AE Blog - Risk Management Topic: “Value Engineering”
Sometimes by changing its materials, means, methods, or schedule, a contractor can offer “Value Engineering” cost savings that it will share with the owner. The A/E of record will likely be asked to review the proposed change. The risks associated with accepting contractor-proposed changes can be enormous especially compared with the compensation received by the A/E of record to review the contractor’s “Value Engineering” proposal. Some client’s may expect the A/E of record to review the contractor’s “Value Engineering” proposal at no cost.
Here are some examples of “Value Engineering” proposals that went very badly and the A/E of record was drawn into the claim:
- The owner wanted to reduce the cost of a storage building by making the slab thinner. It was thinned out to the point where it could no longer support the walls. Result will be a seven-figure claim.
- Contractor proposes a cost saving change to mechanical equipment. The new equipment is 18” taller than original design and is no longer hidden by the parapet wall, as is required by code.
- Design of balcony railing was in steel. Contractor’s “Value Engineering” proposal saves money by substituting aluminum. The materials have different coefficients of expansion in sunlight. The hard set grout cracked and had to be replaced at a cost in excess of $100,000.
Some protection for the design professional can be accomplished by the following:
Include a section in the contract between the owner and design professional that calls for the design professional reviewing contractor proposed “Value Engineering” as an additional service.
- Include a section in the contract between the owner and the contractor that requires that the contractor must provide certain specific information that will be needed by the A/E of record to evaluate a contractor’s “Value Engineering” proposal.
- Include a section in the contract between the owner and the design professional that limits the design professional’s liability for review of contractor proposed Value Engineering” proposals.
The information above was provided to Hall & Company by John Lowe, Lowe Consulting, LLC. To learn more about the services provided by Lowe Consulting, LLC, please visit his website. To download an eBook written by John Lowe, click on the following link.