How to Apply Value Engineering to Benefit the Owner and the Project

This month, I thought we might discuss the topic of value engineering from an engineer’s perspective. It’s a term that gets much use and abuse in the vertical build market.

The term is made up of two distinct words: value and engineering. As with many things in the English language, these terms can have different meanings to different people, all depending on the perspective through which they view those terms, so let’s start by applying some definitions. As a noun, the term value would be regarded as something that holds importance, worth, or usefulness. It can also be a person’s principles or standards of behavior, one’s judgment of what is important. Engineering, on the other hand, is much more concrete; it is the branch of science and technology concerned with the design and building of structures or systems that make up such structures. Engineering is the artful application of the laws of science, physics, and mathematics to turn a client’s vision into a physical reality, while protecting the public’s health, safety, and welfare.

The History of Value Engineering

Value engineering (VE) originated through the efforts of Larry Miles, an engineer working for General Electric (GE) in the early 1950s and generally considered the father of VE. Miles was working toward a process of continuous improvement, with GE forming a core group to address this area of interest. VE is a valuable tool when applied as it was originally conceived and continues to have a positive impact when appropriately applied as a systematic approach to enhance or improve a product or manufacturing process, software, and/or general business management.

In its original incarnation, VE was envisioned to be an analytical approach to provide cost controls that could be instituted at any point in a project’s or product’s life-cycle. The only standard or constant was to emphasize the reduction or elimination of costs; however, any cost reduction would not impact engineering or design standards, quality, and reliability when applied to the project or product under analysis.

The term VE has also been known as value analysis, value control, value assurance, and value management. Regardless of the name, they all have the same basic objective: reduce costs, increase productivity, and improve quality.

SAVE International (a global organization supporting VE) calls value engineering “a powerful problem-solving tool that can reduce costs while maintaining or improving performance and quality requirements.” The key to SAVE’s definition is that the objective is not to diminish, devalue, or degrade the quality or effectiveness of the engineering or design of the project or product. When the team of owners, designers (engineers and architects), contractors, users, and construction managers (CMs) comes together to analyze every step of a project to ensure maximum value, this can be an extremely impactful process for all of the stakeholders, especially if done in the beginning of the project.

And This Is Where the Problems Begin!

Unfortunately, there often is no discussion regarding VE until the design is complete, approved, and ready for construction. Regardless of who brings up the discussion of VE items—the CM, prime contractor, or a subcontractor—it almost always relates to alternate materials or a change in design that will allegedly save the project money. This is certainly a reasonable goal, but it may lack any real analysis or consideration of the overall project. The decision often doesn’t consider whether the VE will degrade or cheapen the project’s quality, effectiveness, or reliability. The proposal probably offers some monetary savings to the owner, but it also might degrade the design intent or lower the quality and potentially impact the long-term reliability that the owner desired and expected. This is not necessarily the intent of those making the offer, but the VE often doesn’t consider what impact the change may have on other parts of the design.

It has been my displeasure over the years to see many VE items offered by CMs and various contractors. Some are just differing approaches to meet a common goal, a viable conclusion to the project. However, many are nothing but a means to allow the contractor to reduce their costs, while offering the owner a portion of those savings. In many cases the VE change resulted in increased cost to some other part of the project, and the owner then had to cover those costs. I have seen cases where the owner received what they thought was a reasonable sum of savings, only to have to spend considerably more to revise another part of the project because the change was not compatible with that area of the work.

This is why VE has a bad reputation in the consulting community. It is brought up at the last minute without any supporting documentation to validate its true impact on the project and potential long-term costs. It brings questionable “value” to the owner, more to the advantage of the CM or contractor, and absolutely no “engineering.” In many cases, if not all, it is simply a means to increase profits, while sharing a small portion of the savings with the owner, but without much thought, if any, regarding the overall design and project.

How to Properly Implement the VE Process

This is not to say that the intent of VE does not have achievable goals when properly implemented as part of the design from conception. At first glance, it appears that implementing VE would be fairly simple, but to accomplish a desirable result, the team must have some perspective about where, how, and why VE will be applied. However, time is money, and while VE can improve a project and potentially save costs, there is a cost to doing the VE effort. The owner and design team need to understand that these costs are real and can contribute to the overall project costs. Therefore, everyone must commit to working through VE considerations, but also consider if the effort best serves to get the intended result or is just adding to the overall project costs.

