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What Is Value Engineering In Cost Estimating?

July 23, 2018

Value engineering is one of the most commonly misunderstood processes in the world of cost estimating. Some say it’s the same as cost-cutting, budget-cutting, and scope reduction. Others add that quality loss, elimination, and redesign are risks in the process. So, what exactly is it?

It started at General Electric during World War II in response to skilled labor shortages, a lack of raw materials, and component parts. Because of the shortages, Lawrence Miles and Harry Ehrlicher of GE had to look for substitutes. What they found was that some substitutions not only reduced cost but offered a better final product and even more value than before. It was this happy accident that led to their newfound technique, “value analysis.”

Today, value analysis has been deemed “value engineering,” and it’s an important part of a good estimator’s process. According to NIBS, value engineering is “a conscious and explicit set of disciplined procedures designed to seek out optimum value for both initial and long-term investment.” It’s considered an organized, group effort that is meant to seek out the best value at the lowest cost.

 

There are three main stages of value engineering:

  1. Planning
  2. Design
  3. Methodology and Approach

 

Value engineering can be applied at any stage of the project— even during construction; although this stage can sometimes present the biggest risk. The sooner it’s implemented, however, the higher the success rate. If you’re simply trying to cut initial costs, value engineering isn’t for you. This is just a knee-jerk reaction to going over budget.

With the dire need for high-quality cost estimators due to a lack of accurate cost projections, value engineering will become an important skill in the industry. There are even certifications and licenses available if you’d like to show capabilities in the field, with SAVE International’s Highest Level of Certification for Value Methodology being one of the most prestigious.


If you’re interested in learning more about the value that value engineering brings, download our free ebook, How to Add Value to Your Estimates With Value Engineering.

Sarah is the Content Manager/Editor for Constructible and Trimble MEP. She has worked on many large scale marketing campaigns for Fortune 500 companies, helping them define their story and shape a compelling narrative. Now, she focuses on creating and sourcing valuable thought leader content for our readers.

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