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A Tool Built from Necessity
Architects, engineers, and design professionals juggle several coexisting responsibilities and desires. They want to design and build inspiring, innovative facilities. They want to create reputations for doing thorough, efficient work. They want satisfied clients and occupants. On top of all that, they also face an important reality: They must maximize their available budget.
All images courtesy of Gordian
The practice of value engineering (VE) enables design professionals to realize aesthetic and performance goals in the field.
Value engineering is a vital tool in the design professional’s kit for navigating this reality. Its history is one forged by the fires of necessity. The term “value engineering,” or VE, was first used during World War II by Lawrence Miles, an employee of General Electric (GE). Tasked with finding production materials despite the extreme shortages during the war, he needed a creative and resourceful approach to meet the needs of GE customers. Miles developed the process of VE to evaluate alternative materials that could still meet the performance requirements of the materials GE would use in normal, peace-time production conditions. In so doing, he created a standard method to compare, contrast, and assess materials and determine their suitability.
Miles identified two elements of the value equation—function and cost—and balanced them against one another. For him, the purpose of any value analysis was to identify all elements of function and cost and express their mutual interdependency so that an informed decision could be made between the two. In his equation (shown below), value is the most cost-effective way to reliably accomplish a function that will meet the user’s needs, desires, and expectations.
Value = function/cost, in which:
Function = the specific work that a design/item must perform; and
Cost = the life-cycle cost of the product.
The basic principles are simple. Under Miles’s equation, an item that maximizes function with a minimal cost is of greater value than an item of lesser function with the same cost. Conversely, an item that serves little or no function but has a high cost is considered to be of little or no value. Simply defined, VE means finding ways to make design or material adjustments that still meet project goals while allowing for better value, keeping a project within budget.
According to Miles, VE is basically “a creative, organized approach whose objective is to optimize cost and/or performance of a facility or system.” The intended purpose is to improve the value obtained by an owner sponsoring a constructed project.
Miles’ method quickly demonstrated its promise. By 1959, The Society of American Value Engineers (SAVE) was formed as a professional society dedicated to the advancement of VE through a better understanding of the principles, methods, and concepts involved. Requirements for registration as a Certified Value Specialist (CVS) were developed by SAVE at the request of the U.S. General Services Administration in the early 1970s. Today, SAVE, now known as SAVE International, has grown to more than 2,000 members and currently has more than 350 active CVSs in the United States.
With the growing demands placed on buildings and their designers by policies and codes, VE remains an ever more necessary tool. For the design professional, VE concentrates on maximizing a project’s function while minimizing costs to generate the greatest value for the client. However, to effectively value engineer, the design team must first understand where the costs lie on construction projects.
VE is not limited to the first costs of construction but should also take into account the longer-term operational and maintenance costs, creating a full life-cycle picture of the structure. With both first- and long-term costs in view, a truly informed decision-making process can be undertaken.
The Necessity of VE Today
Building a functional facility depends on smart planning. Architects, engineers, and design professionals must not only manage physical assets such as materials, labor, and equipment but also balance code requirements, certification goals, and client requests, all while maximizing operating and capital budgets. Comprehensive data and analysis create the insight needed to design a prioritized, actionable plan and budget.
When VE takes place often determines how great the maximized savings will be. There is an ideal balance of cost and savings versus time when VE is performed.
VE helps design professionals keep within the bounds of a client’s budget while preserving the client’s wish list. That said, VE goes beyond mere cost-cutting. VE is a methodology that ensures the owner is not over-paying for a feature when an equally effective, less expensive option exists—just as Lawrence Miles intended. When applied to construction, VE analysis must be performed within the standards and criteria established by the owner. Both value and owner requirements can be improved by eliminating or modifying elements not essential to required functions. Performance levels, established by the owner and user, can be achieved by adding elements that meet required, yet unattained, functions or by changing elements to improve quality or performance. The goal is not to simply trim the bottom line, but to maximize function at the lowest possible cost. Product quality is still the name of the game.
VE Benefits
While VE can feel like a repetitive or time-consuming step, its benefits to both the design team and the project more than offset the few additional days spent in planning.
VE creates the opportunity to explore all possible alternatives. By sitting down and critically evaluating costs and functions, project participants are forced to address and define “value” and “function.” This helps to clarify project purposes and identifies and prioritizes a client’s value objectives.
