The Purpose of Value Engineering
Robert A. Nidzgorski, CPE Lifetime, VMA, CCHM Director of Preconstruction AUSTIN COMMERCIAL
What do you think of: cutting the cost, making the building smaller, removing scope from the project, rebidding the project to more subcontractors? The correct answer is to add value to the project.
What is Value Engineering? When you’re asked that, what do you think of: cutting the cost, making the building smaller, removing scope from the project, rebidding the project to more subcontractors? The correct answer is to add value to the project.
Value analysis was created in the early 1940s by Lawrence D. Miles, while he worked for General Electric, a major defense contractor, during World War II. He proposed that products are purchased for either function, or esthetics and desires.
Suppose I need a hammer to build my backyard deck this weekend, and a new grill to cook dinner. If I buy the grill with the six burners and the WiFi controls in a custom color to match my college football team, it is very desirable; however, I can still cook a great meal without those accessories added to the grill. The hammer performs work; the super grill is very desirable.
A Value Engineering study would confirm that the hammer is what I need to build my deck, and that I can cook dinner on a grill without the WiFi and matching school colors. Lawrence Miles asked the question, “Can a design be improved, or would a different material achieve the same function?” He had a change in thinking — to move from reviewing the existing parts to improving the conceptual design. A new process was born: Think before you build.
In the 1950s, Miles’ process began to be used in other industries, and analysts were hired. Those hired were engineers, and were called value engineers. In 1959, the Society of American Value Engineers was incorporated, and in 1996, changed their name to SAVE International.
Engineering is a process used by a team to improve the value of a project through analysis of its function. Function analysis is the foundation of Value Engineering. Functions are described using two words, measurable noun/active verb. A hammer is used to apply force and a pen is used to write. The Value Engineering team reviews the project’s functions to determine how it can be improved, and made more efficient and cost effective. The tool used by value engineers is the Function Analysis System Technique (FAST Diagram).
Why use Value Engineering? There are several reasons: customer satisfaction, productivity improvement, quality improvements, and it is a tested system which has worked for over 50 years. It is result oriented, operations enhanced, lowers life cycle costs, and brings cost savings to the project. Many of the Value Engineering techniques that are used for a formal study are used by estimators all of the time, but in different ways and by different names.
Reasons for poor value that occur on a construction project include lack of time, information, ideas, habits, politics, and a lack of money (or fee).
Lack of Time:
Each member of the design team has a set date to complete their final design/plans. There is only a limited time to achieve the best design for the best value. The statement made on all projects to the design team from the client generally is, “Get the design done, bid the project, we need the widget store open in ten months.”
Lack of information:
New materials, technology, and products are constantly entering the market. No member of the design team can keep up with these changes, and what is done in one area of the country is usually very different in another area.
Lack of ideas:
The design team cannot think of everything. It could be time, money, or materials. The team can’t always second guess. An idea is selected, and the design follows that idea.
It was done this way before and it worked, why change? If the new or “better” idea fails, costs the owner additional money, or delays the completion of the project, how does the team explain that to the owner? It is easy to cut and paste details from a previous project into the current project.
There are many people to please and each knows what is best for them. Often the least costly solutions may not be acceptable to the residents in the surrounding areas of the project.
Lack of fee:
Not having the proper fee to design a project can affect the end project. To stay within the project budget, sometime short cuts are taken which can affect the project.
A Value Engineering study can help to address all of the above reasons.
Who should be involved at the Value Engineering (VE) study is as important as the study itself. The owner and the end user of the project should be an integral part. If it is a hospital bed tower, the nursing department should be involved in the study. If it is a hotel, housekeeping and the restaurant staff should have representation in the study.
Engineers and architects, who were not on the original design team, should be included in the Value Engineering study. A Certified Professional Estimator, certified by the American Society of Professional Estimators, and a Value Engineer, trained by SAVE International, round out the Value Engineering study team.
All Value Engineering studies start by using the same four phases: Information, Creative, Judgement, and Recommendation.
1. Information phase:
Define the project. Discover the background information of how or why the design team got the project to where it is (what they thought the owner intended them to design).
2. Creative phase:
Ask questions. Do not assume. Think outside of the box. This is an open discussion with all members of the VE study. No idea is a bad idea. The floor is open to all ideas at this time. All ideas are recorded — covering the walls with sticky notes of ideas.
3. Judgment phase:
Review each idea from the creative phase for advantages and disadvantages. Rate each of the ideas from one to ten, ten being the most desirable. At this time, the team does not know if an idea will work, can be developed, or will bring value to the project and save money. Those questions are answered with a cost assigned during the recommendation phase.
4. Recommendation phase:
The recommendations phase brings value engineering ideas into function. The team prepares the best ideas selected from the creative phase, with a cost for each, and life cycle cost if it applies to an idea. The recommendations can challenge the original design. The ideas from the recommendation phase are now presented to the original design team and the owner. The Value Engineering team presents their ideas in the following format: what it is, what it does, what it must do, what else will perform the same function, and what will it cost. The owner and original design team can decide to accept or reject the VE ideas presented.
Value Engineering cannot be done in a vacuum. It is a not a one-estimator solution because the project is over budget, and can’t be done using the “slash-and-burn method” to cut cost. Value Engineering is a team process that works best with a trained team.
In all of the excitement of finding cost-saving ideas, the question to be asked by the Value Engineering team is, “How does the change affect the big picture of the project?” Suppose you want to remove the wall tile in a private restroom and paint the wall … great idea. What about increasing the floor-to-ceiling height to add ballrooms to a hotel for additional income? Then you realize you have to take into account column lengths, building weight, foundation size, skin of the building, plumbing risers, HVAC vertical duct runs, electrical conduit runs, metal studs, drywall, and elevator runs, etc. These are all factors to be considered during a Value Engineering study. Do not wait for the right opportunity to use Value Engineering. Do it now, on your project, because there is no better time to start.