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Value Engineering

Value Engineering is a method for the Contractor and Owner to save money by exploring innovative ways to design and build a project. By doing a little research and innovation, you can uncover the secrets to building a better system and develop a more cost effective design.  

When a large project is out for bid and everyone is going after it and times are tough, is the right time to think outside the box. Coming up with innovative means and methods can land you the job for a good price. So how do you come up with the innovative ideas that will get the job for the right price? This requires a commitment from the company to invest time and money into the estimate. We have an extensive library on new and old technology with volumes of research papers and presentations. Let Track Guy Consultants assist with the approval process.

Procurement Methods

Design Bid Build: On standard Design, Bid, Build (DBB) projects, it is typical for the Owner to include a clause for value engineering whereby the Owner and Contractor share in the savings. This gives the Contractor a small incentive to develop innovative means and methods and introduce new products and technologies. Both the Contractor and the Owner share in the risk. Owner approval is mandatory prior to any changes to the original contract.

Design Bid Build and Bid Preparation: Value Engineering takes valuable time. The Owner may not necessarily approve the new method. Therefore, the Contractor must do Value Engineering before bidding the job. The Contractor must have the confidence, resources, and the Engineering capabilities to develop innovative plans and, in turn, bear the risk that the Value will be approved by the Owner. This risk-taking often determines the lowest bidder on difficult and large scale projects. The rewards are great -- as is the risk. This method can payoff in a big way if the Contractor takes the time and spends the money prior to the proposal date.

Design Bid Build and Peer Review: On Federally funded projects, it is common to have a peer review prior to the request for proposal (RFP). A mediator is chosen by the Owner and they gather about 15 to 30 professionals to participate in typically a one-week workshop. At this stage the Owner has at least developed 30% drawings for review. This is an intense brainstorming session with the objective to save the owner money. There are few rules. Ideas are produced by the thousands. Some ideas are way out in left field but most will save the Owner millions of dollars in construction costs. The Owner reviews volumes of paper and then continues with the design incorporating many of the money saving ideas. This is a long process but well worth the effort.

Design Build: On Design, Build (DB) projects, the Owner will produce very general information. In some cases, the Owner will furnish 30% drawings. In other situations, they will offer design criteria only. This process is very popular for the Owner that does not have a large Engineering staff to design and administer the project. The Contractor likes this method because they will not have to share any savings. It is the Contractor's responsibility to Design and Build the project and ultimately hand over the project to the Owner (Turnkey).  The biggest advantage to this method of procurement is the speed of project completion. Construction can begin very quickly since not all aspects of the job must be designed prior to starting work. Designs can be prioritized so construction is not delayed; this can mean year's worth of savings. This type of procurement method carries some risk and therefore ALL participants must be pre-qualified. Quality Assurance and Quality Control are the most important aspects of Design Build. Without these controls, field forces may cut corners and ultimately turnover an inferior system to the Owner. Safety and Quality are extremely important. Whether the Owner or the Contractor assumes these duties, there must be checks and balances for both.

Design, Build, Operate Maintain: The most desirable procurement method is the Design, Build, Operate and Maintain (DBOM). This adds a new dimension to the project. The builder is now responsible to operate and maintain the system. The Owner will typically only furnish the alignment and design criteria. The rest is up to the Contractor. It is now his responsibility for interface between all the disciplines in order to produce a well performing system. The Contractor has many choices and always must remember that he is responsible for the long term. It is common to install more superior products in order to save money later. It is very costly to do remedial work while trains are running or under very short shutdowns of the system. Stray current can kill a system in 15 years and cost millions of dollars to fix. Any owner that does not pre-qualify the participants is asking for trouble from Day 1. Safety and Quality are heightened even more in this method and audits must be regular and intense. These activities are typically the responsibility of the Contractor and there must be outstanding checks and balances. Maintenance of any system can wipe out profits in a heartbeat and the losses will not be recognized for years to come. Therefore it is imperative to build it right the first time. What may be a savings in Year 1 can cost 4 times as much in Year 12.

Design, Build, Operate, Maintain and Finance: The final method is the Design, Build, Operate, Maintain and Finance (DBOMF). This is a very recent method that has been used because of funding issues. This method incorporates all the above and the Contractor will finance the construction and collect the revenue. The risks are great but the potential profits could be overwhelming.

Procurement Methods Produce Success: In summary, there are many different versions of the above procurement methods. They can and have been very successful for both the Owner and the Contractor. On one project, the Contractors expressed extreme concern over underground utilities and said that they would have to raise their prices in order to mitigate this risk. The Owner listened and created a contingency fund to be used for unforeseen conditions. The caveat was that at the end of the project, if there was money left in that fund, the Contractor took half of it and the Owner retained the other half.

Example of Value Engineering

As Contractors, Designers and Maintainers, we constantly are looking for better and cheaper ways to do the work. Value engineering is a thinking process that can save time and money to the project. Typically on the design build projects, the contractor keeps all the savings. On a standard bid build project the savings is usually shared with the owner. The benefits can be enormous and the thinking process should begin immediately during the bidding stage. The following is an example of how research and innovative thinking works. We saved $3 million and were able to show all that in the bottom line.

