What Is Value Engineering in Construction?

What Is Value Engineering in Construction?

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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What Is Value Engineering?

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. 

When to Use Value Engineering

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.

How Value Engineering Works

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.

Types of Value

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:

  • Cost value: How much it takes to make a product is its cost value. Cost can include time and money. For example, suppose a product requires premium quality control to ensure customer safety and experienced labor with specifically-treated raw materials to create it. In that case, it will likely have a higher cost value than a similar product without those requirements. If the consumer values the product at a lower cost than the company and believes the company charges too much, this could lead to a negative cost value. 
  • Use value: Use value is defined by what the product can do, its purpose and how it's used. Typically, this value is the main purpose of value engineering. Consumers require a use value to motivate them to make the purchase. For example, if an umbrella does not cover a consumer from the rain, they have no use for the umbrella. 
  • Exchange value: Whether a product can be exchanged is known as its exchange value. If a product is difficult to obtain or purchase, the exchange value will be low.
  • Esteem value: The esteem value is the value the consumer gets based on the product's brand recognition. For example, wearing an elite clothing brand could mean a high esteem value for the consumer. 

Value Engineering Stages

There are three stages in the value engineering process — the planning, design and methodology stages.

1. Planning

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:

  • Create a project budget.
  • Review all material and utility options.
  • Analyze the functionality of the facility.
  • Develop ideas for sustainable, alternative solutions.
  • Define key objectives, criteria and goals for the project.

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.

2. Design

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.

3. Methodology

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.

  1. Gathering information: Collect all the data you need during this step to understand the project's full scope. During this step, evaluate and define your objectives, scheduling, materials needs, formal design and cost. To compare every possible option, your team can collect information from similar projects. 
  2. Analyzing functions: During this step, you'll analyze a project's primary and secondary functions. The primary function brings the greatest value to the project, while the secondary functions are worth noting but hold less value than the primary function. 
  3. Brainstorming: After you determine your project's functions, you can move on to the brainstorming phase. Your team will brainstorm creative ideas for fulfilling your project's function. These ideas should relate to the information you collected in the last step and focus on increasing value and lowering initial costs. During this step, your team can assess all solutions and evaluate functions. Consider aspects of the project's life span, such as its safety, required tools and materials and environmental factors.
  4. Evaluate ideas from brainstorming: After your team decides on the criteria for evaluation, they will weigh the pros and cons of each idea and determine which alternative solutions may be best. 
  5. Conducting a life-cycle cost analysis: Next, conduct a life-cycle cost analysis. Consider costs at each phase, from initial costs for construction to long-term development costs. For example, you can assess whether an alternative solution will cost more initially but less later on and determine the ideal solution in terms of cost. At this step, discard the ineligible ideas and narrow down your options to alternatives you will bring into the following steps.
  6. Developing the project: During this step, your team chooses the best alternatives and assembles these ideas into a verbal and written proposal to present in the next stage. Each recommendation should outline the advantages and disadvantages of the proposed solution, including design models, cost comparisons and projected timelines. If you made a change from the original design method, you should also present a comparison.
  7. Presenting recommendations: In the next step, your team will present your findings and recommendations to decision-makers and stakeholders. During this presentation, your team can explore possible alternatives and identify the value proposal best suited for your project moving forward. The purpose of this step is to get approval for your project.
  8. Implementing the project: After management approves your team's recommendations, you can begin implementation. If decision-makers request changes, incorporate these into your implementation plan first. While implementing the project, ensure that your team achieves your goal of increasing value. 

How Value Engineering Applies to Construction

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.

we recommend starting value engineering procedures

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:

  • Owner: The owner has objectives and goals for the project, which set the guidelines for analyzing any alternatives. An owner has significant influence over the project's direction after the completion of the value engineering process. 
  • Cost estimator: The cost estimator calculates the costs of different proposals to change parts of the construction techniques or the building's design. 
  • Certified Value Specialist: This engineering professional leads the process of increasing a product's value through improved function or decreased costs.
  • Structural engineers and architects: The design team is composed of structural engineers and architects, and they propose the project's initial design. They also work to incorporate alternatives within the safety parameters and design principles. 
  • Construction manager and general contractor: The construction manager and general contractor work collaboratively to discuss implementing the proposals from the value engineering process.

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.

Examples of Value Engineering

In the construction industry, value engineering involves examining various aspects of a construction project, such as:

  • Costs
  • Life span
  • Materials
  • Functionality
  • Design needs
  • Construction methods

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. 

Building Example of Value Engineering

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.

  1. Gathering information: During this step, your team understands the owner's intentions and goals for the project. An owner may want the building to be energy efficient, for example, so this will influence the design proposal. 
  2. Analyzing functions: The next steps will involve your team identifying aspects of the project that may change due to the information you've gathered in the previous step. For instance, you may decide you need to use thicker glass for the windows to increase the building's energy efficiency.
  3. Brainstorming: During this step, your team will suggest alternative approaches to expensive glass, such as special coatings, window treatments and window placement.
  4. Evaluate ideas from brainstorming: Next, you'll narrow down your list from the brainstorming phase to the most beneficial and realistic ideas. For example, changing the window placement could compromise the aesthetics of the building. In this case, you may determine that the only realistic alternative is standard glass with window coatings.
  5. Conducting a life-cycle cost analysis: Consider the functionality, cost and implementation of your proposed change. In this example, window coatings may have a shorter life span than thicker glass, but installation and materials are more widely available, affordable and easily replaced.
  6. Developing the project: During this step, your team will develop a proposal for these proposed changes.
  7. Presenting recommendations: Next, you'll present your recommended changes to show the owner the pros and cons of each option.
  8. Implementing the project: When the owner chooses their preferred option, you will then move forward with implementation. For example, if the owner decides that window coatings are a suitable alternative, you will move forward with this adjustment to your original plan.

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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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