Value Engineering Review

Section 1

Purpose

The Stage 3 Value Engineering Review is a targeted, structured assessment of the spatially coordinated design to identify and quantify opportunities for cost optimisation at sub-elemental and specification level. It is distinct from the Stage 2 VE exercise: where Stage 2 VE addressed high-level elemental choices (structural system, façade type, M&E strategy), Stage 3 VE examines the detailed specification of components, materials, systems interfaces and coordination solutions that are now visible in the developed design.

RICS Value Management and Value Engineering (1st edition, 2017) confirms that the potential for VE declines as design progresses. Stage 3 represents the last point at which design changes can be made without generating significant abortive technical design work. The QS must complete the Stage 3 VE review before Cost Plan 2 is finalised and the Stage 3 gateway is closed — any VE savings accepted by the client must be incorporated into CP2 before sign-off.

The five-step VE process — information gathering, creative thinking, analysis and evaluation, development, and presentation — applies at Stage 3, but with a tighter scope than Stage 2. Returns on VE investment of 10:1 to 100:1 have been documented by RICS when VE is carried out at a sufficiently early stage; Stage 3 represents the lower end of this opportunity window.

Section 2

Key Principles

RICS Value Management and Value Engineering (1st edition, 2017): defines the five-step VE process, the QS role, workshop techniques, and reporting requirements. Confirms that VE must be positive (value-focused), structured, auditable and multidisciplinary.
BS EN 12973:2020 — Value Management: European standard defining value management principles, function analysis (FAST diagrams, function cost matrices) and the structured evaluation process.
RICS Whole Life Costing (1st edition, 2016): Stage 3 VE proposals must be assessed for whole-life cost impact using NPV methodology — a capital saving that increases operational or maintenance cost may not represent net value.
NRM 1 (2nd edition, 2012): the elemental cost plan structure provides the primary tool for identifying VE targets (elements with EURs exceeding BCIS benchmarks) and quantifying proposed savings.
PD 156865 Standardised Method of Life Cycle Costing (BSI/BCIS, 2008): at Stage 3, VE proposals for components (M&E plant, cladding systems, floor finishes) should include LCC at component/system level using the cost structure defined in this standard.
Construction (Design and Management) Regulations 2015 (CDM 2015): VE proposals must be assessed against CDM design risk obligations — no proposal that introduces new unmitigated design hazards should be accepted.

Section 3

Practical Application

Step 1

Prepare the VE analysis input: extract from Cost Plan 2 all elements where the elemental unit rate exceeds the BCIS benchmark by more than 10%, and all elements where the element's percentage of construction cost is above the BCIS norm for the building type. These define the Stage 3 VE target list.

Step 2

Categorise VE opportunities by type: (i) specification substitution (alternative material, product or system of equivalent performance at lower cost); (ii) design simplification (removal of complexity added through coordination that does not serve a required function); (iii) interface rationalisation (eliminating duplication at structural/services/architectural interfaces); (iv) component standardisation (replacing bespoke or non-standard items with catalogue products).

Step 3

Brief the design team. Issue the VE target list to the architect, structural engineer and M&E engineer in advance of the workshop. Request each discipline to prepare at least two VE proposals for their high-cost elements, with preliminary cost estimates and functional analysis notes.

Step 4

Conduct the VE workshop. For each proposal, follow the five-step process: (i) information — confirm the function served; (ii) creative — generate alternative ways to fulfil the function; (iii) analysis — evaluate each alternative for cost, LCC, quality and risk; (iv) development — develop shortlisted options with supporting cost estimates; (v) presentation — recommend accept/reject/further study with documented rationale.

Step 5

Quantify each accepted VE proposal: update the relevant CP2 elemental rate and quantity, calculate gross saving (£), assess LCC NPV impact (if material), and check for any consequential cost implications in other elements (e.g. a structural simplification may affect foundations or external works).

Step 6

Prepare the VE appraisal table: one row per proposal, columns showing element, proposal description, capital saving (£), LCC NPV impact (£), net value impact (£), quality/risk rating, and recommendation (Accept/Reject/Further Study).

