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PART 1, SECTION 2

PART ONE: THE CLIENT

SECTION 2: VALUE ENGINEERING

Introduction
Value management (and within it, value engineering) is a structured method
of eliminating waste from a clients brief and from the design on a
construction project before binding commitments are made. Used to deliver
more effective and better quality buildings, for example, through taking
unnecessary costs out of designs, value management ensures a clearer
understanding of the brief by all project participants and improves team
working. According to the Construction Task Force report, Rethinking
Construction (published by the DETR in July 1998) it is practiced by up to a
quarter of the construction industry in the UK. The report also estimates that
while the objective of value management is to increase value, it can also
reduce costs by up to 10 per cent.

Value management is the wider term used in the UK to describe the overall
structured team-based approach to a construction project. It involves clearly
defining the clients strategic objectives, considering optimum design
solutions within the context of the clients business objectives and deciding
which of these provides the optimum lifetime value to the client, as well as a
review of the whole process after occupancy. Value management includes
value engineering as part of this process.

Value engineering is a systematic approach to delivering the required

functions to the required quality at the least cost, i.e. a method of ensuring
that the client gets the best possible value for money in terms of safety,
performance and delivery targets. It is a structured form of consensus
decision making that compares and assesses the design solutions against the
value systems declared by the client.

This section of the handbook looks at the carrying out of a value engineering
exercise during the early design phase of a project, i.e. an evaluation of design
solutions against the clients brief. Value engineering, as described here, can
be a stand-alone exercise (a value engineering workshop) or may be part of an
overall value management process.

In describing the value engineering process this section aims to assist

surveyors both in advising clients on the use of value engineering and taking
part in a value engineering exercise as part of the design team. It is not
intended for surveyors acting as value engineering facilitators and makes no
attempt to address the very particular skills required for this role.

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G 1.2.1 Why Value Engineering?

1.2.1.1 Value engineering has grown in popularity for the simple reason that it
actually works. Construction projects can often take on a life of their own
when members of the design team become focused on their own particular
problems and time constraints. Consequently, the true objectives of the client
get lost along the way. Value engineering relates design proposals directly
back to a clients business, thus ensuring that a management system is in place
which forces designers to justify their decisions when tested against the
clients required function.

1.2.1.2 A value engineering exercise can only relate design proposals to a clients
business requirements if early value management studies have encapsulated
these requirements within the brief. If a value engineering exercise is carried
out in isolation from any strategic review of the project requirements, it can
only act as a functional assessment of the technical design solutions and their
relative cost. However, even in this limited function it can still be very useful.

G 1.2.2 Applicability
1.2.2.1 The technique of value engineering can be employed on any project. However,
more complicated and higher value buildings are likely to benefit the most
(see figure 1). This is because it is more difficult to develop the design brief
in such instances and consequently a design solution may be adopted without
being questioned, usually because of time constraints placed upon the
designers.

Figure 1: Projects Benefiting from Value Engineering

High
Essential

Complexity

Optional
Low
Low High

Value

1.2.2.2 Many client organisations will only undertake value engineering on schemes
over a certain value. For example, Railtrack will carry out the technique on
projects valued at 250,000 or more and Northumbrian Water will only
consider it for projects worth over 1m. Despite this, there is no reason why
the process should not be applied to smaller schemes. Furthermore, value
engineering will be invaluable where repetitive schemes are being considered

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as improvements and savings can be incorporated into future schemes. They

can also be tested in practice, leading to the sort of continuous improvement
recommended by the Rethinking Construction report.

1.2.2.3 Value engineering works irrespective of the procurement route taken. It is a

discipline upon the design team members and the clients who appoint them.
Where the contractor is mainly responsible for the design, for example, design
and build, develop and construct or PFI projects, the technique is just as
appropriate in ensuring that a well-defined statement of requirements is first
established and that subsequent design solutions address the function of the
building most economically.

G 1.2.3 At What Stage Should Value Engineering be Carried Out?

1.2.3.1 The greatest benefits can be obtained by commencing the VE process at the
earliest possible stage. Once it has been established that the clients needs will
best be met through a construction project the purpose of the first VE exercise
should be to inform the brief. When an experienced client has prepared the
brief, or a value management exercise has already examined the clients
requirements, the value engineering exercise (which will address the proposed
design solutions) is best done towards the end of the scheme design. Several
workshops may be necessary at each of the crucial decision-making stages of
a project:

(a) A first exercise (a functional analysis of requirements), to define the

project needs and inform the brief, could be carried out as early as option
appraisal, and since this could generate the greatest benefit to the client the
timing is crucial. Carry it out too early and not enough will be known about
the problems associated with the building function, whereas too late and
minds become set on the solutions formulated by the design team.

