Define Value Engineering

Define Value Engineering

How often have you heard the phrase “value engineering,” or even used the words yourself, in the context of an AV integration project? If you are like me, you are probably tired of hearing what probably started out as a term to describe good construction management practices, but over time has become overused to the point of becoming a euphemism.

  • Ted Leamy
  • Leveraging Core Competencies
  • As “value engineering” becomes a euphemism for everything that makes people groan on a project, it might be time to throw it into the scrap heap with all the other phrases that should be outlawed in project communications. After writing this column, Ted Leamy came up with this abbreviated list: awesome, future proof, “I’m done,” robust design, cutting-edge, critical mass, globalization, ballpark figure, budgetary number, “with all due respect” (insult surely to follow), top priority—and the list goes on, ad nauseam.
  • So, other than smirking every time the phrase rears its head in a meeting, what can be done to make value engineering mean something? A quick internet search reveals that value engineering was developed by General Electric during World War II. It is defined as “an analysis of the functions of a program, project, system, product, item of equipment, building, facility, service, or supply of an executive agency, performed by qualified agency or contractor personnel, directed at improving performance, reliability, quality, safety, and life cycle costs.” Even the textbook definition is a bit circuitous and unclear.
  • When creating an AV design, budget is always an issue, along with profit margin. But after the contract is signed and the project meetings begin, suddenly AV is just one of many components fighting for a piece of the pie. That is the point where the term “value” is really in flux. Every client will have a different stance on the importance of communications technology. If AV has a stalwart champion on the design team, that can protect a lot of performance and functionality. But if AV is an afterthought, we all know what’s getting cut first.
  • Bearing these realities in mind, what does value engineering really mean to you? Do you have any nightmare stories from the field? Seeing as how we probably can’t send this concept to the dustbin any time soon, how can we improve the process? What is the next step? Head here to continue the discussion.
  • —Kirsten Nelson
  • In general, the term value engineering is a cliché throughout the construction industry today. The definition has been diluted over time and now means different things to different people, depending on their role in the project. Architects, consultants, subcontractors, owners, operations people, general contractors, and system integrators all seem to have a slightly different interpretation of the meaning and the expected results. Don’t get me wrong. There are valid reasons to have a process in place for evaluating the original design concepts in the context of changing priorities and project costs. The trick lies in knowing how and when that process is to be used, and ensuring that it is clearly defined and understood by all.
  • The generally agreed-upon definition of value engineering is a corrective process taken to reduce total cost while still maintaining the original functionality outlined in the program document that was created in conjunction with the owner. Ideally, it is an iterative process where program and design adjustments are made to fit the project budget realities. More simply put, it means finding a cheaper way of accomplishing the same functional design goals.
  • This process is most effective during the early programming and design phases when functionality and performance criteria are first being defined and developed. Unfortunately it commonly occurs at some later time such as during the bid process and is generally prompted by a budget crisis. However at this juncture, cost reduction rarely produces a result that does not adversely impact both expected functionality and performance. This can create a paradox: even if functionality can indeed be successfully maintained, the impact of lowering the performance expectations to reduce cost does not always get examined by, or explained carefully to, the owner. This can create unmet expectations.
  • The key to proper value engineering is to preserve functionality while adjusting performance. Where suitable, cost should be reduced by adjusting the level of system performance. For example, if you need a certain number of loudspeakers to effectively cover an audience area with intelligible sound, you must by definition of the design maintain the coverage (functionality) but may need to choose a less costly loudspeaker to accomplish the goal. This will affect performance but preserve the designed functionality.
  • In the truest sense of the words, value engineering is a term that describes a careful and thoughtful process. And it will always include value judgments. The project team must discuss, and test in theory, each individual value judgment with the owner and any other stakeholders. A simple litmus test is to pose the question: who is the value accrued to? Any true value engineering solution must serve the owner’s needs. Keep in mind that performance-altering substitutions and cost reductions may not provide the best genuine value to the owner.
  • If budget constraints cause one portion of a system, or an entire subsystem to be deleted (reduction of functionality) then all stakeholders must understand the consequences and be willing to live with the results. This should not be considered value engineering. Wholesale deletion of systems or portions of systems should be called by the correct terms. Deletion, cancelled, scrapped, or cost-cutting are good words that quickly come to mind.
  • In addition it must be realized the concept of value engineering does not help correct for a shortfall in an initial budget, make up for cost overruns, rescue a poor design, or make up for margin erosion or financial projection mistakes.
  • Value engineering is not a panacea for having ignored, or not upheld, solid project development and management discipline. Only clear communications throughout the entire process of programming, design, and installation can correct the regular misuse of the term. In summary, the true “value” of value engineering needs to be maintained by a thoughtful and honest approach being taken by all professionals involved in serving their client—the owner.

Ted Leamy is the COO of Pro Media/UltraSound, an audio-video installation and tour-sound contractor.