Report Title:

Value Engineering; Charrette Services; Requirement in State Projects; Recycling

Description:

Requires all state capital improvement projects with a total contract value above $2,500,000 to utilize dedicated value engineering technology and charrette services to improve project value and to encourage recycling.

THE SENATE

S.B. NO.

2383

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to QUALITY CONTROL IN STATE PROJECTS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that construction, infrastructure, and transportation planning, including capital improvement projects, inefficiently utilize state funds due to numerous change orders and inadequate project designs. This results in poor quality construction and cost excesses.

The legislature further finds that approximately $3,000,000,000 is spent annually on construction projects in Hawaii, and the State spends anywhere from $500,000,000 to $1,250,000,000 per year on construction projects.

Value engineering methodology helps organizations compete more effectively in local, national, and international markets by decreasing costs, increasing profits, improving quality, expanding market share, saving time, solving problems, and using resources more effectively. Value engineering is a proven management tool that can be used by state agencies to streamline operations, improve quality, and reduce contract costs.

Value engineering is a systematic process of review and analysis of an engineering project by a team of persons not originally involved in the project. Such a team may offer suggestions that would improve project quality and reduce total project cost by combining or eliminating inefficient or expensive parts or steps in the original proposal or by totally redesigning the project using different technologies, materials, or methods.

The Society of American Value Engineers International (SAVE) and the non-profit Lawrence D. Miles Value Foundation are committed to enhancing value engineering in the nation. SAVE is a national society with chapters worldwide. Value engineering is a recognized field of study in engineering education, and is taught at the University of Hawaii at Manoa.

The legislature further finds that all federal agencies require the use of value engineering. The United States Department of Defense has reaped immense benefits amounting to many tens of billions of dollars since it implemented value engineering in the 1950s. Other federal agencies are now reporting similar dividends.

The legislature finds that the U.S. Department of the Army has recently required the use of planning charrettes for twenty to thirty per cent of its construction projects. This has been done because the Army has used this process to realize immense benefits by identifying the appropriate scope of a project. The design charrette is a derivative of value engineering, and is similar to the functional analysis concept design used by the United States Department of the Navy. The U.S. Department of the Navy regularly uses functional analysis concept design on projects to reduce change orders, reduce claims and litigation, and save costs. Charrettes, functional analysis concept design, and value engineering are all part of the larger value engineering methodology prevalent in industry.

The legislature finds that value methodology is widely used throughout the nation. The State of Virginia became the first state in the union to require value engineering on state projects, and has saved millions of state tax dollars as a result. In addition, the Defense Authorization Act (Public Law 104-106) states that each executive agency must establish and maintain cost-effective value methodology procedures and processes. The 1986 Water Resources Development Act (Public Law 99-662) requires a new cost-cutting review (the value methodology) on all federally funded water and wastewater-

treatment projects with a total cost in excess of $10,000,000. The Office of Management and Budget requires federal agencies to use the value methodology as a management tool to reduce program and acquisition costs. The U.S. highway industry has employed the methodology for more than twenty years. The 1995 National Highway System Designation Act requires states to carry out a value methodology analysis for all federal-aid highway projects with an estimated total cost of $25,000,000 or more.

United States government agencies are realizing an average of more than $20 in savings for every dollar invested in value methodology. These savings increase the funds available to achieve mission objectives. Over the past fourteen years, value methodology has saved the city of New York hundreds of millions of dollars, identified alternative strategic approaches, confirmed or modified the direction of dozens of major projects, and identified flaws in poorly conceived projects early enough to adjust them.

Value methodology savings enable states to get more value from their highway construction dollars because the money saved by a state can be used for other projects. State transportation departments spent $7,500,000 to administer value methodology programs and have realized a return on investment of $113 for every dollar spent.

The legislature finds that value methodology easily produces savings of thirty per cent of the estimated cost for manufacturing a product, constructing a project, or providing a service. The Federal Highway Administration realized a net return on investments of one hundred sixteen to one in 2002 using value methodology, while saving $1,043,000,000 in costs.

