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 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.
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.
- Evaluating alternative designs.
- Undertaking feasibility Studies.
- Investment Appraisal
- Measuring and describing construction work but only in terms of cost planning.
(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.