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To manage is to forecast and plan, to organize, to command, to coordinate and to control. - HENRI FAYOL

Value Engineering Definition and Use in Construction

An article about the origin of this term and how different it is from Quantity Surveying, and its use in Construction

Value Engineering Concept

The concept evolved from the work of Lawrence Miles who, in the 1940's was a purchase engineer with the General Electric Company (G. E. C). At that time, manufacturing industry in the United States was running at a maximum capacity to supply the allies with arms. There were shortages in steel, copper, bronze, nickel, bearings electrical resistors, and many other materials and components.
G. E. C wished to expand its production of turbo supercharger for B24 bombers from 50 to 1000 per week.

Miles was assigned the task of purchasing the materials to permit this. Often he was unable to obtain the specific material or component specified by the designer, so Miles reasoned, "if I can not obtain the product, I must obtain an alternative which performs the same function".  Where alternatives were found they were tested and approved by the designer.
Miles observed that many of the substitutes were providing equal or better performance at a lower cost and from this evolved the first definition of value engineering.

Value Engineering Definition

Value Engineering can be defined as an organized approach to providing the necessary functions at the lowest cost
From the beginning the concept of value engineering was seen to be cost validation exercise, which did not affect the quality of the product. The straight omission of an enhancement or finish would not be considered value engineering. This led to the second definition :

Value Engineering can be defined as an organized approach to the identification and elimination of unnecessary costs.
Unnecessary cost is Cost which provides neither use, nor life, nor quality, nor appearance, nor customer features.

Quantity Surveying

Quantity Surveying is a profession developed in the nineteenth century from the earlier job of measuring. It deals with diverse variety of problems, mainly those relating to costs and contracts on construction projects.

How different it is from Quantity surveying 

The following tasks are undertaken by quantity surveying practitioners and are not considered to form any part of value engineering

- Producing contract documents including the bill of quantities
- Analyzing complex projects into manageable work packages
- Planning and controlling costs
- Valuing work in progress and exercising cost control during construction
- Evaluating tender bids and contractual arrangements
- Preparing valuations for insurance purposes and advising on insurance claims
- Sub contract documentation
- Settlement of final accounts
- Advice and settlement of contractual disputes and claims
- Advising on taxation grant and financial matters
- Schedule resources
- Planning and programming design and construction work
- Use of network analysis techniques
- Project and construction management

The following tasks are undertaken by Quantity Surveyors, and are involved in value engineering practice:

- Preparing and administering maintenance programs.
- Forecasting expenditure flows.
- Advising on cost limits and preparing budgets.
- Advising on Cash Flow Forecasting.
- Advising on Life Cycle Costing.
- Cost Analysis.
- Cost benefit Analysis.
- Estimating
- Evaluating alternative designs.
- Undertaking feasibility Studies.
- Investment Appraisal
- Measuring and describing construction work but only in terms of cost planning.

Use in Construction

The 1999 edition of FIDIC included a Sub-Clause for value engineering. It encourages contractor to seach for better alternatives that may - in his openion - be of benefit to the Employer. Sub-Clause 13.2 reads as follows:

"The Contractor may, at any time, submit to the Engineer a written proposal which in the Contractor openion will - if accepted - (i) Accelerate completion, (ii) reduce the cost to the Employer of executing, maintaining or operating the Works, (iii) improve the efficiency or value to the Employer of the completed works, or (iv) otherwise be of benefit to the Employer. The proposal shall be prepared at the cost of the Contractor and shall include the items listed in Sub-clause 13.3 (Variation Procdure) If a proposal, which is approved by the Engineer, includes achange in the design of part of the permanent works, then unless otherwise agreed by both parties:
  • (a)The Contractor shall desgn this part
  • (b) Sub-paragraphs (a) to (d) of Sub-Clause 4.1 (Contractor;s general obligations) shall apply and
  • (c) If this change results in a reduction in the contract value of this part, the Engineer shall proceed in accordance with Sub-Clause 3.5 (Deteminations) to agree or determine a fee, which shall be included in the contract price. This fee shall be half of the difference between the following amounts:

    (i) such reduction in contract value, resulting in from this change, excluding adjustments under Sub-Clause 13.8 (Adustments for Change in Costs)

    (ii) the reduction in the value to the Employer of the varied works, taking account of any reductions in quality, anticipated life or operational efficiecies.