UNIVERSITY OF MAURITIUS

CIVIL ENGINEERING DEPARTMENT

BUILDING SERVICES
CIVE 3218(5)
CIVE 2215
CIVE 2242D

LECTURE NOTES 9

VALUE ENGINEERING OF
BUILDING SERVICES

Naresh Sewdin

16 October 2013
Lecture Notes 9 Building Services

Objectives

The objectives of this section are to:

1. produce guidance aimed specifically at building services engineers to assist in the
value management/engineering of the building services for a project;
2. provide examples of how value management/engineering can reduce the installed
cost of engineering services.

1. History

The techniques used for value analysis were born out of necessity during the Second
World War. In order to cope with increased demand for war machinery, component
shortages had to be overcome by seeking alternative ways of achieving the same
functions. The exercise proved that there was almost always an alternative to the
accepted design solution, and that many of these alternatives gave just as good reliability
and performance while costing less. Achieving the same function for less cost meant
better value. This war time experience demonstrated that value analysis during peacetime
could achieve continued cost savings and productivity improvements for manufacturing
industries.

2. Basic concepts

2.1 Core principles

There are two core principles which underpin value analysis:

1. Function should not be sacrificed for cost - cost savings are often achievable by
reducing the specification for performance, materials or labour. Although a
reduction in cost is achieved, customer satisfaction is also likely to be reduced.
True value analysis seeks to define and understand the function so that all of its
crucial features are protected whilst alternatives are considered. The process of
defining function is referred to as "functional analysis".

2. No existing standard or best practice solution is exempt from challenge - the fact
that there is a written standard defining a procedure or method of doing things
does not exclude it from scrutiny under value analysis. Standards are useful
means of defining current best practice but should not stand in the way of
innovation. Furthermore, the duration for which a standard has been in use is no
justification for its continued use. On the contrary, any standard which has been
in use for more than five years warrants challenging. Similarly, any designers
who still design in the same way they did five years ago need to reconsider their
methods.

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2.2 Causes of unnecessary costs

Unnecessary cost is simple enough to define:

“If, by comparing any two design alternatives, it is found that one is lower in cost than
the other but meets all of the functional requirements, then the difference in cost between
the two alternatives is unnecessary cost.”

The causes of unnecessary cost include the following:

• Lack of ideas - Too often the first workable solution that comes to mind is
accepted. This is partly due to a natural instinct to be lazy, or may simply be the
result of a lack of imagination.
• Poor information - The engineer may not have all the information he needs in
order to make an informed decision. For example, client requirements may not be
clearly stated, or information on innovative design options may be incomplete.
• Honest wrong beliefs - Engineers may believe there is a good reason why
something is done in a certain way which, when scrutinised, turns out to be false.
Such beliefs are frequently passed between engineers until they become self-
supporting myths.
• Habits and attitudes - Old habits can be very difficult to shake. Some people are
reluctant to make changes of any kind.
• Reluctance to seek advice - Engineers are often reluctant to seek advice from
others since they do not wish to appear unknowledgeable. Unnecessary cost could
be avoided by involving experts in various specialist fields.
• Poor human relations - Misunderstandings or friction between individuals can
often lead to unnecessary cost. This is because such friction impedes the free flow
of ideas and information needed to ensure efficiency in the design process.
• Shortage of time - For some design appointments, designers would argue that
their fees do not allow them enough time to consider a large number of
alternatives.

2.3 Terminology

Value is generally defined as the relationship between function, need and cost. Good
value is considered to be obtained when the function meets the need at the lowest cost.
Value engineering may therefore be thought of as a process which aims to increase the
value of engineering solutions.

A typical definition for value engineering is as follows:

“A systematic approach to achieving the required project functions at least cost without
detriment to quality, performance, and reliability.”

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In practice, for most construction clients capital cost tends to be the most important
criterion although the other factors will usually need to be taken into account.

Value engineering is often considered as a sub-set of value management. Whereas value

engineering focuses on specific engineering options, value management addresses the
overall project objectives, questioning the need for the project in the first place and
seeking to clarify the client's priorities in achieving the project.

Whilst value engineering is viewed as a sub-set of value management, for individual

construction projects value management and value engineering are often divided on a
chronological basis. Value management is understood as happening at the concept design
and feasibility stages whereas value engineering occurs at the scheme design and detailed
design stages.

Figure 9.1

The term "value management" refers to the whole process whereas "value engineering"
refers to the value analysis of engineering decisions.

Constraints
Constraints are design features which are made compulsory for whatever reason. They
may come from law, standards or market demands or may be defined by the user or
client.

Risk
Achieving best value involves taking hard decisions about what can or cannot be done
before the design fails (ie the client's objectives are not met). It is therefore important to
assess the risk associated with each design option under consideration and establish
whether the client is willing to accept that level of risk.

