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Newsletter Articles What is Value Engineering? James B. Salter, June 2000 The term value engineering is tossed around a lot in our business. It means many things to many people. Some people think it is just simple cost cutting. Others think it is reducing scope. Others feel deferral of scope is value engineering. Actually value engineering is the means to ensure that the client achieves his intended goals at a price consistent with his established budget, quality, scope of work, and schedule. Value engineering is a management process and a project management philosophy. As project managers perform their work, they should constantly be charged with the tasks of value engineering. As the project is being designed their value engineering philosophy must steer their project management actions. Because most project owners appropriately demand that projects meet tight budgets, the value engineering process can become stressful and puts the design team members under pressure to look closely at their designs. While executing a value engineering process we suggest that you follow four basic rules to maximize your effectiveness. 1. Value engineering should be an ongoing process over the design of the project. The goal is to ensure that nothing is "left on the table" without sacrificing scope, quality, or schedule. The preferred approach is to schedule formal value engineering sessions at 100 percent schematic design, 50 percent design development, 100 percent design development and 30 percent construction documents. 2. Value engineering is a team activity. The successful project manager involves the entire team in the value engineering process. He encourages the team to establish value-engineering objectives early on, thereby buying into the process. While he must be suspicious, he also must maintain respect for the project team members. To the project manager involved in a value engineering process, nothing should be sacred. All designs must stand up against the scrutiny of the value engineering goals. He should ask questions like, "I understand the design, but why does it have to be in this particular configuration?" He should ask, "Are you absolutely sure this is the most cost effective method that meets the client's goals?" He must encourage discussion even if it initially appears to be contrary to his interpretation of the Owner's goals. He must listen, but more importantly he must hear what others are saying. 3. Motivate through accountability. Projects should be contracted as design to budget so that the designer has a vested interest in obtaining design efficiency. All project team members should understand that the Owner is serious, that his project's financial success is contingent upon their effectiveness. The team members should understand the ramifications of failure, e.g. replacement, peer review, etc. 4. When the going gets tough, stay positive. The project manager must always stay focused on the solution, not on who is to blame. He should not let situations become volatile. Remain calm; discuss, don't argue; solve the problem; don't create another one. To further describe our view of value engineering, we provide below a few examples of what we do and do not consider value engineering. Value Engineering The owner of a 5+ star hotel chain wants a stone floor in his lobby. He has established a budget utilizing high quality marble floors. We suggest high quality granite as a value engineering recommendation because we can obtain the granite in a bulk order for two projects at the same price as the marble. Why is this value engineering? We accomplish the client's goal of having stone flooring material in his lobby. We accomplish a second client objective, high quality material consistent with his established budget. Finally, we accomplish a third client goal because granite is more easily maintained and is more durable. We are building several very high-end model homes in Hawaii. There is over $300,000 in cabinetry in each home. The cabinets are made of imported African hardwood. In a sample cabinet, the project manager notices several coloration flaws. He communicates with the mill in Washington, D.C. The mill representative states that the coloration flaws are due to the quality of lumber that he receives from Africa. Our project manager asks him to go to the African supplier with a sample of the finish that is acceptable to the Owner. The supplier says he can produce the quality but he has to increase his price by 5 percent. The Owner accepts the price increase as a value engineering recommendation, because he has guaranteed his quality and his schedule. He no longer has the threat of mill rejections or onsite rejections increasing his schedule. Not Value Engineering
James B. Salter Winner of Hilton Hotel Corporation 1998 - Project Manager Award for Value Engineering < Previous Page | ^ Back to top |
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