Value Engineering

Value engineering is an approach to productivity improvement that attempts to increase

the value obtained by a customer of a product by offering the same level of functionality
at a lower cost.

The term Value Engineering is sometimes used to refer to the application of this process
of cost reduction prior to manufacture, while Value Analysis refers to the process when
applied to products currently being manufactured.

Both attempt to eliminate costs that do not contribute to the value and performance of the
product or service. The approach is more common in manufacturing.

VE originated in General Electric (under Lawrence Miles) during the Second World War.
They were seeking ways to make the most efficient use of war-limited funds and raw
materials. They found in most cases alternative materials and processes delivered
performance and cost at least as good and often better than the original. This led them to
formalise the approach and devise a team-oriented technique that determines the value of
each part and each product.

Value engineering critically examines the contribution made to product value by each
feature of a design. It then looks to deliver the same contribution at lower cost.

Different types of value are recognised by the approach:

• Use value relates to the attributes of a product which enable it to perform its
function.
• Cost value is the total cost of producing the product.
• Esteem value is the additional premium price which a product can attract because
of its intrinsic attractiveness to purchasers.
• Exchange value is the sum of the attributes which enable the product to be
exchanged or sold.

Although the relative magnitude of these different types of value will vary between
products, and perhaps over the life of a product, VE attempts to identify the contribution
of each feature to each type of value through systematic analysis and structured
creativity-enhancing techniques.

Value engineering programs are best delivered by multi-skilled teams consisting of

designers, purchasing specialists, operations personnel, and financial analysts.

Pareto analysis is often used to prioritise those parts of the total design that are most
worthy of attention. These are then subject to rigorous scrutiny. The team analyses the
function and cost of those elements and tries to find any similar components that could do
the same job at lower cost.

Common results are a reduction in the number of components, the use of cheaper
materials, or a simplification of the process.

Value engineering (VE) is also called value analysis. It is a

systematic, function-based approach used to increase the value of
a product to the customer by providing the same or better
functions at lower cost. This is done without sacrificing the required
performance, reliability, availability, quality, safety, and
environmental attributes of the product. The value of a product can
be expressed as a ratio of its function relative to its cost:

Value = Function/Cost

Value is not simply a matter of minimizing cost. The value of a

product can also be raised by increasing its function (performance
or capability) and cost as long as the added function increases
more than its added cost. A function describes what something
does. In VE, functions are always described in a two-word
abridgement of an active verb and measurable noun, i.e., “create
file,” or “tighten screws.”

Functions may be broken down into a hierarchy, starting with a

basic function, which is what a product or process must do to work
or sell and the customer is willing to pay for, followed by secondary
functions that support that basic function. Secondary functions can
be modified or eliminated to reduce product cost.

Function analysis identifies both basic and secondary functions,

analyzes the functions, and measures the cost of each component
as accurately as possible, including all material and production
costs. Function analysis can be enhanced with a graphic mapping
tool known as the function analysis system technique (FAST). FAST
applies why/how logic to test functions, creates a common
language for a team, and tests the validity of the functions in the
project. Take a wooden pencil, for example, as shown in the table.
The value equals the total cost divided by the basic cost and is
therefore 0.20/0.05 = 4.0. The value calculated should not be
greater than 3. This means that VE study is required.

The VE process involves a multidisciplinary team of people

following a structured VE job plan. The process helps team
members communicate across boundaries, understand different
perspectives, innovate, and analyze. The eight phases of the job
plan are:

1) Project: Selection, objectives;

2) Information: Collection of relevant information;

3) Analysis: Function and cost analysis;

4) Speculation: Generation of alternatives;

5) Evaluation: Selection of alternatives;

6) Development: Shortlist ideas and develop those with merit into

value alternatives;

7) Presentation: Obtain approval; and

8) Implement and follow up.

CASE STUDY

Product: Staple remover of an office stapler, as shown in Figure 1.

Before VE: The staple remover is placed in an awkward position
and obstructs the user’s fingers when the stapler is held in the
palm of the hand. It is attached to the stapler with a plastic catch
and becomes loose when the catch wears down. Moreover, it
makes the stapler look bulky.

After VE: The staple remover is incorporated into the lower body
of the stapler.

Result: About an 8% reduction in manufacturing cost is achieved.

SUMMARY

VE can be applied not only to products but also is equally suitable

for all functions of business such as product design, processes,
systems, or services. It is also particularly useful during the
research, development, and introduction of new products or
services.
Introduction

Value Engineering is a conscious and explicit set of disciplined procedures designed to seek out optimum
value for both initial and long-term investment. First utilized in the manufacturing industry during World War
II, it has been widely used in the construction industry for many years.

Value Engineering (VE) is not a design/peer review or a cost-cutting exercise. VE is a creative, organized
effort, which analyzes the requirements of a project for the purpose of achieving the essential functions at
the lowest total costs (capital, staffing, energy, maintenance) over the life of the project. Through a group
investigation, using experienced, multi-disciplinary teams, value and economy are improved through the
study of alternate design concepts, materials, and methods without compromising the functional and value
objectives of the client.

The Society of American Value Engineers (SAVE) was formed in 1959 as a professional society dedicated
to the advancement of VE through a better understanding of the principles, methods, and concepts involved.
Now known as SAVE International, SAVE has grown to over 1,500 members and currently has over 350
active Certified Value Specialists (CVS) in the U.S. Requirements for registration as a CVS were developed
by SAVE at the request of the U.S. General Services Administration in the early 1970's.

