Value Engineering Case Studies
Examples of how VE focuses on function rather than simply cutting costs.
Case Study 1: The Airport Terminal Flooring
Improving value by analyzing the primary function of a material choice.
During the design phase of a new international airport terminal, the architect specifies high-end, imported Italian marble flooring for the main concourse. The initial cost estimate for this flooring is \5,000,000$. The owner feels this is too expensive and initiates a Value Engineering (VE) study.
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Case Study 2: Re-evaluating Structural Steel vs. Concrete
A VE study that resulted in a higher initial cost but vastly improved schedule value.
A developer is planning a 10-story office building in a dense urban core. The initial structural design utilizes cast-in-place reinforced concrete. The initial cost estimate is \15,000,000$, and the construction schedule is estimated at 14 months.
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Life Cycle Costing (LCC) Mathematical Examples
Calculating the Present Value of future costs to compare design alternatives.
Example 1: Basic Present Value Calculation for Replacement
Calculating the current cost of a future expenditure using a discount rate.
A facility owner is evaluating a building component that will cost \50,00010 \text6%$ annually.
Calculate the Present Value (PV) of this future replacement cost.
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Example 2: Present Value of an Annual Operating Cost
Calculating the PV of a recurring, uniform series of payments (like an energy bill).
An HVAC system requires \15,00020 \text5%$.
Calculate the Present Value of these 20 years of recurring energy payments using the Uniform Series Present Worth formula.
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Example 3: Comprehensive LCC Comparison of Two HVAC Systems
Comparing a cheap, inefficient system against an expensive, efficient system over a 15-year study period.
An owner is deciding between two chillers for a new hospital. The study period is and the discount rate is .
Chiller A (Standard Efficiency):
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Initial Cost: \100,000$
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Annual Energy Cost: \25,000/\text$
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Salvage Value at Year 15: \10,000$
Chiller B (High Efficiency):
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Initial Cost: \150,000$
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Annual Energy Cost: \15,000/\text$
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Salvage Value at Year 15: \25,000$
Perform an LCC analysis to determine which chiller provides the better long-term economic value.
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Key Takeaways
- Value Engineering (VE) is a systematic process focused entirely on analyzing and improving the ratio of function to cost. It is not merely cost-cutting.
- Life Cycle Costing (LCC) brings all future cash flows (energy, maintenance, replacement, salvage) back to a Day 1 Present Value using a discount rate.
- LCC provides the mathematical justification for selecting higher-quality, more expensive initial materials if they yield significant operational savings over the life of the asset.
- A higher discount rate heavily devalues future cash flows, which mathematically favors cheap initial construction over long-term efficiency investments.