Finding True Project Value: Value Engineering in Today’s Construction Industry
Whether you’re an avid HGTV enthusiast or a casual viewer, you’ve undoubtedly seen one of the myriad home renovation shows populating our television channels and streaming services. Regardless of the program or its source, the episode’s story arc likely mirrored the following pattern. After revealing a stunning new design and completing the mandatory demolition sequence, the hosts inevitably pause the project after discovering a major problem – a structural failure caused by termite damage, outdated knob and tube electrical wiring within the walls, or maybe even a nightmarish sewer line rupture. This unexpected challenge is always costly and requires the homeowners to reevaluate something in the project’s scope. Just like that, their fabulous open concept kitchen is reduced to a nice galley, their dream master suite is downsized to a three-piece bath, or perhaps their backyard oasis is scaled back from a full-service outdoor kitchen to a modest fire pit.
This is always the lowest point in the episode, and it’s easy to understand why you might correlate this plot element with the concept of value engineering in the construction industry. However, value engineering – when properly applied – is both more complex and less traumatic than the cost-cutting methods seen on TV.
“Value engineering tends to be viewed negatively across the industry,” said Tyler Buchanan, Ross Group’s corporate scheduler and an experienced member of our operations team. “But it’s a team process that’s not just about cutting costs. It really is about adding value for the client. We look at the project as a whole and explore a variety of options with our subcontractors and the design team to see how we can decrease the overall construction cost without sacrificing any of the client’s must-have items.”
According to the U.S. General Services Administration, value engineering is defined as “an organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability, and safety.” In other words, it's a team effort to analyze the project and identify the least expensive way to meet the client's needs and wants without sacrificing the big stuff, like safety and quality.
Value engineering can be done during the design phase of a project, looking at alternative design solutions that maintain or enhance results while reducing life cycle costs.
“The earlier in the process we can consider value engineering options, the better,” Tyler said. “This helps avoid re-designing – or worse, de-scoping – portions of the facility and associated schedule delays. That’s one of the many reasons we like to involve subcontractors and suppliers in the design process. They can tell us the actual cost of our proposed designs, helping our team develop real-to-life cost estimates, and they can offer insight on possible design alternatives that meet our required specifications for less.”
A contractor can also explore value engineering options during construction, working with equipment manufacturers and the design team to propose changes that cut costs without impacting functional performance.
“When we are awarded a construction project – especially in today’s market – we’re looking for creative solutions for our clients,” Tyler said. “A lot of this is with the mechanical and plumbing subcontractors. The design may specify particular manufacturers with specific performance requirements, but the facility could function well with different equipment from either the same manufacturer or different manufacturers and still meet the same performance criteria.”
Situations like this can sometimes become strained, however, and require careful mediation on the part of the project management team.
“One of the reasons value engineering is painted in such a bad light is that it is often approached from the wrong mindset,” Tyler said. “After a project is won and a general contractor calls a subcontractor looking for value engineering options, it can be viewed as the GC looking to add more money to their bottom line, in some respects. That shouldn’t be the case. Things can sometimes be missed in construction, so VE items could be used as an owner’s or subcontractor’s contingency to help move the project forward without the burden or delays associated with costly change orders at the back end.”
The sensitive value engineering process can often be even more challenging on federal government projects due to the level of detail in their specifications.
“On government projects, they pick exactly what they want very early on, and that can often throw a wrench in the value engineering process,” Tyler said. “But sometimes they will change their minds. For instance, we were able to go to an aquatherm piping system on an Altus Air Force Base (AFB), Okla. project several years ago because it’s reliable, sustainable, and cheaper than copper. Now, most if not all Altus AFB projects – and Sheppard AFB projects – specify it rather than PVC or copper.”
Ross Group completed a separate project at Altus AFB where value engineering played a large role in its successful execution, Tyler mentioned. The design for this building addition specified either structural steel or CMU. Even then, structural steel was costly and had prolonged lead times, and a CMU building was going to extend the project schedule as well due to the remote project location.
“We proposed using insulated concrete form (ICF) walls – a newer system at the time – with a smaller steel package consisting of more readily available, standard steel components,” Tyler said. “The government hadn’t done many projects with the material, but ICF was less expensive and faster to get than structural steel. We were able to save a bit of money while giving a betterment to the government.”
Sometimes, though, the proposed value engineering option is not what the client wants, no matter the price or schedule advantages it may offer – and that’s okay.
“We recently completed a project that specified a particular type of terracotta that is only made in Italy,” Tyler said. “The acquisition of this material delayed the project for months and months, but the government required that exact terracotta because it matched an adjacent building. Using a similar, locally manufactured product would have reduced the schedule, but it was important to the client to have an exact match, which is what we provided them.”
Like most aspects of construction management, communication is at the heart of value engineering. Knowing the client’s overarching goals is crucial to making sure you propose the optimal value engineering choices to match their preferences and meet their needs. Depending on the project and the client, almost any aspect of a construction project can be value-engineered, and combining a variety of small changes can add up to large savings in the long run.
Consider again the example of a home renovation show. While finding cost savings on larger scale construction projects is more multifaceted than these programs typically depict, contractors still want similarly happy conclusions to projects. Like the hosts on each episode, we aim to reveal the finished project to delighted customers, with the work completed on time and within budget. Value engineering is an essential tool for making that happen.