Keep in mind that evaluating change is not limited to material substitutions. Each component should fall under the lens of both immediate and long-term, or life-cycle, costs and benefits. What was, on paper, a cheaper alternative material or system may actually end up costing much more over the life of the building, therefore negating its initial savings. Conversely, a greater initial investment in an upgraded system can sometimes reap benefits for the building and its occupants down the road. Thinking about life-cycle costs for the project not only helps with preliminary decision-making, but it also allows the design team and the client to project the building and its operations into the future.
VE also creates a time window to implement accepted proposals into the design, collect client feedback, and weigh alternative solutions and goals. Critically, any changes to the project at this stage have very little if any impact on schedule and redesign costs. Therefore, the project will be developed with fewer changes, fewer redesigns, and a greater understanding by all parties of what the final function and space allocations will be.
VE Challenges
While VE can harness tremendous benefits for both design professional and client, VE that is done with incomplete information or feedback can present challenges. Changes proposed to a design mean risk—even thoughtful changes that grow out of VE.
Therefore, it is important for the team to take a global perspective on any adjustment. Changing just one aspect of a design will affect other material, structural, or engineering elements. For this reason, any new component or adjusted design must be plugged into the whole plan to avoid unintended consequences. Additionally, changes made to project elements that focus on only initial savings may end up costing the building more during its life cycle.
Avoiding the risks of VE is as simple as maintaining the same thoughtful planning that went into the project design from the beginning. There are several ways in which architects can be effective managers of value-engineered change, minimizing their exposure to risk. Architects, engineers, and design professionals should keep complete, accurate records of the project’s process and thorough documentation. They should also feel free to exercise their professional authority by refusing a change or requesting further information. Knowledge is power. Exercising that knowledge and expertise can only benefit the team and the project as a whole.
VE becomes necessary to meet an owner’s goals, stay within budget, and maintain architectural integrity on a project. While frustrations can arise as the team works to maintain aesthetics, preserve square footage, and strategically allocate money, frustrations are overshadowed by the benefits: happy clients, high-quality projects, and maximized budgets.
A Tool Built from Necessity
Architects, engineers, and design professionals juggle several coexisting responsibilities and desires. They want to design and build inspiring, innovative facilities. They want to create reputations for doing thorough, efficient work. They want satisfied clients and occupants. On top of all that, they also face an important reality: They must maximize their available budget.
All images courtesy of Gordian
The practice of value engineering (VE) enables design professionals to realize aesthetic and performance goals in the field.
Value engineering is a vital tool in the design professional’s kit for navigating this reality. Its history is one forged by the fires of necessity. The term “value engineering,” or VE, was first used during World War II by Lawrence Miles, an employee of General Electric (GE). Tasked with finding production materials despite the extreme shortages during the war, he needed a creative and resourceful approach to meet the needs of GE customers. Miles developed the process of VE to evaluate alternative materials that could still meet the performance requirements of the materials GE would use in normal, peace-time production conditions. In so doing, he created a standard method to compare, contrast, and assess materials and determine their suitability.
Miles identified two elements of the value equation—function and cost—and balanced them against one another. For him, the purpose of any value analysis was to identify all elements of function and cost and express their mutual interdependency so that an informed decision could be made between the two. In his equation (shown below), value is the most cost-effective way to reliably accomplish a function that will meet the user’s needs, desires, and expectations.
Value = function/cost, in which:
Function = the specific work that a design/item must perform; and
Cost = the life-cycle cost of the product.
The basic principles are simple. Under Miles’s equation, an item that maximizes function with a minimal cost is of greater value than an item of lesser function with the same cost. Conversely, an item that serves little or no function but has a high cost is considered to be of little or no value. Simply defined, VE means finding ways to make design or material adjustments that still meet project goals while allowing for better value, keeping a project within budget.
According to Miles, VE is basically “a creative, organized approach whose objective is to optimize cost and/or performance of a facility or system.” The intended purpose is to improve the value obtained by an owner sponsoring a constructed project.
Miles’ method quickly demonstrated its promise. By 1959, The Society of American Value Engineers (SAVE) was formed as a professional society dedicated to the advancement of VE through a better understanding of the principles, methods, and concepts involved. Requirements for registration as a Certified Value Specialist (CVS) were developed by SAVE at the request of the U.S. General Services Administration in the early 1970s. Today, SAVE, now known as SAVE International, has grown to more than 2,000 members and currently has more than 350 active CVSs in the United States.
