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Value Engineering
AGENDA:
1) Overview
2) Functional Analysis
3) Keys to Success
4) VE Approach
5) VE Procedures
6) Reporting Procedures
© Construction Management Association of America. Do Not Duplicate or Reproduce.
© Construction Management Association of America. Do Not Duplicate or Reproduce.
“ … an organized effort directed at analyzing the
functions of systems, equipment, facilities, services, and
supplies for the purpose of achieving the essential
functions at the lowest life cycle cost consistent with the
required performance, reliability, quality, and safety.”
Source: Office of Management and Budget
“Price is what you pay. Value is what you get.”
~ Warren Buffet
© Construction Management Association of America. Do Not Duplicate or Reproduce.






Evolved during World War II
General Electric took lead after WW II
Expanded to design & construction in 1960’s
Government and private sector by 1970’s
Numerous VE programs active today
History of Value Engineering
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Alignment
Scope
Ongoing
Effort
Expectations
Budget
Projects need to start right to
finish right
© Construction Management Association of America. Do Not Duplicate or Reproduce.
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Item-Oriented Optimization
• Item-oriented optimization involves
looking at item A and asking: “How can
item A be made at a lower cost?” The
1
result is item A , a modified version of
item A, as shown below:
A
© Construction Management Association of America. Do Not Duplicate or Reproduce.
A
l
Function-Oriented Optimization
• VE involves looking at item A and asking the
questions: “How can the basic functions of
item A be provided at a lower cost?” The result
is item B, which is sometimes a completely
different item, as shown:
A
Basic
Functions
of A
© Construction Management Association of America. Do Not Duplicate or Reproduce.
B
Function Analysis
ITEM
VERB
 Window
Admits
Allows
Provides
Conducts
Improves
 Retaining wall (exterior) Retains
Controls
Improves
 Roof coverings
© Construction Management Association of America. Do Not Duplicate or Reproduce.
NOUN
Light
Ventilation
View
Heat
Appearance
Earth
Grade
Landscape
Reasons for Unnecessary Costs
• Lack of time
• Lack of
information
• Lack of key ideas
• Lack of budget
• Temporary
circumstances
© Construction Management Association of America. Do Not Duplicate or Reproduce.
• Habits and
attitudes
• Honest wrong
beliefs
• Politics
• Inadequate
definition of value
Attitudes Toward VE
• General negative attitude toward VE
• Consensus to do VE earlier
• Conflict over emphasis
• Diversity of opinion on approach
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Industry Trends
• Emphasis on value
• Timing of studies
• A / E, owner, and user participation
• “Zero-based” design
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Improvement
Value
= Functional benefits
Cost
• To improve value:
– Improve benefits, maintain cost
– Maintain benefits, reduce cost
– Improve benefits, reduce cost
– Reduce benefits, reduce cost *
– Increase benefits, increase cost *
* If benefits remain within needs and cost within limitations.
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Functional Benefits: How are they
measured?
• Esteem
• Use
• Reliability
• Cost
• Maintainability
• Security
• Expandability
© Construction Management Association of America. Do Not Duplicate or Reproduce.
• Aesthetics
• Safety
• Durability
• Convenience
• Accessibility
• Flexibility
• Perception
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Key to Value Engineering Success
• What does “value” means to the owner
• Understand what is of “value” to the owner
• Understand how the owner measures “value”
• Understand how “value” is perceived
• Define appropriate levels of “value”
• Be precise in assessing “value”
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Relationship Between Quality and Cost
HIGH
Too Expensive
TOTAL LIFE CYCLE COST
COST
QUALITY LIMITS
LOWEST LCC
FUTURE COSTS
MAX
INITIAL COSTS
MIN
Too Cheap
LOW
LOW
MIN
QUALITY
© Construction Management Association of America. Do Not Duplicate or Reproduce.
MAX
HIGH
Pareto’s Law of Distribution
100
90
PERCENTAGE OF COST
80
70
60
Best Value Focus
50
40
30
20
10
0
0
20
40
60
80
PERCENTAGE Of TOTAL FACILITY COMPONENTS
© Construction Management Association of America. Do Not Duplicate or Reproduce.
