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How to create and manage value through capital project execution

Perception: “Value engineering is just another way of saying ‘the project is too expensive, and we must cut costs.”

Versions of this disposition grumble through the minds of participants during the design phases of capital projects, as construction professionals present estimates exceeding established budgets.  The term “Value” is seen as synonymous with “Cost.”  The origins of value engineering (VE) however, sought to empower all parties to increase the value of an outcome, while responsibly and efficiently deploying resources. Discussed in this piece will be the brief history of value engineering, a description of current VE exercises, and will identify how university stakeholders can determine, communicate, and steward a capital project’s value from concept through design.

The original intention of value engineering

The value engineering process was first popularized by General Electric as a World War II approach to mitigate issues of material supply chain and labor availability.  GE sought to mitigate war-time shortages through innovative design and process approaches, creative material substitution solutions, and reengineering small adjustments to component assemblies.  These agile and collaborative modifications ensured the continued delivery of high, or higher, outcomes to GE’s customers.  The VE approach involved the teaming of experts and seasoned technicians across all disciplines from the earliest moments of initiatives.  The team was clear on the value to be achieved and the collaboration resulted in more elegant, reliable, and efficient outcomes.

The VE concept quickly became adopted by other industries, including the design and construction sectors. The process encouraged AEC professionals to assume a collaborative stewardship approach where owners, builders, and designers collaborated to retain an initiative’s full “value,” while innovatively realizing resource and process efficiencies.

The modern experience of value engineering

Since the 1940’s, the typical VE process that most owners and project stakeholders will participate in has transformed. Today, the “VE exercise”, is anticipated to be a contentious, uncomfortable and often emotional engagement. University constituents find themselves faced with lists of options from the builders or designers, to reduce or eliminate large elements of the design.  The discomfort is furthered by the constricted timeframe in which decisions must be made to avoid “delay”, and by the limited visibility into unintended consequences, life-cycle trade-offs, or assurances of outcome criteria attainment.  Emotionally, there are fears of making the wrong decision, frustrations stemming from the belief the designers should have designed within the established budget, and disappointment from having to sacrifice an element that was aspirational.  The process does not provide the time for sufficient socialization or for educating end-users with limited construction knowledge.  This leads to adversarial relationships, perceptions of unmet requirements and that the final product has been cheapened.

Steps to stewarding value

Today, elements of GE’s intentionality may be found more formally in complex contracting typologies like Integrated Project Delivery and through the utilization of Lean Methods. While these methodologies are indeed intended to create deep collaborations throughout the project teams, all projects, regardless of methodologies, can be advanced through establishing a culture of value stewardship.

The goal is to achieve shared ownership of identifying challenges to success and developing creative solutions such that all parties are consistently aligned and contributing their best efforts to create an elegant, agile, and predictable experience. The creation and maintenance of a value-centric culture starts the earliest moment of a project’s life and continues consistently through to the ribbon-cutting barbeque. Each of the elements below are common to all projects, but what is uncommon, is their intentional usage as continuous guides and teaming tools for success.

1. Define the outcome: It is incumbent upon a university to conceptualize, advance, pressure-test, and revise what the intended outcome of any project is going to be. The answer to this question is almost never “to build a building.”  Universities enter into capital projects, typically because they need an asset to support an outcome.  Examples of outcomes include: achieving a higher Carnegie classification or capturing more on-campus residents through an elevated residential experience.Action: Define and communicate the high-level outcome throughout all project stakeholders, internal and external, to create knowledge of and ownership in the achievement of the outcome. Reference often throughout the entire project life cycle.
2. Curate capabilities: The most elegant projects are delivered by teams built from invested, aligned, competent, individuals with complementary expertise. Universities must strategically design their steering committee to ensure observations can be made, questions can be asked, and efficient decision-making enabled. The key to stewarding value is having the right eyes, ears and experiences in a place of authority throughout the programming, design, and negotiation phases. Going back to the original GE concept, continuous collaboration of varied stakeholders from start to finish builds value effectively.
   