Life Cycle Costs

Life cycle costs comprise the assessment of the present value of the total costs of an asset
over its operational life which includes initial capital cost, finance cost, operational costs,
maintenance costs and the eventual disposal costs of the asset at the end of its life. Life
cycle costing enables investment options to be more effectively evaluated.
.

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Stakeholders
All key interest groups (client, investors, end users etc) with a real interest in and the
power to influence the final outcome of the project.

2.4 Benefits of value engineering

The building industry in general stands to gain significantly from value engineering. This
is because a great deal of unnecessary cost is created due to the fragmented nature and
complex inter-relationships in the industry. The total cost of a building project is
contributed to by potentially hundreds of individuals, many of whom may not even meet
one another, and who may have no direct accountability for the cost consequences of
their decisions. Those who do know what the project costs (ie the accountants or quantity
surveyors) often do not know why it costs what it does. This fragmentation has so
removed the decision maker from cost that there has been very little incentive to
minimise cost.

For individual construction projects, cost savings are almost always achievable. Case
studies have shown that cost savings of between 10% and 25% can be made on building
services installation costs on typical projects. The cost of achieving these savings is
estimated to be between 0.5 and 1% of the building services costs.

In addition, value management can provide other important benefits including:

1) improved communication and team working
2) a shared understanding among key participants
3) better quality project definition and design briefing
4) increased innovation.

3. Value management

The preceding advice for design and contracting organisations can equally be applied to
many client organisations with engineering staff. For client organisations a positive
philosophy in support of value management can help them to:
• evaluate building policy and company strategy
• optimise internal specifications
• optimise procurement routes
• participate effectively in value management and value engineering workshops run
by a third party.

Some clients may appoint their own "value manager" to represent them during the value
management process. The client's value manager may even act as "facilitator" during
value management or value engineering workshops.

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The participants in a value management process should ideally be those individuals who
have a vested interest in the outcome of the project and the authority to influence that
outcome.

From the client's side, participants need to be senior enough to make important decisions
about the fundamental requirements of the building. This might include cost consultants
appointed to protect the client's spending limits, but must also include representation
from facilities managers and end users.

Value management and value engineering workshops are normally organised and run by
an experienced facilitator. The appointment of the facilitator should ideally be approved
by the client. It may be the client's own value manager, or it may be someone from
within the design team's own staff.

Creativity and imagination are needed to ensure that as many ideas as possible are
generated and considered. This is best achieved by holding a workshop (or series of
workshops) to which all relevant client and design team participants are invited.
Workshops are seen as a useful way of compressing all the requirements of value
engineering into a defined period in a quick and economical manner. Short, intensive
workshops at predefined stages are usually cheaper to implement than frequent
concurrent meetings.

Value management/engineering should be carried out as a planned activity during the

design of a building. It makes sense for value engineering decisions to be made at
specific stages in the design process.

In order to motivate the project team to achieve maximum savings from value
engineering it is important to establish realistic savings goals. Since the most common
central objective of value engineering is to reduce cost, targets should be expressed in
money terms. Targets should be set at reasonable levels, i.e. not so high as to be
unattainable nor so low as to require very little effort to exceed them.

Whatever the cost saving target set, it needs to be regularly compared against the cost
incurred due to value engineering. It is reasonable (and normal) to expect a significant
cost saving in comparison to the cost of value engineering.

Value engineering should be an integrated part of the design process. However to ensure
that all possible cost saving areas are explored the client could offer a share in the cost
saving proposals submitted by the design team. Regular clients are in the advantageous
position of being able to offer the carrot of repeat business to designers who achieve
impressive results from value engineering.

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4. Value analysis tools and techniques

The preceding advice for design and contracting organisations can equally be applied to
many client organisations with engineering staff. For client organisations a positive
philosophy in support of value management can help them to:
 evaluate building policy and company strategy
 optimise internal specifications
 optimise procurement routes
 participate effectively in value management and value engineering workshops run
by a third party

There are a number of tools and techniques which can be used at different stages in the
value management (VM 1 & 2) and value engineering (VE 1 & 2) process which will
assist decision making.

The most commonly used are as follows:

1. Value hierarchies
The agreed project objectives are arranged into a value hierarchy in order to
show how they fit together and to establish a common understanding of their
order of importance.

2. Priority matrix /importance weightings

As some of the attributes are more important to the outline design options than
others it is important that each is weighted in. accordance with its perceived
importance. The use of a weighted priority matrix helps to eliminate this
complexity and minimises subjectivity and partiality.

