The project management landscape is changing.  With an increased emphasis on efficiency and the advent of new and disruptive technologies, being a project manager today is more challenging than being just ten years ago. In today’s highly competitive environment, IT organizations have to contend with condensed timelines, while significant cost cutting measures are often employed to keep projects on track and under budget.  Unfortunately, indiscriminate cost cutting often leads to diminished quality or performance in the end result.

With less than one-third of projects successfully completed on-time and on-budget, business and IT executives are beginning to expect IT projects to fail.  According to a study of approximately 600 business and IT executives published by software development firm, Geneca, nearly 75% of business and IT executives actually anticipate their software projects will fail.  Recognizing these challenges, innovative IT organizations can shift their focus from cost cutting to value optimization using an analytical process known as value engineering to keep projects on track.

With fewer resources at hand and more complex projects to tackle, we can’t afford to do things the way we’ve always done them.  Project managers are on the front lines of creating value, and a recent survey delivered by PwC shows that business leaders agree:  97% of organizations believe project management is critical to business performance and organizational success.  So how can we do better? Enter value engineering.

  Project management stats in 2016:

  • 75% of business and IT executives anticipate their software projects will fail. (Source: Geneca)
  • Fewer than 1/3 of all projects were successfully completed on time and on budget over the past year. (Source: Standish Group)
  • 97% of organizations believe project management is critical to business performance and organizational success. (Source:PricewaterhouseCoopers)


What is Value Engineering?

Value engineering began at General Electric Co. during World War II due to shortages of skilled labor, raw materials, and component parts. GE purchasing department employee Lawrence Miles, often considered the father of value engineering, and his associates looked for acceptable substitutes to keep the production process rolling along. Miles noticed that these substitutions often reduced costs, improved the end product, or both. After the war, Miles used these observations to develop the analytical field of “value analysis” for General Electric, an analytical technique now known as value engineering.

Value engineering is, in short, a systematic, organized approach to obtaining optimum value for each dollar spent.  In a proper value engineering exercise, cost cutting is achieved without reducing essential performance, reliability, or maintainability of the end result.  Concentrating on the maximizing the project’s function while minimizing life-cycle cost (capital, operating, and maintenance) generates the greatest value.  A mathematical way to express the foundational principles of value engineering is

Value = Function/Cost

in which:

Function = the specific work that a design/item must perform.

Cost = the life-cycle cost of the product.

Value = the most cost-effective way to reliably accomplish a function that will meet the user’s needs, desires, and expectations.

In other words, you can improve the way the product functions, or reduce its cost, to increase its value.  Value engineering seeks to identify all elements of function and cost in a project and balance them against one another so that informed decisions can be made between the two.  This allows for a simultaneous optimization of both the cost and end function of the project. The intended purpose is to improve the success of the project by increasing value for the owner sponsoring the project.

A key feature of any successful value engineering planning process is a facilitated workshop which brings together the people representing all of the functional areas involved in the project. The basic premise behind this formal value-engineering process is that 1) two (or more) heads are better than one, and 2)  there can always be a different (and perhaps better) approach to satisfying a particular need than the first thing that comes to mind.  Held during the design phase of the project, the value engineering workshop has five key steps:

Note that the greatest return from a value engineering exercise is during the schematic design stage prior to proceeding into the detailed project design stage. When value engineering occurs later, it often simply generates hostility between different stakeholders and ends up degenerating into a simple cost cutting exercise which can ultimately degrade value.

What are the Benefits?

Done right, value engineering can make an enormous contribution to the overall success of the project.  Some of the benefits that can be expected to flow from this analytical technique include:

So how do you put a Value Engineering approach into practice?  What does it look like?

To learn more, follow our next blog in the Value Engineering series – “IT Value Engineering:  An Example from the Trenches.”  We’ll examine a recent client project and describe how a value engineering approach was used to deliver on the promise of increased efficiencies and faster delivery in a laboratory environment.

About the Author

Dale Curtis Jr. is the President of Astrix Technology Group. For over 18 years, Mr. Curtis has built an impressive track record of leadership and success in high technology/scientific enterprise software sales, business development and service delivery. He has proven talent for driving innovative operational and marketing strategies, building successful teams, and rapidly developing new markets for start-up companies as well as multimillion-dollar global technology enterprises.   Mr. Curtis holds a B.S. in Chemical Engineering from the University of Virginia and an M.B.A. from the Drexel University LeBow College of Business.