Last edited 24 Apr 2020

Value added in construction projects

Value relates to the assessment of the benefits brought by something in relation to the resources needed to achieve it. In the context of construction projects it is normally expressed as a ratio between a function and the whole life cost for that function.

Value = Function / Whole Life Cost

or

Value = What you get (or want) / What you pay

See Value in building design and construction for more information.

The term ‘value added’ refers to the increase in value created by goods or services.

The term 'gross value added' (GVA) offers a measure of the actual value added by a commodity, excluding the costs of production. This is often used to express the contribution of a good, service, sector or region to the wider economy. For example, in 2014, the construction industry GVA was £113 billion. Ref House of Commons Briefing paper Number 01432, 6 October 2015 Construction industry: statistics and policy.

See Gross value added for more information.

The term ‘value added’ is also used to express the differentiation of a commodity compared to its competitors by the additional features it offers that cannot be measured by its price.

Focussing exclusively on price can be at the expense of value added features, or 'value for money'. Value added features can increase the worth or benefit of a product or service. However, value added features are often subjective, meaning they are dependent on the perception of the additional worth or benefit.

Manufacturers of construction products for example, will often be competing with a large number of similar products available on the market. It can be beneficial therefore to develop added value 'brand values' that make a particular product more desirable.

Value added can be created by identifying and understand the needs and desires of the market, rather than focusing exclusively on price. Some techniques for creating a value added approach include:

NB, STAR Procurement (a shared procurement service for Rochdale, Stockport, Tameside and Trafford Councils), Glossary of Terms, published in May 2019, suggests that added value is: 'An improvement or addition that goes beyond the specification in the tender/contract documents.'

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