Why the most effective value engineering considers what a project gains, as well as what it costs.
When a proposed change to a construction project delivers a saving of £250,000, it's a welcome result. The revised specification is less expensive, the cost plan has been updated and the project is in a stronger position against its budget.
But before that saving is accepted, there's another question worth asking: what has changed as a result?
If the revised solution delivers the same performance, meets the client's requirements and reduces the cost of construction, there's a strong case for making the change.
If it affects the building's durability, increases maintenance requirements or compromises how the facility will operate, the financial benefit may be less straightforward.
Both proposals might show a £250,000 reduction in construction costs. Whether they represent the same improvement in value is another matter.
This distinction sits at the heart of effective value engineering.
The purpose is to make the best use of the money being invested, considering the relationship between cost, function, performance and the outcomes the project needs to achieve.
What are we actually trying to improve?
Value engineering is an established part of construction project development. It brings together technical, design and commercial expertise to examine how a project can achieve its required functions and performance as efficiently as possible.
Done well, it creates opportunities to simplify construction, improve buildability, review specifications and identify alternative solutions that offer better value.
The starting point is understanding what the client needs the project to deliver.
Consider a new education facility.
Its design will need to respond to requirements around capacity, accessibility, durability, maintenance, energy performance and how the building will be used.
There may be several ways of achieving those requirements, each with different implications for construction cost, programme and long-term operation.
A value-engineering exercise could identify an opportunity to simplify the structural arrangement, standardise certain components or reconsider a proposed material.
If the alternative meets the required performance while reducing cost or improving delivery, it may represent a genuine improvement.
But a lower-cost option that affects the building's expected service life or creates additional maintenance demands needs to be assessed differently.
The important thing is understanding the consequences before deciding whether the saving is worthwhile.
A saving in one area can influence costs elsewhere
Construction costs are interconnected.
A decision about specification can affect installation, maintenance and replacement. A change in construction methodology can influence labour requirements, temporary works and programme. Simplifying a design may reduce material quantities while improving buildability.
Take a proposed change to a building's roofing system.
An alternative specification may offer a lower initial supply and installation cost. Before recommending it, the project team needs to establish whether it meets the required performance, what its maintenance demands are likely to be and whether it affects other elements of the design.
The lower-cost solution may prove entirely appropriate. It could offer comparable performance with simpler installation and a meaningful saving.
Alternatively, a system with a higher initial cost may offer sufficient advantages in durability, maintenance or service life to justify the additional expenditure.
Neither conclusion should be assumed. The recommendation depends on the building, its intended use, the client's requirements and the available evidence.
The same principle applies to programme and construction methodology.
An alternative might reduce material costs but require a longer installation period. Another might involve higher component costs while reducing site labour, temporary works or programme duration.
Looking at one cost item in isolation can give an incomplete picture. Good commercial analysis considers the relevant consequences across the project, allowing the client to understand the net benefit.
Not every decision requires an extensive assessment. The level of scrutiny should reflect the significance of the proposed change, its potential benefits and the risks involved.
Value engineering can mean spending more
For organisations that will own and operate a building for many years, construction costs are one part of a much longer financial commitment.
Maintenance, energy consumption, replacement cycles and operational requirements can all influence the cost of owning and using an asset.
Consider two flooring specifications for a heavily used public building.
One has a lower initial installation cost. The other costs more but is expected to provide a longer service life and require less frequent replacement.
The appropriate choice depends on expected usage, maintenance requirements, replacement costs and the anticipated period of occupation.
If the evidence supports the higher-cost specification, that may be the better commercial recommendation. If the additional expenditure offers little meaningful benefit for the building's intended use, the lower-cost option may be preferable.
This is particularly relevant for public-sector organisations managing facilities over extended periods, often with separate capital and operational budgets.
A saving during construction may create additional costs for the organisation responsible for maintaining the asset. Equally, higher initial expenditure should be justified by a proportionate improvement in performance or longer-term value.
The objective is to establish where additional expenditure is worthwhile and where the required performance can be achieved more economically.
The best opportunities often come from looking at the whole solution
Some of the most effective value-engineering decisions involve more than changing a material or reducing a specification.
They come from reconsidering how a particular requirement can be achieved.
A complex structural arrangement might be simplified through changes to the design, reducing material quantities and construction time.
A different approach to building services distribution might improve installation efficiency and future maintenance access.
Standardising components could reduce procurement complexity, improve consistency and support more efficient construction.
These opportunities require collaboration between the client, designers, cost consultants and those responsible for delivering the work.
Each brings a different understanding of the project. The commercial contribution is to establish the cost implications of the available options, including their effects on programme, risk and longer-term expenditure.
This is where value engineering becomes more than an exercise in adjusting individual cost items.
It creates an opportunity to examine whether the proposed solution is the most effective way of achieving the required result.
How do you know whether value has improved?
A proposed saving should be supported by enough information to demonstrate what it means for the project. The assessment will depend on the decision, but five questions are particularly useful.
What is the actual financial benefit?
The saving should reflect the relevant cost implications of the change, including any effects on other elements of the works, construction methodology or programme.
Does the alternative meet the required function and performance?
The proposed solution needs to be assessed against the client's requirements, relevant technical standards and the intended use of the asset.
Are there wider cost implications?
Maintenance, operation, durability and replacement may be relevant, particularly where the decision could materially affect the building over its expected life.
Does the change introduce new risks or dependencies?
An alternative may affect procurement, availability, programme, design coordination or the allocation of commercial risk.
Is the benefit proportionate to any compromise?
Where a change involves a reduction in specification, performance or flexibility, the client needs to understand whether the saving justifies that trade-off.
These questions help distinguish between a reduction in construction costs and an improvement in the value delivered by the investment.
Sometimes the evidence will support the less expensive option. In other cases, it will justify retaining the original specification or investing more in a particular element.
What matters is that the recommendation reflects a clear understanding of the consequences.
Make the saving count
When a value-engineering proposal is presented, the client should be able to see more than the financial savings.
They should understand what will change, what the implications are for the building and whether the proposed alternative still delivers what the project needs to achieve.
A successful exercise should leave the client confident not only in the cost of the proposed solution but in the decision to adopt it.
The ultimate test isn't how much has been taken out of the cost plan. It's whether the project is better for the change.
Sharp facts. Solid ground.
Shard Stone | Chartered construction cost consultancy
