Does Value Engineering Live Up to Its Name?
The term "value engineering" means different things to different engineers. When several consulting engineers were asked to define the term, each had a different, sometimes positive, sometimes negative view. Tim Smith of Metro Design, Schaumburg, Ill. said that, ideally, "value engineering is when a design is reviewed, and alternate means are suggested that result in the same system but at a lower cost. The value engineered system should perform the same as the original design while giving the owner the same value at a lower cost."
Paul Gonzales of HDR, Inc., Dallas, Texas, reinforced the need for keeping the design objective at the forefront. "Value engineering is engineering systems to accomplish the same results while reducing the construction cost and maintaining the integrity."
This ideal isn't always met, however. "As long as the objective of the system is retained, reducing the cost corresponds to increasing the value," Daniel Fagan of Teng & Associates, Chicago, said. "But, more often than not, the term 'value engineering' is used to refer to reducing the cost of a building by reducing the scope of the work." For example, he explained, a hot water system for a laundry could be designed with a water softener, which results in a better quality finished laundry product using less soap. As a value engineering option, though, the water softener could be deleted, Fagan said. This would cut the cost, but rather than providing the same results, the parameters would instead be revised.
Bob Boulware of Design-Aire Consultants, Indianapolis, offered a less idealized definition. "Value engineering means cheapening the job," he said. "There is no regard for 'value.'" John Serwatka of Bacik, Karpinski Associates, Inc., Cleveland, agreed, saying that value engineering is "providing a product to the owner that he/she didn't want. It really should be called 'no-value engineering.'"
Hard FeelingsSome engineers dislike having their designs re-evaluated and changed for the sake of cost-cutting. "It depends on if it is done professionally and for an engineering reason, without introducing cost first," Joe Baz of Sloan Valve Co., Miami, said. "Too often, it is based on price only."
Smith said that he doesn't resent the intrusion as long as it is done properly. "Typically, value engineering on my projects ends up in reduction of equipment or equipment quantities." For example, he said, "We may design a hot water system with two boilers, each sized for 66% of the building's demand. A typical contractor's value engineering suggestion would be to provide one boiler sized for 100% capacity. There is a savings, but no value. If that one boilers fails, the owner has no hot water," Smith explained. "The value of the original system design gives the owner 66% capacity from the second boiler, thus allowing him to have some hot water until the other one is repaired.
"Reduction in equipment or purchasing equipment with shorter useful lives (that is cheaper, in most cases) is not my idea of value engineering," Smith added.
"We have a saying that the client usually gets the job he deserves," Boulware said. "If the owner chooses to listen to the contractor after we make our case, then he deserves his own fate." His frustration, he said, is that "we see perhaps 30% of that quality leave the job with 5% cost savings and the owner never seems to appreciate that."
Fagan, too, is less than happy about re-engineered projects. "While admittedly there are times when a design can be modified to provide an equal product, more often than not the redesign involves the second party deciding that certain parameters or program elements can be either modified or deleted," he said. "The reason this second activity is frustrating is that it makes the original engineer look like he is not cost-conscious."
Boulware shared Fagan's opinion, saying that it was irritating to be "made to feel inferior by the architect and the owner for 'over-designing' his project. With the resulting lost credibility, the contractor has a free hand to install poor quality work, and there is little we can do about it," he said.
Serwatka sees that often budgets and value engineering don't mix. "We, as MEP consultants, get budgets to work with from the architect and have to design within those budgets. But when the project comes in over bid, the architects ask us to value engineer our system so that he can keep his 'pretty' stuff in, and for no additional fee. They always want to build a Taj Mahal, even if the owner can't afford it."
Budget ConstraintsUnfortunately, situations can often arise for some of these consulting engineers in which the budget for a project needs to be cut, and the answer seems to be value engineering. "Value engineering can result in cost-cutting on any project that comes in beyond its expected budget, which occurs on almost every project. It's one of the reasons that the consulting engineering field exists," Fagan said.
