# Turn Costs into Opportunities: 5 Key Principles of Value Engineering for Effective Project Management

Every leader strives to find a formula to enhance project profitability. There’s no magic involved: profitability increases by reducing expenses (and consequently, the cost of the product) or by increasing the final value. But is there a way to make a product or manufacturing process better without spending more money? Yes, this very idea lies at the heart of the Value Engineering method.

# What is Value Engineering?

Value Engineering (VE) is a scientifically grounded approach to increasing profitability and the investment attractiveness of projects. Let’s delve into the essence of this method and how to implement it in your projects.

## Value Engineering Defined

The term “Value Engineering” (VE) has several variants: cost engineering, functional cost analysis (FCA), cost design, value engineering, benefit optimization method, and others. The essence of the method is that it effectively reduces the cost of products or services by analyzing and justifying changes in the functional properties of the product. As a result of such changes, product quality may either improve or slightly decrease, but the product remains valuable to end consumers.

For example, you can replace a material that makes your product durable with a cheaper one that has similar technical characteristics. Or, you might find a way to make a software program run faster and bug-free while removing some functionalities that clients rarely use.

It’s important to understand that optimizing product cost often leads to “planned obsolescence,” which stimulates additional sales and encourages customers to replace outdated goods. However, such a strategy can negatively affect the manufacturer’s or brand’s reputation and ultimately lead to decreased sales.

## A Brief History of Value Engineering

During World War II, General Electric sought alternatives to scarce resources in production. The company’s Vice President, Harry L. Erlichauer, discovered that such substitutions not only increased profits and reduced product costs but also improved the quality and reliability of products.

In 1947, engineer Lawrence D. Miles assembled a group of specialists to further investigate this substitution effect. Over four years, they studied and optimized many types of products. Thanks to this new approach, General Electric’s production costs were reduced by an average of 25%. In Miles’ note published in 1949, the term Value Engineering first appeared.

At the same time, a similar model for cost optimization was being developed in the USSR. Engineers and designers R. L. Bartini, Yu. M. Sobolev, and N. A. Borodachev analyzed various functional approaches to planning and production in their works. However, these methodologies did not gain widespread application. In 1969, a comprehensive study of foreign experience was conducted, resulting in Miles’ work being recognized as the most effective. This approach was implemented in some industrial enterprises and included in GOST standards under the name “functional cost analysis.”

# 5 Core Principles of Value Engineering (FCA)

In every production facility, there are elements that incur unnecessary costs. Removing or replacing them with more affordable ones can significantly reduce the cost of the final product while maintaining quality. Comprehensive research of the product’s consumer properties, service, or project for subsequent optimization is the engineering approach. The subject of Value Engineering analysis includes not only production objects but also business processes.

## 1. Early Diagnosis

Excessive expenses often arise from improper resource utilization during the planning stage. Therefore, the earlier you conduct cost analysis and optimization, the greater the effect you can achieve.

## 2. Determining Highest Priority

If you cannot apply VE to all aspects of production immediately, it’s essential to understand where its implementation will bring the most benefit. In practice, the method works best in areas related to production and engineering development.

## 3. Choosing Optimal Level of Detail in Analysis

Properly defining the consumer properties of a product or production object plays a crucial role in the VE method. However, overly detailed study can prolong the process and slow down project implementation. Therefore, the detailing of the object or system should be conducted in stages, starting with general functions and gradually delving into details.

## 4. Maintaining the Sequence of Analysis Steps

The VE method includes stages of preliminary preparation, analysis and search for creative solutions, testing the trial sample, transitioning to mass production, organizing sales, collecting feedback, and making adjustments if necessary. It is essential to follow the sequence of these steps to achieve the best results.

## 5. Identifying and Eliminating Bottlenecks

Identifying vulnerable points in the work process allows you to prevent potential problems and optimize costs.

# Value Engineering vs. Lean Manufacturing in Project Management: Which Method to Choose?

Implementing the Value Engineering method in project management allows you to:

• Define and align project objectives
• Analyze the costs involved in project implementation
• Obtain an accurate assessment of the project’s cost

Based on VE analysis data, it becomes easier to estimate and plan budgets, secure investments, manage the cost of the final product, and effectively approach risk planning. However, implementing VE may require significant efforts and resources in companies lacking experience with this method.

Although the Value Engineering method closely aligns with the principles of Lean Manufacturing (Lean methodology), it is not particularly popular among project teams. Instead, Value Engineering is more widely used when working with physical products to optimize existing production.

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In the realm of venture capital and private equity, methodologies like Value Engineering play a critical role in enhancing the viability and profitability of startups. VC firms and private equity firms often look for efficient and cost-effective strategies to maximize returns. By implementing Value Engineering principles, businesses can attract angel investors and secure funding from reputable investment opportunities near me.

Moreover, tools like Co-Founder Ai streamline the process of connecting with venture capital companies, private equity companies, and business investors, ensuring that your startup remains competitive in the dynamic market. Whether you’re seeking startup jobs or aiming to start a startup, understanding and applying Value Engineering can significantly impact your success and appeal to top-tier equity investors.