The Six Steps of Value Engineering

Value engineering refers to the systematic method of improving the value of a product that a project produces. It is used to analyze a service, system, or product to determine the best way to manage the important functions while reducing the cost.

Value is calculated as a ratio of function to cost. A business can add value to a product by either cutting down on cost or improving the function. Most companies use value engineering as a cost-cutting strategy, where the basic function of a product is preserved – not sacrificed – in the process of pursuing value improvement.

Value engineering can be broken down into the following phases:

1. Information

The information phase involves gathering project information and refining the goals of the project. They obtain project data, present the original design or product concepts, and understand the project scope. Schedule, costs, budget, risk, and other non-monetary issues are studied until the team is comfortable with the concept of the project, what it is to produce, and who its end users are. Data is collected and analyzed, and the information obtained is used to finalize the priorities of the project and areas of improvement.

2. Function Analysis

The function analysis phase involves determining the functions of the project and identifying them with a verb/noun combination for every element under evaluation.

Functions come in four forms:

• Basic function is the specific purpose for which the items exists, answers the “how” question.
• Higher order function is the specific need for which the basic functions exist, answers the “why” question and is outside the scope of the subject.
• Primary functions are those that represent the reason for the project’s existence.
• Secondary functions are those that the project serves without being core to the project.

There can also be all-the-time functions, one-time functions, unwanted functions, and lower order functions.

Each of the identified functions is analyzed to determine if there are improvements to be made and if a new function is required. An example of a function can be “disinfect water.”

The function should be as non-specific as possible, to leave room for multiple options that perform the function presented by the project. A cost is assigned to each identified function.

3. Creative

The creative phase follows the function analysis phase, and it involves exploring the various ways to perform the function(s) identified in the function analysis phase. This allows team members to brainstorm alternatives to existing systems or methods that are in use.

Brainstorming forces people to be creative and allows team members to speculate on all possible solutions to the problems presented, or alternatives to the function. The team is required to develop a list of potential solutions to the function formulated by the verb/noun combination.

4. Evaluation

In the evaluation phase, the merits and demerits of each of the suggested solutions and alternatives from the creative phase are listed. The team should describe each advantage and disadvantage in general terms.

When the disadvantages exceed the advantages, the alternative is dropped in favor of other solid alternatives. The team performs a weighted matrix analysis to group and rank the alternatives, and the best alternatives are selected for consideration in the next phase.

 5. Development

Once the value improvement options have been whittled down to the ones that make sense, the value engineering team conduct an in-depth analysis of each best alternative to determine how it can be implemented and the cost involved. The examination of each alternative may involve creating sketches, cost estimates, and other technical analysis. They must be clearly written and explained so that the project owner and stakeholders can understand how it benefits the project and act on it. Any potential negative factors are identified. Potential costs and cost savings are itemized. Team members formulate an implementation plan for the project, which describes the process to be followed in implementing the final recommendations.

6. Presentation

The presentation phase is where the team meets with the management and other stakeholders to present their final report. The team is required to present their findings to the decision-makers using reports, flow charts, and other presentation materials to convince them that the final ideas from the development phase should be implemented.

The ideas should be described in detail, including associated costs, benefits, and potential challenges. The final report acts as a record of the team’s accomplishments during the study and a summary of the team’s deliberations and findings. It can also act as a reference tool for the company in future projects.

Implementation of the project begins after the management’s approval of the team recommendations. If there are changes requested by the management or other decision-makers, these changes should be incorporated into the implementation plan before the implementation begins.

When implementing the project, the team should ensure that the primary goal of increasing value is achieved. The actual cost savings of the project should be determined based on the implementation of the recommendations.