When phone calls and sales office traffic slow down, it’s natural to turn to cost-cutting measures. After all, you have homes to sell and the price must be right. But today’s buyers are more discerning than ever. Full on a diet of HGTV how-tos and Pinterest inspiration, they’re more likely to detect cut corners and low-quality materials.
Fortunately, there’s a better way for builders to make house plan updates that improve balance sheets while maintaining buyer appeal. Due to its unfortunate misuse as solely a cost-cutting measure, value engineering may have a bad reputation in our industry and with home buyers. But value engineering is so much more than cost-reduction. It represents a comprehensive review of a home’s design and construction with the objective of making incremental improvements that add value. But it takes a team approach and a willingness to communicate, collaborate, and compromise. In this blog, we’re walking through how to begin the process of value engineering in residential construction.
Table of Contents
- Value Engineering is Not Only About Building a Cheaper House
- All Hands on Deck
- Communicate and Collaborate
- Get Ready to Redline
- Benefit From Economies of Scale
- Value Engineering Takeaways
Value Engineering is Not Only About Building a Cheaper House
There’s a right way to tackle the value engineering process, and it shouldn’t be confused with simple cost-cutting measures – replacing materials with cheaper options, for example. Reducing a house’s building costs is important to maintain builder margins and stabilize housing prices, but if you’re solely embarking on value engineering to keep costs down, you’re missing out on its other benefits.
It involves a total-systems approach to a project’s life cycle:
- Planning and design
- Pre-construction
- Purchasing
- Construction
- Closeout
Value engineering in residential construction is a re-evaluation process. It helps to think of it as an exercise in creative discovery. It aims to examine each project phase to identify areas to improve design, methods, efficiencies, and materials that keep existing standards or add value to the project. In other words, value engineering keeps or improves a home’s quality with better ways of doing things. When it’s approached this way, cost reduction is a common result and benefit.
All Hands on Deck
The first step in value engineering is understanding what’s possible. And that takes a village, which is why it’s crucial to assemble your value engineering A-team. All project stakeholders and contributors should attend so everyone’s input can be discussed and vetted in a collaborative roundtable format. Here’s a short list of some of the key players:
Architecture
Value engineering begins with design, and your architect will offer guidance on plan changes and cost-effective design solutions. Their invaluable input can balance project metric goals while retaining your plans’ distinguishing features and buyer appeal.
Construction
Your construction manager or superintendent will offer crucial, on-the-ground insight on how proposed changes to a project’s design, materials, and methods will improve performance, quality, durability, and safety. Ideas from your trades can be relayed to your superintendent to share with the VE team.
Purchasing
Value engineering may involve product swaps and material standardization, so a member of the purchasing team should be on hand to not only reprice the project but offer guidance on quality, performance, availability, delivery dates, and other product-specific details that impact the project. Purchasing can also provide important intel about potential warranty issues a product change can create.
Marketing
Marketing and sales typically interact with the buyers the most and therefore hear what home features buyers like and don’t like about their homes. They should be able to tell you what plan changes will appeal and offer market differentiation, in addition to buyer turn offs and potential design and functionality deal breakers.
Primary subcontractors
Foundation, framing, electrical, plumbing, structural engineering and HVAC subs have decades of combined experience in their respective specialties and are helpful resources for onsite improvements. These are the teams in the trenches that can offer invaluable insight into ways to streamline the construction process, reduce waste, and identify existing or proposed construction details that will increase or decrease costs.
Communicate and Collaborate
Once you have assembled your team, it’s time to meet to discuss priorities before plan changes can begin. This is a collaborative effort among all meeting participants, so everyone should come to the table ready to contribute. Suggestions for improvement should address the following:
- Ways to eliminate waste
- Areas to streamline construction complexity
- Where to improve efficiencies, from pre-construction and purchasing and through construction and closeout
- How to do all of the above while designing a great house with features that are most important to buyers
It’s also a good time to dust off your communities’ design review boards and zoning ordinances to understand what types of plan changes are allowed and restricted. The last thing you want is finalized updated drawings only to be denied and forced to revise the process.
Encourage Ideas and Compromise
Creativity and out-of-the-box thinking should be welcomed! Open communication, mutual respect, and a willingness to see things from various perspectives will create a safe environment to generate ideas, share, and discuss feasible solutions. Making hard choices and compromising are often required during value engineering reviews. It’s helpful to remember everyone is on the same team and desires a successful project.
Before redlining begins, everyone in attendance must be clear on what metrics are the priority, and what goals are associated with them. A $750 savings per house will yield a much different value engineering approach than a $5,000 savings. The team must be clear on its targets and how success will be measured before work begins.
Get Ready to Redline
The next step is to have your architect create a set of redline drawings that indicate the updates the team agreed upon. Some examples of house plan updates you may receive from your architect may include but aren’t limited to:
- Changing a bedroom to a loft
- Optioning garage space as a home office
- Reducing corners
- Standardizing kitchen island shape or size
- Moving some standard features to options
Redlines are helpful work-in-progress drawings to hand off to your purchasing and construction team members, who can reprice the plan(s) and see if you’re meeting your goals. Once you’ve decided on your home’s plan updates, your architect will create a new finalized set of drawings that incorporate the changes.
Benefit From Economies of Scale
The financial benefits of value engineering in residential construction can add up quickly, especially if you’re a production home builder. Incremental improvements yield big results at scale. A $500 savings per house may seem small, but creates exponential savings in a 50 or 100-unit community.
If your business falls in the mid-volume or boutique home builder category, it can benefit from a value engineering exercise, too. Using similar principles to update your portfolio of best-selling house plans can result in cost savings, albeit spread out on a smaller scale.
Value Engineering Takeaways
Value engineering in residential architecture takes a whole systems approach and re-examines each phase of a home’s construction life cycle. A thoughtfully designed and high-performance home is imperative to remain competitive, and value engineering opens up dialogue among your team members to make incremental improvements that add value to both the builder and buyer. If you would like to discuss house plan review options, please contact us below for a consultation.
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