12 June 2019
What is Value Engineering?
Value engineering began at General Electric Co. during World War II, as a shortage of skilled labour, raw materials, and component parts necessitated the need to look for acceptable substitutes. These substitutions often reduced costs, improved the product, or both. What started out as an accidental necessity turned into a systematic process which GE called “value analysis.”
It is a systematic, structured, and organised effort to discuss the main functions of a system, its equipment, process or installation, to reduce costs significantly, without compromising its essential function or quality. It also introduces other value benefits that may not always be cost-based.
The value of a product or service can provide an increase of its function or a reduction of its cost. Therefore, value engineering seeks to analyse this function by questioning the how and why to identify relationships that increase value.
Benefits can include lowering operating and maintenance costs, enhancing quality management and efficiency of resources, lowering staff or raw material costs, simplifying procedures, increasing competitiveness, and improving social and environmental footprint.
Value engineering should be embedded in the project development fabric from the start. If positioned near the construction phase, it will drive behaviours that can translate to a “value-loss” as the relationship between money and time (schedule) is inverse.
It is ideal to involve a contractor or experienced construction professionals. This will allow a focus on budget priorities which can be incorporated into the construction schedule. If it’s not applied until much later, changes made will require additional services from the engineers/consultants, having significant follow-up costs and causing schedule delays.
Value engineering is not just a process about cutting costs. The driving force needs to be able to get more from the spend. Overall project vision has defining purpose here as return on investment for the project is always a defining point. Many things can drive the client to invest and build: social improvements, improved image, diversity, flexibility, environmental improvements, asset longevity, reduced whole of life impact costs or more (the list is endless) These all have value. Understanding these at the start and progressing the project through a Value Engineering exercise to look for ways (at times at zero cost) to exploit them must be a key responsibility of the Engineer. Providing a priority approach to these driving factors will help determine where the design focus should be and where the dollars will make the most impact.
Value engineering DOES NOT stifle creativity. Engineering professionals understand that every project has a set of parameters it must meet, and that clients don’t have endless budgets. Like architects, engineers are also trained to be creative under constraint- working on a project with unlimited funds is a proverbial unicorn. A good team will incorporate value engineering into the creative process, seeing it as a challenge instead of a limitation.
To achieve value for money, it is necessary to maximize optimisation of the design. However, in reducing costs, it is important that key project objectives such as system capacity and operational flexibility are not sacrificed.