(b) A review of the project at outline design could be conducted to ensure

that the decisions taken earlier have been implemented or, if changed, that
they still meet the functional requirements.

(c) Another review (a functional analysis of the solutions) would then be

carried out at scheme design to test individual building elements involving
traditional cost planning/life cycle costing techniques.

1.2.3.2 This section of the handbook considers the evaluation of a design at the end of
the scheme design phase, but the process will be the same whenever it is
carried out. The objectives of the project should remain the same throughout
the process and they should be validated at the beginning of each workshop.
The objectives of each workshop may be different. If the project objectives do
change the whole direction of the project will need to reassessed.

1.2.3.3 It is important that time for the value engineering process and any resultant
redesign is included in the scheme design programme at the outset.

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PART 1, SECTION 2

G 1.2.4 Who Should Carry Out Value Engineering?

1.2.4.1 It is strongly recommended that a value engineering exercise is organized by

an experienced value management facilitator to ensure that the value
engineering participants retain their objectivity and that an unbiased approach
is maintained.

1.2.4.2 The value engineering participants should represent the principal stakeholders
in the project namely, the client, the building users and the design team
(designer, engineers and quantity surveyor) and also the contractor, where
applicable. It is important that each of the participants have the authority to
make decisions at the workshop. It may also be appropriate to include clients
advisers, for example, letting agents or rating valuers.

The participants should be those who can make decisions and provide
information related to the specific aims and objectives of the workshop. These
may include:

those people with responsibility for the needs of the business;

those with specific responsibility for development, design and

implementation of the operation/project;

those with responsibility for the management and/or maintenance of the

operation; and

those who will be affected by the outcome.

Different stakeholders will be required to participate at different stages of the

project.

1.2.4.3 The optimum size of a value engineering panel would depend upon the
complexity of the project as well as the skills of the facilitator. However, it is
considered that panels of more than twelve members are difficult to manage.
Panels with fewer than four members could be considered ineffective.
However, it is important that all stakeholders are represented even if this
results in a larger group.

1.2.4.4 It is common practice in North America to appoint an outside team of

consultants to question the design teams solutions. However, this practice has
been known to cause resentment between the project team and the external
advisers and might therefore compromise the final design solutions. It is
considered that an experienced facilitator independent of the design team,
with an appropriately briefed panel, will ensure that the design teams
solutions are adequately tested at the workshop.

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PART 1, SECTION 2

G 1.2.5 How Long Should It Last?

1.2.5.1 The length of time taken over the value engineering workshop will depend on
the complexity of the project and the level of design detail that has been
completed.

1.2.5.2 The 40-hour workshop is the classic industrial value engineering standard.
However, two-day workshops at key points during the design process are
more common in the UK construction industry.

G 1.2.6 Preparing for a Value Engineering Workshop

1.2.6.1 Prior to the workshop, it is most important that an agenda is agreed by the
panel and distributed by the facilitator.

1.2.6.2 In addition to an agenda, a functional analysis of the clients requirements

should be drawn up.

The clients value criteria will have been developed in the first value
management workshop. With each successive workshop these criteria will be
developed further into a function diagram. This should be included in the
workshop handbook. If it is to be developed further this will take place as part
of the information stage of the workshop.

The functional analysis should always be generated by the client

representatives with the help of the other members of the workshop. It is the
role of the facilitator to facilitate this process, not to take part in it.

All participants must be prepared to propose and challenge design solutions.

The input of all participants (not just those who are experts in a particular
discipline) is one of the strengths of the VE process and should be encouraged
by the facilitator.

G 1.2.7 Functional Analysis of Design Relative to the Clients

Requirements

1.2.7.1 It should be understood that it is not possible to find meaningful alternatives

to a technical solution without first identifying the function required of it.

1.2.7.2 Functional analysis is any technique designed to appraise value by careful

analysis of function. This can be simple creative session of the functions and
possible alternatives, but the most common method is using a functional
analysis systems technique (FAST) diagram.

1.2.7.3 The FAST system uses a function diagram which identifies the basic
function what is required on the left-hand side and more detailed secondary
functions working from left to right until all the means of achieving these

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functions how are they to be fulfilled are identified on the right. See figure 2
for an example of a FAST diagram. It should be understood that this is a
broad-brush technique.

The objective of functional analysis is to produce a complete description of

the end purpose of the design in terms of what it must do.

Reference is sometimes made to different types of FAST diagram: Classical

FAST, Technical FAST or Customer/Task FAST.