With the growing demands placed on buildings and their designers by policies and codes, VE remains an ever more necessary tool. For the design professional, VE concentrates on maximizing a project’s function while minimizing costs to generate the greatest value for the client. However, to effectively value engineer, the design team must first understand where the costs lie on construction projects.
VE is not limited to the first costs of construction but should also take into account the longer-term operational and maintenance costs, creating a full life-cycle picture of the structure. With both first- and long-term costs in view, a truly informed decision-making process can be undertaken.
The Necessity of VE Today
Building a functional facility depends on smart planning. Architects, engineers, and design professionals must not only manage physical assets such as materials, labor, and equipment but also balance code requirements, certification goals, and client requests, all while maximizing operating and capital budgets. Comprehensive data and analysis create the insight needed to design a prioritized, actionable plan and budget.
When VE takes place often determines how great the maximized savings will be. There is an ideal balance of cost and savings versus time when VE is performed.
VE helps design professionals keep within the bounds of a client’s budget while preserving the client’s wish list. That said, VE goes beyond mere cost-cutting. VE is a methodology that ensures the owner is not over-paying for a feature when an equally effective, less expensive option exists—just as Lawrence Miles intended. When applied to construction, VE analysis must be performed within the standards and criteria established by the owner. Both value and owner requirements can be improved by eliminating or modifying elements not essential to required functions. Performance levels, established by the owner and user, can be achieved by adding elements that meet required, yet unattained, functions or by changing elements to improve quality or performance. The goal is not to simply trim the bottom line, but to maximize function at the lowest possible cost. Product quality is still the name of the game.
VE Benefits
While VE can feel like a repetitive or time-consuming step, its benefits to both the design team and the project more than offset the few additional days spent in planning.
VE creates the opportunity to explore all possible alternatives. By sitting down and critically evaluating costs and functions, project participants are forced to address and define “value” and “function.” This helps to clarify project purposes and identifies and prioritizes a client’s value objectives.
Keep in mind that evaluating change is not limited to material substitutions. Each component should fall under the lens of both immediate and long-term, or life-cycle, costs and benefits. What was, on paper, a cheaper alternative material or system may actually end up costing much more over the life of the building, therefore negating its initial savings. Conversely, a greater initial investment in an upgraded system can sometimes reap benefits for the building and its occupants down the road. Thinking about life-cycle costs for the project not only helps with preliminary decision-making, but it also allows the design team and the client to project the building and its operations into the future.
VE also creates a time window to implement accepted proposals into the design, collect client feedback, and weigh alternative solutions and goals. Critically, any changes to the project at this stage have very little if any impact on schedule and redesign costs. Therefore, the project will be developed with fewer changes, fewer redesigns, and a greater understanding by all parties of what the final function and space allocations will be.
VE Challenges
While VE can harness tremendous benefits for both design professional and client, VE that is done with incomplete information or feedback can present challenges. Changes proposed to a design mean risk—even thoughtful changes that grow out of VE.
Therefore, it is important for the team to take a global perspective on any adjustment. Changing just one aspect of a design will affect other material, structural, or engineering elements. For this reason, any new component or adjusted design must be plugged into the whole plan to avoid unintended consequences. Additionally, changes made to project elements that focus on only initial savings may end up costing the building more during its life cycle.
Avoiding the risks of VE is as simple as maintaining the same thoughtful planning that went into the project design from the beginning. There are several ways in which architects can be effective managers of value-engineered change, minimizing their exposure to risk. Architects, engineers, and design professionals should keep complete, accurate records of the project’s process and thorough documentation. They should also feel free to exercise their professional authority by refusing a change or requesting further information. Knowledge is power. Exercising that knowledge and expertise can only benefit the team and the project as a whole.
VE becomes necessary to meet an owner’s goals, stay within budget, and maintain architectural integrity on a project. While frustrations can arise as the team works to maintain aesthetics, preserve square footage, and strategically allocate money, frustrations are overshadowed by the benefits: happy clients, high-quality projects, and maximized budgets.
Defining the Process: VE Steps
Delivering a high-quality, value-engineered product does not just happen. It takes the right mindset, the right process, and the right tools. VE offers architects, engineers, and design professionals the ability to balance physical assets, code requirements, certification goals, and client requests while staying within budget. VE, when properly executed, also creates an opportunity to future proof designs and preserve building functionality.