As this is an article related to plumbing engineering, we will discuss VE from a plumbing design perspective. Every plumbing engineer knows that the hardest part of a project is the initial phase: collecting accurate and factual information. It is imperative to utilize quality data and information in the process. The design engineer and the VE team must be in the same mindset, collecting the same information and data. This means each is detailing every design element and product. The VE must be accomplished in a methodical and documented process, using a practiced procedure that is documented through the use of worksheets. These worksheets typically include basic information the describes the project and related data: project name, project element being evaluated, project detail, detail name, detail description, detail location, location description, materials list, product list, and any other pertinent information, to name a few. This leads us into Phase One—Information.

Phase One—Information

The engineer must begin the collection of information and document the process to make a qualitative determination of its value. Some of the questions that can assist in making such a determination are:

  • Does the information support the definition, specifications, and/or requirements of the project?
  • Is there a reason to believe that any of the information is biased?
  • Is there a reason to believe some type of collusion may be taking place between stakeholders?
  • Does any of the collected information suggest potential conflicts?
  • Are any potential conflicts addressed in the estimated costs?
  • Is all of the information current and up to date and seem factual and valid for the project or detail being analyzed?
  • Does the information form an integrated whole, and does each item support the other items?
  • Given the engineer’s expectations, does the information conform to the intent?
  • Is any of the information suspect or seem inaccurate or non-representative of the detail or project?
  • Is additional information needed?
  • Does the relationship or association between the various information sets require further exploration?
  • If the information causes concern or creates a restraint to the analysis, can it be verified by other sources?

In this phase, the team also must collect costs related to the project, detail, or material being analyzed. The cost determination can, and most likely will, become complex.

Phase Two—Analysis and Function Analysis

Once all of this preliminary effort has been accomplished, Phase Two—Analysis and Function Analysis begins. This phase answers “What does it do?” and “What is it supposed to do?” This is where the VE team needs to work with the design engineer to understand how the design element under consideration fits into the overall project.

This phase is generally considered the heart of value engineering, as the design engineer had a methodology to establish the project or design elements in a simple, workable expression as shown in the documents. The VE engineer needs to understand this and reestablish/justify this. This can become difficult as it involves translating and giving substance to the words used for the project’s or element’s requirements and specifications. The design engineer has taken these words, brought them to life, and provided a visual interpretation. The VE engineer now must examine those same words and provide a structured analysis and evaluation of them, resulting in a functional analysis and/or definition.

Many published sources provide guidance and rules for functional analysis; I will leave researching those up to the interested reader. (If you are an ASPE member, check out Chapter 11 of Plumbing Engineering Design Handbook, Volume 1, for a very detailed explanation of functional analysis.)

Phase Three—Creativity

Phase Three—Creativity is where one gets to address the following question: “What will do the job?” This effort is best thought of by the expression, “Start with a clean sheet of paper.” This does not refer to the original design; it just allows the VE engineer to come at the design from another perspective. It still requires a team approach to the engineering disciplines. The team needs to separate itself from all of the previous work or phases. The team needs to leave the forms, information, drawings, and models behind, making a fresh environment in which to reassemble the project or detail.

Some suggest that in this creativity environment, two-word, verb-noun functions be used to describe a single product, system, or material under analysis. It can also be considered coming at the project through another set of eyes. It is about using observation and experience as a creative incentive to advance the design process. The team must not be inflexible or allow roadblocks to get in the way of creative thinking. The team should use divergent thinking (speculation and brainstorming) to achieve creative ideas to the design process. Through this effort, solutions and improvements can be formulated.

Phase Four—Evaluation

Phase Four—Evaluation is a continuation of the creative process. It accomplishes this through a combination of appraisal, judgment, and the selection of quantitative/qualitative criteria as well as ideas developed for each function. During this phase, the team turns from divergent to convergent thinking, with divergent thinking being the problem-identification and fact-finding effort and convergent thinking being a mix of appraisal, evaluation, judgement, selection, development, and implementation.

