Value Engineering Definition

Value engineering can be defined as an organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest life cycle cost consistent with required performance, quality, reliability, and safety.

In the design phase of federal building development, properly applied value engineering considers alternative design solutions to optimize the expected cost/worth ratio of projects at completion. Value engineering elicits ideas on ways of maintaining or enhancing results while reducing life cycle costs.

In the construction phase, GSA PBS contractors are encouraged through shared savings to draw on their special ‘know-how’ to propose changes that cut costs while maintaining or enhancing quality, value, and functional performance.


What Is Value Engineering?

Value engineering is a systematic and organized approach to providing the necessary functions in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives, without sacrificing functionality. It is focused solely on the functions of various components and materials, rather than their physical attributes. Value engineering is also called value analysis.

Understanding Value Engineering

Value engineering is the review of new or existing products during the design phase to reduce costs and increase functionality in order to increase the value of the product. The value of an item is defined as the most cost-effective way of producing an item without taking away from its purpose. Therefore, reducing costs at the expense of quality will simply be a cost-cutting strategy.


With value engineering, cost reduction should not affect the quality of the product being developed or analyzed.

What is value engineering analysis?

Value engineering analysis is a systematic process which organizations use every time they want to conduct a study of the product’s function. The method seeks to know if the function of the product provides the value that the organization intends to give to its consumers. The objective of this method is to improve the value of the end product.

What is value engineering in cost estimating?

Value engineering is one of the most commonly misunderstood processes in the world of cost estimating. Some say it’s the same as cost-cutting, budget-cutting, and scope reduction. Others add that quality loss, elimination, and redesign are risks in the process. So, what exactly is it?

What is the importance of value engineering?

Value Engineering and Its Importance In Engineering Industry The value is a function of cost. Therefore, it can be increased either by improving the function or reducing cost. The maximum value is achieved when the function performs reliably at the lowest cost.

What is value engineering, origins of value engineering?

Origins of Value Engineering. Value Engineering originated with the efforts of Larry Miles, an engineer who was working with General Electric in the early 1950’s. He is now considered the father of Value Engineering. Miles was working toward continuous improvement and GE formed a core group to address this area.

What does value engineering mean?

What is Value Engineering Value engineering is a systematic and organized approach to providing the necessary functions in a project at the lowest cost. … The function of an item is the specific work it was designed to perform, and the cost refers to the cost of the item during its life cycle. The ratio of function to cost implies that the value of a product can be increased by either improving its function or decreasing its cost.

What are the benefits of value analysis?

A critical advantage to using value analysis is its potential for reducing costs, which is a benefit that permeates all advantages of the system. Because value analysis breaks down a product or service into components, it enables you to analyze each component on its own, evaluating its importance and efficiency.

What are the characteristics of a cost estimating system?

The characteristics of a cost estimating system are preparation of estimates, creation of costing options, development of project budget, and control measures for the project execution within the allocated budget. The process validates the success of the project in the allocated budget, including completion of objectives, and the deliverables.

How does an estimator estimate the cost of a construction project?

The total cost estimate is made up of numerous smaller cost estimates for each activity required to complete the overall project. The estimating equation is therefore composed of a series of calculations, the estimator has to assess and propose a monetary solution. The total cost estimate is the total of all the minor monetary solutions.

Value Analysis

Value Analysis (VA) is concerned with existing products. It involves a current product being analysed and evaluated by a team, to reduce costs, improve product function or both. Value Analysis exercises use a plan which step-by-step, methodically evaluates the product in a range of areas. These include costs, function, alternative components and design aspects such as ease of manufacture and assembly.

A significant part of VA is a technique called Functional Analysis, where the product is broken down and reviewed as a number of assemblies. Here, the function is identified and defined for each product assembly. Costs are also assigned to each one. This is assisted by designing and viewing products as assemblies (or modules). As with VE, VA is a group activity that involves brainstorming improvements and alternatives to improve the value of the product, particular to the customer.  

Note: Many refer to Value Management as an umbrella term, which encompasses value engineering and value analysis.

Reducing Costs by Using Value Engineering in Conjunction with other World Class Manufacturing Techniques

Before we move on and examine the specifics of value analysis, it is worth pointing out some of the best performers in industry

 often use value analysis, in conjunction with other world class manufacturing techniques, such as Lean Manufacturing. They do this in order to reduce their costs not only in product development, but in all areas of the business, particularly production. Please see the Lean Manufacturing Essentials section for specific details about production-based cost reduction.

Reasons for Value Analysing Existing Products

The majority of the information here is geared towards New Product Development and New Product Introduction. In contrast to this, as stated above, VA is based upon products you already sell. On the face of it, the reasons for value ationali existing products may seem obvious. However you may find yourself in a situation where you need to convince others and make the case for undertaking a VA exercise. Senior managers may require justification as to why it’s worth the investment of time and effort. Below are some points that may help. Consider applying them to your specific situation.

  • VA reduces costs (in all areas such as materials, parts and production), as well as improving product function. Therefore, the value of the product is increased to the customer.
  • Reducing the cost of products increases revenue and profit per product. Therefore, giving your company the option of reducing price to sell more or investing in R&D.
  • VA enables improvements to be made to the product in a variety of areas, such as design and engineering, material selection, testing, manufacturing, assembly, shipping, installation, use by the customer, service, maintenance and recycling.
  • For many manufacturing businesses their product range has evolved over time, as a collection of solutions to meet new customer needs, rather than being the result of strategic planning. Often products have been developed under tight time constraints and as a result, a wide variety of parts and materials have been sourced and used. This leaves lots of scope for component ationalization across the range.  In-turn this opens the door to cost reduction negotiations based on ordering greater quantities and economies of scale. A value analysis exercise can deliver this.
  • A VA project enables your business to take commercial advantage of the constantly falling price of some technologies, as well as source alternative components and materials.
  • The above factors all increase perceived value of the product by all those who interact with it, throughout its product life (including of course, the customer).
  • The prestige value of the product increases, therefore making ownership more desirable, which should help product sales (and indeed the process of marketing and selling it).
  • A customer who perceives the value of the product as being more prestigious is more willing to pay a premium for it or choose it over rival products if it is priced the same.
  • An all-round better quality product is easier and less costly to produce, assemble, ship, install, use, service and recycle. The result is to reduce all associated costs throughout the product lifecycle (importantly, including ownership costs for the customer).
  • VA, in conjunction with other world class manufacturing techniques, can help realise substantial company-wide improvements, thereby delivering significant competitive advantage

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