The original FAST diagram was a presentation of the user-related and

product-related functions of a design solution. It was a technique used to
assemble the functions of a product in a hierarchy and to assess why and
how they are delivered. This is known as a Classical FAST.

Subsequently it was recognized that all functions did not fit into the flow logic
so it was decided to separate out the functions that are always active, whether
the product is operational or not. It was also decided to separate out those
functions that only occur one time regardless of repetitiveness of the process.
This diagram describes what a product, element or component must do and is
known as a Technical FAST.

It was then recognized that, ideally, it is the customer who should determine
the value of the product and that the FAST diagram should include the
customer/user in the development of value study projects. The resulting FAST

Figure 2: FAST Diagram

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PART 1, SECTION 2

diagram has become known as a Customer or Task FAST. It is this concept

from which the Value Tree has developed.

All FAST diagrams should include a scope line on the left-hand side of the
diagram. The scope line limits the area of the project on which attention is
being focused. The scope is the portion of the project that is selected for the
value study.

The FAST model displays functions in a logical sequence and tests their
dependency. It does not indicate how a function should be performed.

There is no such thing as a correct FAST model, only a valid FAST model.

1.2.7.4 Most practitioners insist that functions are defined in terms of active
verb/measurable noun (or phrase) combinations, for example, minimize
energy consumption. This improves clarity, helps all panel members develop
a shared understanding and promotes the examination process. These should
be interrogated by asking why the client requires this in order to examine
how it should be achieved.

1.2.7.5 The process of setting up a FAST diagram is of matching the functional

elements of the building (object functions) to the clients required functions
(user functions). The functional requirements need to be broken down until
they are reflected in elements which can be priced (and built). This process is
called functional decomposition. For example, the requirement for increased
energy efficiency might be provided by increased levels of insulation which
might be achieved by changes to all or any of roof, walls, floor, windows and
doors or finishes. The number of levels of decomposition required cannot be
predetermined.

1.2.7.6 VALUE TREE

A Value Tree is a diagram that describes the business driver (mission) for a
project or need and the criteria that need to be satisfied in order to achieve it.
A Value Tree should be developed at an early stage in order to inform the
brief. However, it can be developed at any stage in order to confirm the brief.
It will generally be carried out by the client organization in order to establish
whether a project is the solution to their needs. The criteria are then developed
further into the functions required in order to achieve them. The scope line for
a project will begin to the right of the Value Tree.

1.2.7.7 Appendix A gives an example of part of a Value Tree and a FAST diagram for
a health centre.

Function elements (object functions) are defined in the BCIS publication,

Standard Form of Cost Analysis: Principles, Instructions and Definitions and
in Section 2.3 of this handbook.

A typical example of a value engineering process is included in Appendix B.

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PART 1, SECTION 2

G 1.2.8 Pricing the FAST Diagram

1.2.8.1 As the FAST diagram progresses and different solutions are found, it becomes
possible to establish alternative costs for achieving a given function.
However, it is important that all functions are clearly defined if costs of
alternative proposals are to be meaningful. Also, it should be remembered that
it is the design solutions to the functional requirements that are being priced
and compared to the value and importance that the client puts on that function.
For example, the client can identify the value of savings from reduced energy
consumption or may rank this as important for other reasons. The value
engineering teams task is to put a price on the various design solutions
suggested that will achieve this end. It is creativity in finding the most
economical solution that is the essence of the value engineering exercise.

1.2.8.2 Fees and value added tax (VAT) and other financial and fiscal matters may
also need to be considered.

G 1.2.9 Presenting a Design Solution to a Value Engineering Workshop

1.2.9.1 Design solutions should be presented as designers normally would to any

panel of users. However, they should expect to be questioned quite
extensively. They should keep an open mind and maintain objectivity in
justifying their proposals because the objective is to find the most
cost-effective solution, not to criticize for the sake of it. On the other hand,
designers should be prepared to stand by their design solution if they think it
is correct for the function being considered.

G 1.2.10 The Workshop

1.2.10.1 A value engineering workshop will work through phases of information,

speculation, evaluation, development and presentation:

(a) The information phase identifies the spaces, elements and components in
terms of the functions they fulfill. It asks the questions about what is the prime
function of an element?; what are its subsidiary functions?; what does it
cost?; what is its value? It is at this stage that the FAST diagram is developed
and it is against the background of this information that the value engineering
evaluation will be made.

