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To recognize outstanding VE achievements and promote awareness of the importance of this program, the AASHTO Value Engineering Task Force has established national awards to be given to state transportation agencies. These awards are presented every 2 years to agencies that have shown special achievement in either cost-effectiveness or innovation.

The concepts of annualized cost and present worth are employed in LCC. Using the annual­ized cost method, all costs incurred are converted to equivalent annual costs using a base­line and a specified life span. For example, initial costs would be amortized over the life cycle and include principal and interest (similar to home mortgage payments). Replacement costs or rehabilitation costs at various points during the life cycle would also be converted to equivalent annual costs (sinking fund). The following steps can be employed:

1. Annualized initial cost. Tabulate all initial (acquisition) costs. These include the base cost of each of the alternative systems and any other initial cost. Total these ini­tial expenditures to arrive at the total initial cost (IC)...

Costs that must be considered depend to some extent upon the system or project analyzed,

but can generally be categorized as follows:

1. Initial costs

a. Item costs. These are costs to produce or construct the item.

b. Development costs. These are costs associated with conducting the value study, testing, building a prototype, designing, and constructing models.

c. Implementation costs. These are costs expected to occur after approval of the ideas, such as redesign, tooling, inspection, testing, contract administration, train­ing, and documentation.

d. Miscellaneous costs. These costs depend on the item and include costs for owner-furnished equipment, financing, licenses and fees, and other one-time expenditures.

2. Annual recurring costs

a. Operation costs...