The legislature further finds that with the State's landfills rapidly filling, and due to the proliferation of illegal dumping in the State, the State should do everything possible to encourage recycling among state agencies. Planning and design charrettes provide an ideal forum to review solid waste disposal and recycling plans for state projects, and appropriate use of recycled materials.

The purpose of this Act is to mandate the use of value engineering and planning and design charrettes on all state capital improvement projects that cost more than $2,500,000.

SECTION 2. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . Value Engineering and Charrette Services

103D- Planning charrettes on state projects. (a) Notwithstanding any other provision of law, all state capital improvement projects with a total contract value of $2,500,000 or more shall include outside planning charrette services to help define the scope and cost of the project and to encourage recycling of waste from the project. On qualifying projects, planning charrette services shall be procured before five per cent of the design is completed.

(b) All planning charrette services required by this section shall be conducted for at least one week and shall be supervised by cost specialists. During the provision of planning charrette services the stakeholders shall extend their full cooperation to fulfill the aims of the planning charrette exercise.

(c) Payment for planning charrette services required by this section shall be made at prevailing market rates.

(d) For purposes of this section, the term "charrette services" means the collaboration and consultation of a group of stakeholders to evaluate the efficiency of the portion of the project reviewed by the group.

103D- Design charrettes on state projects. (a) Notwithstanding any other provision of law, all state capital improvement projects with a total contract value of $2,500,000 or more shall include outside design charrette services to help define the functions and objectives of specific designs and to encourage recycling of waste from the project. The service shall also consider appropriate use of recycled materials in the projects. On qualifying projects, design charrette services shall be procured when between twenty-five to forty per cent of the project has been designed.

(b) All design charrette services required by this section shall be conducted for at least one week and shall be supervised by value specialists. During the provision of design charrette services the stakeholders shall extend their full cooperation to fulfill the aims of the planning charrette exercise. For projects with a total contract value of $5,000,000 or more, the minimum time for the workshop shall be eight working days.

(c) Payment for design charrette services required by this section shall be made at prevailing market rates.

(d) For the purposes of this part, the term "charrette services" means the collaboration and consultation of a group of stakeholders to evaluate the efficiency of the portion of the project reviewed by the group.

103D- Value engineering on state projects. (a) Notwithstanding any other provision of law, all state capital improvement projects with a total contract value of $2,500,000 or more shall include outside value engineering services to enhance the value of projects and to encourage recycling of waste from the project. The service shall also consider appropriate use of recycled materials in the project. These services shall be procured and completed once the design is seventy-five to eighty-five per cent completed, but before the project is put out to bid for construction.

(b) All value engineering services required by this section shall be conducted for at least one week and shall be supervised by value specialists. During this time the designers shall extend their full cooperation to fulfill the aims of the value engineering exercise. For projects with a total contract value of $5,000,000 or more, the minimum time for the workshop shall be eight working days.

(c) Payment for value engineering services required by this section shall be made at prevailing market rates.

(d) For purposes of this section, "value engineering" means a systematic process of review and analysis of an engineering project by a team of persons not originally involved in the project.

103D- Use of charrette and value engineering services. Notwithstanding any other provision of law, the charrette and value engineering services required by this part shall be utilized in the order specified by this section. The planning charrette shall be used first, followed by the design charrette, and followed by value engineering. Decisions on adoption of planning charrette recommendations shall be made by the head of the purchasing agency and any necessary corrections shall be made before design is pursued further. Decisions on adoption of design charrette recommendations shall be made by the head of the purchasing agency and incorporated in design drawings before the design is completed. Decisions on value engineering recommendations shall be made by the head of the purchasing agency and drawings appropriately revised before the project is put to bid for construction.

103D- Rules. The procurement policy board shall adopt rules pursuant to chapter 91 to implement this part."

SECTION 3. This Act shall take effect on July 1, 2004.

INTRODUCED BY:

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