Value engineering is about finding ways to achieve the required project outcome more efficiently, while protecting the things that matter to the client.
Done properly, it can reduce cost, improve programme and sometimes improve the project itself.
What is value engineering?
Value engineering is a structured process for improving the value of a project by examining the relationship between function, cost, performance and risk.
The objective is not simply to make something cheaper.
A cheaper product that fails earlier, takes longer to install or creates a consenting problem may actually increase the overall project cost.
Good value engineering asks:
“What does the client actually need, and what is the most effective way to achieve it?”
When should value engineering happen?
Ideally, value engineering begins during design development. The earlier significant decisions are reviewed, the more options the project team has.
Once construction has started, changing the design can create additional consequences:
- Redesign fees
- Programme delays
- Consent amendments
- Procurement delays
- Contractor claims
- Rework
- Material availability issues
- Funding implications
This is why value engineering should not be treated as a desperate exercise undertaken after the tender price arrives. It should be part of good project management.
What should be considered?
A successful value engineering exercise considers more than the price of an individual item. For example, changing a material may affect:
- Design
- Structural requirements
- Fire compliance
- Planning or building consent
- Installation time
- Availability
- Maintenance
- Durability
- Energy performance
- Contractor methodology
- Programme
- Whole-of-life cost
A $50,000 saving on one line item can disappear very quickly if the change creates $100,000 of consequences elsewhere.
Value engineering is not value cutting
There is an important distinction.
Cost cutting asks:
“What can we remove?”
Value engineering asks:
“How can we achieve the required outcome more efficiently?”
That might mean:
- Changing a material
- Simplifying a structural solution
- Revising the building layout
- Changing construction methodology
- Standardising components
- Reducing unnecessary specification
- Improving sequencing
- Reconsidering procurement
- Removing unnecessary complexity
The right answer depends on the project.
An example from our work
On the Gaia Forest Preschool project, value engineering became an important part of managing the project through significant cost and design pressures.
The project involved an unusual education facility with a strong architectural and environmental brief. The challenge was not simply to reduce the construction price. The challenge was to find solutions that maintained the project's purpose and quality while responding to cost pressures.
Through structured review and coordination of the design and construction implications, significant savings were identified. The project ultimately achieved approximately $380,000 in value engineering savings.
Value engineering works best when the people doing it understand both the design and the construction process.
Who should lead value engineering?
Value engineering works particularly well when the person leading the process can look across the entire project. They need to understand:
- Design
- Construction
- Cost
- Programme
- Procurement
- Contracts
- Consenting
- Buildability
A change that looks sensible from one discipline's perspective may create problems somewhere else. That is why client-side project management can add significant value during design development.
When should a client consider value engineering?
Consider a formal value engineering exercise when:
- Preliminary designs are done and budget needs to be firmed up
- The project is over budget
- Tender prices exceed the approved budget
- Market conditions have changed
- Material prices have increased
- The design has become unnecessarily complex
- The programme is under pressure
- The project brief has changed
- Funding is constrained
The best time, however, is before you have a problem.
The objective
Good value engineering does not produce the cheapest building. It produces the best achievable project outcome for the client's budget and objectives.
That requires experience, coordination and a willingness to challenge the assumptions built into a design.
When you engage us, we bring client-side project management, construction and commercial experience to value engineering and project decision-making.