Cutting Edge Insights
with Dr. Lee

The Essence of Value Engineering

The following is Investopedia’s definition of Value Engineering:

Value engineering is a systematic, organized approach to providing necessary functions in a project at the lowest cost. Value engineering promotes the substitution of materials and methods with less expensive alternatives, without sacrificing functionality. It is focused solely on the functions of various components and materials, rather than their physical attributes. Value engineering is also called value analysis.

The following is mine:

Value engineering is finding ways of reducing cost without compromising function.

Simple enough, right? But it also can’t involve cutting corners or compromising quality.

Therefore, the study and analysis must be thorough.

As in,

How is the structure placed on the property?
What utilities are needed, are they available, and through what path(s)?
What is the soil quality?
What is the drainage like?
What are we going to build and out of what materials?
How robust is the thermal envelope?
Can we offset any utility use with renewable sources?

I have a degree in Value Engineering from the University of Lee, School of Hard Knocks.

That’s a joke. But what it means is that I’ve learned more from previous mistakes, mostly my own but also those made by others, than I’ve learned in a traditional textbook fashion.

The former is more fun, anyway – learning from mistakes (by doing and observing) rather than from a book.

But it’s also more humbling, especially when you screw up. (Ask me how I know.)

The accompanying video was one that I had forgotten about, one that resurfaced when I cleaned out my phone.

It involves a project that is a second location for a business.

The first location was started pre-pandemic, when everything didn’t cost as much.

The second location, we knew, was going to cost more due to the effects of inflation on building materials and building labor.

How could we design it to mitigate some of the increases?

One thing we could do is design a post-and-beam building. Rather than have a continuous concrete footing and stem wall around the almost-400 foot perimeter, we would have many individual posts resting on a chunk of concrete that in turn was resting on stone, so that the bottom of each hole could be leveled perfectly. If there were an isolated area of poor soil, we would deal with in within that individual hole, and it wouldn’t affect the entire perimeter.

In what areas did we save?

We saved a lot of digging, and the possible impact of poor soil (one or more homes previously stood on this property).
We saved the need to relocate hundreds of cubic yards of soil excavated.
We saved the need to import hundreds of cubic yards of sand for a continuous footing.
We saved the cost of a fair amount of concrete and the labor for that.
We saved the cost of backfilling the almost-400 foot perimeter.

And I’d say it was a success, because the total cost to build was within $5 per square foot of what it was pre-pandemic “the usual way”, and we started in mid-2022.

I hope you enjoy the video I dug out from the archives.

Never underestimate the potential impact of value engineering your projects. It could in fact help some transition out of “improbable” status all the way to the “possible” designation, when costs are considered.

Until next time,
Dr. Lee Newton

How A Doctor Learned To Develop Real Estate

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The Essence of Value Engineering


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