VE can be applied at any point in a project, even in construction. However, typically the earlier it is applied
the higher the return on the time and effort invested. The three main stages of a project and VE's application
are described below.

Planning

At the Planning stage of development, there are additional benefits to be derived from a Value Engineering
Workshop. An independent team can:

• Review the program

• Perform a functional analysis of the facility
• Obtain the owner/users definition of value
• Define the key criteria and objectives for the project
• Verify/validate the proposed program
• Review master plan utility options (e.g. Central Utility Plant versus individual systems)
• Offer alternative solutions (square footage needs per function, adjacency solutions, etc.)
• Verify if the budget is adequate for the developed program

The benefits are tremendous.

• Any changes to the program at this stage have very little if any impact on schedule and A/E time
and redesign costs.
• The project will be developed with fewer changes, redesigns, and a greater understanding by all
parties of what the final function and space allocations will be.
• An independent team can bring a fresh outside view of alternate solutions from other similar
projects.
Design

This is the stage that most VE participants are used to becoming involved, when the design has at least
made it to the schematic stage. Most government agencies require at least one VE session at the design
stage on projects over a certain $ size. The primary tool available to the VE team is the Workshop—typically
a 40-hour session (or less for smaller or less complex projects).

The Workshop is an opportunity to bring the design team and client together to review the proposed design
solutions, the cost estimate, and proposed implementation schedule and approach, with a view to
implementing the best value for the money. The definition of what is good value on any particular project will
change from client to client and project to project.

Methodology and Approach

During the actual Workshop portion of the VE study, the five-step Job Plan is followed, as prescribed by
SAVE International:

The VE Job Plan follows five key steps:

1. Information Phase
2. Speculation (Creative) Phase
3. Evaluation (Analysis) Phase
4. Development Phase (Value Management Proposals)
5. Presentation Phase (Report/Oral Presentation)

These five key steps are described as follows:

1. Information Phase:
At the beginning of the VE Study, it is important to:

• Understand the background and decisions that have influenced the development of the design
through a formal design presentation by the design A/E.
 • Analyze the key functional issues governing the project. The functions of any facility or system are
the controlling elements in the overall VE approach. This procedure forces the participants to think
in terms of function, and the cost and impacts associated with that function.
• Define Owner's objectives and key criteria governing the project.
• Determine Owner's definition of Value.

2. Speculation (Creative) Phase:

This step in the VE study involves the listing of creative ideas.

• The VE Team thinks of as many ways as possible to provide the necessary function within the
project areas at a lesser initial or Life-Cycle Cost which represent improved value to the client.
• Judgment of the ideas is prohibited.
• The VE Team is looking for quantity and association of ideas, which will be screened in the next
phase of the study.
• Many of the ideas brought forth in the creative phase are a result of work done in the function
analysis. This list may include ideas that can be further evaluated and used in the design.

3. Evaluation (Analysis) Phase:

In this phase of the Project, the VE Team, together with the Client and/or Users,

• Defines the criteria to be used for evaluation.

• Analyses and judges the ideas resulting from the creative session. Ideas found to be impractical or
not worthy of additional study are discarded. Those ideas that represent the greatest potential for
cost savings and value improvement are developed further. A weighted evaluation is applied in
some cases to account for impacts other than costs (such as schedule impacts, aesthetics, etc.).

4. Development Phase:
During the development phase of the VE study, many of the ideas are expanded into workable solutions.
The development consists of:

• Description of the recommended design change.

• Descriptive evaluation of the advantages and disadvantages of the proposed recommendation.
• Cost comparison and LCC calculations.
• Each recommendation is presented with a brief narrative to compare the original design method to
the proposed change.
• Sketches and design calculations, where appropriate, are also included in this part of the study.

5. Presentation Phase:
The last phase of the VE Study is the presentation of the recommendations in the form of a written report. A
briefing/oral presentation of results is made to the Client and Users, as well as the Design Team
representatives. The recommendations, the rationale that went into the development of each proposal, and
a summary of key cost impacts are presented at that time so that a decision can be made as to which Value
Management proposals will be accepted for implementation and incorporation into the design documents.
In addition to the monetary benefits, a VE Workshop provides a valuable opportunity for key project
participants to come together, then step aside and view the project from a different perspective. The VE
process therefore produces the following benefits:

• Opportunity to explore all possible alternatives

• Forces project participants to address "value" and "function"
• Helps clarify project objectives
• Identifies and prioritizes Client's value objectives
• Implements accepted proposals into design
• Provides feedback on results of the study

Construction

During this phase value engineering is still possible through the use of Value Engineering Change Proposals
(VECP). Contractors can be provided monetary incentives to propose solutions that offer enhanced value to
the owner, and share in the financial benefits realized. Clearly the owner must consider contractor-
generated proposals very carefully, from a life-cycle perspective and a liability perspective. The A/E team
must be brought in to the decision-making process to agree to the proposed change as not having any
negative impact on the overall design and building function. The evaluation of a VECP is treated similarly to
any change order during construction, with issues such as schedule and productivity impacts being
considered along with the perceived cost savings generated.

Conclusion

In the final analysis, Value Engineering is not only beneficial, but essential because:

• The functionality of the project is often improved as well as producing tremendous savings, both
initial and Life-Cycle Cost.
• A "second look" at the design produced by the architect and engineers gives the assurance that all
reasonable alternatives have been explored.
• Cost estimates and scope statements are checked thoroughly assuring that nothing has been
omitted or underestimated.
• Assures that the best value will be obtained over the life of the building.