VE creates the environment for teamwork and allows design professionals to share their vital insight with the client.
Strategies and Tactics for Easier VE
Defining the “What”
Before evaluating a design for VE, it is vital to have a firm grasp on the project owner’s expectations and the value the owner places on the project. For that reason, defining expectations is the essential first step. This means a clear communication of, and delineation between, needs and wants, ensuring a successful marriage of design and goals. Owners may have different motivations for completing a project, or even several motivations at once. One purpose might simply be to create a revenue stream. Or it might be to revitalize a neighborhood, drawing tourists to the area with an innovative design. Perhaps the building’s genesis arose from local merchants needing an affordable place to set up shop. Or the owner may have an attachment to the area from childhood and wish to preserve that history.
Regardless of the motivation, the owner’s goals, expectations, and vision of the project belong at the forefront of the discussion. While keeping any design criteria package within reach is vital, no amount of savings or added value will be enough to satisfy the owner if his or her expectations are unmet.
The key to the success of VE analysis is developing a more precise and appropriate definition of value, writes Steve Howard, senior vice president with Cumming, and Anthony Haas, AIA, ACHA, senior principal with Watkins Hamilton Ross (WHR) Architects.
In “The Good and Bad of Value Engineering,” Howard and Haas note, “The owner is responsible for defining the quality level of a project. The designer is responsible for producing a design that meets those expectations or requirements.” Howard and Haas caution that owners tend to define only the lower limit of those expectations. Designers frequently exceed those minimums, believing that better quality always equals better value. However, better quality usually comes at an increased cost and is not usually on a linear relationship with value. This is why the owner must establish what constitutes value.
Determining the “When”
Often, VE is brought into the discussion when a budget exceeds set parameters, regardless of where the project is in the design and construction process. At that juncture, the design team stands a crucial crossroads. On one side, if the project team and the building owner can agree that the extra cost is necessary, the budget can then be increased accordingly. Crisis averted. Owners may readily agree to a budget increase in the instance that an element or requirement changed, or if such was added to the original scope of the project, or when a new design or performance requirement was introduced. Conversely, in some instances, the owner will not agree to a budget increase. When increasing the budget is not an option, the other route to resolution is to launch the VE process.
When VE takes place often determines how great the maximized savings will be. There is an ideal balance of cost and savings versus time when VE is performed. Maximized savings are highest if VE is done during initial planning and analysis or even in schematic design phases. As time goes on, and the project proceeds from design to development, construction documents, and into construction, the design team is often confronted with losses from VE instead of gains.
According to the Whole Building Design Guide (WBDG), conducting VE during the planning stage of development has exceptional benefits. During planning, architects, construction managers, and design professionals can coalesce key project factors with little disruption and minimal loss of time and money. VE during planning includes a wide variety of actions: performing a functional analysis of the facility, obtaining the owner and occupant definitions of value, defining the key criteria and objectives for the project, verifying and validating the proposed program, reviewing master plan utility options, offering alternative solutions, such as square footage needs per function and adjacency solutions, and verifying if the budget is adequate for the developed program. Any changes to the program at this stage should have very little if any impact on schedule and A/E time and redesign costs. Conducting VE during planning also means that the project will be developed with fewer changes, fewer redesigns, and a greater understanding had by all parties of what the final function and space allocations will be.
VE during planning can also incorporate a fresh outside view of alternate solutions from other similar projects.
If VE is not performed in the planning stage, WBDG identifies project development, when the design has advanced to schematics, as the stage at which most VE participants are used to becoming involved. VE during design brings together the design team and the client to review the proposed design solutions, the cost estimate, and the proposed implementation schedule and approach, with a view to implementing the best value for the money. Again, the definition of what is “good” value on any particular project will change from client to client and from project to project.
While VE is still possible during construction, any VE done at this stage adds layers of complexity. Contractors can be provided monetary incentives to propose solutions that offer enhanced value to the owner and share in the financial benefits realized. However, any change at this stage needs careful consideration from both life-cycle and liability perspectives. The proposed change(s) should not have any negative impact on the overall design and building function.
