How to value engineer and reduce construction costs on your development project (Pt 4)

PART 4 OF 4: THE FUNDAMENTALS OF VALUE ENGINEERING YOUR PROJECT’S FIXTURES.

In our previous blog, we outlined the fundamentals of good value engineering.

In this blog we’ll be discussing:

• What Value Engineering a fixture specification means
• When you should VE your development’s fixture spec
• How to VE your development’s fixtures spec

But first a recap of the 3Fs of Value engineering.

Good VE focuses on the 3Fs:

• Fabric: This is the shell and core of the building. Everything from the superstructure to the façade, windows, landscaping and foundations can be redesigned or respecified to reduce prelim costs, construction costs and programme length. The ideal time to consider these specifications is before planning. This prevents you from securing consent for a scheme you simply can’t afford to build. Your last opportunity is before tender submission. Read about how to VE your project fabric, here.
• Finishes: This is self-explanatory. It’s the finishes of the scheme. It’s your floors, ceilings, and worktops. The ideal time to consider these specifications is just before/after planning submission. Your last chance is before tender. Read about how to VE your project finishes, here.
• Fixtures: This refers to items such as lights, door handles and taps. We also include appliances such as washing machines and key mechanical, electrical and plumbing( MEP) such as Mechanical Ventilation and Heat Recovery units (MVHR). It’s best to consider MEP fixtures before planning submission because they will form part of your sustainability strategy. All other fixtures should be considered before tender but can be adjusted onsite.

WHEN SHOULD I VALUE ENGINEER THE PROJECT’S FIXTURES?

As mentioned above, the best time to consider value engineering your large MEP fixtures is before planning because most of them will form part of your energy and sustainability strategy.

The best time to consider value engineering your appliances is before tender. However, they can also be value-engineered later in the construction programme because they are (often) amongst the last orders. (Unless they have a particularly long lead time).

If late Fixture VE is required or is likely, the building contract and its provisional sums must reflect these requirements.

HOW TO VALUE ENGINEER YOUR PROJECT’S FIXTURES

The specifics of how to VE fixtures depends on the fixtures and when you’re engaging in the process.

Pre-Planning:

Value Engineering fixtures pre-planning is very technical and relies on working with your MEP engineer to create a cost-effective solution that still satisfies planning, building regulations and energy requirements.

When considering sustainable MEP fixtures it’s important to also consider the goal of the fixtures and the strategy rather than simple compliance.

For example, many local authorities are pushing for the inclusion of heat pumps in new developments. Unfortunately, they’re expensive, require underfloor heating to be installed and are potentially loud (thus requiring an additional acoustic strategy).

Alternatives such as infrared heating still operate like panel heaters but they heat objects (people, walls, floors etc) rather than the air, are almost 100% efficient and are a fraction of the price.

Pre-Tender:

The last chance you have to VE your property development’s fixtures spec is during the tender process. There are a few ways you can do this.

• If you’re clear on your fixtures but are open-minded about suppliers. You can ask your tenderers to propose cheaper alternatives. You can reserve the right to deviate from the original specification by ensuring the building contract and all contract documents state that the final specification will be as per the contract/tender documentation. Any deviation will be via mutual agreement. This method provides you with commercial flexibility that you can use later in the construction process. Because fixtures are installed later in the construction process you can decide on specifics later. For example, you may be undecided on whether you want to have pendant lights or spotlights. Most contractors are comfortable with this. What is essential is that there is an allowance for this in the contract and you’re clear on when this decision needs to be made. These items are referred to as defined provisional sums. And they allow both parties to agree on a sum which will be set aside for the installation of a particular element up to the maximum value agreed. Like a budget. Using the spotlight example. Both parties may agree that £5000 should be set aside for spotlights. If you opt to have the spotlights installed the cost of the materials and labour must not exceed the agreed £5000. Alternatively, the project may be running late so you, as the client, decide the spotlights will take too long to install so should be omitted. Thereby saving the project £5000.
• Once tenders are returned you have the option of comparing and interrogating each one. If the returns are not in the same format, you have to go through the painful process of standardising the information and comparing the returns. This can become quite painful and expensive and may end up feeling like comparing apples and oranges. If you use a procurement platform like C-Link, the platform will automatically standardise your tender requests and stack rank all of your tender returns. It can order the returns using price and proposed programme length. Being able to compare what the market believes is achievable provides clarity on which parts of your project are too expensive and need to be value engineered.
• The very last opportunity you have is before you sign the building contract. Every building contract should have a Contract Sum Analysis (CSA) or a Schedule of Works (SoW) / Bill of Quantities (BoQ). This document will be what your chosen contractor or sub-contractors will be working to. Agreeing on this and any subsequent penalties are essential to achieving your commercial aims.

