers to adopt the private-sector discipline known as “value engineering” to boost innovation and achieve savings.

In a revision of OMB Circular A-131 published Dec. 26 in the Federal Register, OMB tasked agencies with applying value engineering to programs costing more than $5 million -- an increase from the current $1 million -- and with naming an official to be accountable for embracing the concept. OMB believes targeting value engineering to projects costing more than $5 million will focus the strategy on projects “where it is likely to have the greatest value while allowing agencies to tailor the use of the tool to meet their mission needs,” the circular stated.

Value engineering “challenges agencies to continually think about their mission and functions -- in the most basic terms -- in order to determine if their requirements are properly defined and if they have considered the broadest possible range of alternatives to optimize value,” wrote Joe Jordan, administrator for federal procurement policy, who leaves government at the end of January for the private auction firm Fedbid. “It promotes ‘share-in-savings’ by encouraging contract holders to identify ways to reduce the cost of performance on existing contracts and share with the government in the savings produced from the results.”

The discipline, he continued, is “generally performed in a workshop environment by a multidisciplinary team of contractor and/or in-house agency personnel (such as an integrated project team), which is facilitated by agency or contractor staff that is experienced, trained and/or certified in leading VE teams through a series of specific phases.”

Value engineering dates back to World War II when the Defense Department used it primarily in construction projects. It is has been widely adapted by private corporations under the name value methodology, or functional analysis, according to Rob Burton, who worked in the procurement policy office under President George W. Bush and is now a law partner at Venable.

OMB first outlined principles of value engineering in a 1988 circular that was updated in 1993. Evidence of its success, according to the revised circular, includes Defense’s reported cumulative savings of more than $10 billion in fiscal 2011 and fiscal 2012; the Transportation Department’s Federal Highway Administration’s savings of $1 billion to $2 billion in construction projects from fiscal 2010 to fiscal 2012; and the State Department’s reported “life cycle” savings of $40 for every $1 spent on value engineering studies since 2008.

The new approach calls for consideration of value engineering to reduce contracting delays on projects involving strategic sourcing and even services.

“This is long overdue,” Burton told Government Executive noting that OMB seldom revises circulars. “The timing is critical since agencies are facing greater challenges than ever to save costs.” Burton calls value engineering more valuable than “almost any other management tool available to government to help agencies use it before issuing a request for proposal to get better procurements, reduce bid protests and get what they need. It’s not just for construction projects, but for information technology and other services,” he added.

Equally pleased with the revision is the Dayton, Ohio-based nonprofit society Save International, which promotes value engineering and has worked with OMB. “The process forces creativity and fosters efficiencies, whether in analyzing the organizational structure of an agency, the improved procurement of IT or other services, or the design of a VA hospital,” the group’s executive vice president, Mary Ann W. Lewis, told Government Executive. “Kudos to OFPP for its diligence in making A-131 relevant, addressing the need for accountability, and relating VE to OMB Circulars. Much has changed in the last 20 years and the updated circular reflects how VE works for government now.

The White House office plans to work with the Federal Acquisition Regulation Council on possible regulatory revisions to promote VE, and will cooperate with the Federal Acquisition Institute and the Defense Acquisition University on new training materials.

(Image via pedrosek/Shutterstock.com)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

When you download a report, your information may be shared with the underwriters of that document.