By definition, the aim of value engineering is to help the owner improve efficiency and decrease operating costs. In the construction industry, however, its most common purpose is to bring over-budget construction projects back within budget. In the book Quality in the Constructed Project, the American Society of Civil Engineers states, “Value engineering of a design focuses on potential cost saving…where the usual value engineering question is ‘Is there money to be saved?’” However, simply reducing cost at the expense of quality is not value engineering but merely cost cutting.

The Society of American Value Engineers International (SAVE International) defines value engineering as a “function-oriented, systematic, team approach to provide value in a product, system, or service.” The definition further explains that while the process is often “focused on cost reduction, other improvements such as customer-perceived quality and performance are also paramount in the value equation.”

Value engineering is, in short, a systematic, organized approach to obtaining optimum value for each dollar spent. Another definition of value management is “a disciplined effort to analyze the functional requirements of a project for the purpose of achieving the essential functions at the lowest total cost (capital, operating, and maintenance) over the life of the project.” When applied to construction, the analysis must be performed within the standards and criteria established by the owner. Through a system of investigation using trained, multidisciplinary teams, both value and owner requirements are improved by one of the following:

Eliminating or modifying elements not essential to required functions.

Adding elements that achieve required functions that have not as yet been attained.

Changing elements to improve quality or performance to meet more desired levels established by the owner/user.

Construction and design professionals use value engineering throughout the design process to regulate the costs on a project budget. Larry Miles, considered by many to be the father of value engineering, introduced this process nearly 60 years ago. When Miles developed the analytical field of value analysis for General Electric after the Second World War, he identified two elements of the value equation—function and cost—and balanced them against one another. As Miles approached the problem of enhancing value, his objective of value analysis was to identify all elements of function and cost, and to express their mutual interdependency so that an informed decision could be made between the two. His equation was:

Value = Function/Cost

in which:

Function = the specific work that a design/item must perform.

Cost = the life-cycle cost of the product.

Value = the most cost-effective way to reliably accomplish a function that will meet the user’s needs, desires, and expectations.

In other words, an item that maximizes function with a minimal cost is of greater value than an item of lesser function with the same cost. Conversely, an item that serves little or no function but has a high cost is considered to be of little or no value.

According to Miles, value engineering is basically “a creative, organized approach whose objective is to optimize cost and/or performance of a facility or system.” The intended purpose is to improve the value obtained by an owner sponsoring a constructed project.