VE TIP 1: Supplier Agreements

The best way to reduce the cost of fixtures is through the use of supplier agreements.

Supplier agreements are contracts/memos of understanding that a supplier will supply goods to your projects at a reduced rate if you (as the developer) agree to specify their product to the exclusion of others.

Aggregating these agreements across fabric, finishes and fixtures can make a significant difference in the cost of a development project.

If you can route the purchase through your contractor, you also save on VAT. (At the time of writing UK VAT is 20%).

VE TIP 2: Lighting

Value Engineering lighting is quite simple.

Avoid spotlights, track lights and dimmable lights.

In the majority of scenarios, a standard white pendant light fixture is more than sufficient.
For larger rooms (such as living/dining spaces), specify 2 pendants. The reason for this is that people rarely utilise the main light. We tend to use lamps instead.
You may want to be selective and have spots in a few spaces but they are rarely required or appreciated everywhere.

Admittedly the single pendants can look a little ‘spartan’. Therefore we recommend purchasing high-end detachable lampshades. These can be kept in place for the duration of the sales process and can be taken back before handover. If you’re feeling generous/relieved about selling the home you may wish to gift them as a gesture of goodwill.

VE TIP 3: Ironmongery

Ironmongery (door handles, hinges etc) are inconspicuous fixtures save for one location. The front door. When selecting ironmongery it is always worth stretching for a good, high-quality front door and front door ironmongery set. The front door and the feel of this form the first impression of the dwelling. It needs to feel high quality and secure. If you can also stretch for a good quality door knocker it will be worth it.

Internally, be pragmatic. We would recommend white metal internal ironmongery fixtures because cost-effective brass/gold fixtures rarely look good below a certain price point.

VE TIP 4: Fridges (built-in vs standalone)

It’s common to supply white goods as part of a new build development. If you can get out of supplying these you could save some money but it may also negatively affect your sales process. Broadly speaking white goods can help a prospective buyer become more comfortable buying off-plan.

Most white goods come as they are. The exceptions are the fridge, hob and oven. All three either come as stand-alone units or are integrated into kitchen cabinetry. In our experience, the integrated units are more competitively priced than the standalone options and they’re often unbranded. When it comes to appliance brands there are the best and there is the rest.

If you can’t afford to install the best, it’s often better to choose appliances that perform well and look the part but don’t have a conspicuous logo.

The other advantage of integrated appliances is that they are smaller and lighter. This makes a big difference if site access is a challenge (narrow communal stairs etc).

If you change your spec from stand-alone to integrated you’ll need to make sure that your kitchen fabricators are aware and have amended their shop drawings.

VE TIP 5: Kitchen Sinks

Kitchen sinks can make or break a kitchen. Fortunately, the ingredients of a good sink are simple.
The sink has to be robust, clean up well, have a well-sized bowl and drainage area.

High-end sinks often have drainage cut into the worksurface and have a stainless steel or composite granite under-hung bowl.

These arrangements are costly and take up considerably more space. The most cost-effective (and still attractive) option is a single (possibly double) bowl stainless steel sink with an integrated drainage board.

These sinks are very cost-effective, don’t stain (unlike cheap composite granite), clean up well, save space and don’t require that your worktop material is a solid piece of granite or marble.

The way to really make these sinks stand out is with an attractive swan neck tap, preferably with a detachable head.

VE TIP 6: Switches, plugs and face plates

Light switches and face plates may seem unimportant but their costs can spiral if not sensibly specified.

The temptation is to specify plug facias with USB ports and metal light switches. In reality simple, white, cost-effective light switches and plug facias are sufficient. They blend into white walls and pop on coloured walls.

They cost a little more but we would also recommend selecting light switches with the hidden screws.

If your scheme must have some high-end switches, the optimal solution is to concentrate the high-end elements in the living space and possibly the kitchen and keep all the other spaces simple.

WHERE CAN I READ MORE DETAILED PRACTICAL ADVICE ON VALUE ENGINEERING?

Our team is made up of seasoned construction and property professionals so we know how hard it is becoming to manage projects successfully.

That’s why we have created a blog series that focuses on value engineering, cost reduction and provides proven practical advice.

Click here to learn the fundamentals of good value engineering.
Click here to learn how to value engineer your project’s fabric.
Click here to learn how to value engineer your project’s finishes.

And click here to learn more about C-Link or just say hello.

Photo by wu yi on Unsplash

About Paul Heming

Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.