Value Engineering

Value engineering may be broadly defined as an organized approach in identifying unnecessary costs in design and construction and in soliciting or proposing alternative design or construction technology to reduce costs without sacrificing quality or performance requirements. It usually involves the steps of gathering pertinent information, searching for creative ideas, evaluating the promising alternatives, and proposing a more cost effective alternative. This approach is usually applied at the beginning of the construction phase of the project life cycle.

The use of value engineering in the public sector of construction has been fostered by legislation and government regulation, but the approach has not been widely adopted in the private sector of construction. One explanation may lie in the difference in practice of engineering design services in the public and private sectors. In the public sector, the fee for design services is tightly monitored against the "market price," or may even be based on the lowest bid for service. Such a practice in setting professional fees encourages the design professionals to adopt known and tried designs and construction technologies without giving much thought to alternatives that are innovative but risky. Contractors are willing to examine such alternatives when offered incentives for sharing the savings by owners. In the private sector, the owner has the freedom to offer such incentives to design professionals as well as the contractors without being concerned about the appearance of favoritism in engaging professional services.

Another source of cost savings from value engineering is the ability of contractors to take advantage of proprietary or unusual techniques and knowledge specific to the contractor's firm. For example, a contractor may have much more experience with a particular method of tunneling that is not specified in the original design and, because of this experience, the alternative method may be less expensive. In advance of a bidding competition, a design professional does not know which contractor will undertake the construction of a facility. Once a particular contractor is chosen, then modifications to the construction technology or design may take advantage of peculiar advantages of the contractor's organization.

As a final source of savings in value engineering, the contractor may offer genuine new design or construction insights which have escaped the attention of the design professional even if the latter is not restrained by the fee structure to explore more alternatives. If the expertise of the contractor can be utilized, of course, the best time to employ it is during the planning and design phase of the project life cycle. That is why professional construction management or integrated design/construction are often preferred by private owners.