   Action: Ensure the assembly of the steering committee is curated to the specific project’s needs. The stakeholders must be engaged and hold agency over decisions, with governance as streamlined as possible. External project teams must understand both the steering committee’s governance and their expertise.  Fostering relationships with like-minded counterparts, creates multiple touch points of collaboration and project alignment opportunities.
3. Align parameter expectations and set the driver: In capital projects, the common parameters are funds, time, and levels of quality. The three parameters must be defined specifically for the project. Once defined by the steering committee, a single parameter must be determined as primary.  This primary driver cannot change once set.  The primary driver guides the steering committee on how to triage value-based decisions throughout the project while remaining aligned with outcome achievement.  As a companion to the driving parameter, one parameter also must be established as flexible. Like the driver, the flexible parameter will give the steering committee the latitude to prioritize solutions.  Examples of parameter definitions and drivers may look like:

   Example 1: “Our project must be occupied by Fall 2027 and we will utilize a mix of institutional funds which should be kept below $200M. The facility must incorporate the attached standards, as the 2029 accreditation process requires two years of prior operations in a compliant facility,”Primary driver: Time – Qualifying condition: Quality – Flexible farameter: Funds

   Example 2: “We received a donation of $50,000,000, which is the full funding-source for this project, we hope to have it open for the opening game in 2029, and the project, when completed, must serve as a strong example of our university’s brand.”

   Primary driver: Funds – Qualifying condition: Quality – Flexible parameter: Time

   Action: Define the project’s parameters thoughtfully and ensure consensus throughout the steering committee. Determine the Primary Driver which will be held sacred over the project’s life. Define the flexible parameter which allows the primary driver to achieve the outcome. Evoke the primary drivers clearly and often. Hold the flexible driver within the steering committee to use it only as an internal decision-making resource.

   Context-setting roll-up: The above three steps set the stage to deploy and engage a culture of collaboration throughout the design process and across parties that share a definition of success. As new members join teams, ensure they understand the below conditions exist:

   • The outcome is defined and communicated,
   • The steering committee is curated with invested and complimentary experts,
   • The parameters are defined and communicated,
   • The primary driver is determined and referenced often, and
   • The flexible parameter is agreed upon and kept within the steering committee.

The following value stewardship steps occur during the design phases of projectization.

4. Be present and set expectations for collaboration: During the teams’ onboarding and the beginning of the design process, the steering committee representatives must be fully engaged, aligned with the established outcome, and must navigate conversations back to the primary driver often. Not all steering committee members will have the expertise to ask technical design questions, but all university representatives must engage from their own perspective in alignment with their role on the committee. This comprehensive engagement communicates collaboration expectations and an invested team. The early goal of this engagement is to create comradery and a shared definition of success. The more often the outcome and the parameters are referenced, the more successful value stewardship will be.

   Action: Develop, through active engagement, a culture of exchanging ideas, aligning perceptions and understanding, foster hypotheses creation, and utilize outcome-based language to create ownership. Ask questions that are rooted in achieving the outcome and connected to the primary driver. Contribute setting the engagement’s cadence and schedule of deliverables which align with the governance structure. Be consistent in messaging throughout the process.

5. Look for what is not there: The university will be asked for opinions on many things. Responses crafted with thoughtfulness, disciplined outcome-alignment and an adherence to the driving parameter are essential for value preservation. Additionally, independently identifying elements that are not evident or do not appear to be advancing, is also critical.  There are functional reasons why progress may lag in certain areas as there are increasing levels of granularity that develop as the design matures. If something is missing and a question is asked too early, the team will let you know. However, the benefits a steering committee can regularly provide by generating valuable discussions through:
   1. Inquiring about programmatic elements that are missing or under-designed,
   2. Asking for confirmation on experiential assumptions
   3. Confirming operational realities are accommodated through the design.The designers will not have the depth of knowledge or experience the steering committee holds. It is important to note that this may be an area where tension occurs.  Depending on the level of misalignment, the designer may feel threatened that the design is at risk.  Here is where reliance on assessing the misalignment against the defined outcome and the driving parameter will guide the teams to collaborate on solutions that maintain progress and attain the appropriate value.