Step 7

Present the VE appraisal table to the client with the QS recommendation. Obtain written confirmation of each accepted proposal before updating CP2. Document all rejected proposals with the reasons for rejection.

Step 8

Update Cost Plan 2 to reflect accepted VE decisions. Issue as Cost Plan 2 (Revision 1) with a VE schedule appended. The VE schedule becomes part of the permanent project audit record.

Section 4

Common Mistakes to Avoid

Treating Stage 3 VE as a repeat of Stage 2 VE — Stage 3 VE should focus on sub-elemental specification, system interfaces and component choices that were not resolved at Stage 2; revisiting Stage 2 strategic decisions is inappropriate and wastes workshop time.
Assessing VE proposals on capital cost only — a specification change that saves £50,000 in capital cost but increases annual maintenance by £8,000 produces a net negative NPV over a 10-year horizon at any standard discount rate.
Allowing VE to breach statutory requirements — no saving justifies non-compliance with Building Regulations (Part B fire, Part M access, Part L energy, Part F ventilation) or CDM design risk controls.
Conducting the VE review after Cost Plan 2 has been signed off — savings identified post sign-off constitute a scope change, not a VE outcome, and require a formal change control process.
Not documenting rejected proposals — the audit trail of what was considered and why it was rejected is as important as the record of accepted proposals, particularly for public sector audit purposes.
Introducing VE proposals at Stage 4 without QS cost verification — post-Stage 3 VE proposals must still go through the full cost analysis process; informal 'savings' without quantified cost evidence are not VE.

Section 5

APC Competency & Quick Reference

APC Competencies: Value Management (L2) | Design Economics & Cost Planning (L2) | Cost Management (L2) | Life Cycle Costing (L2)

How does Stage 3 VE differ from Stage 2 VE?

Stage 2 VE addresses strategic elemental choices: structural system, façade type, M&E strategy — high-level decisions with large cost implications. Stage 3 VE focuses on sub-elemental specification detail: component choices, material substitutions, system interface rationalisation, and coordination simplifications visible only in the spatially coordinated design.

What is functional analysis and why is it used in VE?

Functional analysis (using FAST — Function Analysis System Technique) identifies what function each component or element serves. By defining the required function independently of the current solution, the VE team can generate alternative ways to fulfil the same function at lower cost. VE that does not define the required function risks substituting a cheaper product that fails to perform.

How does the QS quantify the net value impact of a VE proposal?

Net value impact = capital saving (£) − (NPV of additional life cycle cost, if any) + (NPV of operational savings, if any). All figures must be expressed in present value terms using the project discount rate. The VE appraisal table should show gross capital saving, LCC NPV impact and net value impact as separate columns.

Section 6

Value Engineering Review Checklist

☐

VE target list prepared from CP2: elements where EUR exceeds BCIS benchmark by >10%

☐

VE proposals categorised (specification substitution, design simplification, interface rationalisation, standardisation)

☐

Design team briefed and proposals requested in advance of workshop

☐

VE workshop conducted following five-step process (information, creative, analysis, development, presentation)

☐

Each proposal quantified: capital saving (£), LCC NPV impact (£), quality/risk rating

☐

Consequential cost impacts in other elements checked

☐

VE appraisal table prepared with QS recommendation per proposal

☐

Client sign-off obtained on accepted and rejected proposals

☐

Cost Plan 2 updated to reflect accepted decisions (issued as Revision 1)

☐

Rejected proposals documented with reasons (audit trail)

Section 7

CPD Learning Outcomes

Apply the RICS five-step VE process to a Stage 3 design review, identifying sub-elemental and specification-level cost optimisation opportunities from an elemental cost plan benchmark analysis.
Assess VE proposals for net value impact incorporating both capital cost saving and whole-life cost (LCC NPV) implications, in accordance with RICS Value Management and Value Engineering (2017) and RICS Whole Life Costing (2016).
Distinguish the scope and focus of Stage 3 VE (sub-elemental specification) from Stage 2 VE (strategic elemental choices), and advise clients on the declining value improvement potential as design progresses.

Section 8