Uncovering the value in value engineering
Value engineering (VE) is a method used to improve the value of goods or a product by using an examination of function. If that’s Greek to you, let’s break it down. It’s getting more value for less money, and everyone loves a good deal.
VE originates as far back as World War II, specifically to General Electric Company. The war caused shortages of skilled labor, raw materials and component parts. G.E. employees Lawrence Miles, Jerry Leftow and Harry Erlicher began looking for tolerable substitutes. In the process of doing so, they realized the substitutes they found actually reduced costs and / or improved the product.
What was birthed out of necessity became a systematic process still used today by many businesses, including construction companies like F.A. Wilhelm Construction. In fact, in 1959, SAVE International (Society of Value Engineers) was founded to promote a better understanding of the principles, methods and concepts involved. The VE process can be applied at nearly any point in the project, though the earlier the better to reduce time and money spent.
F.A. Wilhelm strives to incorporate value engineering into every project. Tim Barnett, vice president of business development, stresses it’s an important part of all of Wilhelm’s work.
“There are people in our line of work who think value engineering is an optional activity that happens at some undetermined time in the future,” Barnett said. “In contrast, if you listen to our estimators, you will hear them talking about value opportunities well ahead of a bid or proposal. I think it just comes naturally to our people to always be searching out added value for our clients.”
Erik Dirks, pre-construction manager, incorporates a potential VE session after every design publication and budgeting session. This means the value is reassessed multiple times to make sure new ideas are incorporated.
For Dirks, the VE process includes:
- Documenting the potential savings item
- Researching the cost
- Documenting the designer recommendations and the owner’s acceptance/rejection
- Providing detailed information for the designers to revise the drawings incorporating the cost savings change
“My assumption at each publication is the architect has had more time to develop his ideas and usually, some of those ideas were not assumed in the original budget,” Dirks said. “Therefore, we conduct a subsequent estimate at each publication to validate the scope and budget so there are no surprises on bid day.”
A VE session will also be conducted post bid to make sure none of the scope packages have unexplainable overruns. It’s also an option if the client wants to reduce construction cost above the line and move their savings to the soft cost side of the budget below the line, such as fixtures, furniture and equipment, etc.
VE was successfully incorporated into Wilhelm’s current Marian University project. Dirks is conducting a post-bid VE session with the electrical contractor to address a high-costing lighting package. The team wanted to free up some money by recommending to the owner more economical fixtures and possibly even quantities while still achieving the designer’s aesthetic vision.
“I have documents to track all the items, cost, approval/rejection, dates, etc., so I can effectively communicate the owner’s decision to the designer,” Dirks said.
This isn’t something Dirks does alone. A VE team can include several people in addition to the preconstruction manager, such as the project manager, representatives from the design community, a subcontractor, and representatives from the client who have the authority to approve or reject changes affecting the final cost.
VE not only offers time and space for the client to get a better value, but it also helps the client flesh out a project, as VE sessions often tend to span out into workshops to incorporate ideas not in the original drawings.
“I have to ensure on bid day, the project costs what we have estimated and budgeted for during the entire design development process,” Dirks said. “It shows our clients we’re taking ownership of the process and ensuring we maximize their scope and quality for the available construction budget.”