Long-time readers may recall a blog I wrote back in October of 2013 about value engineering. In that blog, I talked about the perils of interpreting “value engineering” as “removing features to reduce first cost.” The way I see it, the goal of value engineering should not be to save money initially. Rather, it should increase the overall value of the project. Simply put, true value engineering changes your focus from saving money in the short run to saving money in the long run.
So what does this mean? Let’s say you have the opportunity to sell a prospect “Model 100” of a particular energy-saving device. The Model 100 involves a given cost and a given projected savings. What if instead of selling your prospect on Model 100, you convinced your specifying engineer to consider the pros/cons of installing a Model 200?
What would the increased first cost be? More importantly, would the life-cycle cost of a Model 200 be higher or lower than that of a Model 100? What if an incremental incentive, lower annual operating cost, longer estimated life, or some other benefit offset the incremental first cost of going from a Model 100 to a Model 200? Then you should ask the specifying engineer to expand the analysis and perform a similar life-cycle cost comparison between a Model 200 and a Model 300.
The approach to value engineering that I just described has the potential to deliver great value (pun intended) to your prospect. Doing value engineering the conventional way – focusing only on how you might slash first cost – is doing a great disservice to both yourself and your prospect.
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