Value Engineering and Optimization
In addition to the cost/benefit analysis methods discussed previously, that works well in construction for both controlling costs and optimizing performance is value engineering. VE is a systematic and structured approach designed to optimize value (initial value and long-term investment) and improve projects, products, and processes. VE can be used with any economic analysis method listed previously; it has been used in the construction industry for many years and has proven to be an effective method for evaluating and improving economic costs and building performance. The VE approach analyzes the requirements of a project to achieve the desired function at the lowest total cost over the lifetime of the project. Identifying several approaches and analyzing them based on identified criteria relevant to the project often achieves tremendous savings, in initial and life-cycle costs.
The value of a particular technology or measure may be either quantitative or qualitative, or a combination of both. For instance, energy-efficiency measures will have a quantifiable value in terms of operating cost savings, but will also have qualitative value in terms of greater comfort, reduced potential for damage because of moisture or condensation issues (which also carries quantitative effects in terms of repair), and improved indoor air quality. For energy efficiency, quantitative value can be either direct and immediate (cost savings), or indirect and long term. Examples of the latter are the resale value of the building, including its desirability to potential future buyers and the hedge it provides against rising utility rates. Both of these qualitative values are hard to predict and make it difficult to define the precise economic value. When considering innovative technologies, however, be sure to think beyond the time you expect to own the building; value can be realized even if you do not realize it personally.
Some measures may provide solely qualitative benefits that you deem important to provide improved livability and amenities for your anticipated residents. For instance, it may be very important to you to provide both indoor and outdoor gathering spaces so that residents can socialize. Whole building or apartment mechanical ventilation may hold particular value for occupants that may be more prone to smoking in their dwelling units.
VE should not be thought of as merely a cost-cutting endeavor. The goal of performing VE analyses is to ensure that the decision you make is the most efficient and that alternative ways of attaining your desired goals or functionality at a lower cost are not always viable. Using VE, you may be able to include additional technologies or amenities through the savings you achieve in another area.
Including VE analysis during the initial conceptual phase may be beneficial. The building owner or manager is in the best position to identify the needs or required functionality for your project. If you are renovating or adding on to an existing building, this process may start by identifying what is not working.
Some initial questions to ask about the requirements of your project include—
- What are the inadequacies of your current building (or of other buildings previously owned)?
- What systems do you want to improve/upgrade?
- What types of functionality do you need, given the nature of the residents? (For example, space that is compliant with the Americans with Disabilities Act, or ADA; indoor community space; outdoor community space; and central food-preparation and dining areas.)
- Which do you prefer—central or distributed utilities? Is one more feasible than the other
Incorporating a VE approach at the design or conceptual phase of a project generally involves the use of a VE workshop. The workshop provides an opportunity to bring the design team and the building owner together to establish the scope of the project. This workshop can help identify the owner’s definition of value relating to the project, all potential design solutions, cost estimating, scheduling, and approach.