(b) Speculation is the brainstorming stage which will generate the ideas from
which solutions will be developed. It is important that each member of the
panel thinks positively. The facilitator will ensure that no one is allowed to
become overly critical of another members contribution in order that ideas
flow. All ideas should be logged at this stage. However, in order to encourage
idea building, they should not be analysed or rejected. It is important that the
underlying functions of suggestions for improvement are listed for evaluation
later. Design solutions should not be developed at this stage to ensure that

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what is to be achieved is properly addressed. All optional solutions should

only be considered at the evaluation stage.

(c) Evaluation is the analysis of the ideas generated by the earlier

speculation. Again, a positive feeling will be encouraged by the facilitator
with advantages/disadvantages being discussed in an even-handed manner. At
this stage some ideas will be rejected and the best taken forward. It is essential
to ensure that all the ramifications of any suggested changes should be
considered. For example, if the exercise has suggested a change to a piece of
M&E equipment, the effects on the control management systems and
structural requirements must also be considered.

Life cycle costing can be an important factor in the process when considering
optional solutions but the criticality of this aspect will hinge on the clients
philosophy.

(d) Development of the ideas to be taken forward will be initiated at the

meeting and a programme established for completion of this stage. Often the
detailed development including life cycle costing, if appropriate, will be
continued beyond the initial meeting and the outcome presented to a
subsequent meeting for the panel to determine which design options to adopt.

(e) Presentation takes the form of a report prepared by the facilitator which
records in some detail all elements of the study and concludes with those
options to be incorporated in the developed design. This report is normally
presented to the client by the value engineering panel at a meeting held within
one or two weeks of the date of the workshop.

1.2.10.2 The workshop should focus on expensive items or mismatches, for example,
parts of the FAST diagram which are important to the client but which have
been allocated little money or have cost a lot of money but do not contribute
to the function.

G 1.2.11 Assessing the Value of the Workshop

1.2.11.1 Areas for research/change identified at the workshop could be grouped into
three categories:
(i) those that are removed/changed and result in reduced cost;
(ii) those that are added/changed and result in additional cost; and
(iii) those that are identified for investigation but not implemented

1.2.11.2 The financial benefit should then be identified against all elements within
categories (i) or (ii).

1.2.11.3 A major benefit of the workshop which will be enjoyed by the panel members
is a better understanding of the project functions and common ownership of
the team-based designs solutions which have evolved.

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G 1.2.12 Implementing the Results

1.2.12.1 The value engineering panels decisions are recommendations that need to be
accepted by all stakeholders. Those stakeholders that are not part of the panel
are likely to have a right to comment before decisions are adopted.

1.2.12.2 Once the workshops proposals have been sanctioned by the client, decisions
should be fed back to the design team, briefing those members whose work is
affected as to why the changes were made.

1.2.12.3 If necessary, amendments to the design brief, design programme and scope of
professional teams brief should be incorporated into these documents.

G 1.2.13 Feedback from Post-Occupancy Evaluation

1.2.13.1 It is important for any client to carry out a project review to demonstrate how
project objectives have been achieved and particular problems overcome. As
part of the project evaluation process, it should be established whether the
project represents best value for money and whether or not key design changes
made as a result of value engineering have achieved the benefits expected.
These should always be set against the cost of carrying out the exercise.

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PART 1, SECTION 2, APPENDIX A

Appendix A: Health Centre Value Tree

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PART 1, S ECTION 2, A PPENDIX B

Appendix B: Typical Example of a Value Engineering Process

B1 BACKGROUND

A retail client with a regular development programme for a series of new

stores (typical size 8,000m2) entered into a partnering agreement with key
members of the construction team for four new projects.

To encourage value engineering, the partnering contractors share in any

savings that relate to any accepted proposals.

For two of these projects the client opted for a design and build contract for
the services installations (mechanical, sprinklers and electrical).

In an effort to reduce costs and ultimately add value to the schemes, the client
set a target of reducing the costs on these projects by 10 per cent, with no
material effect on quality or health and safety.

To set a benchmark for this reduction model cost plan costs for a typical store
(derived from historical records) were modified to suit the new scheme
layouts. Allowances were included for any items that were classified as site
specific (e.g. acoustic requirements stipulated by the district surveyor). Cost
plan figures were based on the clients current specification.

Due to the volume of developments undertaken by the client and the repetitive
nature of the works, the savings generated by value engineering can be
incorporated in any future schemes.

B2 SPECIFIC EXAMPLE: VENTILATION TO SALES FLOOR

The original design was based on previous solutions and included traditional
ventilation.

At the information phase, the functional requirement, including the need for
ventilation, was examined against the clients desire to reduce capital costs.
This identified that a high proportion of the cost of the mechanical installation
related to the provision of ventilation to the sales floor of the store (plant,
distribution ductwork, diffusers, etc.)

