Realities of Value Engineering: Tips for Maintaining the Integrity of Your Specification When Budgets Are Cut

October 29, 2018 Meagan Weinzierl

Value engineering, the review of a product specification to determine the most cost-effective way to fulfill it without taking away from its intended purpose, has become increasingly important in recent years. With specifications often written long before a project begins, it’s no wonder that an estimated 45 to 60 percent of projects are impacted by requests for some level of value engineering. Here are four tips to help you maintain the integrity of a specification when faced with budget cuts.

Facilitate open communication among stakeholders. Most requests for value engineering are made after bids have been awarded and coincide with budget finalization. Typically, all project stakeholders have been determined at this point; in addition to the owner or owner’s representative and the engineer, architect, or lighting designer who wrote the specification, the general contractor, electrical contractor and sales agent should have been chosen by this phase of the project. So, gather these stakeholders in one room to discuss value-engineering requests. Bringing everyone together encourages teamwork and facilitates open dialogue, as well as opportunities for increased understanding between groups. Stakeholder meetings like these have the added benefit of helping non-specifiers understand why certain specifications are important.

Remember the original intent of all specified products. Don’t allow the immediate budget pressure to make you forget the reasons for the specification, as written. You’ve put a great deal of thought into designing the spaces to meet the owner’s needs, and owners invest significant amounts of money in this process. But too often the intent of a designer can get lost during value engineering when other project stakeholders make design choices based solely on cost. Design expertise carries its own inherent value – for example, a well-lit space can increase an owner’s business revenue because lighting contributes to well-being, productivity and comfort.  It can also set the desired mood and tone in a space.

Present decision-makers with “good, better and best” options. It’s important to point out the specific trade-offs associated with each alternative, as compared to the original specification. Presenting good, better and best options during the value-engineering process – each of which, ideally, meet the project requirements – helps decision-makers focus on features and think about which ones they value most, as well as how much they’re willing to pay for them. Organizing options in this way also naturally leads to a discussion of how adding or subtracting features will impact the end result. In many cases, a “good” but less expensive option may be perfectly fine for certain spaces in a building, while the “best” option is worth the higher price tag in others. For example, in a recent hotel project with two towers, more than 1,000 rooms and a 188,000 square-foot gaming floor, we were asked to value engineer 300 different types on a lighting specification. Ultimately, our group of stakeholders decided to keep the high-end “best” lighting in public spaces where it would have the most impact and use the “good” option for individual hotel rooms, cutting the budget by approximately 50 percent.

Avoid compromising on quality. In the long term, compromising on quality never translates to strong partnerships with stakeholders. Unfortunately, we are now seeing this happen with greater frequency in the lighting industry; non-reputable manufacturers often sell knockoff imports at prices lower than those of established manufacturers, which then impact project budget expectations. In many cases, these non-reputable manufacturers will not be in business even one year after their products are installed – which means they can’t provide support or honor warranties. Even worse, many of these knockoff imports are low-quality, do not meet accepted safety standards, and do not allow for post-installation maintenance.  Use of products like these erodes trust between stakeholders and can ultimately reflect negatively on the specifier. There are plenty of high-quality, safe and competitively priced products available from reputable manufacturers, and these products are also backed by the warranties and support services of these established companies. Often, you can find options that meet value engineering goals within the product offering of the manufacturer who was originally specified. That takes one element of risk off the table.

 

A native of Western Pennsylvania, Harry McGovern earned a degree in business and marketing at Edinboro University. For the past seven years, he has worked in sales at Performance Lighting Systems in Irvine, California, where he recently became a Certified Lighting Controls Professional™ (CLCP™).

 

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