Value engineering is used to solve problems and identify and eliminate unwanted costs on a project, whilst also improving functionality and quality. The aim is to increase the value of a project, satisfying the buildings performance requirements at the lowest possible cost. A common misconception in construction is that Value Engineering means sacrificing on the quality of the project to save money, when in reality the same quality or finish can often be achieved using less expensive products.
When considering value engineering proposals, it is important to analyse the availability of materials, the construction methods which can be used, any transportation issues, any site limitations or restrictions, planning and organisation, costs, profits, and so on. Quantity Surveyors / Construction Estimators play a pivotal role in Value Engineering, and in many ways this process is probably the best way they can show their worth to a client. An Architect designs a building with little or no consideration of cost; ordinarily they specify the most expensive products or products with big brand names. They specify these because of familiarity or because these products are often well-marketed.
A Quantity Surveyor / Construction Estimator can suggest value for money alternatives such as a different brand of insulation, or alternative construction methods such changing from steel to concrete frame. These are considerations that an Architect simply doesn’t make, which would not compromise the quality of the project but can reduce the cost of a project for the client.
Value engineering should start at project inception where the benefits can be greatest; this also means design costs are kept to minimum. If this can be carried out in the early phases of design, then it prevents Architects, Structural Engineers etc. having to prepare a second or third detail design to accompany value engineering changes. However, it is often the case that value engineering only comes to the fore in the post-tender stage of the project. This is after the tender returns are received and the project is too expensive for the client, who then realises they need to cut costs. Typically, the lowest tenderer is asked to price a bill of reductions produced by the client’s Quantity Surveyor. A bill of reductions involves the client’s QS identifying items in the bill of quantities to omit, reduce or change specification to lower the project cost, without impacting on the client’s project objectives. Alternatively, the client can ask the lowest tenderer to suggest value engineering proposals for that project.
It is important for the client to agree these value engineering changes pre-contract and get them written into the design information to prevent being hit with heavy contractual penalties by the contractor. This is because the contractor has set their price for the works and set their programme time based on the existing design information adjoined to the agreed contract signed by both parties. If the client changes this design post contract, the contractor can charge an extortionate amount to carry out the new design and claim for delay damages in programme. Therefore, rather than being value engineering, it would end up being more expensive to the client.
To summarise, the main functions of value engineering are to:
- Identify potential elements of a project for change.
- Analysing the functions of those elements.
- Developing alternative solutions for delivering those functions which save the client money without compromising quality.
- Assessing the alternative solutions and selecting the best for the client.
- Providing the client with costs for the alternative solutions in comparison to existing solutions.
- Delivering the client with a professional opinion on the best course of action to take.
Avoiding mistakes in Value Engineering
When the time comes to value engineer a project, there are mistakes that can be made in the process. These mistakes do not come intentionally but are usually the result of bad project management habits and time constraints.
There are five things that can be done to make the most of VE in a project.
- Do not sacrifice quality
As previously outlined, when the project budget calls for cuts to be made and value engineering hits the table, a lesser quality product can often be selected to save money. However, initially specified products are usually not selected with price as the main focus but aesthetics and functionality. With this in mind, there are usually many alternatives that can be provided that match the initial aesthetic of the product and still provide considerable savings.
- Be open to alternatives
Value engineering can provide an opportunity to re-evaluate products and design to see if there are better alternatives available. Like all technology, there are advancements made in construction products so regularly that there may be additional products available that weren’t initially on the table to consider. A possible scenario could be a project where hardwood flooring was originally specified, but now that advancements have been made in luxury wood effect vinyl flooring, it may be a better fit and could potentially provide a lower product and maintenance cost compared to hardwood, while maintaining the same design aesthetic that was originally selected.
- Stay ahead of the problem
A lot of the time, value engineering comes in the 11th hour of a project to keep things on budget. When this happens at the last minute, it can limit product options as these need to be able to fit in with other design elements, as well as potentially having limited available stock, production time, or extended importing timeframes. When value engineering is discussed months in advance of the installation, it is possible to have products imported or even custom made. This can equate to project savings and maintaining a great design aesthetic.
- Expand your product network:
If value engineering is a need for a project, it is essential to expand the reach outside of the initial network of manufacturers and distributors that were considered. If you expand out of the initial manufacturers that were specified, it is usually possible to find an equal or better product at a more competitive price. This can be done by sourcing directly from manufacturers and allowing other new manufactures to compete for the project.
- Make it an opportunity
Value Engineering provides a unique opportunity for the architect, client and contractor to re-evaluate the project and the finishes. It can be a time to shift focus and make sure the client is getting the best results possible.
Dealing with the Challenges Faced in Value Engineering
When Value Engineering is carried out on a project, there will inevitably be challenges to face. However, there are measures which can be put in place to deal with these challenges and make the Value Engineering stage run smoothly.
- Maintain the construction programme
As value engineering is usually carried out late into a project schedule, it is essential that any changes that are made that do not slow down the project. It is important to consider lead times of alternative products to ensure the project is not delayed on-site.
- Getting everyone on board
As a quantity surveyor / construction estimator, you can often be met with a negative reaction by an architect for suggesting changes to their design. The first thing to communicate is the reason for value engineering. If everyone recognises and understands the need to make changes, it will be an easier process. It should also be presented to the design team as an opportunity to re-evaluate the initial selections to see if there are changes that could benefit the project, regardless of the budget.
- Protecting margins
Unfortunately, for many professionals, value engineering is a time to select products or finishes that will add margin to a contractor’s line. Staying as involved as possible in the process of product changes is essential for the decision makers and design team on a project. It is important to make sure the project is getting maximum benefit from the process of value engineering, and that you are creating the best result for the client, and not looking to make additional money by utilising cheaper products.