The Case for Value Engineering in Capital Project Delivery
Chuck Centore | President of PM&E
In today’s capital-intensive industries, delivering value without sacrificing function, quality, or reliability is paramount. Enter Value Engineering (VE), a structured, proven methodology that has been quietly transforming projects, products, and processes for over 75 years.
Origins Rooted in Function, Not Cost
Value Engineering was born out of necessity. During World War II, General Electric engineer Lawrence D. Miles faced severe material and part shortages. His response was groundbreaking: identify the function a component serves, then find alternatives that perform the same function, sometimes better, at a lower cost.
This shift in thinking gave rise to the discipline now known as the Value Methodology (VM).
The approach spread rapidly from industry to government. By the 1950s, the U.S. Navy had adopted VE to manage shipbuilding costs. By the 1960s, it was codified in federal procurement regulations, with incentive-sharing provisions to promote contractor participation. Today, VE is used globally across construction, manufacturing, defense, infrastructure, and public services
Why VE Matters for Capital Projects
In major capital project delivery, whether in energy, infrastructure, chemicals, or manufacturing, the stakes are high. The sheer scale of investment and interdependencies means that early decisions have compounding effects. Poor scope definition, over-engineering, or rigid adherence to legacy specifications can quietly erode value.
Value Engineering counters these risks by:
Identifying and eliminating unnecessary costs without reducing performance or safety.
Reframing project scope around core functions instead of historical design choices.
Enabling multidisciplinary teams to generate innovative alternatives.
Creating a structured process for aligning cost, schedule, risk, and value before critical design and procurement decisions are locked in.
Divergent and Convergent Thinking: The Heart of Innovation
One of the most powerful, yet often overlooked, aspects of Value Engineering is its disciplined use of divergent and convergent thinking.
Divergent thinking occurs early in the process. Teams are encouraged to explore a wide range of functional alternatives, unconstrained by traditional design limitations. This is where creativity thrives, identifying bold ideas that may not emerge in conventional reviews.
Convergent thinking follows. Ideas are methodically evaluated, prioritized, and refined against project criteria, ensuring that only the most feasible, high-impact solutions move forward.
This structured thinking model prevents premature convergence on default solutions. It ensures the team fully understands what the project must accomplish before deciding how to do it. In the context of capital projects, this leads to innovative yet pragmatic outcomes that preserve function and quality while improving cost efficiency and constructability.
The Value Methodology in Practice
The VE process is delivered through a structured eight-phase job plan, typically facilitated by a Certified Value Specialist:
Preparation Phase – Clarify objectives, participants, and logistics.
Information Phase – Understand project drivers: cost, schedule, risk, performance.
Function Analysis Phase – Define what the project or asset must do, using tools like FAST diagrams.
Creativity Phase – Generate alternatives to meet functions more efficiently.
Evaluation Phase – Assess alternatives against stakeholder requirements and constraints.
Development Phase – Build proposals with supporting technical, cost, and risk data.
Presentation Phase – Deliver findings in a form that decision-makers can act on.
Implementation Phase – Track and execute approved value improvements.
This process is most powerful when applied early in the project lifecycle, during front-end loading (FEL), concept select, or preliminary design, when flexibility is greatest and course corrections are less costly.
Industry Results and Benchmarks
Agencies such as the U.S. Department of Defense and state DOTs report ROIs of 7:1 or higher for VE studies. In the private sector, owner-operators and EPC firms have leveraged VE to:
De-risk execution by identifying more constructible or operable alternatives.
Reduce total installed cost by refining over-specified systems.
Improve stakeholder alignment by reframing design intent around shared functions.
Notably, VE does not equate to cost-cutting or value erosion. When properly facilitated, VE strengthens quality, reliability, and long-term operability, core to delivering lifecycle value.
Making VE Part of Your Delivery Strategy
To embed Value Engineering into capital project delivery:
Include VE studies in your project delivery model, especially during FEL-2 and FEL-3.
Use function analysis tools to challenge assumptions and clarify objectives.
Invest in trained facilitators and multidisciplinary teams, not just cost estimators.
Align VE outcomes with decision gate criteria, ensuring proposals inform investment approvals.
Closing Thought
Capital projects succeed or fail on the quality of early decisions. Value Engineering equips project teams with the tools to make those decisions more rigorously, balancing cost, performance, and risk through a function-first lens.
As we navigate an era of constrained capital and rising complexity, VE isn’t a luxury. It’s a discipline that belongs at the center of every major capital project.
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