When companies develop new products, projects, processes and services, the possible solution is often determined in an early design stage. Once started, the solution is fixed and 90% of the costs are ‘designed in’. That is, they cannot be avoided without redesigning the product or solution*. There is a systematic method of avoiding tunnel vision in the early stages of design and development. This method is called Value Engineering (VE) and is rapidly gaining momentum.
In some industries – like automotive and hi-tech – value engineering already is a standard procedure in R&D and manufacturing. Philips for instance has labeled their method DFX – design for excellence – and applies DFX in each product development project. Value Engineering brings together stakeholders and experts that are involved in finding solutions, immediately at the start of a project. Consolidating all requirements and wishes, VE looks for alternative ways to achieve the project’s function at the lowest cost. VE offers a structured approach to discuss all inputs to a project. Next, all participants can propose alternative solutions for the situation. Finally, the solutions with the best trade-off between functions and costs are chosen. The value of VE is not only recognized by industries, but also receives governmental endorsement.
Mandatory Value Engineering
Since 2012, the US government has mandated by law to apply value engineering prior to the implementation of major infrastructure projects in road construction and transportation. This law derives from guidelines for using value analysis in the construction of highways, which have already been applied since 1970. The statutory mandatory application of value engineering ** applies to major infrastructure projects to which the government contributes more than $ 20 million.
The law states: “Value Engineering (VE) is defined as a systematic process of review and analysis of a project, during the concept and design phases, by a multidiscipline team of persons not involved in the project, that is conducted to provide recommendations for:
- providing the needed functions safely, reliably, efficiently, and at the lowest overall cost;
- improving the value and quality of the project; and
- reducing the time to complete the project.”
The US government does so, because: “The successful application of the VE process can contribute measurable benefits to the quality of the surface transportation improvement projects and to the effective delivery of the overall Federal-Aid Highway Program.”
The law is not only intended to enforce efficiency but, above all, wants to encourage improvements to all concerned. The value engineering law therefore includes a series of activities such as: “technical assistance, liaison with industry and the States, promotional activities, and active participation in studies”. In addition there is a: “focus on education and training of Federal, State, and local highway employees through the presentation of the National Highway Institute’s VE workshop.”
Mandatory Value Engineering in practice
The approach includes a documented value engineering study process that VE-teams should follow to achieve the desired quality at the lowest cost. It also looks at construction time reduction, security improvements, operational and environmental aspects, reducing total costs, applying innovative technologies and life cycle costs. According to the law, the VE-team should consist of a multidisciplinary group of individuals who are not directly involved in the design or planning of the project. The facilitator should be trained in and be familiar with value engineering. The team follows a strict procedure called the “value engineering job plan” and completes 7 phases. The value engineering job plan provides approved enhancement proposals that are documented in a fixed format in a value engineering recommendations report. Depending on the complexity of the project, a value engineering study takes 3 to 5 days, followed by the formal recommendations report. The study should preferably take place as early as possible in the design process, because the impact is then the largest. The report must be kept for 3 years. In summary, the US value engineering law has already delivered more than 1,000 studies since 2012, with an average total annual savings of over $ 1 billion through the use of approved recommendations. Showing the beneficiary value of value engineering. Want to learn more on how to put Value Engineering to work, email us at firstname.lastname@example.org
* Target costing and value engineering / Robin Cooper, Regine Slagmulder, 1997, ISBN p XXI
** Dept. Of Transportation final rule Docket No. FHWA-2013-0039