100
Sensible Trade-Offs
01
02
03
04
05
06
07
08
09
10
11
Foundations
Substructure
Superstructure
Exterior Closures
Roofing
Interior Construction
Conveying
Mechanical
Electrical
General Conditions
Sitework
Facility Value Target
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Relationship of Time and Change
Ability to
make changes
High
Cost of
making changes
Degree of
Change
Best Opportunity
for Improvement
Low
Planning
Design
Construction
Time
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Focus on Interdisciplinary Areas
Electrical
Mechanical
Owner’s requirements
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Civil & Structural
Architectural
Sensitivity to Life Cycle Impact
Transportation
5%
Other Support Costs
2%
School Allotment
1%
Textbooks
1%
Construction
18%
Furnishings/Fitout
4%
Fees
1%
Benefits/Overhead
14%
Other Project Costs
1%
Construction Contingency
1%
Major Capital Replacements
5%
Maintenance
3%
Energy
2%
Support Staffing
11%
Educational Staffing
31%
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Care with Major Risks in the Budget
“It’s worth a $100,000!”
$75,000
$125,000
Are they the same?
“It’s worth a $100,000!”
$25,000
$175,000
$100,000
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Project-Specific Issues
• Design approach
• Technical design
• Program
• Flexibility
• Reliability
• Constructibility
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• Expandability
• Energy
• Maintainability
• Budget
• Schedule
• Procurement
approach
September, 2009
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Engineering and
Value Analysis
Planning &
Design
Value
Engineering
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Construction
Value
Analysis
Approach to a VE Study
3 Phases of a VE Study:
• Pre-Workshop: preparation & organization
• VE Workshop: intensive & focused team
during a 3-5 day dedicated effort
• Post-Workshop: Follow-up, assessment,
report, meetings if needed, implementation
PreWorkshop
VE Workshop
PostWorkshop
Value Engineering Study
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Establishing a VE Team
• A most critical action!
Good experienced team = successful VE
• Three choices:
1. Select team from people involved in project
2. Select independent team not involved in
project
3. Hybrid: i.e. some insiders/some outsiders
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Advantages/disadvantages of the VE
Team Composition
• A VE specialist facilitates the study using the
existing design team, owner personnel, and
other owner consultants
• Traditional outside, independent “cold team”
which conducts the study, facilitated by a VE
specialist
• A VE specialist facilitates the study using an
independent “cold team” working with the
design firm, owner personnel, and other owner
consultants
© Construction Management Association of America. Do Not Duplicate or Reproduce.
September, 2009
VE Work Plan
• Information Objectives
– Key issues & criteria
– Function analysis
• Development
– First cost
– Life cycle cost
– Non-economic objectives
• Speculation
– Open-minded
– Creative
•
Evaluation
– Performance against criteria
– Goals & objectives
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• Report
– Considerations
– Implementation
Defining Value Objectives
List Criteria / Objectives
• First cost
• O & M cost
• Energy
consumption
• Space
requirements
• Performance
• Image (owner’s vision)
• Flexibility
• Reliability
• Expandability
• Schedule
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Defining Value Objectives
Determine minimum (or maximum) acceptable standards
Item
• First cost
•
•
•
•
•
•
•
•
•
Acceptable Standard
NTE $150/sf
O & M cost
NTE $8/sf
Energy consumption
NTE 60,000 Btu/sf/p.a.
Space requirements
NLT 50,000 sf net program area
Performance
on scale of 1-10: 7 minimum
Image
on scale of 1-10: 5 minimum
Flexibility
35% of space
Reliability
minimum toleration: 24 hours
Expandability
horizontal, one side
Schedule
September, 2003
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Defining Scope
• Program
–
–
–
–
Functional Space Program
Blocking & Stacking
Public Space
Efficiency
• Geometric Drivers
– Wall Area Ratio
– Degree of Articulation
© Construction Management Association of America. Do Not Duplicate or Reproduce.
• Volume Drivers
–
–
–
–
–
Clear Ceiling Height
Plenum Height
Interstitial Needs
Atria
Light Shelves
Criteria and Standards
• Building systems standards
• Energy standards
• Codes -- local and national
• Life safety considerations
• Technical specifications
• Document standards
• Procurement standards
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Functional and Operational
Requirements
• Operating standards
• Interface / support requirements
• Redundancy
• Security
• Flexibility
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© Construction Management Association of America. Do Not Duplicate or Reproduce.
Overview of VE Procedures
•
•
•
•
•
•
Cost models
Energy / maintenance models
Function analysis
Issues analysis
Brainstorming and Group Dynamics
Economic Analysis/Life cycle
costing/Sustainability
• Examples
• Value Enhanced Design/Integrated VE
• Standards
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Cost Model
COST MODEL
Construction
$0.00
$141.45
12
Site
+
Contingency
@ 0.00%
$0.00
$0.00
+
Escalation
@ 0.00%
$0.00
$0.00
$0.00
$0.00
Building
$0.00
$141.45
Overhead
& Profit
$0
$0
Structural
$0.00
$29.74
Architectural
$0.00
$61.66
Site
Preparation
$0.00
$0.00
01
Foundation
$0.00
$6.94
Site
Improvement
$0.00
$0.00
=
Construction
@ Bid Date
$0.00
$141.45
Project
Location
Belmont Learning Complex
Los Angeles, Ca.
