Value engineering began at General Electric Co. during World War II, when there were shortages in component parts, raw materials and labor. These shortages led engineers to explore alternatives, which resulted in the discovery of alternative resources and materials that lowered costs without sacrificing quality or functionality.
Soon, the systematic process of value engineering was implemented in the construction industry, resulting in better final products and performance. If you're a construction business owner or contractor, you may want to implement value engineering in your construction projects. This article covers what value engineering is, its different stages, how it applies to construction and examples of value engineering.
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Value engineering, also known as value analysis, is the systematic process of increasing a product's value by improving functionality while keeping costs low. A team of engineers and designers come together during this process to analyze each step of a project and ensure the maximum possible value.
In the construction industry, value engineering is a valuable process for every stakeholder, particularly when used at the start of the project. You can use value engineering before, during or even after the design process, but using this method before the design process can save money and time and lead to a greater return on investment.
Value is a ratio of function compared to cost. Businesses can add value to products by improving the product's function or reducing costs. Value engineering can help cut costs while preserving the product's function.
Generally, value engineering is used to ensure a product lasts for a certain period before becoming obsolete. If a business expects a product to be practically or stylistically obsolete in a certain amount of time, value engineering can be used to save on costs without sacrificing the intended purpose. By avoiding unnecessary costs during the production process, companies can pass these savings on to the customer.
Value engineering involves defining value, which can vary from one customer to the next. When it comes to value engineering, there are four recognized types of value:
There are three stages in the value engineering process — the planning, design and methodology stages.
The first stage of the value engineering process is the planning stage. Planning is essential for strengthening communication and preventing the need for fewer redesigns and changes in later stages of the project, which could negatively impact the project's schedule and costs. The planning stage may include the following steps:
During the planning stage, your value engineering team can assess every possible option for your project to ensure the greatest value. Your team may also better understand the desired function of your project.
The next stage of value engineering is the design stage. During this part of the process, everyone on your team reviews the projected design plan. Typically, your team will hold a workshop at this stage to review each project element, such as the estimated costs, design plans, best-value options and projected timeline. During the design stage, your team reviews the initial findings and provides the client with every possible alternative.
The last stage of the value engineering process is the methodology stage. During this phase, your team analyzes and eliminates alternatives to determine which options will be the best. Several steps are involved in this stage, from gathering information and analyzing functions to developing and implementing the project.
The construction stage usually starts when the other value engineering stages are completed. However, it's still possible to implement value engineering via Value Engineering Change (VEC) proposals at this stage. Construction contractors submit this proposal, as they can evaluate the design plan with their expertise and experience. The proposal should include suggestions that add value, improve project performance, shorten project time and reduce costs.
Implementing value engineering this late may be risky, however. We recommend starting value engineering procedures before signing construction contracts when possible, along with any additional solutions that can improve the project's value. This can be advantageous because it gives the project a fresh opinion from the contractor's perspective.
In construction, the value engineering process involves collaboration between stakeholders. This collaboration usually occurs during the design stage. Value engineering can be used for both design-build and design-bid-build projects, though a design-build project has the advantage of involving a contractor before bidding. For construction projects, there may be various stakeholders involved in value engineering, including:
By working together, these stakeholders can determine alternatives to the original construction process or design, evaluate each alternative's feasibility and implement the new approach if the owner approves it.
In the construction industry, value engineering involves examining various aspects of a construction project, such as:
Together, these aspects of the project contribute to its value. To truly understand how value engineering works, it may be helpful to look at an example.
Here is an example of how the value engineering process might break down for a particular aspect of a building, following the steps of the methodology stage above.
Value engineering does not necessarily diminish the price of your work or reduce the contract cost, so even if value engineering is designed to benefit owners, it can also be advantageous for contractors. This is because creating value usually requires the owner to invest more upfront to get greater rewards later. Beyond increasing value, value engineering also builds trust between you and your clients, leading to repeat business, fewer disputes and an enhanced reputation.
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