Although building projects involve many technical aspects, we must not forget they are business ventures, with investors who want to maximize the return on their equity. Value engineering is a useful method to improve the financial performance of building projects, turning them into more lucrative investments.
In simple terms, the goal of value engineering is to accomplish as much as possible with each dollar invested. There are two main ways to increase value in building projects:
Value engineering often involves trade-offs, where some extra expenses are assumed on purpose to achieve even greater benefits. For example, improving the insulation and air-tightness of a building involves additional costs, but you reduce heating and cooling loads. If the cost savings from purchasing smaller heating and cooling equipment exceed the additional building envelope costs, value engineering has been applied successfully.
Value engineering requires ample knowledge of building systems, including how they interact with each other. To apply the method successfully, a project design team must have members from several technical fields – finding the optimal configuration for building systems is much more difficult when the design process is carried out by isolated teams.
Construction progress is often tracked based on the budget percentage that has been used already, but this practice can be misleading. For example, if a project has a budget of $10 million and the accumulated expenses add up $4 million, it does not necessarily mean that 40% of the work has been completed. Value engineering can tell you if the budget is being used correctly.
Only value engineering can give you a realistic perspective of how efficiently a project is using its budget. Simply comparing the spent budget with the planned budget can lead to wrong conclusions; if a project has been wasteful, you can use 100% of the budget without reaching 100% completion.
MEP engineering ensures that built environments have suitable conditions for human occupancy, but the business aspect of property development is not addressed directly. You can have a project design that uses the latest technologies in its mechanical, electrical and plumbing systems, but the business case is not favorable if the project cost exceeds your budget. When you combine MEP engineering and value engineering, a building project can achieve high performance in both technical and financial aspects.
With value engineering, your building project can maximize its benefits while staying under the available budget. Additional features do not necessarily represent a budget increase; if you can reduce the cost of building elements without affecting performance, those funds become available for enhancements to the same building or for other projects.