We all know what value engineering is when it comes to buildings. Generally speaking, it is the process of trying to identify high-cost items with relatively low perceived value. Once you identify these items, you then remove them (if you can), replace them with alternatives, or find other creative solutions. All projects have to do this at one point or another because, well, money doesn't grow on trees.
One way to think about this is in terms of the following four-quadrant chart:
Low-value and low-cost items aren't expensive, so you will probably just leave them alone. But if you can move them up to the next quadrant, that's even better.
High-value and low-cost items are the ideal place to be. One example might be a low-cost material that gets applied in a creative way so as to create high perceived value. This is where design really becomes alpha.
Low-value and high-cost items are the fertile ground for value engineering exercises. If the perceived value is low, why spend the money on it? Surely there must be other options.
High-value and high-cost items, on the other hand, require the most thought and debate. How high value is it? Do we really need or want to spend the money on it? One example of this would be the architectural facade lighting at One Delisle. Sadly, it was not free.
Years ago, the team presented it as a possible value-engineering option. But ultimately, we viewed it as being fundamental to the overall design. Its perceived value was off the charts. I mean, why invest so much in the architecture only to cut the very thing that helps prominently display it? So a decision was made to keep it and, boy, am I glad we did.
There's nothing else going up in Toronto like it.
Anyone who has ever worked on a development pro forma will know that the process generally works like this: You start with a bunch of assumptions. You assemble those assumptions in a way that will allow you to determine if the project in question is feasible. And then, you realize that almost everything is more costly than you initially thought and that the project may not actually work. Oh shit.
In fact, a sure-fire way to know that you're on the right track is if the numbers sort of don't work. If the returns look too good to be true, they almost certainly are and you're likely missing something big and meaningful. As we have talked about before on this blog, development happens on the margin. That means that you have to work at it. You have to be creative. And often you have to find ways to increase revenues and cut costs.
The common way to find money is through something known as value engineering, which is just a fancy way of saying, "I need to cut costs, so let's see what I can tolerate losing from this project." That's generally how it works. And we do it on every project. You're trying to find high-cost items with relatively low perceived value.
This process often gets a lot of criticism because people view it as a distasteful cheapening of a project. But the reality is that it is usually an important part of maintaining project feasibility. You may really want to use that fancy material you can only get from Switzerland, but maybe development charges were just increased and now you need to offset those new costs by finding savings somewhere else.
This isn't a perfect analogy, but imagine you were shopping for a new car. You might start out by wanting the fully-loaded version, but then you see the price and realize you can't afford it. So you decide to start trimming features and add-ons until you get to a place where you feel more comfortable. I would imagine this happens with cars, and I'm not sure it's right to point to that person after and say, "oh my god, I can't believe you cheaped out and didn't buy the fully-loaded version."
At the same time, I think it would be perfectly reasonable to argue that you don't need to spend a lot of money to (1) care deeply about the work that you do and (2) have taste. You can't fight the economic realities of the world, but you can care and you can be creative. And I don't think it's too much to advocate for these things.
We all know what value engineering is when it comes to buildings. Generally speaking, it is the process of trying to identify high-cost items with relatively low perceived value. Once you identify these items, you then remove them (if you can), replace them with alternatives, or find other creative solutions. All projects have to do this at one point or another because, well, money doesn't grow on trees.
One way to think about this is in terms of the following four-quadrant chart:
Low-value and low-cost items aren't expensive, so you will probably just leave them alone. But if you can move them up to the next quadrant, that's even better.
High-value and low-cost items are the ideal place to be. One example might be a low-cost material that gets applied in a creative way so as to create high perceived value. This is where design really becomes alpha.
Low-value and high-cost items are the fertile ground for value engineering exercises. If the perceived value is low, why spend the money on it? Surely there must be other options.
High-value and high-cost items, on the other hand, require the most thought and debate. How high value is it? Do we really need or want to spend the money on it? One example of this would be the architectural facade lighting at One Delisle. Sadly, it was not free.
Years ago, the team presented it as a possible value-engineering option. But ultimately, we viewed it as being fundamental to the overall design. Its perceived value was off the charts. I mean, why invest so much in the architecture only to cut the very thing that helps prominently display it? So a decision was made to keep it and, boy, am I glad we did.
There's nothing else going up in Toronto like it.
Anyone who has ever worked on a development pro forma will know that the process generally works like this: You start with a bunch of assumptions. You assemble those assumptions in a way that will allow you to determine if the project in question is feasible. And then, you realize that almost everything is more costly than you initially thought and that the project may not actually work. Oh shit.
In fact, a sure-fire way to know that you're on the right track is if the numbers sort of don't work. If the returns look too good to be true, they almost certainly are and you're likely missing something big and meaningful. As we have talked about before on this blog, development happens on the margin. That means that you have to work at it. You have to be creative. And often you have to find ways to increase revenues and cut costs.
The common way to find money is through something known as value engineering, which is just a fancy way of saying, "I need to cut costs, so let's see what I can tolerate losing from this project." That's generally how it works. And we do it on every project. You're trying to find high-cost items with relatively low perceived value.
This process often gets a lot of criticism because people view it as a distasteful cheapening of a project. But the reality is that it is usually an important part of maintaining project feasibility. You may really want to use that fancy material you can only get from Switzerland, but maybe development charges were just increased and now you need to offset those new costs by finding savings somewhere else.
This isn't a perfect analogy, but imagine you were shopping for a new car. You might start out by wanting the fully-loaded version, but then you see the price and realize you can't afford it. So you decide to start trimming features and add-ons until you get to a place where you feel more comfortable. I would imagine this happens with cars, and I'm not sure it's right to point to that person after and say, "oh my god, I can't believe you cheaped out and didn't buy the fully-loaded version."
At the same time, I think it would be perfectly reasonable to argue that you don't need to spend a lot of money to (1) care deeply about the work that you do and (2) have taste. You can't fight the economic realities of the world, but you can care and you can be creative. And I don't think it's too much to advocate for these things.
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