Value engineering (VE) is a systematic method to improve the "value" of goods or products and services by using an examination of function. Value, as defined, is the ratio of function to cost

Cost

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...

. Value can therefore be increased by either improving the function or reducing the cost

Cost

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...

. It is a primary tenet of value engineering that basic functions be preserved and not be reduced as a consequence of pursuing value improvements.

In the United States, value engineering is specifically spelled out in Public Law 104-106, which states “Each executive agency shall establish and maintain cost-effective value engineering procedures and processes."

Value engineering is sometimes taught within the project management

Project management

Project management is the discipline of planning, organizing, securing, and managing resources to achieve specific goals. A project is a temporary endeavor with a defined beginning and end , undertaken to meet unique goals and objectives, typically to bring about beneficial change or added value...

 or industrial engineering

Industrial engineering

Industrial engineering is a branch of engineering dealing with the optimization of complex processes or systems. It is concerned with the development, improvement, implementation and evaluation of integrated systems of people, money, knowledge, information, equipment, energy, materials, analysis...

 body of knowledge as a technique in which the value of a system’s outputs is optimized

Optimization (mathematics)

In mathematics, computational science, or management science, mathematical optimization refers to the selection of a best element from some set of available alternatives....

 by crafting a mix of performance (function) and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers.

VE follows a structured thought process that is based exclusively on "function", i.e. what something "does" not what it is. For example a screw driver that is being used to stir a can of paint has a "function" of mixing the contents of a paint can and not the original connotation of securing a screw into a screw-hole. In value engineering "functions" are always described in a two word abridgment consisting of an active verb and measurable noun (what is being done - the verb - and what it is being done to - the noun) and to do so in the most non-prescriptive way possible. In the screw driver and can of paint example, the most basic function would be "blend liquid" which is less prescriptive than "stir paint" which can be seen to limit the action (by stirring) and to limit the application (only considers paint.) This is the basis of what value engineering refers to as "function analysis".

Value engineering uses rational logic (a unique "how" - "why" questioning technique) and the analysis of function to identify relationships that increase value. It is considered a quantitative method similar to the scientific method, which focuses on hypothesis-conclusion approaches to test relationships, and operations research, which uses model building to identify predictive relationships.

Value engineering is also referred to as "value management" or "value methodology" (VM), and "value analysis" (VA). VE is above all a structured problem solving process based on function analysis—understanding something with such clarity that it can be described in two words, the active verb and measurable noun abridgement. For example, the function of a pencil is to "make marks". This then facilitates considering what else can make marks. From a spray can, lipstick, a diamond on glass to a stick in the sand, one can then clearly decide upon which alternative solution is most appropriate.

Origins

Value engineering began at General Electric Co. during World War II

World War II

World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

. Because of the war, there were shortages of skilled labour, raw materials, and component parts. Lawrence Miles, Jerry Leftow, and Harry Erlicher at G.E. looked for acceptable substitutes. They noticed that these substitutions often reduced costs, improved product, or both. What started out as an accident of necessity was turned into a systematic process. They called their technique “value analysis”.

The Job Plan

Value engineering is often done by systematically following a multi-stage job plan. Larry Miles' original system was a six-step procedure which he called the "value analysis job plan." Others have varied the job plan to fit their constraints. Depending on the application, there may be four, five, six, or more stages. One modern version has the following eight steps:

1. Preparation
2. Information
3. Analysis
4. Creation
5. Evaluation
6. Development
7. Presentation
8. Follow-up

Four basic steps in the job plan are:

• Information gathering - This asks what the requirements are for the object. Function analysis, an important technique in value engineering, is usually done in this initial stage. It tries to determine what functions or performance characteristics are important. It asks questions like; What does the object do? What must it do? What should it do? What could it do? What must it not do?
• Alternative generation (creation) - In this stage value engineers ask; What are the various alternative ways of meeting requirements? What else will perform the desired function?
• Evaluation - In this stage all the alternatives are assessed by evaluating how well they meet the required functions and how great will the cost savings be.
• Presentation - In the final stage, the best alternative will be chosen and presented to the client for final decision.

How it works

VE follows a structured thought process to evaluate options as follows.

Gather information

1.What is being done now?

Who is doing it?

What could it do?

What must it not do?

Measure

2.How will the alternatives be measured?

What are the alternate ways of meeting requirements?

What else can perform the desired function?

Analyze

3.What must be done?

What does it cost?

Generate

4.What else will do the job?

Evaluate

5.Which Ideas are the best?

6. Develop and expand ideas

What are the impacts?

What is the cost?

What is the performance?

7.Present ideas

Sell alternatives

See also

• Benefits Realisation Management
  Benefits Realisation Management
  Benefits realisation management is the explicit planning, delivery and management of whole life benefits from an investment. An investment is only successful if intended benefits are realised and BRM supports key choices and actions to achieve this success...
  
  
• Cost
  Cost
  In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it is counted as cost. In this...
  
  
• Cost engineering
  Cost engineering
  Cost engineering is an area of engineering practice concerned with the "application of scientific principles and techniques to problems of cost estimating, cost control, business planning and management science, profitability analysis, project management, and planning and scheduling."- Overview...
  
  
• Cost overrun
  Cost overrun
  A cost overrun, also known as a cost increase or budget overrun, is an unexpected cost incurred in excess of a budgeted amount due to an under-estimation of the actual cost during budgeting...
  
  
• ISO 15686
  ISO 15686
  ISO 15686 is the in development ISO standard dealing with service life planning. It is a decision process which addresses the development of the service life of a building component, building or other constructed work like a bridge or tunnel...
  
  
• Overengineering
  Overengineering
  Overengineering is when a product is more robust or complicated than necessary for its application, either to ensure sufficient factor of safety, sufficient functionality, or due to design errors...
  
  

Further reading

• Cooper, R. and Slagmulder, R. (1997): Target Costing and Value Engineering.
• "Value Engineering - Concepts, Techniques and Applications by Anil Kumar Mukhopadhyaya"
• "Value Engineering Mastermind - From Concept to Value Engineering Certification by Anil Kumar Mukhopadhyaya"
• "Value Optimization for Project and Performance Management by Robert B. Stewart, CVS-Life, FSAVE, PMP"

External links

• Lawrence D. Miles Value Foundation
• Lawrence D. Miles Value Engineering Reference Center: Wendt Library
• SAVE International - Value engineering society
• wertanalyse.com - Many links regarding VE organizations and publications
• The Canadian Society of Value Analysis - Value Engineering in Canada
• Value Engineering’s History in Construction- American Institute of Architects - AIA