Value Engineering; not just for cheapskates
Value Engineering or VE as it is sometimes called is often a fancy way of saying “Our projected project cost is higher than our budget, so let’s figure out a way to save money!” Sometimes it is just a manager thinking that it is their job to bring the project in under budget so they look good. Those are not the only reasons for a value engineering exercise though. Oftentimes, you are trying to save on one part of a project so that you have more to spend on another part. Whatever the reason, a VE exercise does not have to mean that your project has lower quality components, or cannot completely satisfy the end
users. The “Value” comes in when you can find ways to get the same outcome for less money. So how do you go about doing that?
First, when undergoing a VE process for a project, it is important to know what the real user requirements are. As an example, if your user says they need an electrical outlet every 6 feet along every wall, it is important to find out if that is a want or a genuine need. Do the users want those outlets for convenience, or do they really have that many things to plug in?
Another example would be if the user says they need 20 gallons per minute of room temperature Water for Injection (WFI). If you question them, they may say that they need that flow rate because they want to fill their tank in 10 minutes. As the project manager, it is your job to let them know the potential consequences of that requirement. If they could settle for a 20 minute fill, or the product really only needs water that is 30 deg C. they could save the project and the company 10’s of thousands of dollars. Asking probing questions is a great way to determine which needs are real.
Other than the user requirements, engineering requirements also need to be understood. A steam heated water heater might be the best engineering solution for long life, ease of maintenance, and operating costs, but a gas fired water heater, may be a better choice for first time cost, simplicity of controls, and cost of replacement.
Business requirements are also important. If you are building a facility to manufacture research materials, it probably does not need to be built to the same standards (and cost) of a facility to manufacture commercial products.
Other areas to look for savings are: materials of construction, the possibility of delaying some portion(s) of the project, utility capacities, and different technologies for achieving the same outcome.
Many times, the VE exercise starts and ends with only the most expensive budget line items. That may be adequate if you only need to find a small savings, but for the best outcome, you should look at all budget line items. As you go down the list from most expensive to least expensive, there will be smaller savings, but lots of small items can add up to a big number.
Think outside the box. Let’s use building lighting as an example. Many designers will design using standards and materials that they have used before and are comfortable with. Don’t let that happen. We’ve all walked through buildings that are lit uniformly throughout the space, but if you ask the Illumination Engineering Society, they will clearly tell you that lighting should be designed around the task that is being lit. Corridors that are just designed for pedestrian traffic do not need the same amount of lighting that a manufacturing space where the operators must be able to read small print in a batch record. Even in an office environment, the overall lighting is often much brighter than it needs to be. Using task lighting where it is needed while reducing the overall lighting in the room is often much more economical.
When planning your VE exercise, first get everything in your budget itemized as much as possible so you can instantly see where the big hitters are and the biggest potential savings. As you proceed through the VE process, get all the stakeholders and decision makers around the table at the same time. The engineers, users, contractors, sub-contractors, project managers, and anyone else who may be helpful in brainstorming and finding savings should all be involved. When communicating the purpose of the exercise, ask everyone to come to the meeting prepared with suggestions for savings as well as a good idea of which requirements are “must-haves”.
Another thing to consider is how much money you need to save. I would suggest that this is not something you should announce or else you risk not finding all of the potential savings. Starting with a number in mind will stifle creativity and will threaten the outcome of the exercise. Try not telling the VE team how much you are trying to save and look for every opportunity. Only when you have exhausted all of the ideas should you add up the savings and see if you have met your goal.
Value engineering does not mean you have to get an inferior project, just a less expensive one. Like everything in industry, Safety and quality should not be compromised. Go into the exercise with a positive attitude and you are likely to have a positive outcome.