It is an increasingly common response to high bids to value engineer the project to reduce its cost. Value engineering is the process whereby various building materials, equipment, systems, and even construction details recommended by the design architect or engineer are compared by the bidder against less expensive alternatives in order to reduce the cost of a building project.
While the effort may be worthwhile, should we not assume that the design professionals have value engineered all of their options while developing their design, and have recommended the options with the most value?
Too often, value engineering is no more than a bidder’s sales tool, employing the substitution of cheaper materials for the better quality materials specified by the designer. The cost of the project can probably be reduced by making the substitution, but will the quality of the project also be compromised when lesser quality materials are substituted?
It is important to understand that much of the value engineering exercise is not about creating more value as much as simply reducing the cost of the project. And the cost reductions offered do not always accurately reflect the reduction in quality. Care should be taken to assure that value engineering doesn’t result more in increased profits for the bidder than increased value for the owner.
True value engineering considers the real value to the owner, both for the short term and the long term, and takes longevity, ease of maintenance, warranties, and other factors into consideration as well as initial cost. It is not limited to what may be less expensive.
Value engineering is commonly offered by bidders to encourage building owners to negotiate the construction contract with them alone. Every contractor can do that for you. So it’s probably unwise to restrict this value engineering exercise to one bidder only, even if you would be inclined to question the designer’s recommendations.
An effective contract negotiation doesn’t rely on value engineering alone. After the relatively easy part of value engineering is complete, the real work begins. Finding and eliminating the common bidder errors that unnecessarily inflated the bid price in the first place can frequently reduce the contract price by more than the value engineering exercise, but without sacrificing project quality.