Value Engineering: what does it mean in the scope of construction?
When an architecture design or construction project goes over-budget, the most common way to mitigate concerns is through value engineering. However, value engineering is not based on cost-cutting alone. The true value of this process considers every possible option and never loses sight of the desired end result.
What is Value Engineering?
The term value engineering was coined by General Electric in the 1940s with the intent to provide a superior product using minimal labor, materials, and cost.
Over the years, it has been defined variously by different industries, but the key take away remained the same: value engineering is a set of procedures designed to identify the best possible cost-to-value ratio in an effort to reduce costs, maximize investment, and ensure the optimum value of the end result.
Originally, it was never intended to be applied to architectural design or construction, but when interpreted appropriately, it can create value and preserve the integrity of the original intent. The interpretation is key.
The very definition of value engineering involves bringing an over-budget construction project back into budget range. However, when the process is focused solely on cost reduction, it often comes at the expense of quality, performance, and often, aesthetics. If this is the case, then the “value” is often unrealized.
Value engineering, as it concerns architectural design and construction, should take cost into consideration, but it should never compromise performance, maintenance, long-term costs or design. For instance, if an architect designed a building feature that was initially approved but had to be revisited due to budgetary constraints, an effective value engineering process would consider alternative materials or methods rather than scrapping the feature altogether.
Value Engineering: A Five-Step Process
Where value engineering is concerned, it takes a team to make it happen. Considering a range of alternative approaches is important as there may be several ways to go about it. A value engineering team is generally made up of owners, designers, cost estimators, building management personnel, manufacturer’s representatives, material suppliers, contractors, sub-contractors, certified value specialists, and sometimes, third-party consultants.
Once the team is assembled, the process moves forward in five steps:
This is the information-gathering phase where all stakeholders are apprised of the design, the overall project requirements, the budget, the schedule, and associated constraints.
2. Functional analysis
The analysis phase delves deep into the functional requirements of the project so that the team understands what the design is meant to accomplish.
At this stage, ideas and options are brought to the table with regard to possible solutions. Every possible solution is presented with the goal of achieving the best possible result for the client.
4. Ideas analysis
This involves taking the creative ideas put forth in the brainstorming phase and developing them into working solutions. Costs and other impacts are evaluated for feasibility and value.
A formal report is issued outlining the value-engineered proposals. This will include an overview of the expected cost savings as well as the long-term value that will be realized.
Keys to Value Engineering Success
The ultimate goal of value engineering is to deliver on the intended function and design of a building while staying within budget and realizing long-term value – value being the keyword here.
Value, in terms of architecture design and construction, means that the features and integrity of the design and the materials used to bring it to life provide cost savings as well as quality results. Longevity, durability, functionality, aesthetics, quality materials, and sustainability all factor into value. If these items can be made tangible within the scope of the project’s intent, the value engineering process has been a success.
Case Study: Richline Motorsports
During Phase I of the Richline Motorsports project - a commercial project in the Kansas City area we did earlier this year, the client required that value-engineering exercises be conducted during the design development, because they had a limited budget to accomplish the design, size and quality of development desired. Members of the design team, the owner, the contractor, sub-contractors, and material suppliers were consulted for value engineering sessions.
VE Process and Solutions
Maintaining the look of the initial design and quality of finishes was the main concern. Improved functions, good durability, and ease of maintenance were also studied. The group’s ideas were gathered and presented for review. The ideas ranged from working with the selected contractor to allow the owner to utilize sub-contractors the owner had relationships with, substituting the exterior cladding material from aluminum panel system to Nichia panels, changing out the insulation materials of the showroom from K-13 to colored spray foam insulation system, and deferring some of the work such as landscaping and some interior finishes to after the General Contractor had completed his work.
After identifying their respective advantages and disadvantages and their impact on first cost and life-circle costs, the final options were presented to the owner for selection of value-engineering items to be incorporated into the project.
The owner had reduced initial projected cost of the project by approximately $250,000 on a 2,000,000 project. The benefits of this value engineering process to the owner were more than cost reduction, it also helped with a better insulated building, and a more durable exterior cladding system.
Conclusion: Incorporate Value Engineering from the Start
To achieve the best possible results from your building project, it is recommended to incorporate value engineering from the start. Many design and construction projects stall mid-stream as a result of realizations that could have been factored in from the beginning.
Having realistic expectations of cost is very important. There is historical data available for every type of construction project that will provide a basis of cost. Expecting a project of similar size, quality and design aesthetic to be considerably less is not realistic.
As an architectural firm, we consider long-term costs and allow for several options. This allows clients to make changes expediently if necessary, minimizing delays and maximizing the true value of the project through to completion.
If you have any questions about value engineering and how it would apply to your construction project or development, reach out today.
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