Establishing the “How”
After defining expectations, design professionals should have a consistent process outlined for VE. This is the “how” of VE. Whether a designer wants to substitute one material for another, consider alternative building methods, or limit a project’s environmental impact, the VE process follows a logical, straightforward path.
According to Howard and Haas, a formal VE process typically progresses through a series of analytical steps. These may look like:
- Information gathering: an initial briefing by the project team to develop an understanding of the project requirements and design, the status of the budget and schedule, and constraints.
- Functional analysis: examination of the project’s functional requirements within budgetary limitations to enhance understanding of why the project is being built and what the final result should be.
- Creativity/brainstorming: developing and listing ideas and options for VE, keeping in mind the functional requirements of the project.
- Analysis: expanding the creative ideas into workable solutions, evaluating their impacts and costs, and ranking them in terms of cost, feasibility, and value received.
- Recommendation: presentation of the VE proposals, expected savings, and value results in a formal report.
Another way to think about VE is to put the elements and systems identified during discussions under the microscope and ask a series of progressive questions about each.
- Step 1 – Identify: Identify the material makeup of a project. Ask yourself: What is this?
- Step 2 – Analyze: Analyze the functions of those elements. Ask yourself: What does this do?
- Step 3 – Develop: Develop alternative solutions for delivering those functions. Ask yourself: What else could do this?
- Step 4 – Assess: Assess the alternative solutions. Ask yourself: Can this still deliver the experience the owner demands?
- Step 5 – Allocate: Allocate costs to the alternative solutions. Ask yourself: How much will this cost?
- Step 6 – Develop: Develop the alternatives with the highest likelihood of success. Ask yourself: What will do the best job for the longest time?
After establishing the “what” via expectations and running through the “how,” it is important to value engineer where it makes sense. That means defining large and small systems and preserving required items for functionality, code, and safety.
Choosing the “Where”
For Howard and Haas, during the functional analysis phase, the team views the project functionally in three ways to help better analyze and study options. First is identifying materials and systems that create the basic function for the project. These elements will be essential to the performance of a user function or designed to fulfill a user requirement. A key defining question is, “Can this function be eliminated and still satisfy the user?” Any function that must be achieved to meet codes, standards, or owner requirements is an element with a required secondary function. For example, Howard and Haas note that the basic function of a hospital is to treat patients. A fire-protection system is not required to treat patients, but it is required for the project. Those elements with a secondary function are materials and systems which, if removed, would still allow basic and required functions to be met.
One area where design professionals can often find value is in large systems—think heating, ventilation, and air-conditioning (HVAC) systems, lighting, and electrical systems. This does not mean using a bargain product or compromising on performance. Often, spending more on a higher-performing system at the beginning of a project will save in maintenance costs over the building’s lifespan. The importance of using a wide lens of time in VE is crucial. It is always wise to conduct a life-cycle cost analysis and get input from the team responsible for maintaining the building to gather the long-term cost implications of major systems.
Measuring Success
Overall, VE demands that architects and builders view a project with a wider lens and scrutinize materials, plans, and processes to identify cost-effective alternatives that meet the requirements of a project. But finding alternatives takes work. You have to know what you are looking for and where to look.
Although VE began as a cost-saving measure, it is becoming a valued project management technique that addresses all aspects of the building life cycle from the initial construction through the sustainability of sourced materials and utility efficiency of the final project, notes South Bay Construction. The company has more than 37 years of experience building in the Bay Area of California, adding, “Our goal has always been to create the greatest possible value for our clients. We have found that incorporating value engineering into our design and construction process results in greater added value and reduced costs for our clients.”
VE also provides the opportunity for the project team to bring positive environmental and social impact solutions to the table, including methods for reducing the carbon footprint of transportation, building, and operation as well as suggestions that positively affect the safety and wellness of the surrounding community.
VE Tools
Of paramount importance to the VE process is access to verified and reliable sources of construction cost data. Third-party, independent cost data will provide the most objectivity and allow the entire design team and owner to make accurate, informed decisions. In the end, it is all about identifying the best alternatives.
To effectively value engineer, design professionals need to know where costs lie. To help assess feasible solutions, many architects, owners, engineers and other construction professionals rely on accurate cost data from a reliable industry expert. Accurate cost data is crucial for understanding the facts on the ground, enabling effective decisions and detailing the reasons why a change was or was not recommended.