      Action: Add to ongoing design conversation the experiential expectations and assumptions early and unprompted. Share your expectations through inquiry and requests for confirmation will result in alignment conversations.  Engage alignment discussions early, and utilize the outcome and the driver as guideposts, to ensure the team has the tools and time to gauge value and collaborate on solutions. 

6. Pull the thread of “too small to move the needle” cost saving options: At a periodic estimate in design, the steering committee will be asked to engage in a value engineering exercise. The value-based culture that has been established should, at this point, create a collaborative environment to work through concerns, however, the VE meetings can remain challenging. The steering committee will receive a list of areas where costs can be reduced.  This list often includes eliminating in whole or in part, broad infrastructure changes, elimination of programmatic elements, downgrading university standards, etc.  The list will also include a few items that hold small dollar amounts, like changing the size of baseboard trim. In truth, there can be hundreds of these small-scale items. Time is spent on the large items, as small items “do not move the needle.”  However, pulling the thread on the small items will determine if there is a bigger path.  For instance, if the baseboard can be reduced, the committee may ask for a wholesale review of all finish assumptions. This review may (and often does) result in uncovering design assumptions that can be broadly modified, deferred as alternates, or eliminated entirely.

   Action: Do not dismiss the small line items without first evaluating their place in the larger story. If the large items pose significant risk to the value of the project, know that a series of small items can quickly become a large item.  Set ownership of outcome expectations onto the third-party designers and builders.  Suggest investigation into bundled opportunities for savings across multiple elements.

7. Process and strategy can be as expensive as the materials to build with: Combining the last three steps, collaboration during the design does not end with only reviewing the drawings and specifications of the building being designed. The process and strategy applied to constructing a building contribute significantly to the value of the final product. Setting the expectation for innovation of process as well as design is essential.  University constituents may ask questions or generate conversations that spur innovation.

   Action: Some examples of discussion topics during design and in value engineering exercise include:

   1. How can the university:
      • Support opportunities to strategically sequence or combine activities that result in reducing time or restrictive parameters?
      • Create a path towards evaluating institutional policies which are uniquely restricting process efficiency?
      • Participate in innovative constructability approaches, site logistics, or operational considerations to reduce cost?
      • Generate market interest and competition that may guide bid scope development?
      • Position the campus to consider a request to modify allowable work hours / days, either throughout the project, or at certain critical times.
   2. Can the university offset general requirements / general conditions costs by:
      • Providing vacant office space?
      • Providing contractor parking?
      • Allowing direct connection to university power in lieu of temporary power?
      • Allowing direct connection to university data connection and other services?

Scratching the surface of value-based stewardship

The above begins to uncover glimpses of how Brailsford & Dunlavey supports universities to weave a web of intentionality, collaboration, awareness, discipline, and investment.  Frameworks for decision-making which are crafted by the defined outcome and parameters, provide the university the ability to collaboratively define, evaluate, and maintain value. While the modern version of “Value Engineering” as an exercise will likely remain a process reality, understanding at a high level how university stakeholders can individually and collectively mitigate uncertainty, create shared ownership, and invite and celebrate innovative approaches will empower all to be stewards of outcome.

Rebecca Geraghty is a seasoned leader at B\&D with decades of experience as a licensed architect, builder, educator, and expert witness. She has managed billions in planning, design, and construction nationwide, bringing deep expertise in project lifecycle management, risk mitigation, and stakeholder alignment. Her diverse background spans justice, commercial, academic, and religious sectors, and includes roles as a business owner, assistant professor, and project executive. Rebecca can be reached at rgeraghty@bdconnect.com.