VE or Value Engineering. Two words everyone on a project hates to hear (except for contractors and others that have found out how to work the system).
What is Value Engineering? Often times when a project is over-budget, the owner, contractor, and design team will meet to find ways to reduce the cost of the project. Value Engineering is the term given to this process of eliminating areas that are over-designed or not needed in a project. Unfortunately, this typically means that the owner is not getting the best overall value on their project. Value engineering rarely adds value to a project.
The right approach to design should mostly eliminate this part of a project. A great design team should be looking at life cycle costs when selecting materials and equipment for a facility, which should include a detailed cost-benefit analysis where the best overall products are included in a facility.
It should be noted that some of the products with the lowest life cycle cost (total cost to own) might include products that have high capital cost (first cost) but low cost to operate (the amount you are paying each month). A prime example of this is LED lights. Installation of LED lights is often expensive, but the lights last longer and are less expensive to operate than normal light bulbs. It is common knowledge that LED lights cost less over a period of time, but they are often on the chopping block during VE.
Typical VE options for commercial swimming pools include:
- Switching to a lower cost pool surface
- Changing gutter styles
- Reducing mechanical equipment
- Accepting cheaper deck products (scoreboard systems, water slides, play features, bulkheads, starting blocks, etc.)
On projects where the VE process has failed, often times the owner is controlled by the bottom line. In this situation, the contractor typically has the upper hand and will usually make additional money on the project.
An example of this is when a contractor removes a UV system for the project in the name of value engineering. The owner will get a credit back from the contractor that amounts to less than the actual price of the equipment, putting money in the contractor’s pocket for doing less work. This is when having a skilled design team that understands current market rates for equipment is able to hold contractors accountable for actual project cost reduction.
With large projects, Value Engineering is typically done by running through a “laundry” list of cost reductions. The owner is asked to make decisions on major items without much information on what is being proposed to reduce the project's cost. For a $20 million project, this list could be over 100 items, with prices ranging from $5,000 to $500,000. In this scenario, the owner is forced to select items based almost solely on cost.
Don’t give contractors the upper hand. When it comes to your projects, hire a skilled architectural team to help you navigate the process. An experienced architectural team will hold contractors accountable by ensuring all Value Engineering cost reductions are necessary and make sense.