Six Steps to Creating a Value Engineering Model

By Giles Munyard

As the volatility in market movements within the construction industry continue, many building design and construction professionals are struggling to find the balance between cost-consciousness and innovative design. Prices continue to surge, raw materials are scarce, and staffing shortages are everywhere. But amidst this frenzy and uncertainty, there is a trusted methodology that savvy professionals are now employing to bring discipline and confidence to their projects: Value Engineering.

Value engineering is a function-oriented, systematic team approach to building design and construction that enables teams to identify unwanted costs, improve the quality of projects and make data-driven decisions. The result is successful construction projects that deliver the best possible value for the lowest cost. But the benefits of value engineering can go well beyond cutting costs.

The Best Time to Value Engineer

While there is never a bad time to add value, there is an optimal time to Value Engineer. No one likes to hear about how they could have saved money by using aluminum wiring right after the last copper wire is in place. If VE is brought into the conversation too late in the construction process, it may not truly add value. The closer the process is to the schematic stage, the better. Planning and design are the two stages of the building lifecycle where value analysis truly lives up to its name. If value engineering creates rework or causes project delays, it may no longer be beneficial to the project. This graph shows when value engineering moves from presenting a financial gain to a financial loss. 

It’s important to note that value engineering isn’t simply a knee-jerk reaction to avoid going over budget. Value engineering is a methodology that ensures the owner is not overpaying for quality when an equally effective, less expensive option exists. Product quality is the ultimate prize.

Step by Step Methodology

Value engineering is more than a concept; it’s a methodology, an organized procedure for providing the necessary functions in a project at the lowest cost. Whether a team wants to substitute one material or system for another, consider alternative building methods or limit environmental impact, the process of value engineering remains generally consistent. Here is a step-by-step roadmap for creating a value engineering methodology:

Step 1: Information Gathering

The first is all about gathering information and getting a clear understanding of the project. The material makeup and scope of a project must be identified and documented. Materials, schedule, costs, drawings and specifications are studied until the team is comfortable with the project concept, who will be using the end product and what the expectations entail. Once the foundational elements of the project are identified, functions can be analyzed.

Step 2: Function Analysis

Functionality cannot be sacrificed for value engineering to be effective. Therefore, a function analysis must be conducted on the elements identified in the previous step, along with an evaluation of their necessity to the goals of the project. There are two forms of functions; primary functions, vital to the existence of the final product, and secondary functions, notable but not critical to the core of the project. Once these are identified, the team can get creative and investigate solutions.

Step 3: Creative Speculation

In this stage, the value engineering team brainstorms to generate potential design solutions to reach the project functions. It’s smart to focus on the big-ticket items because they have the most opportunity to deliver value. At this stage of the game, no viable options are eliminated, even those with serious flaws. Next, designers and their teammates will eliminate the weak plays to present only their strongest options on game day.  

Step 4: Evaluation

By turning to subject matter experts and questioning the available options, the team can begin weighing alternatives against one another. The primary focus of this discussion should be how well each alternative can perform the function of the original solution. This may involve where the facility will be built, how it will be used and the weather in the area. 

The details are critical in this step, as are the owner’s expectations. Delivering value is tremendous but if the facility does not do what the owner intends and the vision is unexecuted, the team has missed the mark. The team must discuss the holistic effects of each alternative, as a change in one system or area of the facility can affect multiple parts of the project or even the function of other systems. 

Step 5: Cost Analysis

The team will need to allocate costs to the alternative solutions. These cost estimates should include not only the current cost but also the total cost of ownership over the building’s lifecycle. 

The design team’s best tool in this step of the process is accurate construction cost data. Historical pricing is great for a rough projection of costs for known materials, equipment and tasks, but it may prove inadequate in the value engineering process. 

Project estimates need to be detailed down to the unit costs. To help get to this level and assess feasible alternative solutions, many architects, owners, engineers and other construction professionals rely on accurate cost data from a reliable industry expert. RSMeans data from Gordian is a highly trusted, detailed, localized and accurate construction cost database. Such a robust resource is ideal for value engineering because it contains tens of thousands of viable alternatives. 

Input from the maintenance team and lifecycle cost of products will help to answer how much the alternative solution will cost long term, or the total cost of ownership — quantifying the cost of the material, system or piece of equipment across the product’s entire lifecycle. This step will likely conclude with three options to choose from: the original design, one that costs more now and less later, and another that costs less now and more later. 

Step 6: Development

Only the alternatives with the highest likelihood of success should make it to this final step. The project timeline and available resources will determine the actions that are taken during this step. At the very least, the team needs to assemble all recommendations, their advantages and disadvantages, and implementation plans to present to project owners.  

Following these steps will help to ensure that the value analysis leads to beneficial results throughout the building lifecycle. There are a handful of value engineering tips and common pitfalls to remember:

• Never compromise health and safety. Any change that would result in a violation of building code or otherwise jeopardize the well-being of the people who use the facility should be rejected immediately.
• Design professionals can often find value in large systems — think HVAC, lighting and electrical systems. This is not to suggest one should go looking for discount systems, quite the opposite. Often, spending more on a higher-performing system early will save in maintenance costs over the building’s lifespan. It would be wise to conduct a lifecycle cost analysis and get input from the team responsible for maintaining the building to gather the long-term cost implications of major systems. 
• The design should meet client’s cost expectations — that’s the design team’s professional responsibility. Value engineering often comes up after bidding because bids are too high based on the owner’s budget. This can be avoided if cost estimates are provided to the owner after each stage of the design process using reliable, trustworthy cost information.
• Every choice has consequences. A change in one area of a facility can affect any or all other areas of the facility.
• Don’t lose sight of function while focusing on costs. Function is the basis of value engineering. The goal is to maximize function at the lowest possible cost, not to trim the bottom line.

Giles Munyard is Senior Engineer at Gordian.