Date
Dec-97
Phase Design Development
Bldg Type
Const. Type
Use Units
High School
Steel Frame/Masonry
3,550 Students
GSF
NSF
Floors
369,757
0
3
Comparative Ratios:
Parameter
Target
Cost per Student
SF per Student
ACT/EST
$14,733
104
08
Mechanical
$0.00
$18.17
09
Electrical
$0.00
$15.51
11
Equipment
$0.00
$1.47
10
GC, OH & Profit
$0.00
$14.89
04
Ext. Closure
$0.00
$27.04
HVAC
$0.00
$10.47
Service &
Distribution
$0.00
$4.14
Fixed
Equipment
$0.00
$0.52
Mobilization
Expenses (Bond)
$0.00
$0.00
Special
Foundations
$0.00
$0.00
05
Roofing
$0.00
$5.24
Plumbing
$0.00
$6.03
Lighting
& Power
$0.00
$6.76
Furnishings
$0.00
$0.95
Job Site
Overheads
$0.00
$10.79
Site Utilities
$0.00
$0.00
02
Substructure
$0.00
$2.57
06
Interior Const'n
$0.00
$28.08
Fire
Protection
$0.00
$1.68
Spec. Elec.
Systems
$0.00
$4.61
Special
Construction
$0.00
$0.00
Demobilization
$0.00
$0.00
Off-site Work
$0.00
$0.00
03
Superstructure
$0.00
$20.23
07 Conveying
Systems
$0.00
$1.30
Spec. Mech.
Systems
$0.00
$0.00
Legend:
Target
Actual/Estimated
3.4 COST MODEL
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Off Expense
& Profit
$0.00
$4.10
Function Analysis Assigning cost to functions
Item
Acoustic Tile Ceiling
Function
Retard Fire
Hide Structure
Absorb Sound
Total
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Cost
$0.85
$0.35
$0.30
$1.50 sf
Facility Level Function Analysis
Project:
High School
Date:
May-97
Location: Metropolitan D.C.
Client:
School Board
NO.
FUNCTION
3.0ITEMARCHITECTURAL:
DESCRIPTION Closure
VERB
NOUN
Exterior
Control
1.0 SITE: Roofing
Control
Preparation
Establish
Elevation
Interior
Construction
Protect
Improvements
Allow
Access
Programming
Item:
Function:
Page:
Total Facility
House People & Equipment
1
of
1
VALUE INDEX
KIND
COST
Environment
Environment
P
$1,387,250
R/SSurface
$1,885,775
Ambiance
Separate
Area $688,311
R/S
Waste
Conveying Systems
Move
Vertical Loads
Water
Utilities
System:
Creates
Convey
P
P
$1,250,000
P
$1,600,000
1.11
1.18
$500,000
R/S
1.38
Potential Simplified Drainage
WORTH
C/W
COMMENTS
$2,602,348
$2,500,000
$548,737
$540,000
Adjust Ballfields
$4,168,402
$4,000,000
Limit Parking
$40,000
$40,000
Energy
2.0
3.0
4.0
5.0
STRUCTURAL:
Foundation
Substructure
Superstructure
ARCHITECTURAL:
Exterior Closure
Roofing
Interior Construction
Conveying Systems
MECHANICAL:
HVAC
Plumbing
Support
Support
Support
Loads
Loads
Loads
P
P
P
$344,792
$1,000,846
$1,987,380
$340,000
$800,000
$1,500,000
1.01
1.25
1.32
Minimum
Thinner Groundslab
Bracing &/or Selected Load Beraing Walls
Control
Control
Protect
Separate
Move
Environment
Environment
Surface
Area
Vertical Loads
P
P
P
$2,602,348
$548,737
$4,168,402
$2,500,000
$540,000
$4,000,000
1.04
1.02
1.04
Limited Material Substitution
Minimum
Material Substitution
$40,000
$40,000
Control
Convey
Environment
Water
Waste
Storm
Structure
Environment
$3,424,093
$1,105,006
$3,000,000
$1,000,000
1.14
1.11
System Choices (LCC Impact?)