Accurate third-party cost data on materials, labor, and equipment is an invaluable resource for building reliable rough order of Magnitude estimates. That same data is also great for building client trust. Accurate cost information demonstrates the impact of design decisions and shows project owners that the team has exhausted all of its options in pursuit of creating the best possible design within budget parameters. Sharing objective, third-party cost information with a project owner establishes that the design team is a partner that cares about the bottom line and will not take advantage of ownership.
Accurate third-party cost data can offer the additional benefit of predictive costs. Design work is often complicated by the factor of time. Architects and design professionals create drawings and conceptual designs in the present when the structures outlined in the drawings will be built in the future. The project timeline is often extended beyond expectations because of approvals, permitting, weather, or other unforeseen circumstances. Projecting costs and other economic conditions into the future is problematic. Often, forecasting costs have been based on guesswork at best.
Older methods of traditional forecasting data are often lacking when the market swings or experiences sharp cost escalations. With technological advances, however, today’s design teams have a new, incredibly useful tool: predictive construction cost data. Predictive data models allow design professionals to consider all future factors at play on a regional level, including local labor rates and material costs. This makes it much easier to plan for and complete a project within the established budget. Using trustworthy pricing information helps to find viable, value-creating alternatives.
Macroeconomics versus Data Mining
lthough grounded on econometric principles and modeling techniques, predictive cost data differs from traditional econometric forecasts in two ways. First, traditional forecasts are based on macroeconomic theory, even though analysis of those macroeconomic indicators demonstrate them to be statistically insignificant predictors. Predictive cost models disregard macroeconomic theory altogether and are based instead on data-driven empirical evidence.
The empirical evidence used in predictive cost models is the result of extensive exploratory data analysis and pattern-seeking visualizations of historical cost data with economic and market indicators. This updated approach has been extensively researched and validated by Dr. Edward Leamer, professor of Global Economics and Management at the University of California, Los Angeles. Only economic indicators that have “proven themselves” in exploratory analysis become candidates for model development, testing, validation, and predictive cost estimates.
To further bolster their credentials, predictive cost data uses mining techniques and principles to improve traditional econometric modeling practices. Since the 1990s, this family of processes and analyses has evolved from a mix of classic statistical principles, contemporary computer science, and machine learning methods. Data mining takes advantage of recent increases in computing power, data visualization techniques, and updated statistical procedures to find patterns and determine drivers of construction material and labor cost changes. Measures of these drivers and their relationships to each other, and to construction costs, along with their associated lead or lag times, are represented in a statistical algorithm that predicts future values for a defined material and location.
Put together, predictive models are founded in a robust methodology.
Good Data Makes All the Difference
The ability to use predictive data that accounts for real market conditions, such as amount of construction versus labor availability, and commodity price impacts on material costs is critical to keeping designs in line with budgets. Econometric principles, empirical evidence, and data mining combine to create a powerful tool for construction professionals, allowing them to use predictive data sets to more accurately forecast the cost of construction up to three years before the project breaks ground. This allows for faster planning and less redesign down the road. By using predictive data, project costs are not only forecasted more precisely, but clients also have greater confidence in the designs and the people who deliver them.
Integrating predictive cost data into the design process also keeps today’s plans in line with tomorrow’s financial realities. When it comes to maximizing a project budget, accurate data makes all the difference.
VE + Data = Client Benefits
The benefits of VE stretch beyond securing accurate budgets and a successful design. Certainly, the benefit of a well-run VE process to the owner will be a better, more cost-efficient project that meets his or her needs and objectives. The process can also have substantial benefits for the design and construction team, including fostering a teamwork approach to solving problems, reducing design team expenses by requiring fewer redesigns, allowing for a more efficient construction process, and producing, in the end, a truly satisfied customer.
However, VE additionally allows the design professional to develop an intangible quality clients treasure: insight. Using knowledge of the industry and the design firm, VE allows architects, engineers, and design professionals to show clients a different way of solving the challenges they are facing and provide a better way to achieve their business goals. The basic premise behind the formal VE process is teamwork, note Howard and Haas, embracing the idea that two or more heads are better than one and that there can always be a different, and perhaps better, approach to satisfying a particular need than the first thing that comes to mind.
Client insight shows the customer the business value of making a change and how the impact of that change is realistically felt. VE demonstrates the value in taking action and demonstrating the new way to solve the problem. By making changes via VE, the design and client teams reduce project risk, increase energy efficiency, add savings, and minimize downtime. A “second look” at the design produced by the architect and engineers gives the assurance that all reasonable alternatives have been explored.
