Re-Visiting Value Engineering


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Re-Visiting Value Engineering

  1. 1. Spring 2009 Asselin & Associates Retail Design & Construction Strategy for Sustainability Re-Visiting Value Engineering: Lead Story Headline An Old Concept for Today’s Times Value engineering has been around has become synonymous solely ful Value Engineering outcome: In this Issue: for over 60 years. The concept was with cost-cutting—without the  Begin the VE analysis early—for first developed by General Electric critical underlying analysis to en- retailers, the best time to VE is Lifecycle Cost Analysis and 2 during World War II: While at- sure basic function, performance, once a prototype has been its Role in VE developed, but before any tempting to seek out acceptable and quality are preserved. “VE” is rollout of the new concept— substitutes for parts, raw materials, often invoked late in the develop- Can Sustainability Be Cost 2 starting the VE process during and labor due to wartime short- ment process, when bids are re- Neutral? construction allows fewer op- ages, GE found that these substitu- ceived and the project is suddenly portunities. About Asselin & Associates 2 tions often reduced costs, improved and significantly over budget.  Identify historical base costs; product function, or both. VE was Cutting costs at this stage often Coming in the next Issue: obtain industry benchmarking. born, defined in its simplest terms results in a knee-jerk reduction in  USGBC’s LEED Portfolio Program Gather input from multiple as the ratio of function to cost. the design program, where compo- and LEED for Retail target broad sources: designers, architects & nents or functions are deleted engineers, vendors & suppliers, participation by national retailers. The value engineering process uses (“VE’d out”) from the budget. general contractors, end users. a structured problem solving meth-  Assess degree of risk as well as odology designed to analyze the The retail industry could benefit any scheduling or availability functions of: a) a project, b) a from revisiting the original intent of impacts associated with VE piece of equipment, c) a system, or value engineering: addressing not opportunities. d) a product, with the goal of im- only optimum value at the time of  Present cost-benefit findings proving performance, quality, initial investment, but also value using familiar financial terms and life cycle cost—while still over the long-term investment. (Simple Payback Period, Return preserving the owner’s desired The costs of energy and water, the On Investment, Internal Rate of Return). functions. For retailers, this often costs of maintenance, and the costs means not sacrificing brand iden- of manpower must be a part of the The Bottom Line: value engineer- tity. VE can help to identify and VE analysis in order to understand ing should be about optimizing quantify cost and worth, fostering total cost relative to functionality. functional VALUE, not cost-cutting. informed decision-making. Here are five key things that a All too often, “value engineering” leader can do to ensure a success- Avoiding Greenwashing With an growing emphasis on pro- is true, it glosses over any effect on gory, but distract from problematic Six Sins of Greenwashing: moting environmental stewardship, other environmental issues (i.e., environmental issues of the cate- xx there is great pressure to specify energy efficient equipment manu- gory (i.e., organic cigarettes). products or services that offer factured with toxic chemicals). Sin of the Hidden Trade-Off Third-party labeling (GreenSeal, “green” attributes. Along with the No Proof Sins mean that environ- GreenGuard, EnergyStar, FSC, etc.) Sin of No Proof growth of “green” products on the mental claims can’t be substanti- also helps in avoiding greenwash- market, “greenwashing”—the ated by supporting information or Sin of Vagueness ing, by certifying products meeting misleading of consumers on a prod- third-party research; Vagueness strict environmental standards. Sin of Irrelevance uct’s environmental benefits—has Sins are poorly defined claims that also increased. TerraChoice Envi- risk consumer misunderstanding. The Upshot: a “green” VE analy- Sin of Fibbing ronmental Marketing has defined Irrelevance Sins make claims that sis looks at the “Triple Bottom Sin of Lesser of Two Evils Six Sins to help consumers avoid are unimportant from an environ- Line” cost, where environmental, the greenwashing trap: mental perspective; Fibbing Sins social, and financial performance are claims that are simply false. are weighed together. Read more Hidden Tradeoff Sins typically From TerraChoice Environmental And finally, Lesser of Two Evils at: Marketing, Inc. 2007 address a single “green” attribute, Sins are claims that may be true triple-bottom-line.html and while the manufacturer’s claim within a particular product cate-
