Value Engineering

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Structured methodology for improving the value ratio (function ÷ cost) of a project without reducing required performance. Governed by the SAVE International VM Standard (2015). Distinct from cost-cutting: VE preserves function while reducing cost; cost-cutting reduces cost by reducing scope or quality.

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SAVE International 6-Phase Job Plan

Phase	Activities	Output
1. Information	Gather project data: drawings, specs, cost models, schedule, constraints; identify high-cost areas using Pareto analysis	Cost model, function cost allocation
2. Function Analysis	Map all project elements to verb-noun function pairs (e.g., “contain fluid,” “support structure”); classify as Basic, Secondary, or Unwanted	FAST diagram
3. Creative	Generate alternatives to perform each function — no evaluation during this phase; volume over quality	Long-form alternatives list
4. Evaluation	Screen alternatives: technical feasibility, cost impact, risk, schedule impact; rank by value improvement potential	Screened candidate list
5. Development	Develop top candidates into actionable proposals: engineering sketch, cost estimate, risk assessment, implementation path	VE proposals (1-pagers)
6. Presentation	Present proposals to owner/design team; obtain accept/reject/revise decisions; document outcomes	VE log, accepted proposals

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FAST Diagram

Function Analysis System Technique — organizes functions in a HOW/WHY logic chain:

WHY ← [Higher-order functions] ← [Basic function] → [Secondary functions] → HOW

• Read left (WHY): moves toward project purpose/owner value
• Read right (HOW): moves toward physical means of achieving the function
• Every element on the diagram is a verb-noun pair

Example for a process cooling system:

WHY ← [Protect product quality] ← [Control temperature] → [Circulate coolant] → [Move fluid] → HOW

The FAST diagram identifies which secondary functions are candidates for elimination or substitution without impairing the basic function.

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Timing and Value Potential

VE effectiveness diminishes as design progresses and decisions lock in.

Phase	Typical Savings Potential	Effort to Implement	Notes
FEL-1 / Concept	15–25% of TIC	Low — minimal rework	Maximum leverage; few decisions locked
FEL-2 / Feasibility	10–20% of TIC	Low-Medium	Equipment list not yet locked
FEL-3 / FEED	5–15% of TIC	Medium — some redesign	P&IDs and equipment specs being finalized
DD / GMP	2–10% of TIC	High — design rework	Structural and MEP mostly set
Post-GMP (VECP)	1–5% of contract	High — change order required	Contractor-initiated; subject to owner approval
Construction	<1%	Very High	Logistics and disruption dominate

The GMP boundary is the practical VE deadline for owner-directed studies.

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Owner VE vs. Contractor VECP

Attribute	Owner-Directed VE	Contractor Value Engineering Change Proposal (VECP)
Timing	During design (pre-GMP)	Post-GMP during construction
Initiator	Owner, design team, or third-party VE consultant	Contractor
Contract impact	Reduces GMP basis	Requires formal change order
Savings split	100% to owner	Negotiated — typically 50/50 split
Risk	Owner absorbs redesign risk	Contractor absorbs implementation risk
Typical trigger	Owner-mandated VE workshop at FEL-2 or FEED	Contractor identifies alternative material or method

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Savings Benchmarks by Trade

Industry benchmarks for design-build manufacturing projects (AACE, SAVE International, WBDG data):

Trade / Area	Typical Savings Range	Common VE Opportunities
Structural steel	5–15% of structural budget	Reduce bay spans, optimize column spacing, prefab vs. field
Site/earthwork	15–30% of civil budget	Grade optimization, retaining vs. fill, cut/fill balance
MEP systems	10–20% of MEP budget	Duct routing, equipment consolidation, piping material substitution
Process piping	8–15% of piping budget	Pipe material (CS vs. SS), routing simplification, valve quantity
Exterior envelope	5–12% of envelope budget	Panel system substitution, glazing reduction, prefab vs. EIFS
Overall project	5–15% early study	Weighted average across all trades for FEL-1/FEL-2 studies

[!note] Savings ranges are for studies conducted at FEL-1 or FEL-2. Studies conducted post-FEED will fall in the lower half of these ranges.

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Application by Project Type

Greenfield manufacturing:

• Highest VE leverage in structural system (clear-span vs. column grid), utility routing, and foundation type
• Grade and drainage design often yields largest single-item savings

Brownfield expansion:

• VE constrained by existing infrastructure and tie-in points
• Focus on: new equipment selection, utility capacity augmentation, prefabrication to minimize shutdown windows

Food & beverage / pharma:

• Sanitary and cleanroom requirements limit substitution options
• VE focus: mechanical room layout, utility loop sizing, phasing to reduce operational disruption

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Constraints

• VE must not reduce performance requirements (production capacity, food safety, regulatory compliance)
• Pharma: FDA cGMP and validation requirements constrain material substitutions — any VE proposal affecting product contact surfaces requires engineering review
• F&B: USDA/FDA sanitary design standards constrain drain slope, surface finish, and material substitution options
• Document every rejected VE proposal in the VE log with reason — this protects the owner if questioned post-construction

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Related Pages

• Phase-by-Phase Workflow — where VE workshops fit in the phase sequence
• Brownfield Expansion Playbook — brownfield-specific VE constraints
• Risk Contingency and Escalation — VE savings reduce contingency draw-down risk

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