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Last edited 08 Oct 2018
Value engineering in building design and construction
 Historical development of terms
Value engineering is based on a methodology developed by Lawrence Miles, who worked for the General Electric Company in the USA during the Second World War. Because of the war, there were shortages of materials and certain finished products. However, manufacturing was running at maximum capacity, and ideas were needed to expand production.
Miles was responsible for purchasing raw materials for the General Electric Company and realised if he was unable to obtain one particular material, then it was necessary to obtain a replacement material which performed the same function.
This ‘value engineering’ began with a creative, team-based approach which allowed the generation of alternatives to the existing solution. Because the General Electric Company were manufacturers, the term ‘engineering’ was seen as being more appropriate at that time, than ‘management’.
Later in the 20th century, value engineering started to spread cross the world, but because of differences between the mentality and behaviour of American companies compared to European companies, value engineering, as developed in the USA had to undergo some modification.
The European Community's SPRINT programme (Strategic Programme for Innovation and Technology) adopted ‘value management’ as the official term. It described the same philosophical concept but in terms that were more in keeping with European management styles. The term 'value management' was also applied as a broad, high-order description which encompassed all value techniques, whether applied at a strategic or tactical level.
Commonly used value techniques are now be defined as:
- Value Management (VM). The full range of value techniques available. This is a higher order title and is not linked to a particular project stage at which value techniques may be applied.
- Value Planning (VP). Value techniques applied during the planning phases of a project.
- Value Engineering (VE). Value techniques applied during the design or ‘engineering’ phases of a project.
- Value Analysis (VA). Value techniques applied retrospectively to completed projects to analyse or audit the project’s performance.
Value engineering is used to solve problems and identify and eliminate unwanted costs, while improving function and quality. The aim is to increase the value of products, satisfying the product’s performance requirements at the lowest possible cost.
In construction, this involves considering the availability of materials, construction methods, transportation issues, site limitations or restrictions, planning and organisation, costs, profits, and so on. Benefits that can be delivered include a reduction in life cycle costs, improvement in quality, reduction of environmental impacts, and so on.
Value engineering should start at project inception where the benefits can be greatest, however the contractor may also have a significant contribution to make as long as the changes required to the contract do not affect the timescales, completion dates or incur additional costs that outweigh the savings on offer.
Value engineering involves:
- Identifying the main elements of a product, service or project.
- Analysing the functions of those elements.
- Developing alternative solutions for delivering those functions.
- Assessing the alternative solutions.
- Allocating costs to the alternative solutions.
- Developing in more detail the alternatives with the highest likelihood of success.
Value engineering is an exercise that involves most of the project team as the project develops. It is about taking a wider view and looking at the selection of materials, plant, equipment and processes to see if a more cost-effective solution exists that will achieve the same project objectives.
The 'results accelerators' originally proposed by Miles still act as useful guides to value engineering. Key to this is remembering the relationship between cost and value – value is function divided by cost. Concentration on the function of the project or product will avoid mere cost cutting.
- Avoid generalities.
- Get all available costs.
- Use information from the best source.
- Blast, create and refine.
- Be creative.
- Identify and overcome road blocks.
- Use industry experts.
- Price key tolerances.
- Use standard products.
- Use (and pay for) expert advice.
- Use specialists processes.
The project manager must take a pro-active role in both giving direction and leadership in the value engineering process, but must also ensure that time and effort is not wasted and does not have a detrimental effect on the progress of the project.
Speaking in October 2018, in the aftermath of the Grenfell Tower fire, Dame Judith Hackitt, author of the Hackitt review of the building regulations and fire safety, final report, criticised the industry for value engineering, saying it is a phrase she would be “..happy to never hear again. It is anything but value, it is cutting costs and quality.”
According to Hackitt, ridding the industry of value engineering would be one part of a necessary culture change that the industry has woken up to after the Grenfell tragedy, and that "needs to be embraced to deliver buildings that are fit for purpose."
She said: “People are looking for quick fixes but they need to understand that root and branch reform is required. This has to be a turning point to bring about the culture change we need.”
The text in this article is adapted from Manuals 1, 4 and 7 of “Common Learning Outcomes for European Managers in Construction” developed within the scope of the LdV program, project number: 2009-1-PL1-LEO05-05016 published in 2008. It is reproduced here in a modified form with the kind permission of the Chartered Institute of Building.
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