Running a business is hard work, and when your business is in an area as unpredictable as tri-state area construction, the work is even harder. There are non-stop shifts in the real estate market in New York, New Jersey, and Connecticut, and constant interruptions in the international supply chain. To stay ahead of the ever-present shifts in the real estate market, some in the construction industry are turning toward value engineering.
Value engineering is a method of increasing value, which is defined as the ratio of something’s functionality or quality to its cost. Put simply, value engineering is the process of increasing or maintaining functionality while decreasing or maintaining cost. It boils down to getting the greatest possible results on the smallest possible budget while never allowing value to suffer as a result. It’s worth putting real time and effort into finding solutions that meet those objectives.
In construction, that usually means always searching for techniques and materials that work as well or better – but cost the same or even less – than their alternatives. Although this might seem like a basic tenet of running a business, value engineering can go much deeper as an applied philosophy. For instance, in today’s world of recurring supply chain interruptions, contractors might be tempted to save money by sacrificing functionality, safety, durability, aesthetic appeal, delivery time, or any other standard of good craftsmanship and customer satisfaction. But when they take a value engineering approach, that sort of cost-cutting is unacceptable when it comes at the expense of quality.
Value engineering allows you to keep a balance between making a profit in the short term while also building a good reputation in the long term. It can become difficult to achieve one without giving up on the other, especially for contractors and developers who have to deal with a fickle and ever-changing landscape in places like New York City and Long Island. Adaptability isn’t an issue when you’re committed to a constant search for the best alternative.
Of course, knowledge is power, and you have to know enough to understand and apply value engineering in order to make it work. To find out how much you know about value engineering, take this quiz:
1. Value is defined as:
- Something’s functionality minus its cost.
- The ratio of something’s functionality to its cost.
- How much something is subjectively worth to someone.
- The cost of something listed on its price tag.
Correct answer: b) The ratio of something’s functionality to its cost.
There are many ways to look at value, and each has its own definition. When it comes to value engineering, though, value is specifically defined as the ratio of something’s total functionality, benefit, or quality to the total cost that it incurs over its life cycle (how long you use it or have to pay for it). The whole idea revolves around the principle that cost reduction should not affect the quality of whatever is being analyzed, and functionality improvement should not result in greater costs; if value is defined differently, it can become very difficult to properly weigh those variables.
2. When exploring alternative solutions and researching which has the best value, you should first consult:
- Your local library.
- The designer of the product in question.
- A building materials distributor.
Correct answer: d) A building materials distributor.
Although all of the above answers have their merits, they also all have serious limitations. The library will only have limited and potentially outdated information (at best), Google will have an overwhelming flood of information (with lots of misinformation mixed in), and the designer of the product in question is incentivized to give biased or inaccurate information (based on their financial stake in the matter). Although a building materials distributor does have some financial stake in it, Metro is most interested in helping you find the solution that fits your needs and less interested in loyalty to any single brand or product.
3. What does it mean to engineer something’s “life cycle” value?
- Evaluating the timing of alternative solutions – how long they take to install, how long they last, etc.
- Determining whether something is replaceable.
- Determining whether something will last until the project is complete.
- How the solution will impact the longevity of your business.
Correct answer: a) Evaluating the timing of alternative solutions.
Once you have found the alternative solution or solutions that would work best if implemented today, it is important to consider how they affect things in the future. Some questions to ask might include:
- How quickly can it be put into place? A certain product may cost less, but it could be worthwhile to pay for the product that saves labor costs and the time it takes to install the alternative.
- How long will it last? Sometimes value comes from a product’s ability to stand the test of time.
- How much maintenance will it need? Just because something serves most of the functions of another product and it costs less doesn’t mean that will be the case forever; you should always consider maintenance costs and deterioration in the months and years to come.
Consider the value provided over a solution’s whole life cycle, not just the value provided in the short term.
4. What is one a commonly overlooked part of the value engineering process?
- Analyzing how solutions might change the systems of which they a part..
- Considering which option costs the most.
- Considering which option has the most functionality.
- Taking a break to stretch.
Correct answer: a) Analyzing how solutions might change the systems of which they’re a part.
Importantly, the value engineering process looks beyond how a product might serve its function differently based on the people, places, and things that it interacts with. In construction especially, products don’t exist in a vacuum, they are part of interconnected systems and structures (and in our case: literal, physical structures). If a bottle of liquid soap gets too slippery after it leaks onto the sides, for example, a value engineer trying to sell the soap bottles can solve the problem by redesigning their shape or choosing a new manufacturer for the caps. That can increase sales without any additional expensive advertising. Even if the original leaky caps had the best value at first glance, higher cost caps may be worth it when considering how customers interact with the product.
5. After finding the solution with the best value and weighing all the factors, what is the final step for any value engineer contractor?
- Implementing the solution as soon as possible.
- Double-checking everything to make sure there were no mistakes during the value engineering process.
- Getting stakeholders to buy in.
- Taking another, longer break to stretch.
Correct answer: c) Getting stakeholders to buy in.
This is the point at which designers, architects, developers, site managers, the client, and other decision-makers in the project commit to the alternative solution and buy-in. This is sometimes a thorny prospect, but if the value is really higher, then most people can be convinced that they’re saving money or improving functionality.
How Did You Do?
Add up how many questions you got right, and find out where you rank below:
- 0-2: Still Learning. You don’t know much (yet), but you can only learn more!
- 3-4: Getting There. You’ve clearly learned the basics, so keep it up!
- 5: Master Value Engineer. You add value wherever you go, and you’re more than familiar with how value engineering works.
Whatever your score, Metro has you covered. Contact us today to learn more about how our sales team can help your business get the most out of value engineering.