Value Engineering – What is it? When to use it?

BY: KEVI POTTER
ASSOCIATE DIRECTOR
BRITISH VIRGIN ISLANDS

Value Engineering or Value Management are terms often used interchangeably within the industry. While their names are quite popular, all too often, clients, designers and other stakeholders are misinformed as to the true nature of these processes. To paraphrase from the RICS Value Management and Value Engineering guidance note dated January 2017, Value Engineering became popular in the US in the direct aftermath of the Second World War when materials shortages were rampant. In response, the manufacturing industry had to seek alternative materials while trying to maintain the same function and underlying performance. Many years later, in the UK, Value Management was introduced, attempting to add value directly into the project brief, therefore maximising opportunity from the outset. Today, the main difference between both processes is when they are implemented.  

Value Management, as above, is considered from the onset, making sure that the client’s true needs are explicit in the design brief, thus possibly reducing design and construction times. While Value Engineering, on the other hand, is implemented after the designs have been completed, and usually, once they are priced by the client’s or contractor’s Cost Managers/ Quantity Surveyors, and it is realised that the designs are over budget.

For this reason, the term ‘Value Engineering’ is seen by many stakeholders  as an attempt to ‘dumb down’ or ‘strip away’ elements of the designs. At the heart of it, Value Engineering is about increasing the amount of value achieved relative to the cost, without compromising quality, performance or reliability. Ensuring that the client’s needs are being met efficiently through the selection of materials, building processes, and quite often the design itself, is essential. While the focus of Value Engineering is usually to lower capital cost, life cycle costing, replacement costs, and methods of construction are also key factors to consider. 

Value Engineering is typically implemented through a workshop or a series of workshops led by a Cost Manager. Although these workshops can vary in format, most can be broken down into these basic phases: 

• Introduction/ Information
• Brainstorming/ Investigation  
• Evaluation 
• Implementation

Introduction Phase: 

This is the phase during which the tone of the workshop is generally established. The process often begins with introductions, as depending on the size of the project, it is possible that all of the stakeholders may not be familiar with each other. During this phase, the team will typically revisit the Design/Project Brief and establish parameters such as target savings, timelines, and elements of the current design, which are deemed ‘untouchable’. In some cases, such elements don’t exist, and rather priority areas of concern are set. 

Brainstorming/Investigation Phase: 

During this stage, stakeholders are encouraged to come up with any number of solutions to various areas of concern. This can include anything from simply changing the specification to a light fixture, to something more extreme, like eliminating an entire floor from the building or changing the structural or cladding systems. It is important to note that savings can also be achieved by changing the methodology or sequencing of activities, thus stakeholders should not only focus on substituting or eliminating materials and design elements. 

It is during this phase that the workshop facilitator encourages stakeholders to be as creative as possible in their solutions. 

Evaluation Phase 

The Evaluation Phase is generally conducted in a two-step approach. The first of which is setting target savings for each option highlighted in the previous phase. It can be invaluable to have a Main Contractor or Sub-Contractors in on these sessions, as they usually have first-hand knowledge of various building methodologies and how these affect budgets.  

The second step of this phase includes categorizing each option by their likelihood (likely, less likely or least likely) of being implemented, and then by priority within each category. 

Selection/Implementation Phase 

The final phase generally sees options chosen and implemented by having the Design Brief amended, followed by the updating and re-pricing of designs.  

There may be several different versions of the workshop described above; however, they all seek to achieve the same thing. The importance of utilising an experienced facilitator cannot be overstated, as it is quite easy for inexperience, poor communication, as well as misinformation or a lack of information to de-rail the efforts. 

Every client wishes to produce a project on time and on budget, while maximising the amount they can achieve for their capital investment, thus accomplishing the best value. While there is no steadfast guidance as to whether Value Management / Value Engineering should or shouldn’t be implemented, its importance in the industry is invaluable. 

If you have any questions or if you would like to speak with us about Value Engineering for your next project, please contact Kevi Potter at kpotter@bcqs.com.