Potential Simplification
$387,801
$0
$380,000
$0
1.02
Minimum
Fire Protection
Protect
Special Systems
Control
ELECTRICAL:
Service & Distribution Distribute
Lighting & Power
Illuminating
Convey
Special Systems
Convey
EQUIPMENT:
Fixed
Support
Special Construction
Support
R/S
P
P
R/S
P
Energy
Area
Power
Energy
P
P
$501,358
$1,241,734
$500,000
$1,100,000
1.00
1.13
Limited
Altenate Systems Possible
P
$1,061,760
$800,000
1.33
Emergency Generator
Program
Program
P
$723,600
$0
$650,000
$0
1.11
Alternate Materials
$23,099,193
$20,500,000
1.13
SUBTOTAL
LEGEND Active Verb
Measurable Noun
KIND
P = Primary
R/S = Required Secondary
S = Secondary
COST/WORTH RATIO
3.6 FUNCTION ANALYSIS
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Cost/Worth Ratio of Basic Function Only
C/W Ratio:
1.13
1.04
1.02
1.04
FAST - Technical - Example
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Issues Analysis
• Define key issues
• Tie functions to key issues
• Identify benefits / costs
• Identify priority
• Define trade-offs
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Unlocking Creativity
Two Kinds of Thinking
• Analytical
– Logic based
– Limited/unique
ideas
– Convergent
thinking
– Vertical thinking
– Works well inside
the envelope
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• Creative
– Imagination based
– Many & varied
ideas
– Divergent thinking
– Lateral thinking
– Tests the edges of
the envelope
Brainstorming Techniques
• Defer judgment
• Focus on the key issues identified
• Start with most general & work to specific
• One individual records ideas
• Maintain one discussion at a time
• Everyone is equal
• Keep a good sense of humor
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Barriers to Creative Thinking
• Unwillingness/inability to focus on critical
issues
• Conformity
• Not challenging the obvious
• Extreme focus on details
• Evaluating too quickly
• Fear of looking like a fool
• Self-imposed barriers
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Checklist for Generating Ideas
• Inordinately expensive
items
• Complex & complicated
items
• Construction difficulties
• High maintenance items
• Potential operational
difficulties
• Non-standard products
© Construction Management Association of America. Do Not Duplicate or Reproduce.
• Multiple use & repetitive
items
• Critical materials
• Obsolete materials
• Restrictive criteria
• Extreme safety factors
• Restrictive tolerances
• Proprietary specifications
Group Dynamics & Partnering
•
•
•
•
•
Recognize the importance of group dynamics
Avoid unnecessary conflicts
Base VE process on common goals & objectives
Address the issues not the individuals
Understand that the whole is larger than the
sum of the parts
• Use VE process to develop partner relationships
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Economic Analysis Techniques
• Present Value Analysis
• Annualized Cost
• Rate of Return
• Break Even/Payback Period
• Savings/Investment Ratio
© Construction Management Association of America. Do Not Duplicate or Reproduce.
LEED© Checklist taken from LEED® Green Building Rating System™
Yes
?
Checklist
No
Sustainable Sites
Y
Prereq 1
Credit 1
Credit 2
Credit 3
Credit 4.1
Credit 4.2
Credit 4.3
Credit 4.4
Credit 5.1
Credit 5.2
Credit 6.1
Credit 6.2
Credit 7.1
Credit 7.2
Credit 8
Yes
?
Erosion & Sedimentation Control
Site Selection
Urban Redevelopment
Brownfield Redevelopment
Alternative Transportation, Public Transportation Access
Alternative Transportation, Bicycle Storage & Changing Rooms
Alternative Transportation, Alternative Fuel Refueling Stations
Alternative Transportation, Parking Capacity
Reduced Site Disturbance, Protect or Restore Open Space
Reduced Site Disturbance, Development Footprint
Stormwater Management, Rate or Quantity
Stormwater Management, Treatment
Landscape & Exterior Design to Reduce Heat Islands, Non-Roof
Landscape & Exterior Design to Reduce Heat Islands, Roof
Light Pollution Reduction
Required
Water Efficient Landscaping, Reduce by 50%
Credit 1.2 Water Efficient Landscaping, No Potable Use or No Irrigation
Credit 2 Innovative Wastewater Technologies
Credit 3.1 Water Use Reduction, 20% Reduction
Credit 3.2 Water Use Reduction, 30% Reduction
Y
Y
Y
Credit 1.1
1
Credit 1.2
1
Credit 1.3
1
Credit 2.1
1
Credit 2.2
1
Credit 3.1
1
Credit 3.2
1
Credit 4.1
1
Credit 4.2
1
Credit 5.1
1
Credit 5.2
1
Credit 6
Credit 7
1
1
Yes
?
