Cost Estimating for a Value Engineering Study

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A question was asked of me the other day, “Why do you need a cost estimator on a Value Engineering study?”  This  caused me to pause, think about question and this is what I came up with.  Please feel free to share this.

Cost Estimating for a VE Study

The function of the cost estimator in a VE study differs from the standard cost estimating.  The cost estimator has 2 functions; support the development of design alternatives, developed by the VE team, and analyze and provide recommendations to the design cost estimate.

When a VE team member develops an alternative design to the current design, the cost estimator develops and completes the cost estimate.  The cost estimate will use the same work item description and unit cost, for the baseline design, as is in the design documents.  Where possible, the same description and unit costs will be used for the proposed alternative design.  Where the proposed design incorporates elements that are not in the design cost estimate, the cost estimator develops the unit prices.

Where the design cost estimate uses gross square foot (GSF) or lump sum (LS) for the unit price, the cost estimator will develop costs to support changes that may impact a portion of the baseline design within the alternative design.

The second function of the cost estimator on the VE team is to complete an analysis and prepare a written narrative of the design cost estimate.  This analysis will include review of the general conditions costs, including overhead, profit, bonds and insurance, and provide opinions on the validity of these elements.  An analysis will also be made of contingencies and escalation, with recommendations made as to recommended percentages and durations.

An analysis will be made of the direct cost elements of the project to verify that the correct gross square footage (GSF) is used by all trades for unit costs based on GSF, that work items shown on the design drawings are included in the cost estimate and that elements not in the design documents are not included in the cost estimate.  Random checks will be made against work items that are a large quantity or large dollar value, a reality check.

The result is a written review with recommendations that becomes part of the VE study report.  It is important to note that if errors are found in the cost estimate, the corrections will be made by the design team.  The unit costs in the cost estimate at the time of the VE study are always used to develop costs.  This methodology allows the design team and Owner to compare “apples to apples”.

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