Real Value Engineering
By
James Beal AVS, LEED AP
The term Value Engineering has been misused in the industry for over 30 years. A group does a “Value Engineering” session which concentrates on cutting costs and many times reducing the value of a project. The assumption is the less a project cost, the better the value. This usually means the word “value” is not really understood by the group.
Value is the cost of an item or project over it’s worth to whomever is going to use the product or project. As long as this ratio is less than one the item or project has value. If someone sees a watch and would pay $100 for it and it costs $75 for the watch, the ratio is $75 divided by $100 or .75 which means it has value to that person.
Value can vary. An example is a person dying of thirst in the desert crawls up to a stand where they are selling water. Obviously, the person will pay whatever they charge at the stand. It means there is a high value to the water. If the same stand is at a resort where you can get free water there is no value for the water.
Value engineering should be done early in a project. As part of the study the basic function of the project needs to be determined. A school’s basic function is to impart knowledge. How this is done can vary. In places like the outback in Australia they have been teaching students using ham radios and now computers. This because having the students go to a classroom would take, in some cases, a day of travel. The other option is to have the students stay in town with a family and attend the local school. They could also stay in a dorm set up for this specific purpose. Some of the Indian reservations do this because of the long distances to the schools from the student’s homes.
The Value engineering process should allow the group which should include all of the A&E team, the value engineering leader, the estimating team and most importantly members of the group that will be using the facility to find the best solution to get the best value. These sessions bring up many items that the A&E team needs to know to make sure the project has the best value. An example is a project for A&M University remodeling a residence hall. Here are some examples of information provided by the owner that helped shape the design:
1. The mechanical engineer assumed he would design a system that would save utility costs with a breakeven cost of 20 years. This would consume most of the budget. The owner expected to demolish and replace the units in 5 to 8 years. This design would not be a good value to the owner.
2. The electrical engineer wanted to have “clean power” to the units to lengthen the life the of the tower computers being used by the students to 10 yrs. Because computers change so quickly their useful life is around 3 to 5 years. This was also an expensive item that was not going to give value to the project.
3. The plumbing engineer suggested getting rid of the laundry facilities which were part of the dorms to save cost. The students could go off campus to do their laundry. The owner asked who he thought the client was. The owner explained it was not the students but the parents that were his clients. Many of the parents wanted the children on the campus not off campus and the laundry helped to accomplish that. This would have saved money but would not have been a good value since the owner’s clients wanted to have facilities to wash clothes at the dorms.
The Value Engineering session was only one day because of the size of the project but gave the design team a lot of information to help come up with a design that would help increase the value of the project for the owner. The project was a success and the owner was pleasantly surprised with the outcome of the VE session. Initially the owner was skeptical of the process but after seeing it done correctly was a supporter of the VE process. Once the owners and design team go through a properly done value engineering session, they are usually pleasantly surprised. This system if done early in design saves design time and helps the owner to provide guidance to the design team early in the project design. The result is a project that gives the owner a much better value.
The classic value engineering (VE) session is 5 days. The length is not as important as making sure the study uses the value engineering format prescribed by the Society of American Value Engineers (SAVE). Companies who have their staff attend and participate in a value engineering session have found their employees will use the method doing their jobs. It has increased productivity for the firms. So, what is the process. Here is how a VE session should be arranged:
1. An estimate of the project done in a systems format is required. This typically would be a parametric or schematic estimate. Although VE can be done at design development and construction the value that is gained is small since it typically limits what can be changed. There are cases where this was successful. Unfortunately, it typically requires major redesign and extends the design time significantly.
2. The team for the VE session needs to be picked. It is best to have senior designers and construction professionals that are not part of the design team as part of this team. They will have an unbiased eye to review the proposed design. They are another set of eyes for the project. They will receive ahead of the VE session all of the documents available for them to review.
3. The first step in a VE session is to provide information on the project. The design team will give a presentation on the current proposed design. Questions from the VE team and owner are to be done at this time.
4. Step two is to come up with the primary function of the project. This requires using a verb and a noun to provide the functions. For instance, a chair supports weight. This is a chair’s primary function. The chair can have secondary functions like support back. This is a critical step since the if the project does not fulfill the primary function the project will not provide value. An example is a widget that is designed to be as inexpensive as possible but cannot be sold.
5. The creative phase allows for all possible alternates to portions of the design to be explored. In this phase no idea is rejected. All ideas are recorded no matter how outlandish they may be. For instance, the air conditioning could be done using a block of ice and a fan. This is not a practical solution but might lead to a practical solution during the session.
6. The evaluation of creative phase ideas. This involves reviewing all of the creative phase ideas and rating them by how they would affect the value of the project. These are checked for cost and feasibility. If there are several ideas that deal with the same specific system they will be compared using a decision matrix like the one in Exhibit 1.
Criteria Scoring Matrix
Exhibit 1
In the Development phase the value improvement options are reduced to those that provide the best value for the project. These are passed on to the design team. These items are composed into a report for the owner and stakeholders to review.
The presentation of the report to the owner and stakeholders is the last part of the VE study. The team presents the report and takes questions from the owner and stakeholders. Any changes or additions to the report are done and the final report submitted to the owner, stakeholders and design team.
The last item to be done is to review the final design to see how much of the items in the report were used in the final design and if they were not used what the reason for not using the ideas were. This allows for a more effective workshop in the future.