Value Engineering & Peer Review

New constructions and building renovations are major investments for development companies. When there are many potential projects, developers will want to focus on the most lucrative options. Value engineering  (VE) consists of maximizing project functions and performance while optimizing costs, making it a very useful tool for investment decisions. The benefits of value engineering also apply for organizations who occupy the buildings they own, since it helps them achieve the lowest possible cost of ownership.

Peer review is the evaluation of work by professionals who have the same qualifications as those who produced the work. Peer review is very useful as a complement for value engineering, since it brings an external viewpoint to the project. This offers two key benefits: optimizing the project design, and bringing alternative solutions to the table. Even when a building project has a highly qualified engineering team, thinking outside the box can pose a challenge.

The combination of value engineering and peer review is considered a best practice in construction projects, since it helps maximize value. For investors and developers, this means the project becomes more lucrative. In general, there are two ways to increase value in projects:

• Achieving a higher performance without increasing costs.
• Achieving a lower cost without affecting performance.

Of course, the ideal scenario is when value engineering can increase performance while decreasing costs. In critical applications such as fire protection systems and structural design, value engineering can also be used to enhance safety while optimizing costs. VE can be applied in all technical fields that are involved in construction.

The cost of a new building or major renovation extends beyond the dollar amount in the project budget. Consider all the following costs, which are not reflected in construction cost estimates:

Contrary to popular belief, reducing construction costs is not the main purpose of value engineering. For instance, a lighting system with fluorescent and HID lamps is less expensive than an equivalent LED installation. However, LED lighting has a lower ownership cost when you consider its energy efficiency and simpler maintenance. Older lamp types consume more energy, while requiring more frequent replacements. Fluorescent and HID lighting are less expensive upfront, but LED lighting is less expensive in the long run.

In a few words, value engineering focuses on cost-effective design, and not low cost strictly speaking. The optimization process typically makes the project less expensive, but the main goal of VE is to maximize value. This means that VE may actually increase some project costs, as long as the benefit outweighs the added expense.

Value engineering achieves maximum benefits when applied early in the building process. Changing a preliminary design is simpler than changing final construction documents, and change orders during construction are much more expensive than design changes. The project owner and VE team can also accept suggestions from bidding contractors, but these must be included in the design documents before starting construction.

• Value engineering is much less effective in a project that has already started construction. At this point, the cost of major changes is likely higher than the benefit achieved.
• Some changes may still be cost-effective at this point, even if they involve rework. However, they will still increase the project budget, something that can be avoided by using value engineering from the start.

In theory, value engineering can be carried out by the project’s design team. However, this can be difficult because they must think outside the box, while judging their own work. Peer review brings an unbiased professional opinion, which is external and independent from the project. This generates more design options, allowing the best one to be chosen.

Value engineering and peer review can be combined with advanced design tools, achieving greater benefits. For example, if value engineering is applied during a building retrofit, it can be combined with energy modeling software. This allows value analysis for multiple scenarios, and the building owner can maximize the energy savings per dollar invested. Following a similar approach, NYC buildings subject to emissions limits (Local Law 97 of 2019) can maximize the emissions saved per dollar invested.

The Society of American Value Engineers (SAVE) breaks down the value engineering process into five steps, which are summarized in the following table:

Building performance is a very broad concept, since buildings have many systems and functions. Value engineering can be used to lower operation and maintenance expenses, improving cost performance. However, building performance can also refer to aspects like indoor comfort and environmental impact.

To apply value engineering, an important step is to determine the specific areas of building performance that will be improved. As an example, consider the performance categories of two rating systems for buildings: LEED and WELL.

The WELL certification focuses on human wellbeing, while the LEED certification focuses on energy efficiency and environmental sustainability. These certifications are not mutually exclusive, and a building can achieve both. However, this an example of how “building performance” can have different meanings. Value engineering for a LEED certification will focus on different metrics than value engineering for a WELL certification.

Many building owners use value engineering to improve cost performance. In this case, the project design team and peer review team collaborate to determine the building design with the lowest ownership costs. Of course, there is a lower limit to how much costs can be reduced. The project must meet all applicable building codes, and cost reductions should not be at the expense of human well-being.

However, value engineering goes beyond cost optimization, since it can also improve the following aspects of building performance:

• Making the building safer for its occupants.
• Improving indoor air quality and thermal comfort.
• Reducing the carbon emissions produced by the building.

There is a common belief that additional building functions always increase costs. However, there are opportunities to improve performance while cutting costs. For example, smart ventilation controls can be combined with air pollution sensors to improve indoor air quality. This measure also saves energy by preventing overventilation - air handling systems are ramped down when their full capacity is not needed.

Value engineering can also be used to improve building safety at an optimal cost. For example, when designing an automatic sprinkler system, value engineering can be used to design a layout that achieves full coverage with the least sprinkler heads possible.

Building emissions are getting more priority with the growing concern about climate change and its potential consequences. In fact, New York City has already introduced building emissions limits that are legally mandated. In this case, value engineering can identify the measures that will maximize the emissions saved per dollar invested.

In building projects, there are cases where a design decision brings secondary benefits, such as improving the performance of another component or reducing its cost. For example, if all the electrical devices in a building are energy efficient, the installation uses less current. This reduces the design capacity and cost of many components:

• Electrical wiring
• Conduit and accessories
• Circuit breakers and other protections
• Main service equipment

The same logic applies for all building systems: a reduced workload also reduces the capacity and cost of many components. Water-saving plumbing fixtures will reduce piping costs and the required pump capacity, and an efficient building envelope will allow heating and cooling systems with a reduced nameplate capacity.

Value engineering considers the overall building performance and overall cost, instead of focusing on specific building features. This approach allows better design decisions, especially when VE is combined with peer review. VE is not exclusive for construction projects, and it can be applied before any investment decision.