Price is a crucial decision-making factor for construction estimators in a competitive bidding environment ... but it's not the only way to differentiate your bids.
Value engineering, which is the process of determining minimum cost in relationship to maximum performance, has the potential to help your bids stand out. However, many don’t understand value engineering. Some say it’s the same as cost-cutting, decreasing budget and reducing scope. Others perceive quality loss, elimination and redesign as risks in the value engineering process.
This misunderstanding about value engineering leads to missed opportunities.
What is Value Engineering?
So what exactly is value engineering, and how can it help estimators differentiate your bids?
Value engineering is the process of determining minimum cost in relationship to maximum performance.
With so many misconceptions, it’s essential to address what value engineering is not. Value engineering is not a redesign. For example, you wouldn’t change a domestic water system to a PEX system, but you might suggest an alternative material or fitting. It’s also not cost-cutting or changing scopes. With value engineering, you aren’t reducing the benefit the customer gets from their project.
Value engineering is a process of reviewing plans to reduce cost without compromising function. The goal of value engineering is to maximize the value of a project by balancing its cost, performance and quality and, in essence, identify the highest value at the lowest cost.
Value engineering raises the value of your construction estimates.
How to Implement Value Engineering
In value engineering, you analyze the project requirements to achieve essential functions with the lowest total cost. Often, these savings are identified as labor or material changes within the estimating workflow. While others bid for planned specs, value engineering opens the door to talking with the customer about ways to not just save money but also get more utility out of the project. It also helps mitigate risks related to supply chain issues and labor shortages.
1. Look for Inefficiencies
The process begins with analyzing project requirements to identify areas where you can apply value engineering. Look for places For example, are there materials that can be replaced with a material of equal quality at a lower cost or require less labor? Is there an opportunity to simplify the design to reduce cost? Is the project using a material that is difficult to get due to supply chain delays?
2. Brainstorm Solutions
Once you’ve identified the project requirements and opportunities for value engineering, start thinking about possible solutions to reduce costs while maintaining quality.
For example, are different types of HVAC systems more energy-efficient? Could you source less costly plumbing material if you bundle ordering for your jobs?
3. Propose Possible Solutions
Finally, it is important that your proposed solutions are accurate and detailed. Clients may be hesitant to change original building plans, therefore it’s essential that you are capable of communicating clearly and confidently about the different scenarios available to them. Without the right knowledge or tools to do this, the entire value engineering process is useless.
The Role of Technology in Value Engineering
The quickest way to gain efficiencies is with automation.
When it comes to value engineering, using an estimating solution such as Trimble AutoBid Mechanical allows you to quickly and efficiently evaluate and document options, providing visibility to help the client understand your proposed changes.
For example, using a base estimate to build the alternate solution, you can remove or add costs, specify alternate materials, and adjust labor without re-doing takeoff. With very little time and effort, you can evaluate numerous scenarios to find the most effective option for the client. These “mini estimates” can be used to clearly communicate your proposed solution and gain approval.
Value engineering is more important than ever and making it an integral part of your process can deliver significant benefits. To learn more about the benefits of value engineering or how technology can facilitate your value engineering efforts, get in touch.