At the speculation phase, the clients engineering department worked closely

with the mechanical partnering contractor to consider alternative methods of
ventilating the sales floor of the store.

The alternative method of ventilation proposed was of the displacement type.

With displacement ventilation, air is only conditioned at the level at which
occupiers are breathing. Air is introduced at low level and at low velocity.
Natural convection currents are utilised to remove excess heat and pollutants
out of the occupied zone. There is a saving in the amount of ductwork
required, as only two runs of ductwork are needed on the sales floor. (The

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traditional method is designed for four separate branches of ductwork.) The

new specification requires diffusers of the displacement type, with the facility
of automatically varying the air throw pattern whether in heating or cooling
mode.

Furthermore, the proposed system required ventilation to the occupied zone

only rather than the full building space. This has resulted in capital cost
savings on plant and in the likely running costs of the system.

The evaluation identified significant savings.

Summary of Value Engineering Exercise

Original installation: Traditional ventilation

Value engineering proposal: Displacement ventilation

Benefits: Saving on air handling plant size

Saving on chiller plant size
Saving on sales floor ductwork

Savings on capital cost: Air handling plant 10%

Chiller plant 5%
Ductwork and diffusers 25%

At the development phase, the proposed method was discussed with other
members of the design team to ensure that any impact on the other building
elements, the project programme and the interface with other subcontractors
were taken into account.

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PART 1, SECTION 2, APPENDIX C

Appendix C: Further Reading

British Standards Institute. Value Engineering, Value Analysis Vocabulary Part 1:
Value Analysis and Functional Analysis, BS EN 13251 1997, British Standards
Institute, London, 2000.

Building Cost Information Service. Elements for Design and Build, BCIS Ltd, 1996

Building Cost Information Service. Standard Form of Cost Analysis; Principles,

Instructions and Definitions, BCIS Ltd, 1969 (Reprinted 1997)

Connaughton, John, N., Green, Stuart, D., Construction Industry Research and
Information Association. Value Management in Construction: A Clients Guide,
CIRIA, London, 1996

Dellisola, Alphonse. Value Engineering in the Construction Industry, Van Nostrand

Reinhold Co., New York, 1983

Dellisola, Alphonse. Value Engineering: Practical Software Applications for Design,

Construction, Maintenance and Operations, R. S. Means & Co., Kingston, MA, 1997

Green, Stuart, D. and Popper, Peter, A. Value Engineering: The Search for
Unnecessary Cost, Chartered Institute of Building, Berkshire, 1990

Institution of Civil Engineers. Creating Value in Enginering, Thomas Telford

Publishing, London, 1996

Kelly, John and Male, Stephen. A Study of Value Management and Quantity Surveying
Practice, RICS Books, Coventry, 1988

Kelly, J.R. and Male, S.P. A Study of Value Engineering and Quantity Surveying
Practice, Heriott-Watt University, Edinburgh, 1989

Kelly, J.R. and Male, S.P., Heriot-Watt University, Department of Building

Engineering and Surveying, Royal Institution of Chartered Surveyors. The Practice of
Value Management: Enhancing Value or Cutting Cost? RICS, London, 1991

Law, Alastair, G. An Introduction to Value Engineering: A New Technique in

Technology Assessment and Evalution, Alastair G. Law, Washington DC, 1981

May, Susan, C., College of Estate Management. Value Engineering and Value
Management: A CPD Study Pack, College of Estate Management, Reading, 1994

Mole, Kelly, Fernie, Grongvist and Bowles. The Value Management Benchmark:
Good Practice Framework for Clients and Practitioners. Thomas Telford Publishing,
London 1998

Norton, Brian, R. and McElligott, William, C. Value Management in Construction: A

Practical Guide, Macmillan, Basingstoke, 1995

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PART 1, SECTION 2, APPENDIX C

Palmer, Angela. A Critique of Value Management, Chartered Institute of Building,

Berkshire, 1990

Royal Institution of Chartered Surveyors. Value and the Client (papers presented at a
conference held at the RICS on 29 January 1992), RICS, London, 1992

Smith, J., Jackson, N., Wyatt, R., Smyth, H., Beck, M., Chapman, K., Shirazi, A.,
Hampson, K., Royal Institution of Chartered Surveyors. Can Any Facilitator Run a
Value Engineering Workshop? RICS, London, 1998

Zimmerman, Larry, W. and Hart, Glen, D. Value Engineering: A Practical Approach

for Owners, Designers and Contractors, Van Nostrand Reinhold & Co, New York,
1982

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