E. Design to Cost:

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Target costs are developed at the beginning of the design process by assigning the budget proportionally between various systems and subsystems. These not-to-exceed cost targets are viewed as essential design parameters that must guide decision-making as design proceeds. Detailed cost information must be made available and/or generated so that accurate and achievable cost targets can be generated. As design proceeds and the quality of cost information improves, cost targets may have to be adjusted. Where appropriate, minimum and maximum performance levels can be established for each system and subsystem.

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Design to cost may need to be supplemented with other VIPs to meet cost targets. Value analysis and value engineering techniques are well suited for this purpose, especially function analysis and function/cost/worth tools. Life Cycle Value Impact Assessment techniques will also be needed where a project is given life cycle cost targets.

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Cost Risk Analysis and Assessment techniques may be employed to reduce the uncertainty surrounding any or all of the target costs, given an appropriate level of available information.

Example Application:
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Project: Early Contractor Involvement Project where the Contractor is responsible for the design, and has to design within the budget required by the Client, in order for the project to proceed beyond the design stage. If not achieved, the project will go out to competitive bid.
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Owners Capital Budget: 72 million

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Contractor's Estimate (pre-VE): 90 million

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VE Menu of Potential Savings:
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Level 1 - Least visual impact and general improvements: 9.4 million (+10%)

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Level 2 - Changes to process units and to buildings configuration: 13.15 million (+15%)

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Level 3 - Major visual and process changes: 16.86 million (+18%)

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Level 4 - Radical alternatives: Cost savings not estimated (Massive)

 

The TEAM FOCUS Group Value and Risk Management approach is an excellent framework for conducting the Design to Cost VIP for best results.

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