COTM 5202 Cost Engineering
Introduction to Value Engineering
Miliyon Fikre , Msc
January,2023
Outline
History
Definition of Value Engineering
Concept of Value
Purpose of Value Engineering
Reason for Poor Value
Stages of Value Engineering Application
History
Shortage of materials during world war II.
General Electric company founds that many of substitutes
have better and equal performance at less cost .
Lawrence D miles launched an effort to make the concept systematic.
Establishment of Society of American Value Engineers ‘‘SAVE’’ in 1959.
Definition of Value Engineering
Value Engineering (VE), also known as Value Analysis, is a
systematic and function-based approach to improving the value of
products, projects, or processes.
Value is a personal perspective of your willingness to pay for the
performance delivered by a product, process or project.
Good value is achieved when the required performance can be
accurately defined and delivered at the lowest life cycle cost.
Definition of Value Engineering
Value Engineering (VE) is not a design/peer review or a cost-cutting
exercise.
VE is a creative, organized effort, which analyzes the requirements of
a project for the purpose of achieving the essential functions at the
lowest total costs (capital, staffing, energy, maintenance) over the life
of the project.
Through a group investigation, using experienced, multidisciplinary
teams, value and economy are improved through the study of alternate
design concepts, materials, and methods without compromising the
functional and value objectives of the client.
Concept of Value
Concept of Value
VA/VE uses a value equation that says value is equal to function
divided by cost.
Value = Function/Cost
If, for example, the buyer wants to get more item value, he/she needs
to either increase the item's functionality at the same time he/she is
containing cost; or he/she needs to reduce cost while holding or
improving its functionality. Either way, the result is more value for the
customer .
Concept of Value
Concept of Value
Concept of desirable value Concept of undesirable value
Purpose of Value Engineering
Purpose of VE
In general, Value Engineering is used to:
• Determine the best design alternatives for Projects,
• Reduce cost on existing Projects,
• Improve quality, increase reliability and availability, and
customer satisfaction,
• Improve organizational performance,
• Improve schedule and reduce risk, and
• Identify problems and develop recommended solutions.
Reasons for Poor value……
Reasons for Poor value……
In general, Poor value is obtained due to:
• Lack of and /or poor coordination among designers.
• Failure to network with customer- poor definition of needs and
wants.
• Design based on habituation thinking or mistaken beliefs.
• Change in technology
• Follow an old specifications and standards.
• Time constraint.
Stages of Value Engineering Application
VE can be applied at any point in a project, even in construction.
However, typically the earlier it is applied the higher the return on the
time and effort invested.
Stages of Value Engineering Application
The value engineering process is broken up into three stages: planning,
design and methodology and approach.
Stages of Value Engineering Application
Planning
At the Planning stage of development, there are additional benefits to be
derived from a Value Engineering Workshop. An independent team can:
• Review the program;
• Perform a functional analysis of the facility;
• Obtain the owner/users definition of value;
• Define the key criteria and objectives for the project;
• Verify/validate the proposed program;
• Offer alternative solutions (square meters needs per function,
adjacency solutions, etc.); and
• Verify if the budget is adequate for the developed program.
Stages of Value Engineering Application
Design
This is the stage that most VE participants are used to becoming
involved, when the design has at least made it to the schematic stage.
The primary tool available to the VE team is the Workshop - typically
a 40-hour session (or less for smaller or less complex projects).
The Workshop is an opportunity to bring the design team and client
together to review the proposed design solutions, the cost estimate,
and proposed implementation schedule and approach, with a view to
implementing the best value for the money.
The definition of what is good value on any particular project will
change from client to client and project to project.
Stages of Value Engineering Application
Methodology Stage/Approach
The last and final stage is the methodology stage, which is broken up
into six important steps.
Stages of Value Engineering Application
Methodology Stage/Approach
Information Phase
At the beginning of the VE Study, it is important to:
• Understand the background and decisions that have influenced
the development of the design through a formal design
presentation by the design A/E.
• Analyze the key functional issues governing the project. The
functions of any facility or system are the controlling elements in
the overall VE approach. This procedure forces
the participants to think in terms of function, and the cost and
impacts associated with that function.
• Define Owner's objectives and key criteria governing the project.
