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.

INTEGRATING COST DATA INTO INTERNAL SOFTWARE

For CTA, value engineering (VE) begins using a baseline of the best data possible.

With 30 years of experience in the A/E field, including 26 years as a licensed architect, John Bolton knows his way around a construction estimate. In his current role as senior architect at CTA, a national A/E firm founded in 1938, Bolton uses his expertise to create the most cost-effective designs for clients without sacrificing an ounce of quality. To provide the foundation for VE, Bolton and the CTA team need reliable, comprehensive cost data to demonstrate the real impacts of any given choice. Details matter.

Using construction cost data from an objective third party goes a long way in establishing credibility with clients. CTA uses an in-house software backed by third-party data from an independent company. “The level of detail we are able generate shows CTA understands the details of the designs. Our estimates indicate to the client a real possibility of potential cost impacts versus a lump-sum number,” Bolton says.

The level of detail in each estimate lays a foundation for VE. Itemized material, labor, equipment, and productivity costs allow CTA to demonstrate the financial impact of each choice. Bolton has found this to be far more effective than showing clients a lump sum.

CTA has seen the tangible benefits of using third-party data to power estimates. CTA estimates generally fall within 3–8 percent of contractor estimates during design-build projects.

Furthermore, the detail provided by data helps implement VE during the design process.

Bolton explains, “Our independent data allows the design team to incorporate costs into a project. As we understand the impacts, we are able to coordinate with contractors to achieve the best costs for the client.”

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.