The Real Value Of Value Engineering

February 24, 2005
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BUENA VISTA, Fla. - To Jim Fields of Superior Mechanical Contracting, Greensboro, N.C., value engineering is a lot like going to a good restaurant. First you have your steak and salad, but then along comes the dessert cart with all your favorites: banana pudding, chocolate cake, strawberry shortcake, and pecan pie. You know you can't have them all. You have to choose.

In the same way, he explained to attendees of "Value Engineering: Who Benefits and Who Doesn't" at the ASHRAE (American Society of Heating, Refrigerating, and Air-Conditioning Engineers) Winter Meeting, sometimes HVAC projects specify the use of equipment that looks really cool and could have benefits, but if it's all incorporated, the project would soar over budget. The best options must be identified and those that are not necessary must be carefully removed from the design.

The seminar was part of ASHRAE's increased outreach to HVAC contractors, which seems to be gaining ground. This editor saw a definite increase in the number contractors in the audience for certain seminars and forums this year.

The term "value engineering" has gotten a bad rep, he said, because in the projects you tend to hear about, it has gone terribly wrong. "Properly done, everyone benefits from value engineering," Fields said. His goal was to describe what a mechanical contractor should do to make sure value engineering improves the project.

Engineer To Contractor

To get a good feel for the topic, Fields said he asked a number of engineers for their opinions on how to perform value engineering correctly. This is what they advised contractors faced with making value engineering decisions:

  • Be guided by ethics.

  • Build friendly relationships with the engineers.

  • Don't get a reputation for cost cutting.

    "You must do value engineering in a team environment," Fields stated, "with the owner, engineer, and contractor all on board." The key elements to any successful project, whether or not value engineering is involved, are ethics, strong professional relationships, and good working agreements.

    Fields had some advice for contractors attending this seminar: "You can get training to get into these negotiations through ASHRAE. You gain respect from peers in the consulting world with an ASHRAE membership. It's a great way to enhance your own professional development. Give a speech. Join a committee. Improve your communication ability."

    Cost Negotiations

    Fields said that in any given job, the contractor needs to look at the following areas to find ways to reduce costs:

  • Identify the cost of overruns.

  • Help find out why a standard product has a high cost for the project. For example, rising steel costs have been passed along throughout the industry. Whether or not they can be passed on to the owner depends on how the job was negotiated and how contracts were written.

  • Help eliminate proprietary specs. If the project planner uses one type of equipment over and over without considering other options, Fields pointed out, the supplier may start to raise costs.

  • Suggest alternative construction methods.

  • Negotiate with suppliers.

    The contractor looked at how value engineering fits into both design-build and plan-spec contracting. "Design-build is the only situation where the consultant is comfortable letting the contractor design the system," Fields said. At Superior Mechanical, "We stay with the owner until he's completely satisfied. It's how we get paid."

    On plan-spec projects, "The contractor should never make changes without the full agreement of the owner, designer of record, project owner, and other trades. You've gotta get everybody involved.

    "Choose your contractor wisely," he advised engineers in the audience. "Pick me!" he advised, to the laughter of the crowd. Check the contractor's ethics, reputation, and ability to form agreements in delicate negotiations.

    By working as part of a team, the HVAC contractor can reduce the cost of building to an acceptable level for the owner, without losing the original intent of the designer, Fields said.

    The Engineer's Perspective

    According to Dick Pearson, P.E., principal of Pearson Engineering LLC, Madison, Wis., "In the ideal process, value engineering is applied throughout the process by the design team that must include the owner.

    "In the real world, value engineering describes arbitrary cost cutting to reduce short-term budgeting problems," he said.

    The problems are based on unclear expectations from the owner and design team, and a lack of timely value engineering - as described above, the engineering that goes on throughout the process. In order for this to be done successfully, "The design intent must be very, very clear," Pearson said.

    Before redesigning any part of the system, he said the team must consider what this part of the system does; what it acts upon; and whether it can be reduced or combined with something else, instead of being eliminated.

    Pearson pointed out that in the total lifetime of a building, a full 50 percent of the cost goes for system operations and maintenance. True value engineering might mean optimizing the HVAC system to reduce HVAC maintenance and operations.

    He cited several case histories of "unusual value engineering"; the cost of certain components went up, but the operation and maintenance costs went down for greater long-term savings.

    For instance, he described a project for a new hospital patient wing with perimeter heating in 192 rooms, each with its own thermostat. The final system incorporated more expensive radiant panels because of their reduced operating costs.

    "Sometimes options can be integrated and optimized," Pearson said. "Develop ways to measure results to see where the real value can be achieved."

    Publication date: 02/28/2005

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