3. Decision matrix
Once the importance weightings are assigned, the design proposals can then be
assessed against each third order objective to decide which proposal provides
the best value. A pre-requisite of each design proposal is that it must satisfy the
project constraints identified earlier (not capital costs because this will be dealt
with later) to warrant its assessment against the project objectives.

4. Cost/weighting comparisons
Once the design options are provisionally ranked, the most suitable options can
be compared with each other by dividing the total weighted factor by the
estimated capital and life cycle costs for each respective design option, to give
the weighted factor/cost ratio. Each design option cost should include cost
impacts on other disciplines (where they can be identified). The weighted
factor/cost ratio provides an indication of value for money. The highest ratio
may be determined to provide the best value for money.

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Life cycle costs, when used in the cost/weighting comparison, enable the design
options to be more effectively evaluated by considering the impact of all costs
over their operational life. All future costs and benefits are reduced to present
day values by the use of discounting techniques.

5. Functional analysis
The process of functional analysis should take place during the scheme design
workshop (VE1) and detail design workshop (VE2). The function of parts of the
design offering the greatest potential for eliminating unnecessary cost is
examined. The main aim is to eliminate unnecessary cost while maintaining the
functions required. Functional analysis concentrates on the function of
individual components or systems and identifies alternative ways of achieving
those functions.

6. Brainstorming
The main purpose of brainstorming is to generate a large number of ideas from a
group of people in a short time. For value engineering, it is a particularly useful
means of getting the design team to think beyond their normal way of doing
something, and to consider novel alternative approaches which might reduce
cost.

5. Value engineered solutions

5.1 Office equipment power loads

Office equipment power loads are often specified as global Watts per square metre.
Global values which are selected without regard to the project circumstances can lead to
over-sizing of electrical distribution systems including cabling, stand-by generation,
switchgear and UPS systems. If the same power load values are interpreted as heat gains,
this could result in over-sized air conditioning terminals, central cooling plant and air and
water distribution systems. These problems can have a significant impact on the installed
cost and running costs of buildings and therefore warrant detailed consideration using
value analysis.

For many office buildings, the future occupants may be unknown at the time of design.
In this case some estimate has to be made regarding what is an appropriate power load
allowance. It may be tempting to simply allow a grossly inflated value to cover all
eventualities, but this could result in a large degree of unnecessary costs and considerable
impact on environmental issues. The decision process needs to be rationalised.

A methology which safeguards value optimisation would be as follows:

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1. Define as accurately as possible what would constitute a failure.

For a speculative office developer, a failure may be a building which is too hot, or
whose electrical system cannot cope. Alternatively a failure may be defined as any
prospective tenant who is deterred by the specified power load allowance.

2. Define what level of risk is acceptable.

Risk can be defined as

Risk = total number of failures / total number of occurrences.

Following the above example for speculative office developments, acceptable risk
may be defined as having elevated internal temperatures for say 5% of the
occupancy time, or as losing no more than 1 in 10 prospective tenants.

3. For equipment power loads it is useful to have information on the typical spread of
W/m2 or W/person power requirernents in existing offices. Where the supporting
statistical data is limited, it may be necessary to allow a larger safety factor than
where there is strong supporting data. Safety factors can be defined as:
Safety factor = (Capacity / Load)
e.g. Estimated load = 15W/rn2
Agree safety factor = 10% (0.10)
Calculated capacity = 16.5W/rn2.

5.2 Pipework commissioning devices

Commissioning devices, and the commissioning process itself, often represent a

significant proportion of the cost of pipework systems. The analysis of commissioning
devices is most likely to occur at either the scheme design or detailed design stages.

The feasibility of alternative commissioning solutions is likely to involve some debate on

the issues of how to achieve recommended flow measurement tolerances. The most
likely quoted sources for information on each of these subjects is likely to be existing
CIBSE and BSRIA publications. It would not be good value engineering practice to
accept generally applicable tolerance limits without question.

The analysis of commissioning devices is most likely to occur at either the scheme
design or detailed design stages (VE1 or VE2).The first step is to produce a FAST
diagram to help understand the main functions of commissioning devices.

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Figure 9.2

5.3 Cable management systems

The following is a list of alternatives generated during a brainstorming session to achieve

the ultimate function "Route Cables Safely" of a cable management system. The list of
the most viable alternatives with assumptions in brackets was as follows:
1. trunking and conduit (under accessible raised floor, sockets floor mounted)
2. basket tray (under limited accessible raised floor, sockets floor mounted)
3. lay on ceiling (limited access, socket wall mounted)
4. loose laid under raised floor (limited access, sockets floor mounted)
5. busbar system (under accessible raised floor, sockets floor mounted)
6. dado trunking (exposed around perimeter).

A FAST diagram was produced to analyse and understand the function of a cable
management system.