Value engineering promotes collaboration, innovation, and success on major infrastructure projects

Andrew Loh, Director of Infrastructure at DCWC, discusses how value engineering can mitigate budget blowouts on major infrastructure projects without compromising successful project delivery.

Currently in Melbourne, two major infrastructure projects (Westgate Tunnel and Melbourne Metro) are substantially over budget and others are showing potential signs of budget blowouts.

The cost overruns can be attributed to a myriad of factors including complexities in project scope, design changes, inadequate risk management, poor decision-making processes, ineffective project oversight, supply chain disruptions, labour shortages, and regulatory changes.

Value engineering might have mitigated these budget blowouts without compromising successful project delivery.

Why wasn’t value engineering considered?

Value engineering is a misunderstood approach

There are many reasons why value engineering is not applied or even considered more often in Australia. Chiefly, value engineering is not well understood or appreciated with many project stakeholders having a limited awareness of value engineering principles, methodologies, and best practices, leading to misconceptions or scepticism about its effectiveness in delivering successful infrastructure projects.

Indeed, more often than not, value engineering is interpreted to mean cost cutting.

It’s not.

Value engineering is a systematic and organised approach to improving the value of a project by examining its requirements and reducing unnecessary costs without sacrificing quality, performance, or customer satisfaction. The primary goal of value engineering is to identify opportunities for cost reduction while maintaining or improving functionality and quality.

Value engineering involves engaging stakeholders, including designers, engineers, contractors, suppliers, and project owners, in collaborative decision-making processes. By fostering open communication and collaboration, project teams can leverage diverse expertise and perspectives to identify cost-saving opportunities and address potential challenges effectively. This collaborative approach ensures alignment with project goals and enhances the likelihood of successful cost management throughout the project lifecycle.

PPPs provide the conditions for value engineering

Despite the potential to maximise taxpayer dollars and improve project outcomes, risk averse governments have generally been less inclined to consider value engineering. Whilst on one hand governments prioritise cost savings and efficiency, politics, the economic climate, bureaucratic processes, and public scrutiny influence government decision making.

Traditional procurement methods, such as lump-sum contracts or design-bid-build approaches, often prioritise low upfront costs and fast project delivery over value optimisation. Additionally, risk allocation and contractual arrangements may not adequately incentivise collaboration and innovation amongst project stakeholders.

Moreover, traditional design and delivery methods may be deeply ingrained. Many project stakeholders, including designers, engineers, contractors, and government clients, may be more accustomed to conventional approaches and therefore hesitant to adopt new methodologies.

Despite these challenges, there is growing recognition of the importance of value engineering in optimising infrastructure projects' cost, quality, and performance. Efforts to promote awareness, education, and collaboration among project stakeholders, along with improvements in contractual and procurement practices, are helping to overcome barriers and encourage the consideration and adoption of value engineering when designing and delivering infrastructure projects.

Significantly, Australian infrastructure projects are increasingly being delivered via public-private partnerships (PPPs) and this model provides a conducive environment for value engineering. By leveraging the expertise and resources of both the public and private sectors, PPPs facilitate the implementation of value engineering principles aimed at optimising costs and enhancing project outcomes.

Private sector partners bring specialised knowledge in design, construction, and financing, contributing innovative solutions to improve project efficiency, quality, and sustainability. Meanwhile, the public sector ensures regulatory compliance, funding, and strategic direction, aligning projects with broader societal objectives.

Through performance-based contracts and risk-sharing mechanisms, the PPP model incentivises stakeholders to prioritise cost-effective design choices, streamline construction processes, and minimise lifecycle costs. This collaborative approach fosters creativity, innovation, and efficiency, driving continuous improvement across infrastructure projects and maximising returns on investment.

Ultimately, the PPP model supports the application of value engineering, promoting collaboration, innovation, and success in delivering essential public assets.

A five-step process

Implementing value engineering typically involves a systematic approach to identify opportunities for cost reduction and quality improvement while maintaining or enhancing functionality. Here are five steps to implement value engineering effectively:

1. Research - Analyse the functions, requirements, and performance metrics of the project, and the needs of stakeholders, to understand its purpose and identify areas where improvements can be made.
2. Speculation – Assemble a cross functional team to challenge assumptions, explore innovative solutions, and brainstorm creative ways to improve the value of the project.
3. Evaluation – Evaluate the ideas generated based on criteria such as feasibility, cost-effectiveness, and potential impact on performance, quality and customer satisfaction. Prioritise the most promising ideas that offer the greatest potential for value improvement while considering potential risks and trade-offs.
4. Development and implementation - Incorporate the most promising ideas into the design or delivery process. This may involve redesigning processes, modifying materials, or leveraging new technologies.
5. Continuous improvement - Review the outcomes to assess their effectiveness in achieving the desired objectives and measure KPIs to evaluate the impact on cost savings, quality improvement, and customer satisfaction. Continuously seek opportunities for further optimisation and innovation to drive ongoing improvements.

When is the right time to consider value engineering?

For value engineering to be sufficiently impactful, it must be considered in the early stages of an infrastructure project – from the initiation and design phases through to early in the delivery phase.

As you move through construction, the impact is diluted.

By integrating value engineering principles into the initiation and design stages of large infrastructure projects, project teams can proactively analyse cost-related risks associated with design choices, construction methods, supply chain issues, or external factors such as regulatory changes or market fluctuations. This allows them to develop strategies to mitigate these risks early in the project lifecycle. This proactive risk management approach helps ensure that infrastructure projects are delivered on time and within budget while meeting quality and performance requirements.

