What is value engineering? In short, value engineering is a process by which alternate means, methods, and materials are investigated and compared against initial construction costs. With a build to suit development, it’s also important to note that impact on future costs as well.
This element of the commercial real estate development process is used to solve problems and identify and eliminate unwanted costs. But this method is not simply about cost-cutting. True value engineering is about giving careful consideration to all options, always with the project's goals in mind while improving function and quality.
How can value engineering be implemented?
Value engineering is a method that can be implemented at any point within a commercial real estate development project. Although, applying the process early on in the project stages can help avoid more significant risk.
Within the three main stages of the development process, value engineering can be broken as follows:
The planning stage: the developer and contractors should agree on an anticipated cost of the project.
The design stage: the design team and the client should come together to review the proposed design solutions, the cost estimate, and the proposed schedule and approach.
The construction stage: the architect/engineer team should be brought in to the decision-making process to agree on proposed changes and confirm no negative impact on the overall design and building function.
Why use value engineering?
Specifically, if we look at build to suit properties, where rents are based on build-out costs, value engineering allows experienced developers to realize better value for money in design, contracting, and final build out. And the process is meant to not only benefit the initial construction phase but to provide long-term value.
Upfront construction costs account for only 11% of the total lifecycle costs of a building. That number highlights the fact that early decisions have a critical impact on the long-term cost of ownership.
The benefit of a great value engineering process to the owner and tenant will be a better, more cost-efficient project that meets all of the needs and objectives. Value engineering isn’t meant to diminish the project’s vision or sacrifice project material and quality, functionality, performance, and reliability. On the contrary, the process can actually improve aspects by identifying innovative options and new approaches.
For architects, engineers, and contractors, value engineering can mean reductions in redesigns and a more efficient construction process.
Overall, value engineering can help provide:
Better work scope
Help keep costs within set budgeting
The use of value engineering often means improved functionality of a project combined with increased savings and value over the life of the building. The right development partner can help leverage relationships in order to implement value engineering, ensure quality construction, and finish with a successful project on time and under budget.