Definition of embedded track design: Any track that the rail is surrounded by concrete, asphalt, rubber or any other material that only the top surface of the rail is exposed. A flangeway is formed to allow for the wheel flanges of the vehicle. Typically, but not always, the surface is shared with rubber tired vehicles.

There are a number of embedded track designs, some are friendly and some are not. Choosing the right design is a very important part of a transit system that will last a long time and be easy to build, which usually means a lower cost for construction.

trough track chart

Trough Track

Photos # 1&2  This design is made up of many different parts and requires several stages of construction. Stage 1: A base concrete is poured first with two hanging fiberglass troughs that are surrounded by concrete. These troughs are difficult to incorporate into the formwork and will tend to float during concrete placement. They also must be cut into shorter lengths and spliced together in order to go around curves. Stage 2: Once the first concrete is placed, then holes must be drilled into the concrete at the base of the trough for anchor bolts. These bolts are epoxied into place using a non-conductive epoxy. Stage 3: Base plates are placed over the bolts with a thin leveling nut under them. Base plates are adjusted to the exact elevation and grout placed under them. Stage 4: The rail is painted with coal tar epoxy (a carcinogen) and placed on top of the plates and brought to line and gauge, then clamped down. Stage 5: The troughs are filled with light weight concrete and a flangeway formed if not using girder rail. This process is time consuming and costs many times more than the other methods. It also is not the best way of controlling stray current.

Embedded Track

Photo # 3 Ready for concrete. This design is a simple form of top down methodology that ensures accuracy and stray current protection. Stage 1: Install rubber boot and set rail to line and grade using  steel beams or channels with pandrol shoulders welded in the right location. Stage 2: Place re-bar and pour concrete to the base of the rubber boot or pour to the top of rail, forming the flangeway. Stage 3: Pour concrete to the top of rail and form the flangeway

Embedded Track

Photo # 4   This is a British design that uses a bar-type rail. There are no fasteners and the stiffness can be adjusted. Stage 1: Slip form a base slab with 2 troughs built in. Stage 2: Attach the foam pad a fiberglass shell to the rail, then set into the trough and adjust to line and grade. Stage 3: Pour grout into the cavity to secure the rails. More info from Balfour Beatty Rail.

Ballasted Track

Photo # 5 Simple ballasted track covered with asphalt. There is little to no electrical isolation and in order to tamp the track, the asphalt must be removed and replaced. This is a very high maintenance type of embedded track and should only be used in non-electrified freight track.

The innovations and creative forms of procurement continue to develop. As always the keys to success are listening and learning. Communication and open sharing of ideas with egos left at home will continue to produce profits and rewards.

Call the Track Guy today at 973 222-1300. We can handle it all.

More Thoughts on Innovative Thinking and Creative Ideas ...

Innovative Thinking: When a large project is out for bid and everyone is going after it and times are tough, is the right time to think outside the box. Coming up with innovative means and methods can land you the job for a good price. So how do you come up with the innovative ideas that will get the job for the right price? This requires a commitment from the company to invest time and money into the estimate. A great resource for innovation are the people that have retired, whether they be from your company or another company -- it does not matter -- as long as there is trust and possibly a signed exclusive agreement between both parties. The old timers enjoy the challenge and in most cases will devote countless hours to the cause. They are not intimidated because their job is not at stake and sometimes they have had ideas that they may not have expressed before. Retired people, especially from construction, are eager to share their experiences and use their mind. They have fun throwing out creative ideas and are glad to be involved again. Retired executives, engineers, managers, superintendents and foremen are a great source for innovative thinking and creative ideas.

Young Talented People: Another way to uncover new and innovative ideas is to tap the entire other side of the spectrum -- young people. The young talented people that have not been contaminated by crusty old timers can come up with some very creative ideas. Just imagine the untapped mind of an up-and-coming star with no preconceived ideas about construction, union rules, industry standards, unwritten laws etc. Most of the new and innovative ideas may be so far fetched that they may bring laughter. However, this must be avoided at all costs, otherwise, the new kid will clam up and you will miss out on that one idea that will get you the job at the right price. You will never hear a new kid say "that's the way we have done it since you were a twinkle in your Dad's eye". Young people will also be grateful to be included in such a wonderful cause -- getting work for the company. Some companies may bury their new kids in a cubical until they are ripe and then let them out to tip toe around. Why not assign a mentor and let the kids out to participate in all the good stuff? They will be very dedicated and loyal employees.

Creative Thinkers: Creative thinkers are born and it has something to do with the left/brain vs. right/brain stuff. If you spot one of these in your organization, then you must cultivate that person and give them the opportunity to get involved in all the projects. All it takes is one creative idea to save millions of dollars. I have seen it work in my career and am very grateful to have been given the opportunities to think outside the box. So at your next "brainstorming" meeting, invite a young kid or a retired construction worker, then listen to what they have to say. You can always say 'NO' but what if they come up with a 'YES'? The result of doing some Value Engineering is that you could become the successful low bidder who is awarded the contract and even make some extra profit.



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