Value engineering has to add up

The call for ‘good costs’ on Grenfell’s cladding changed the specification. Value engineering can have unforeseen consequences

Value engineering (VE) is sometimes referred to as cost cutting – but that can sound like corner cutting, which can be perilous.

Undoubtedly the best approach is to look for better, not just cheaper, solutions, although better can also be lower cost.

VE is usually a reactive process, when there is appropriate material on the table for systematic review. This puts architecture on the front line. Usually the pressure is applied to the ‘design’ and frequently the most pressure is on the architectural elements. It can be argued that the structural and services engineering elements should be expected to deliver contributions commensurate with their proportions of the budget. 

But it is not just about design. The client can be asked to look at the brief or statement of requirements. This when ‘must-have’ and ‘nice-to-have’ can be applied – again. The contractor can be asked to look at the construction programme and method statements for economies in durations and preliminaries. However, not all this information may be readily available or presented, while there is usually a large heap of architectural drawings and specifications that everyone can get stuck into. 

The VE exercises are usually applied while concept design, scheme design and detailed design are taking place: the techniques, the opportunities and the issues are different for each. One of the difficulties can be new parties raising aspects which have, or should have been, addressed at a previous review. Thus the involvement of contractors and their construction and supply teams is important – and the earlier the better.

There can be difficulties if parties become involved in VE activities alone and have not actively participated in the project processes to achieve the proposed solutions. In such circumstances the review may need to be conducted as a series of presentations, discussions and sub reviews, possibly on an elemental basis. This will take longer.

Sometimes when a project cost plan or tender returns exceed the budget provision a VE exercise results. Such a pressurised, time-constrained, one-off exercise can be less collaborative with project team members staunchly defending their own proposals, contributions, interests and cost provisions. And while such a review may be at, say, detail design stage, the financial gap may be so large that it is necessary to address fundamental aspects of brief, design and scope that were established at concept and scheme stages.

Time needs to be allowed to verify the application and credibility of VE changes

To ask contractors and their subcontractors at the sharp end to be involved or to lead VE exercises sounds like a good idea, but it is important that the right people are involved – those with managerial, commercial (QS) and technical expertise. All representatives should be briefed on the topics in hand; should undertake some research and thinking beforehand; and should be authorised to speak on behalf of their organisation. It’s better if VE exercises have duration, rather than being single events, so that functionality can be explored, alternatives can be identified and analysed, and recommendations checked and tested. ‘Design it once’ doesn’t work here. 

VE exercises mean that design information usually has to be revised and refined to accommodate and reflect the changes and then reissued. At this point some ‘simple’ VE proposals are discovered to have complications with secondary effects on other aspects, or are not able to achieve the stipulated standards or the full financial savings. 

This can apply to modern, sophisticated assemblies and systems where some cost-saving tinkering or re-engineering substitutions can upset the whole arrangement – for example when wishing to achieve particular levels of air-tightness, sound insulation or water or weather proofing.

Therefore time needs to be allowed to verify the application and credibility of VE changes – just as with any other variations or ‘good ideas’. Similarly it is inappropriate to adopt a technical ‘works’ change that will be largely offset by costs to the design teams or construction teams that diminish or eliminate the proposed cost saving – in some cases members of the project may not even be obliged to participate in VE activities or may participate only partially or with extra fees.  

Design and build and two-stage tendering, plus the previous popularity of management contracting and construction management, have all had expectations of some aspects of buildability and value engineering. The extent to which this is undertaken on a collaborative, team wide, holistic, transparent approach very much depends on the parties involved, their cultures and expectations of each other.

Statutory requirements, standards, planning permissions and the like may appear to be inviolate in VE considerations but this is not always the case. Designers can be asked to explain their specifications or their safety factors or to go back to the statutory bodies to obtain clarifications.

While ‘innovation’ tends to be seen as a good thing, care does need to be taken when value engineering attempts to introduce innovative materials, components, assemblies or systems that are unproven in the context. This might remove a cost but could generate technical or time risks and ultimately lead to the same or additional costs. 

Whatever the sources and directions of suggestions for VE contributions, it is important to remember that the responsibilities remain with the primary parties for each element – legalistically, contractually, appointment-wise, insurance-wise, duties of care, signing off, etc – unless specifically agreed otherwise in writing. 

Tom Taylor is principal of dashdot, a joint founder of Buro Four and vice president of the Association for Project Management (APM).