In this episode of the Nick Schiffer Podcast, I address a great question regarding value engineering. And explain how I define this over-used and often abused term—it drives me nuts when people describe “value engineering” as simply “cutting costs.” If the focus is only on reducing costs, one might be tempted to cut corners and jeopardize the quality of the work or use inferior materials. And that, in my professional opinion, is NOT what value engineering is all about.  

DEFINING VALUE ENGINEERING

I want to save money like everyone else. But when NS Builders was taking its first tentative steps, I decided that my business model would never employ a low cost/low value method. In fact, just the opposite. My goal was to deliver the highest value to my clients and use value engineering to evaluate and optimize other elements of the entire project to reduce costs. Of course, this mindset takes work in analyzing and weighing cost/benefit ratios; I spend a lot of time researching alternative construction methods, innovative designs, or materials that bump up value and offer a cost reduction.

VALUE ENGINEERING STARTS EARLY

There are three main stages in construction: project planning, design, and construction. Value engineering should start early in the planning stage and be carried through the rest of the project. I ask my project managers to look critically at all aspects of the project and offer suggestions on improving value and lowering costs. And whether you find a way to save money or realize the budget is expanding, you’ll need to communicate this to your client.   

Don’t procrastinate in having this conversation. And although email is quick, in this case, it’s not the best option for conveying the bad news that the budget is in peril. Instead, jump on Zoom or get together safely for an in-person meeting. Take the time to walk your client through all the numbers—line by line—explaining what the add-ons represent and why it is necessary. Simply emailing them an Excel spreadsheet with a bunch of cost codes is not going to do it; they may be shocked when they see the figure at the bottom. When you make time to talk with them, they will be more likely to agree to an increase in budget or get on board with a new product recommendation to save money. 

A HACK TO REDUCE OVERALL COSTS

Here’s a trick I picked up from a friend: Let’s say you are looking at the spreadsheet and all the line items add up to $100,000. But you and the client need that number to be closer to $80,000. Try this: Recalculate each line by applying a 20% reduction; the goal is to move your number closer to the $80,000. Of course, some items you can do this with and others are pretty firm. You’ll have to pick and choose where you can apply that percentage. However, you’ve probably already worked in a little wiggle room—a buffer—into those line items. So, you may not achieve the full 20% in your bottom line, but this exercise will allow you to get much closer to your target goal.  

THINK CREATIVELY

Value engineering requires you to think creatively—about the process and the materials. For example, choosing windows. You want to keep with the design, but the budget is already crunched—so open your mind to other possibilities: Can you use a different brand that is less expensive but equal in quality? Why did you choose that particular window? Is it simply because it’s your go-to? Is your decision based on performance or aesthetics? Have you invested time researching other products that perform just as well—or even better—and are less expensive?  

And don’t forget to talk to your vendors and subs—explain your value engineering thought process to them. Ask them to consider how they can help you reduce costs on a particular project; their suggestions could prove to be invaluable.

LESSONS LEARNED FROM LOOKING BACK 

Here’s another aspect of value engineering that we use—looking back at the lessons learned from completed projects. What worked? What ended up costing us more money? What if we had done something in a different order? Where could we have simplified? If we could go back and change something, what would it be? And why? Challenge yourself and your team to come up with new solutions to recurring problems. Find a better way—a smarter way—to do it. 

At NS Builders, we’ve discovered that value engineering is attainable and instrumental in our success. And it can do the same for you. 

It’s time to discover what NS Builders can intentionally craft for you! Contact us today to get started on your custom dream home. Together, we can make it happen. 

—Nick Schiffer