INDOT has a road funding trump card heading into session
As you we’ve recounted for you in these pages, the recent completion of the I-69/I-465 interchange connected the crossroads from Evansville all the way to the Canadian border. That final section of the interstate connection alone cost $1.5 billion. While that might seem like a substantial amount of money, it could have been even more costly without the process of value engineering.
Costs aside, the I-69 Finish Line Project, spanning the terms of three governors, would potentially not have waved the checkered flag earlier this year without the use of value engineering. As we move into a budget session sure to be fraught with high-value, high-cost, road-based expenditures, understanding how the Hoosier state funds infrastructure projects is more critical than ever.
Before we look further into the projects in Indiana that deploy value engineering, let’s reverse to what kick-started value engineering and what it constitutes.
Value engineering began during World War II when materials, parts, and labor were scarce. To maintain uninterrupted production, value engineering was created to find alternative materials to get the project done. In modern times, it is a component of a federally required process to review and analyze certain projects during the design phase.
Note that the Indiana Department of Transportation began using value engineering in the 1990s, around the same time that alternate delivery methods were being adopted by INDOT. Since then, INDOT and the Federal Highway Administration have worked together to determine which elements of a project can be modified to save money and time. While it’s not a new cost-saving method for INDOT . . . many large projects using value engineering this year may have brought the concept to the forefront for taxpayers.
Think about it this way: Value engineering is like opting for the generic version of an item at the grocery store. You effectively achieve the same results without it costing you an arm and a leg.
Value engineering considers alternate materials, designs, equipment, and systems to improve the cost-benefit analysis of the project without minimizing the quality and safety under the U.S. Code of Federal Regulations, 23 CFR 627.
Value Engineering: Checking the Boxes
The process looks a little like this:
A project manager selects a team of three to five qualified people not directly involved in the planning phases to produce a value engineering analysis with recommendations. The team is led by a project manager separated from the rest of the project.
The VE project manager completes the Value Engineering Workbook after the Stage I review and provides the group’s recommendations to the designer.
After receiving comments from the designer, the VE project manager completes a Value Engineering Recommendation Memo and presents it to the Capital Program Management deputy commissioner.
From there, the deputy commissioner signs off on each recommendation in the memo with justification.
The project manager will upload both documents, the VE workbook, and the signed VE Recommendation Memo, to the Electronic Records Management System.
Finally, a hard copy is provided to the Project Support Division director and any changes made are reported to the Federal Highway Administration.
With that process in mind, INDOT specifically uses value engineering for projects that earn federal-aid highway funding.
This includes road projects on the National Highway System (NHS) for $50 million or more, bridge projects on the NHS with a total cost of $40 million or more, any major projects on or off the NHS that cost $500 million or more, any project where a VE analysis is not performed but a change is made to the project in its design or scope, and projects decided by FHWA.
Consider that value engineering assesses projects during the preliminary design. In recent years, INDOT has used alternative delivery methods including Design-Build, Progressive Design-Build, and Construction Manager General Contractor (CMGC) for the execution of complex projects. These alternative methods, along with value engineering, prioritize early contractor involvement, conduct design and construction simultaneously, use a risk register, and increase collaboration.
Alternative Delivery Methods
Design-Build was the first alternative delivery method that INDOT adopted in the 1990s, combining design and construction objectives into one contract. INDOT added Progressive Design-Build and CMGC to the arsenal in July 2023. The main difference between the delivery methods is the number of agreements created.
Progressive Design-Build combines design and construction into a single, two-phase agreement. The preconstruction phase involves creating the design and agreeing on the cost with the help of an independent cost estimator. The construction phase is when that design is executed.
With CMGC, design and construction are displayed in two separate agreements: one with the designer and the other with the CMGC contractor. The designer is responsible for preliminary engineering and developing project design. Then, the CMGC contractor conducts a preconstruction phase to agree on cost and a construction phase for the physical work.
INDOT Strategic Communications Director Natalie Garrett observes that value engineering is not usually used for projects using the Design-Build process because the contractor team is already able to propose and provide solutions within the outcome-based specifications of the process.
Garrett notes that these alternative methods “incorporate added value by means of allowing contractors to perform final design or by allowing substantial input from contractors in identifying innovative and efficient project design solutions.”
