An Alternative to Cost Cutting
Introduction
Value engineering is the structured application of proven techniques at various design phases with the primary aim of cost avoidance, without sacrificing scope and quality. The principle involves evaluating the function of the process and/or equipment and focusing on poor value items/functions. This approach requires extensive team interaction and creativity.
What is VALUE?
Value is the ratio of functionality to cost. The function is the specific task required to satisfy a customer need and the cost is the resource consumed in achieving the function.
Applications
- Used on new plants/revamps:
clarifies scope
encourages focus on poor value
encourages alternatives
basis for cost reduction
- Used on existing plants:
highlights poor value operations
encourages alternative operations
compares costs of operation with benefits
Structured Steps for Value Engineering
The following steps are required to build and develop the value engineering exercise:
Information gathering
Function analysis
Creative phase
Evaluation
Development
Implementation
Summary
The main differences between value engineering and cost cutting are summarised as follows:
| Value Engineering | Cost Cutting | |
| It is | Function based | Equipment/material based |
| Focus | Poor value functions | Big cost items |
| Results | Increased value | Scope reduction |
| Optimises | Overall design | Local design |
| Clarifies | Client requirements | Nothing |
Value Engineering is a technique that is used to identify poor value functions and identify ideas for lower cost, higher value alternatives. It allows the creative generation of solutions to specific functionality problems, without reducing the scope of the process.