This effort can result in workable and meritorious alternatives to the original design. This can eliminate or reduce unnecessary costs and create preferred recommendations or a course of action. However, the danger of this phase is the ease with which a cost-reduction spiral can be imparted that does not result in VE but simply becomes a cost reduction for budgetary reasons. It becomes easier to degrade the product, system, or material by reducing quality, reliability, or maintainability.

While the evaluation phase is usually distinct from development and investigation, in many cases they will overlap. The VE team must decide on the best approach given the scope of the VE effort.

Phase Five—Development and Investigation

In Phase Five—Development and Investigation, the VE team brings in other team members to contribute additional creativity and energy to the process. The combined team reviews all of the functional developed data and documentation. From this new evaluation, worksheets are recreated with only the ideas of the function developments listed. Once the team establishes the rules to follow, which may be similar to those in the other phases, the effort may begin.

The additional team members may include manufacturers, contractors, and/or the owner’s representatives. This value-added group reestablishes the advantages and/or disadvantages, with the original VE team offering input based on the initial data and documentation. This phase may involve an intense critique of the function or idea under consideration.

In this phase the emphasis is on alternatives and additional brainstorming with different expertise and viewpoints. This brings the team to considering final alternatives, developing gut feel indexes and a final cost analysis. The team arrives at a “Are we there yet?” moment. The whole process is intended to provide visibility to all ideas and to flush out any constraints, while offering viable alternative solutions.

From this phase, the VE team needs to offer final recommendations to the owner and design team. One major disadvantage of this approach is the belief that a standardized process to encompass all situations and projects can be developed. Only through structure and rigid rules, supported by data and documentation, can a unique picture be formed to illustrate the final recommendations. It is through the depth of the engineering and analysis that any proposal can be shown as a proposal and not a suggestion or best guess. All of this must be based on sound engineering judgment, supported by the data and documentation.

Phase Six—Recommendation and Presentation

Phase Six—Recommendation and Presentation is the culmination of all of the previous phases and a great deal of effort. It is up to the owner and their team to decide if the VE is acceptable to achieve their vision of the project within the set budget limits and to the quality expected.

The Goal of VE

VE is a process that can make the original design team feel attacked, as if their efforts are being repudiated or rejected. People react in different ways, but in engineering one can count on a few things: it is human nature to resist change no matter how large or small or right, and all recommendations/alternatives must be based on the same technical basis as the original design.

As you can see, VE is not a last-minute decision performed with blinders on that may or may not actually reduce the project’s costs without impacting the quality or overall value to the owner. VE, if done correctly, is a process that involves research, data collection, and in-depth analysis in a team effort. It also involves much time and effort, which has an associated cost.

If VE is to be considered, it must balance the effort verses the associated costs. Additionally, it must begin at the inception of the process, not just before or during the construction phase. While there are many ways to approach a project, second-guessing with half the facts is not the way to proceed. Planning to work with a VE team is always the way to bring multiple views and perspectives together to achieve a common goal: a quality project that will serve the owner’s vision for many years within the limits of the budget. The VE costs must be built into the overall project costs, not assumed to be something offered by someone in the construction team who expects the engineering team to simply accept the offer. If a contractor or CM wishes to make the offer, they need to step up and do the due diligence in data collection and documentation to support such an offer.

About the Author

David D. Dexter, FNSPE, FASPE, CPD, CPI, LEED BD+C, PE, is a Registered Professional Engineer, Certified Plumbing Inspector, and Certified Plans Examiner with more than 40 years of experience in the installation and design of plumbing systems. He specializes in plumbing, fire protection, and HVAC design as well as forensics related to mechanical system failures. Dave serves as Chair of ASPE’s Main Design Standards Committee, Chair of the Bylaws Committee, Co-Chair of the College of Fellows Selection Committee, and Co-Chair of the Professional Engineer Working Group. He also was the 2008–2009 President of the Engineering Foundation of Ohio, 2010–2011 President of the Ohio Society of Professional Engineers, and 2012–2014 Central Region Director for the National Society of Professional Engineers.

The opinions expressed in this article are those of the author and not the American Society of Plumbing Engineers.

Want news delivered right to your inbox?

Sign up for our free newsletter, delivered every other Thursday.

Scroll to Top