  2. 2. Page two Asselin & Associates Retail Design & Construction Strategy for Sustainability Life Cycle Cost Analysis and its Role in VE The expression “Cradle-to-Grave” stressing functional value, VE Big-Box and grocery retailers —the total cost of ownership over seeks to optimize performance, have been at the forefront of this the life cycle of an asset—is often quality and cost over time. movement, incorporating measures used to support decision-making such as energy efficient light fix- For companies where the corporate during project development. En- tures and HVAC&R units, daylight- structure often places responsibility compassing design, construction, ing and lighting controls, reflective for the initial capital budget and operation, and maintenance, this roofing materials, and low mainte- ongoing operating and improve- awareness of a product or piece of nance flooring. In most cases, the ments budgets under different equipment’s cost impact over time added cost of initial investment was groups, there may be inadequate can be helpful in avoiding expen- recouped through operating savings discussion of life-cycle cost impact. sive, long-term errors in selection. within a two-year period. For spe- At the very least, the ability for a cialty retailers that may be more Sieglinde Fuller of the National company’s O&M (Operations & sensitive to a “high-design” aes- Institute of Standards & Technology Maintenance) staff to weigh in on thetic where look can sometimes notes: “Life Cycle Cost Analysis is lifecycle concerns of materials and trump performance, the notion of especially useful when project al- equipment at the design develop- life cycle cost analysis may be more ternatives that fulfill the same ment phase is critical to a discus- problematic. Ultimately, bottom- performance requirements, but sion of “total cost.” line operating costs, combined with differ with respect to initial costs building codes or jurisdiction re- Within the retail sector, the notions and operating costs, have to be quirements, will drive a discussion of life cycle value and sustainability compared in order to select the one of life cycle into the design process. are converging. Pressure from that maximizes net savings.” rising energy costs has brought The Upshot: Life Cycle Cost Analy- Value engineering, by its definition, design, engineering, and O&M sis is an integral part of any Value encompasses life cycle cost analysis stakeholders together to think more Engineering study. principles in its methodology. In critically about life cycle costs. Can Sustainability Be Cost Neutral? The US Green Building Council and ing’s design is between 12 and 24 ject through LEED certification, its voluntary LEED (Leadership in months, primarily from the stand- coupled with added fees for com- Energy and Environmental Design) point of energy and water savings. missioning and energy modeling program to certify sustainable Additionally, costs for “green” can range from $50-$100K. For buildings has made sustainability building products have reduced as large-scale projects, this amount an integral part of today’s design demand has increased. From a life may represent less than 1% of and construction vocabulary. The cycle cost point of view, it can be construction cost, but may be pro- conversation about sustainability is argued that green may actually hibitive on smaller projects. helping to drive the notion of “total save money over a building’s life. Sustainability is the Good news for retailers: Begin- cost” to the forefront. “ability to meet present Soft cost premiums of LEED are ning in May 2009, the USGBC rolls needs without compro- For many, the question remains: more difficult to quantify. Studies out its “Portfolio Certification” proc- mising the ability of “How much more does it cost to undertaken by multiple groups ess, which aims to streamline certi- future generations to go green?” The USGBC indicates since 2003 report that design, fication for companies building on a meet their needs.” that the average payback on inte- documentation, and administrative repetitive basis; this should lower grating green features into a build- costs required to shepherd a pro- soft costs associated with LEED. About Asselin & Associates Asselin & Associates 1771 22nd Avenue San Francisco, CA Asselin & Associates was estab- Lydia Asselin is a licensed architect lished in 2001 to offer specialized and LEED-Accredited Professional 94122 value engineering consulting tar- with over twenty-five years of com- (415) 731-6402 geted at national retailers and mercial architectural and construc- other corporations with large-scale tion experience. She has worked rollout construction programs. The predominantly within the retail Contact: firm provides a range of services to design and construction sector for Lydia Asselin assist clients in identifying and Fortune 500 specialty retailers. Her implementing long-term cost reduc- expertise includes project and pro- President Lydia Asselin, President tion strategies, as well as incorpo- gram management, value engineer- rating energy efficient and environ- ing, life-cycle costing, and sustain- Need help on your VE or sus- mentally sensitive practices into able construction. tainability project? Call us. their building portfolios.