Value Engineering: Saving Money While Enhancing Quality of Life
In dealing with its combined-sewer-overflow problem, Philly is demonstrating a better approach to big infrastructure projects.
Most public officials are always on the lookout for better and cheaper ways to pick up the trash, light the streets or serve children in need. But service delivery isn't the only place to look for efficiencies. Some jurisdictions are showing the way in their capital projects by making aggressive use of the process known as "value engineering."
As mayor of Indianapolis, I learned how much money could be saved on capital projects without loss of safety or value. In one large project -- infrastructure for a downtown mall -- the first proposal seemed far too expensive. I asked that the budget be reduced by 15 percent without sacrificing important design features, and the design and engineering teams quickly complied. In New York City during my time as deputy mayor, I saw the city's use of value engineering across a range of large projects. The New York model featured a special value-engineering group working out of and on contract from the mayor's Office of Management and the Budget. The effort worked well because it created a constructive dynamic by putting some daylight between the agency sponsoring a particular project, which might have one definition of what is necessary, and the budget team, which might have another definition.
Setting up a team responsible to the top elected official that promotes rigorous use of value engineering can easily result in consistent savings of 10 to 20 percent through designs that lower construction and operating costs while providing benefits that offset costs that remain.
Philadelphia shows us, however, a much broader approach to both cost-benefit analysis and to value engineering. In its reevaluation of the solution to combined sewer overflows (CSO), for example, Philadelphia addressed the issue of what happens when the costs are inside one agency but the benefits affect not only many different agencies of government but also quality of life and homeowner interests.
Cities across the country, especially older ones, are laboring under huge and often unaffordable costs associated with resolving their CSO problems. In some cases, federal enforcement actions force double-digit year-over-year increases in water rates to help produce the capital and operating dollars necessary for multibillion-dollar projects.
A number of these cities have begun to question not just the costs of compliance but also the standard longtime approach of relying on expensive "gray" infrastructure -- huge underground pipes and storage tanks. These cities, led by Philadelphia and closely followed by Indianapolis and New York City, have moved to a mix that includes a substantial percentage of "green" infrastructure -- more permeable designs for streets, sidewalks, parking lots and the like to avoid having rainfall go into the sewers in the first place.
Philadelphia ran a cost-benefit analysis comparing traditional CSO solutions with a minimal 50 percent "green" alternative. The hybrid "Green City, Clean Waters" approach, it found, could be expected to yield nearly $3 billion in benefits, including indirect ones, over the next 40 years for a project expected to cost $2.4 billion over a quarter-century. The program's timeline is inherently long-term and remains under development, though a number of initial projects have been initiated across the city.
While the engineering for hybrid approaches like Philadelphia's certainly is complicated, it can produce substantial savings on both construction and operating costs. But, as Philadelphia's cost-benefit analysis suggests, greening a city also produces dramatic and often overlooked benefits far beyond simply meeting federal environmental mandates. How should a city score these projects? Philadelphia has taken that process of evaluation to a new level of comprehensiveness.
Water Commissioner Howard Neukruig, for example, hired a consulting firm that provided a full view of the benefits that green infrastructure can be expected to provide, such as wetlands added or restored, "green-collar" jobs created, energy (electricity, natural gas and vehicle fuel) saved, pollution reduced, and recreational opportunities and property values enhanced. Residential property values within the CSO area are expected to increase by about 3.5 percent, according to Suzanne Biemiller, first deputy chief of staff to Mayor Michael Nutter.
Among the advantages of the green-infrastructure approach have been some unforeseen surprises. Workers at a recreation center in South Philly told Biemiller, for example, that the permeable basketball-court surface not only deadened the noise from the court but cut maintenance costs as water seeped into the ground and reduced the need to remove snow.
Value engineering, as Philadelphia is demonstrating, goes well beyond simply finding better and cheaper ways to get things done. Thinking broadly and calculating benefits scientifically not only can improve decision-making but can bring real enhancement to quality of life.