Over the past half-century, value engineering (VE) has proven to be an effective tool to manage time, costs, and quality with an aim to maximize value. It has also been shown to be a highly effective approach for evaluating current construction projects. However, the application of value engineering in the construction industry is inconsistent and frequently devolves to simply cost cutting. Value engineering is not about redesigning the project, cost-cutting or scope change/reduction - it’s about getting the full functionality of the project. And applying VE to construction projects can lead to numerous benefits for not only the building owner, but also the contractor.
What is value engineering?
Before one considers applying value engineering, it may be helpful to understand more what it is. According to the US General Services Administration, “Value engineering can be defined as an organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability, and safety…Properly applied value engineering considers alternative design solutions to optimize the expected cost/worth ratio of projects at completion…and elicits ideas on ways of maintaining or enhancing results while reducing life cycle costs.” VE is about creating value by striking a balance between improving features and improving costs to deliver what the customer needs. Customers don’t buy things, they buy what the solution does for them.
Why adopt value engineering as a contractor?
There are numerous benefits to adding value engineering to your process as a contractor. With value engineering, you can demonstrate expertise and win more work as you differentiate yourself from the competition by saving your customers money while providing greater functionality. You can also defend against risk from common industry challenges, such as labor and material shortages. Planning for and incorporating labor-efficient materials/labor-saving techniques or using alternative materials, can help keep projects on track when headwinds arise. The ability to deliver not only protects your business from profit fade but also enhances your reputation in the marketplace, leading to better opportunities in the future.
Where to start
There are many opportunities for adopting value engineering principles throughout the life of a construction project, but the most impactful benefits will come by starting as early as possible in the process.
- Take time to review the plan and look for places where you can create value, such as identifying potential areas of costly redesign.
- Go beyond just reviewing the plan and perform a functional analysis of the facility to uncover design deficiencies, such as code violations or outdated specifications. Leverage technology and your expertise to find opportunities for improvement.
- Truly understand the client’s definition of value to make sure the design fully meets their needs. The better you understand the client, the less likely you are to have issues later on, such as hearing the changes you made were “not what I meant. Knowledge saves money!
- Define the key criteria and objectives for the project so excessive – unnecessary – costs and features don’t create scope creep.
- Offer alternative solutions if possible by comparing materials, adjusting labor and saving time without impacting functionality
Enable value engineering using technology
Successfully implementing value engineering involves creativity, informed and objective perspective and clear communication. As a contractor, your experience and expertise gives you the unique ability to identify problems and come up with opportunities to make changes that will provide the client with more value. Clear communication is critical to successfully implementing your ideas. Simply providing the client with a dollar figure isn’t enough. You need to be transparent and provide details to demonstrate how the changes will provide additional value to the client.
Technology is your ally and can help you better communicate your thoughts and recommendations. Using an estimating solution such as Trimble WinEst gives you the ability to evaluate options – and document those options – thereby providing the visibility the client needs to understand the proposed changes. For example, in WinEst you can easily create alternates – take a base estimate, build out the alternate solution, take out costs or add-in costs, use different materials, adjust labor - without re-doing takeoff. With very little time and effort, you can evaluate numerous scenarios and come up with the most effective option for the client. These “mini estimates” can be used to clearly communicate your proposed solution, and help you gain buy-in from the client.
Today, value engineering is more important than ever, and making value engineering an integral part of your process can deliver huge benefits. Accurate cost projections are a persistent need in the industry and value engineering is an important skill. There are even certifications and licenses available if you’d like to show capabilities in the field, with SAVE International’s Highest Level of Certification for Value Methodology being one of the most prestigious.
If you’re interested in learning more about the value that value engineering delivers or how you can leverage technology to facilitate your value engineering efforts, get in touch. Or, you can read more about value engineering in our free whitepaper, “How to Add Value to Your Estimates with Value Engineering.”