If you recall, INDOT used a Design-Build Best Value (DBBV) delivery method on the I-64 Sherman Minton Bridge across the Ohio River. This is an alternative delivery method in which INDOT uses a public-private agreement to determine the best combination of elements for the project. Garrett adds that the DBBV method inherently uses value engineering, thereby both lowering project costs and giving taxpayers the best value for their money.
INDOT Projects Reaping the Benefits
The Sherman Minton Renewal (SMR) project costs $137 million, which includes replacing bridge decks, new lighting, paintwork, repairing drainage, paving roads, a traffic plan, and overall rehabilitation of the infrastructure. The project is fully covered by federal and state highway funding. The SMR, which is expected to be completed late this year, is projected to add 30 years to the bridge’s lifespan.
The rehabilitation project for the troubled double-decked structure (it was closed for several months on an emergency basis during the Daniels Administration) used the DBBV strategy and value engineering to avoid technical issues and emphasize the importance of collaboration between design and construction. Interestingly, Garrett confirms that using these methods leads the project risk to primarily fall on the contractor.
She clarifies that this is beneficial because many unknowns must be dealt with while rehabilitating a 62-year-old bridge. Having a contractor’s opinion prioritized on innovative design solutions can help alleviate potential future problems with value engineering that might not have been caught without the eyes of a contractor.
The rehabilitation of this cross-river connection is possible because of the DBBV contract, which helps minimize any challenges for the 70,000 motorists who traverse the bridge every day. Because of this careful planning, drivers have been able to use the bridge for 95% of the three-year construction timeline.
So, how beneficial is value engineering outside of the Sherman Minton Bridge? Well, the rehabilitation of the structure is not the only project INDOT and the Kentucky Transportation Cabinet are collaborating on. Connecting the crossroads on I-69 also brings a significant amount of collaboration among border states.
The I-69 Ohio River Crossing is the final connection between Evansville and Henderson, Kentucky. The alternate decisions encouraged by the value engineering study involve reducing the shoulder width to the American Association of State Highway and Transportation Officials minimum requirement, leaving U.S. 60’s alignment unaltered, constructing a direct junction instead of an interchange between I-69 and U.S. 41, eliminating the need for a bridge over I-69, and much more. All the alternative concepts collectively saved both Midwestern states $324.8 million and a construction time reduction of almost five years.
Additionally, during the planning process for the I-69 Finish Line, INDOT employed value engineering to ascertain alternative courses of action that would improve cost-effectiveness before the completion of the final plans.
Garrett also cites changes such as extending an east access road north of S.R. 144 to Stones Crossing in Johnson County instead of constructing a grade separation over I-69 at Stones Crossing. This alternative method resulted in $3 million reverting to the state.
Another example is the adjustment of the I-69 northbound to I-465 eastbound ramp and I-465 westbound to I-69 southbound ramp to eliminate overlap with a quarry pond in Marion County. This change resulted in savings of $16.5 million.
That’s not all! The 52@65 project in Indiana also reaps the benefits of a value engineering study. The project aims to improve the I-65 and U.S. 52 interchange near Lebanon by increasing ease for motorists commuting east and west of I-65. In this case, VE will save both Indiana and the federal government money.
The connectivity through this project will eliminate drivers using state roads to reach those areas. Currently, the project is in its VE-facilitated design phase, or, arguably, where all the magic happens. The designer and contractor work to implement alternative solutions that optimize cost savings before significant investments are made in the construction of the project. The Clinton County Daily News reports an estimated three percent to five percent cost savings for the 52@65 project, following a recent value engineering workshop. INDOT Public Relations Director Blake Dollier confirms that taxpayers ultimately saved $2.1 to $3.5 million. The workshop examined factors including design, environmental impacts, utility impacts, and traffic analysis to arrive at the most cost-effective options that also emphasize motorist safety.
Even though value engineering has been a staple in Hoosier projects for years, you’ll want to keep your eye on it as we move into the budget session in 2025. Utilizing VE as effectively as possible may become crucial as lobbyists and legislators scramble to figure out how to backfill Indiana’s $2.4 billion road funding shortfall.