Smith, too, has seen his share of design changes "due to rising construction costs and limited budgets. Some projects that we propose at current budget costs may sit around for two or three years before they actually start construction. The owners would like to carry the original budgets, and they have a hard time accepting any budget increases."
Serwatka said he hasn't had to deal with too many value engineering projects, but when he does, "it is a very long, drawn out process, especially if you designed within budget, and there is no fluff to take out."
Similarly, Gonzales said that for him, re-engineering occurs "percentage-wise, I would say about 10% of the time, usually on projects where a construction manager has a vested interest in having a project come in under budget."
Value Engineering In ActionSo, what exactly happens when a project is value-engineered? "Typically, the equipment quantities are reduced, equipment performance is sacrificed and the quality of the equipment is cheapened, resulting in an overall system that doesn't last as long, results in higher operating costs (fuel and energy), and requires more service and maintenance. Where's the value in that?" Smith questioned.
Whereas these engineers felt the owner or redesigner should bear the brunt of the blame for a value-engineered system not living up to its promise, the original design engineer is more often held accountable. "One project in particular stands out in my mind," Serwatka recounted. "It was a new school, and we designed a four-pipe heating/cooling system. There are a lot of outside air requirements for schools, and our design was the best system to control humidity. We had to delete it, however, because it cost too much money. As of this day, we are still trying to alleviate the problem of too much humidity in the space. The owner is upset because his construction manager failed to tell him that we did not want to take the system out because we knew this was going to happen. Now the owner has to spend thousands of dollars to fix the problem."
Another reason that value engineering may fail is that the person performing the re-design may not have all the facts. "There was a time when value engineering was done on one of my projects to re-route an 18-in. storm water line," Baz reported. "The redesigner didn't know that the owner and architect had decided to leave an area for a future grand staircase from floor to floor, however. Of course you would be saving money if you didn't have to make so many turns to come out of this area," he said.
Boulware described his own situation where value engineering resulted in frustration and loss of work in designing a boiler system for a church in Indiana. "Our original proposal was for a boiler, a chiller, and a two-pipe fan coil system. At our cost, we did life-cycle costing to show that there would be an eight-year payback (12.5% ROI) on operating costs, plus decreased maintenance and longer life equipment. Our presentation was never submitted for serious consideration because the decision to replace with residential equipment and three ground-mounted rooftop units had already been presented to the owner and accepted. The backup of my design was considered 'too adversarial.' This redesign resulted in a 5% savings in first cost, but now they complain about the condensing units sitting by all the entrances."
Fagan noted that equipment life should be a factor in value engineering as well. "A recent project that I worked on included a duplex system in the design for dewatering of the foundation," he said. "The value of a duplex system is that should one of the pumps fail, the other pump would still function. In an effort to reduce the cost of the project, the second pump was eliminated, which did save cost, but left the owner without any backup should the single sump pump fail."
Final ConsiderationsUnfortunately, many owners and contractors often don't realize that there are factors that must be considered before value engineering a project design. If cost is the only issue looked at, problems are sure to arise.
"Value engineering usually occurs with the engineers on one side of the table, the contractors on the other side and the owner in the middle. When the owner is strictly looking at initial installed cost and not at value, the contractors usually prevail. The contractors talk dollars and the engineers talk sense," Smith asserted.
"I see that value engineering has value if you are talking about a business that is likely not going to be around more than five years; then a low first cost is desirable to increase profit margin," Boulware stated. "I see it over-applied to schools, churches and other areas where life-cycle costing would seem to be more appropriate."
Fagan pointed out that what often occurs in an effort to reduce cost is that the initial cost of a building is reduced at the expense of either long-term maintenance or operational costs. "Many times, a more expensive, efficient and reliable piece of equipment is replaced with a less expensive but also less efficient and reliable one," he said. "The result is that the initial cost of the building is reduced, with more expensive consequences down the road."
He summed up the underlying problems with value engineering, stating, "It is common for the contractor to attempt to revise a design to either save money for the owner or for himself. In either case, it is the engineer's responsibility to see that the owner receives what he is due."