Value Engineering and What It Costs

Value engineering, the discipline that Michael Stern’s fifth subject, the economics of an unprecedented building, leans on whenever a budget and a design stop agreeing, is a method with a precise object: value, defined as function divided by cost. An owner’s representative in Los Angeles sets out the equation and draws the line it implies. Value rises when function is held constant and cost falls, or when function rises at the same cost. It does not rise when function is cut.¹ Everything else on this page follows from that definition, including the reason the phrase is so often misused.

The method did not begin in construction. The same account traces it to General Electric during the Second World War, when shortages forced engineers to find substitutes for parts they could not get. An engineer named Lawrence Miles noticed that the substitutes often cost less and performed as well, and he turned that accident of scarcity into a repeatable technique he called value analysis. By the 1960s federal agencies had adopted it under the name value engineering, and the methodology is now maintained by SAVE International.¹ The founding insight was to ask not what a thing costs but what it is there to do. A stair provides egress; a facade encloses and expresses; a chilled water plant rejects heat. Once the function is named in plain words, the question of a cheaper or more durable way to deliver it can be asked honestly.¹

The job plan and when it runs

The procedure has a fixed shape. A general contractor in the Bay Area describes the six stages of a value study as information gathering, function analysis, creative work, evaluation, development and presentation, and notes that SAVE International defines value analysis as an assessment of a product that attempts to minimize its cost in relation to its functions.⁵ The same source separates value analysis, which examines how an existing thing has been engineered, from value engineering, which may redesign whole systems and is most useful before construction begins.⁵

Figure

The six stages of a value study

1. 01
   InformationThe whole team meets to fix the goal of the project and its scope, with schedules, budgets and risks on the table.
2. 02
   Function analysisPrimary functions, the reason the project exists, are separated from secondary functions, the byproducts.
3. 03
   CreativeAlternative methods and materials are generated without yet judging them.
4. 04
   EvaluationEach idea is weighed for risk against reward and for its chance of being carried out.
5. 05
   DevelopmentA plan of action is written for the ideas that survive.
6. 06
   PresentationFindings go to the owner with a risk analysis and the advantages and disadvantages of each option.

Timing is written into the standard. ASTM E1699, the standards body’s practice document for value engineering and value analysis, puts the most effective applications early, while changes can still be accommodated without extensive redesign. For buildings it names a predesign exercise it calls value planning, in which the owner, designer, user and construction manager agree the project’s functions in a common language, and then further studies at schematic design (up to 15 percent complete), design development (up to 45 percent) and construction documents (up to 100 percent). A study at 90 to 100 percent, just before bidding, concentrates on construction methods, phasing and procurement.² During construction the standard turns to the contractor’s value engineering change proposals, which reduce cost or duration without reducing performance, with the savings shared where the contract permits.²

On federal work the timing is a requirement rather than advice. A project controls consultant reports that in May 2025 the Department of Energy’s National Nuclear Security Administration issued a directive making value management a formal requirement on all capital projects, applied no later than conceptual design, and that the practice is backed by federal statute as a management tool for life cycle cost.³ The same piece observes what happened when formal studies lapsed under schedule pressure: projects moved faster at the start and paid later in redesign.³

What the word is used to excuse

Most of what gets called value engineering on a job site is something else. The Los Angeles account puts it plainly: when the budget breaks and someone starts stripping the project for parts, swapping stone for laminate, deleting a stair, downgrading a mechanical system, that is cutting cost under a better name, and it usually costs the owner more over the years the building is in use than it saved.¹ The examples it gives are specific. Rooftop units that fail in seven years instead of twenty. A membrane that voids the roof warranty over occupied space. A deleted redundancy that becomes a code violation at inspection.¹

Figure

Two exercises that get the same name

	Value engineering	Cutting cost
Objective	Raise value while holding quality and performance	Lower expense, often at the price of quality
Approach	Architects, engineers, contractors and the owner work the problem together	Decisions handed down from management
Time horizon	Life cycle, including maintenance and operation	The present budget
Effect on quality	Held or improved	Put at risk

A contractor’s comparison of the two exercises lands on the same distinctions. One starts from function and brings architects, engineers, contractors and the client into the same room; the other starts from the price, works backward to the line items easiest to shrink, and is typically decided from the top without the project team.⁴ A cost engineering firm in India adds a third term: cost engineering controls budgets and executes savings, while value engineering identifies where a saving will not compromise performance, and the two work best in sequence.⁶

The Los Angeles account also names the structural problem with who runs the study. A general contractor running its own exercise has an interest in changes that are easy to build and protect its margin; a designer running it protects the design. Someone has to weigh every proposed change against the owner’s interests alone, and that someone should have no stake in the answer.¹ The connection to independent review is direct, and the question of what a saving does to a bid or to contingency is taken up on those pages.

Where a saving comes back

The clearest record of a saving that returned as a problem is a tower in Manhattan. ArchDaily’s account of the Citigroup Center records a tower completed in 1977 that stands on four stilts placed midway along each side rather than at its corners, with a chevron bracing system by the engineer William Le Messurier and a 400 ton tuned mass damper near the top to control sway in a structure built to a minimal safety factor.⁷ The following year an undergraduate, Diane Hartley, tried to replicate the performance figures and, going a step further than the designers, calculated the effect of quartering winds striking two faces at once. Above a certain wind speed the joints would buckle.⁷

Le Messurier looked into the student’s figures and found them correct. The cause ArchDaily records is a late stage change made to save money: the fully welded joints in the diagonal braces had been substituted with bolted joints, leaving the structure without the strength to withstand quartering winds.⁷ The substitution would have passed any test that asked only what a joint costs. It failed the test the method is built on, which asks what the joint is for. Steel plates were welded over the bolted connections to make the building safe, and the story stayed private for nearly twenty years.⁷

That is the whole argument of this page in one building. A value study holds function fixed and searches for a cheaper way to deliver it; a deletion holds the price fixed and hopes the function was never needed. On a budget summary the pair are indistinguishable, and nowhere else.