Prereq 2
Prereq 3
Credit 1.1
Credit 1.2
Credit 1.3
Credit 1.4
Credit 1.5
Credit 2.1
Credit 2.2
Credit 2.3
Credit 3
Credit 4
Credit 5
Credit 6
Fundamental Building Systems Commissioning
Minimum Energy Performance
CFC Reduction in HVAC&R Equipment
Optimize Energy Performance, 20% New / 10% Existing
Optimize Energy Performance, 30% New / 20% Existing
Optimize Energy Performance, 40% New / 30% Existing
Optimize Energy Performance, 50% New / 40% Existing
Optimize Energy Performance, 60% New / 50% Existing
Renewable Energy, 5%
Renewable Energy, 10%
Renewable Energy, 20%
Additional Commissioning
Ozone Depletion
Measurement & Verification
Green Power
13 Points
Required
Storage & Collection of Recyclables
1
Building Reuse, Maintain 75% of Existing Shell
1
Building Reuse, Maintain 100% of Shell
1
Building Reuse, Maintain 100% Shell & 50% Non-Shell
1
Construction Waste Management, Divert 50%
1
Construction Waste Management, Divert 75%
1
Resource Reuse, Specify 5%
1
Resource Reuse, Specify 10%
1
Recycled Content, Specify 25%
1
Recycled Content, Specify 50%
1
Local/Regional Materials, 20% Manufactured Locally
1
Local/Regional Materials, of 20% Above, 50% Harvested Locally
1
Rapidly Renewable Materials
1
Certified Wood
No
15 Points
5 Points
1
Y
Y
Prereq 1
Prereq 2
1
Credit 1
1
Credit 2
1
Credit 3.1
1
Credit 3.2
Credit 4.1
Prereq 1
?
1
No
Energy & Atmosphere
Yes
Prereq 1
Indoor Environmental Quality
Credit 1.1
?
Y
No
Water Efficiency
Yes
Materials & Resources
14 Points
Credit 4.2
17 Points
Credit 4.3
Required
Credit 4.4
Required
Credit 5
Required
Credit 6.1
2
Credit 6.2
2
Credit 7.1
2
Credit 7.2
2
Credit 8.1
Credit 8.2
2
1
Yes
?
Minimum IAQ Performance
Environmental Tobacco Smoke (ETS) Control
Carbon Dioxide (CO2 ) Monitoring
Increase Ventilation Effectiveness
Construction IAQ Management Plan, During Construction
Construction IAQ Management Plan, Before Occupancy
Low-Emitting Materials, Adhesives & Sealants
Low-Emitting Materials, Paints
Low-Emitting Materials, Carpet
Low-Emitting Materials, Composite Wood
Indoor Chemical & Pollutant Source Control
Controllability of Systems, Perimeter
Controllability of Systems, Non-Perimeter
Thermal Comfort, Comply with ASHRAE 55-1992
Thermal Comfort, Permanent Monitoring System
Daylight & Views, Daylight 75% of Spaces
Daylight & Views, Views for 90% of Spaces
No
1
Innovation & Design Process
1
1
Credit 1.1
1
Credit 1.2
1
Credit 1.3
1
Credit 1.4
Credit 2
No
Yes
?
Innovation in Design: Specific Title
Innovation in Design: Specific Title
Innovation in Design: Specific Title
Innovation in Design: Specific Title
LEED™ Accredited Professional
5 Points
1
1
1
1
1
No
Project Totals
Certified 26-32 points Silver 33-38 points Gold 39-51 points Platinum 52-69 points
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Required
Required
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
69 Points
50
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Engineering Reporting
Procedures
•
•
•
•
•
Summary of Results / Implementation matrix
Executive summaries
Proposals
Cost estimates
Appendix materials
–
–
–
–
–
Cost models
Function analysis
Idea listings
Agenda
Miscellaneous
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value
Engineering
Proposal For
U.S. Embassy
Project
53
© Construction Management Association of America. Do Not Duplicate or Reproduce.
LCC Analysis for VE
Proposal For U.S.
Embassy Project
54
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Sample Implementation Matrix
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Enhanced Design
• Integration of value management, cost
management into design process
• Utilizes design team of record
• Emphasizes owner & user participation
• Must start at outset of project
• Objective is to assure alignment of scope,
expectations & budget
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Enhanced Design Delivery
Cost Management
$
$
On-going, interactive cost
management supplementing
milestone estimates
$
Design
Internal workshops to
improve value and to enhance
constructibility
Value Management
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Value Enhanced Design Delivery
Advantages
• Improved team communications
• Better control over cost
• Improved clarity of value expectations
• Faster feedback on cost impact of
decisions
• Reduced chances of redesign
• Improved relationship with owner
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Standards
© Construction Management Association of America. Do Not Duplicate or Reproduce.
Questions?
© Construction Management Association of America. Do Not Duplicate or Reproduce.