MGT313: CONSTRUCTION

MANAGEMENT (TH.)

Lecture no. 5

Engr. M. Nouman,
Lecturer, CED, SUIT.
Email: mnouman.civil@suit.edu.pk
WHAT IS VALUE
ENGINEERING (V.E.)?
• “The process of reducing the cost of a product without reducing its quality or
how effective it is.” ~Cambridge English Dictionary.
• “The systematic application of recognized techniques that identify the
functions of the facility, establish the worth of those functions, and provide the
necessary functions to meet the required performance at the lowest overall
cost.” ~Architects Handbook of Professional Practice.
• V.E. is to deliver the required functions of a component or product at lowest
cost while meeting quality, performance and reliability specifications.
• V.E. is a methodology that ensures the owner is not over-paying for quality
when an equally effective, less expensive option exists.

Construction Management (Engr. M. Nouman) - Fall 2022

HISTORY OF VALUE
ENGINEERING (V.E.)?
• World War 2 (WWII) created shortages of parts, labor and raw materials.
• Engineers and Project Managers at General Electric (G.E.), facing shortages
were forced to find alternatives to unavailable or cost-prohibitive standard
choices.
• G.E. began to notice that some of these alternatives actually led to better
products, lower production costs and faster production.
• Born out of necessity, the success of the process of analyzing alternatives lead
to a change in the structure design.
• Lawrence Miles formalised this process following the war.

Construction Management (Engr. M. Nouman) - Fall 2022

WHY USE VALUE
ENGINEERING (V.E.)?
• The original or conventional method, design or idea is not always best or the
most cost effective.
• V.E. focuses on essential functions of a project.
• V.E. uses life-cycle cost analysis for decision-making.
• V.E. uses a combination of creative and analytical techniques to identify
alternative ways to achieve objectives.

Construction Management (Engr. M. Nouman) - Fall 2022

WHAT IS VALUE?
• “The regard that something is held to deserve; the importance, worth or
usefulness of something.” ~ Oxford dictionary
• “The worth of something compared to the price paid or asked for it.” ~ Oxford
dictionary
• “Value is the lowest price you must pay to provide a reliable function or
service.” ~(L. D. Miles)
• In terms of value engineering, value is the ratio of function to cost.

𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝑆𝑎𝑡𝑖𝑠𝑓𝑎𝑐𝑡𝑖𝑜𝑛𝑜𝑓 𝑛𝑒𝑒𝑑𝑠

𝑉𝑎𝑙𝑢𝑒= 𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡 𝑈𝑠𝑒𝑜𝑓 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

Construction Management (Engr. M. Nouman) - Fall 2022

 WHAT IS VALUE?
Examples:

𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛

𝑉𝑎𝑙𝑢𝑒= 𝑉𝑎𝑙𝑢𝑒= 𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡 𝐶𝑜𝑠𝑡 𝐶𝑜𝑠𝑡

Function=Time Function=Time+portable Function=Time+portable+Day+Date

Cost=1000 Rs. Cost=1000 Rs. Cost=1000 Rs.
Construction Management (Engr. M. Nouman) - Fall 2022
WHAT IS VALUE?
Examples: 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛
𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡

Construction Management (Engr. M. Nouman) - Fall 2022

WHAT IS VALUE?
• “Value engineering is increasing the value of product by increasing the
function and/or by reducing the cost.”

𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛
𝑉𝑎𝑙𝑢𝑒= 𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡 𝐶𝑜𝑠𝑡
𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛
𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡

𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛
𝑉𝑎𝑙𝑢𝑒= 𝑉𝑎𝑙𝑢𝑒=
𝐶𝑜𝑠𝑡 𝐶𝑜𝑠𝑡

Construction Management (Engr. M. Nouman) - Fall 2022

 Schematic Design Design Construction & Operation &
Planning Development Drawings Documents Maintenance
Design

WHEN TO USE V.E.?

• The earlier in the project,
the better it is.

Potential Cost Savings

• Potential cost savings and
functional impact decrease
with each progressive phase
of a project.

Construction Management (Engr. M. Nouman) - Fall 2022

 V.E. PROCESS &
1. Information
Phase
2. Creative Phase
3. Evaluation
Phase
4. Development
Phase
5. Presentation
Phase
6. Implementation
Phase

MEHODOLOGY
• Value engineering is often done by systematically following a multi-stage job
plan.
• Larry Miles' suggests a six-step procedure which he called the "value analysis
job plan."

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
1. Information Phase:
• It is sometimes called the investigation phase.
• Evaluate the project or product function criteria and design concepts.
• Identify the project’s high-cost elements.
• Conduct functional analysis of high-cost elements.
• Assess their cost-worth relationships.

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
1. Information Phase:
• Some questions for information phase;
i. What is it?
ii. What does it do?
iii. What is it worth?
iv. What does it cost?

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
2. Creative Phase:
• It is sometimes called the brainstorming phase or speculation phase.
• Team applies brainstorming methods to develop realistic alternatives to
conventional or current design.
• Team applies creativity to evaluate all possible solutions to the problem
presented in each function identified in the information phase.

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
3. Evaluation Phase:
• The team evaluates the ideas created in the creative phase.
• Ideas are evaluated on cost and how well they address functions identified in
information phase.
• Ideas with greatest potential savings and function improvement (not function
addition) are selected to be developed in the next phase.

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
4. Development Phase:
• The team further develops the highest ranking option from the evaluation
phase.
• The team develops descriptions, sketches and life-cycle cost estimates for the
best options.
• The team performs all necessary calculations to provide a recommendation to
stakeholders.

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
5. Presentation Phase:
• The team presents recommendations to stakeholders.
• It includes cost-value analysis, life-cost estimates, sketches and all
documentation and information necessary for the owner/stakeholder to make
an informed decision on a path forward.
• It is typically done in a report and formal presentation form.
• It should include more than one options.

Construction Management (Engr. M. Nouman) - Fall 2022

V.E. PROCESS &
MEHODOLOGY
6. Implementation Phase:
• In this stage, the ideas selected is implemented.
• An implementation plan is developed and executed and monitored to
completion.

Construction Management (Engr. M. Nouman) - Fall 2022

END OF THE LECTURE
Q/A