Value engineering and benchmarking

Value engineering

Value engineering (VE) is a process used to drive out unnecessary and excessive costs, in order to ensure value for money. Value engineering techniques can be used throughout the life-cycle of a project, from initial feasibility right through to hand-over. The process aims to ensure that a project is delivered for best value without compromising on time.

VE is defined as:

'A function-oriented, systematic team approach to provide increased value in a product, system, or service. VE identifies needed functions, establishes values for them, and develops alternatives to perform these functions for minimum cost.'

The process involves a multi-disciplinary team reviewing the scope of the project at check-points within the design and construction stages. This team should include:

  • the client;
  • the project manager;
  • the engineer;
  • the quantity surveyor or cost manager;
  • the architect;
  • the designer;
  • the procurement manager; and
  • suppliers or contractors.

A common misconception is that VE is just a means of reducing costs. VE techniques can in fact bring wider benefits. These are outlined in the Value engineering newsletter of the Higher Education Estates Internet Site as including the following:

  • clarification of the brief;
  • improved performance through efficiency savings;
  • identification of alternative designs, solutions or locations;
  • identification of alternative construction methods;
  • empowerment of staff through multi-disciplinary teamwork;
  • enhanced service or product quality;
  • identification of risk and opportunity;
  • identification of additional functions to improve the outcomes of the project;
  • improved staff morale, commitment and relationships; and
  • rationalisation of the project programme.

The newsletter also identifies potential risks that must be guarded against when using VE techniques, and notes that these risks can be managed effectively if they are recognised, identified and dealt with. They might include the following:

  • the exercise is undertaken too late for changes to be effective;
  • inadequate information results in incorrect assumptions;
  • there is insufficient participation by stakeholders;
  • insufficient time is allocated for the process;
  • senior management provide inadequate support;
  • there is improper application of the methodology by an unskilled practitioner.

The VE process

The following points indicate the parts of the Value engineering (VE) process.

  1. Ideas generation - or 'optioneering'. A brainstorming workshop should be held to understand all the areas for potential value improvement.
  2. Once the options have been sorted into the most feasible, they should be ranked in order of greatest value saving.
  3. The ideas should be reviewed and examined in detail, to determine the feasibility of the proposal. The cost manager, working closely with the design and planning teams, will then review the options and engineer the most effective solution.
  4. Any costs gathered from suppliers or contractors should be examined and challenged.
  5. Once the VE studies have been completed on all of the options, a report should be produced outlining a recommendation.
  6. There should be a formal approval or rejection of the proposal by the authorised approver. The action for approved ideas and the reason for rejection of an idea should be recorded for reference.
  7. Once VE proposals have been agreed, they should be recorded within the cost plan or estimate.
  8. Any proposal needs to ensure that the management team has enough time to incorporate effectively any specification, design or methodology change into the project concept. If adequate time is not given, the value improvement may not be realised.