Additionally, as value engineering considers the entire lifecycle of the infrastructure project, including construction, operation, maintenance, and eventual decommissioning, project teams can evaluate the long-term cost implications of design decisions and identify opportunities to optimise costs over the project's lifespan including by minimising ongoing operational and maintenance expenses.

Value engineering: go or no go?

Time is also the principle reason value engineering is not the default approach when designing and delivering infrastructure projects.

Implementing value engineering requires upfront investment of time, resources, and expertise to analyse design options, conduct cost-benefit analyses, and develop alternative solutions. Some project stakeholders may perceive these additional upfront costs and time commitments as barriers to adopting value engineering, especially if they prioritise short-term budget constraints over long-term value optimisation.

Deciding whether to adopt a value engineering approach on an infrastructure project requires careful consideration and evaluation by stakeholders. Here are steps stakeholders can take to make an informed decision:

1. Assess the project’s objectives, requirements, constraints, and priorities. Consider factors such as budget, schedule, quality standards, performance criteria, and stakeholder expectations. Determine whether cost optimisation, quality improvement, and innovation are critical goals for the project.
2. Evaluate the potential benefits of value engineering for the project. Consider how value engineering can help achieve project objectives, such as reducing costs, enhancing quality, improving functionality, mitigating risks, and maximising value for stakeholders. Assess the potential impact of value engineering on project outcomes, lifecycle costs, and long-term sustainability.
3. Consider the risks and trade-offs associated with adopting a value engineering approach. Assess the potential challenges, uncertainties, and limitations of value engineering, such as upfront costs, time investment, changes to project scope, impacts on project schedule, and potential resistance from stakeholders. Evaluate whether the benefits outweigh the risks and whether stakeholders are willing to accept the trade-offs.
4. Engage relevant stakeholders, including project owners, designers, engineers, contractors, and suppliers in discussions about value engineering. Seek input and expertise from individuals with experience in value engineering and cost optimisation. Collaborate with multidisciplinary teams to explore alternative design solutions, assess cost-saving opportunities, and develop innovative ideas.
5. Conduct a cost-benefit analysis to quantify the potential savings, benefits, and returns on investment associated with value engineering. Compare the estimated costs of implementing value engineering measures with the expected benefits, such as reduced construction costs, operational savings, increased asset value, and improved project performance. Consider both short-term and long-term implications to make an informed decision.
6. Evaluate regulatory requirements, contractual obligations, and procurement practices that may impact the adoption of value engineering. Determine whether existing regulations, standards, or contractual provisions facilitate or hinder value engineering initiatives. Consider how to align project goals with regulatory compliance and contractual requirements while optimizing value.

Infrastructure examples of value engineering

Many high-profile infrastructure projects have been delivered using a value engineering approach. The Golden Gate Bridge and the Panama Canal are two examples.

Completed in 1937, the construction of San Francisco’s iconic Golden Gate Bridge utilised value engineering principles to optimise costs and enhance structural integrity. Engineers implemented innovative design solutions, such as the use of lightweight aluminium for the bridge's towers and suspension cables, to reduce material costs without compromising strength or safety. The project also employed advanced construction techniques, including the use of pneumatic caissons (watertight structures to create a dry working environment below the water level) to anchor the bridge's foundations, resulting in significant cost savings and accelerated construction timelines.



The expansion of the Panama Canal, completed in 2016, involved the construction of new locks to accommodate larger vessels and increase the canal's capacity. Value engineering played a crucial role in optimising the design and construction of the locks, minimising costs, and maximising efficiency. Engineers implemented innovative solutions, such as the use of prefabricated steel gates and advanced concrete mix designs, to reduce construction time and costs while ensuring durability and reliability.



Of course, when value engineering is wrongly applied on construction projects—meaning, when safety, quality, and long-term durability are not prioritised over short-term cost savings—the results can be catastrophic.

The 2017 Grenfell Tower fire in London is a highly reported contemporary example. The fire, which claimed the lives of 72 people, raised serious questions about the adequacy of value engineering practices in the construction and refurbishment of high-rise buildings. The tragedy exposed flaws in the building's design and construction, including the use of combustible cladding materials and inadequate fire safety measures. Reports suggest that cost considerations and value engineering decisions may have compromised fire safety standards and contributed to the rapid spread of the fire.

While cost optimisation is an essential aspect of value engineering, it cannot come at the expense of structural integrity, safety, or regulatory compliance. Effective value engineering requires a balanced approach that considers all aspects of a project's lifecycle and prioritises the well-being of its users and the surrounding community.

Value engineering could be the right approach if....

• Cost optimisation, quality improvement, and innovation are critical project goals
• It will have a positive impact on the project outcomes
• The benefits outweigh the risks and stakeholders are willing to accept the trade-offs
• Relevant stakeholders, including project owners, designers, engineers, contractors, suppliers, and end-users, have an appetite for exploring alternative design solutions, assessing cost saving opportunities, and developing innovative ideas
• Cost-benefit analysis quantifies the potential short- and long-term savings, benefits, and returns on investment
• Existing regulations, standards, and contractual provisions facilitate (don’t hinder) value engineering initiatives – project goals can be aligned with regulatory compliance and contractual requirements while optimising value.

Andrew Loh is Director of Infrastructure. Get in touch with Andrew →