• Determine Owner's definition of Value.
Stages of Value Engineering Application
Methodology Stage/Approach
Function Analysis Phase
Function Analysis defines user’s needs through verb-noun pairings.
Specific purposes or intended use of an item (What is this? What is it
supposed to do? What else can it do?)
• Function is that which makes a product, process or project work or
sell.
• All cost is for function.
• The primary function is the core of the project and holds the
greatest value. It represents what is required to make the product
work.
• The secondary functions don’t hold as much value but are always
worth noting.
• Determine by considering the user’s actual needs.
Stages of Value Engineering Application
Methodology Stage/Approach
Speculation (Creative) Phase
This step in the VE study involves the listing of creative ideas.
• The VE Team thinks of as many ways as possible to provide the
necessary function within the project areas at a lesser initial or
Life-Cycle Cost which represent improved value to the client.
• Judgment of the ideas is prohibited.
• The VE Team is looking for quantity and association of ideas,
which will be screened in the next phase of the study.
• Many of the ideas brought forth in the creative phase are a result of
work done in the function analysis. This list may include ideas that
can be further evaluated and used in the design.
Stages of Value Engineering Application
Methodology Stage/Approach
Evaluation (Analysis) Phase
In this phase of the Project, the VE Team, together with the Client
and/or Users,
• Defines the criteria to be used for evaluation.
• Analyses and judges the ideas resulting from the creative session:
• Ideas found to be impractical or not worthy of additional study are
discarded.
• Those ideas that represent the greatest potential for cost savings
and value improvement are developed further.
• A weighted evaluation is applied in some cases to account for
impacts other than costs (such as schedule impacts, aesthetics,
etc.).
Stages of Value Engineering Application
Methodology Stage/Approach
Development Phase
During the development phase of the VE study, many of the ideas are
expanded into workable solutions. The development consists of:
• Description of the recommended design change.
• Descriptive evaluation of the advantages and disadvantages of the
proposed recommendation.
• Cost comparison and LCC calculations.
• Each recommendation is presented with a brief narrative to
compare the original design method to the proposed change.
Stages of Value Engineering Application
Methodology Stage/Approach
Presentation Phase
The last phase of the VE Study is the presentation of the
recommendations in the form of a written report.
• A briefing/oral presentation of results is made to the Client and
Users, as well as the Design Team representatives.
• The recommendations, the rationale that went into the
development of each proposal, and a summary of key cost impacts
are presented at that time so that a decision can be made as to
which Value Management proposals will be accepted for
implementation and incorporation into the design documents.
Stages of Value Engineering Application
Methodology Stage/Approach
Presentation Phase
In addition to the monetary benefits, a VE Workshop provides a
valuable opportunity for key project participants to come together,
then step aside and view the project from a different perspective. The
VE process therefore produces the following benefits:
• Opportunity to explore all possible alternatives;
• Forces project participants to address "value" and "function“;
• Helps clarify project objectives;
• Identifies and prioritizes Client's value objectives;
• Implements accepted proposals into design; and
• Provides feedback on results of the study
Stages of Value Engineering Application
Construction
During this phase value engineering is still possible through the use of
Value Engineering Change Proposals (VECP).
Contractors can be provided monetary incentives to propose solutions
that offer enhanced value to the owner, and share in the financial
benefits realized.
Clearly the owner must consider contractor generated proposals very
carefully, from a lifecycle and liability perspective.
Stages of Value Engineering Application
Construction
The A/E team must be brought in to the decision making process to
agree to the proposed change as not having any negative impact on the
overall design and building function.
The evaluation of a VECP is treated similarly to any change order
during construction, with issues such as schedule and productivity
impacts being considered along with the perceived cost savings
generated.
Conclusion
In the final analysis, Value Engineering is not only beneficial, but
essential because:
• The functionality of the project is often improved as well as
producing tremendous savings, both initial and Life-Cycle
Cost.
• A "second look" at the design produced by the architect and
engineers gives the assurance that all reasonable alternatives
have been explored.
• Cost estimates and scope statements are checked thoroughly
assuring that nothing has been omitted or underestimated.
• Assures that the best value will be obtained over the life of the
building/infrastructure.
End of Slide!
Thank you!