The impact of accurate construction costs during VE cannot be overstated. Current cost data assures that the best value will be obtained over the life of the building, so it is recommended that design professionals update their cost libraries every year. The reality is that material and labor markets are always shifting, and the costs of doing business change along with them. The prices of raw materials, supply and demand, shipping fees, market maturity, time of year, energy rates, and industry trends all influence total construction prices. It is impossible for the data of yesterday to give a reliable vantage point for tomorrow’s project.
Good Data = Good Relationships
Successful construction projects require trusting, cooperative relationships between construction professionals and clients. Architects and engineers are trusted to plan designs that maximize the client’s budget while remaining realistic. Contractors and construction managers are trusted to deliver the promised design within budget and on time. Clients’ financial and facilities teams depend on receiving an end product that meets their needs without exhausting their funding. All this means that budget surprises quickly and significantly degrade trust across the entire construction process. On the other hand, accurate project plans, designs, estimates and bids lay the foundation for trusting, long-term relationships.
In the average year, more than 90 percent of construction costs in the top independent data provider databases get updated. Nearly all construction costs experience some sort of change year over year in North America. Some of those changes are incremental, but others are significant enough to wreck a budget. While periods of two, three, or even five years seem short, the factors that influence costs can change exponentially over that time. The number of new technologies entering the market and the occurrence of major geopolitical events during the year impact prices—unfortunately, none of the materials used in construction projects exist in a vacuum. Chances are high that the supply chains for those materials are affected by these or other outside forces at least once a year.
From 2022 and 2023, 58 percent of construction material costs changed by 5 percent or more. Multiply that 5 percent by the number of times a certain material appears within a design, whether it is a steel beam or a wood plank, and the difference between 2022 and 2023 costs adds up quickly. Estimates are like blueprints in this way: Even small variances in measurements can create major gaps in the end product. And those gaps do not just disappear. Be it the contractor or the client, someone will pay extra for an inaccurate estimate.
If the cost estimates for a project are out of date, that renders the estimates based on them inaccurate. Every phase of the building life-cycle requires accuracy, from planning to building. Inaccurate estimates lead to cost overruns, and cost overruns can shut down a project altogether.
By using the most accurate data during VE, the functionality of the project is often improved, as well as producing tremendous savings, in both initial and life-cycle cost. Cost estimates and scope statements need to be checked thoroughly, assuring that nothing has been omitted or underestimated. While tedious on its face, using the best data and checking it during VE assures that the best value will be obtained over the life of the building.
The work of a design professional is too important to risk a loss of trust with clients and peers. Certainly, not all tension and disagreements are avoidable on a construction site, but beginning the project with reliable information can mitigate some unnecessary conflicts and barriers. It is an investment that acknowledges that both the design professional’s and the client’s reputation are worth protecting. Keeping updated, accurate costs is essential for a successful project.
Conclusion
From its birth out of wartime necessity, VE has become standard practice in a majority of industries. VE creates the platform to achieve cost reduction, generating suggestions of less expensive alternatives to specified materials or systems. It gives the opportunity to introduce value-added elements, such as higher-quality products that will increase value for the client and overall satisfaction with the project. Applying VE with a long-term focus generates life-cycle analysis, ensuring that all options work to create a balance between initial construction costs and the long-term operational budget of the development. This also secures maintainability, as a thorough VE produces recommendations of systems and products that will reduce maintenance costs over the lifespan of the building.
VE frustrations are overshadowed by its the benefits. Keeping expectations in mind and following a consistent process are keys to success. VE should be conducted early and where it makes the most sense. Using third-party data enables the design professional to plan faster and avoid redesign while capturing accurate costs.
But the values generated by VE are not limited to data, dollars, and product enhancement. They allow the design team to develop valuable insight for the client. By using knowledge of the industry and team expertise, VE shows clients a different way of solving the challenges they are facing and a better way to achieve their business goals. VE demonstrates to the client the business value of making a change and how the impact of that change will be realistically felt. Ultimately, VE demonstrates its value by taking, acting, and providing a new and better way to solve the problems faced in construction and design.
Amanda Voss, MPP, is an author, editor, and policy analyst writing for multiple industry publications and teaching live continuing education courses.
