Finding £2 million In Savings: A Value Engineering Case Study In Residential Development
In early 2022, Multiproject SE Ltd was approached by a forward-thinking property developer, faced with the formidable challenge of ensuring his planned residential development remained financially viable and capable of delivering the required return on investment (ROI). With an existing cost estimate significantly exceeding his budget, the developer was faced with the potential halt of the project unless substantial savings could be identified. This case study will explore how our expert team at Multiproject SE Ltd, utilising a comprehensive approach to value engineering, located an astonishing £2 million in savings, thereby securing the project’s future and exceeding the client’s expectations.
Overview of the Project
This case study revolves around a residential development project nestled in the picturesque Home Counties. The initial cost estimates, prepared by a separate Quantity Surveyor, stood at a hefty £10.5 to £11.5 million, based on the RIBA Stage 3 design. The developer’s primary objective was to minimise the construction cost, with a target of below £9 million, which was deemed as the upper limit to maintain a robust return on investment. The looming threat of the project potentially being halted due to high costs necessitated a comprehensive re-evaluation, setting the stage for our value engineering intervention.
The Value Engineering Process
In order to achieve the client’s ambitious goal of a 20% cost reduction in their residential development project, Multiproject SE Ltd implemented an extensive value engineering approach. This comprised a comprehensive review of the project’s functional value, reconsideration of proposed construction methods and materials, and thorough preparation of tender documents to mitigate future claims for additional costs. Let us look at each of these steps separately.
Redefining functional value
In order to maximise the savings potential, it was critical to revisit the core function and value that the client sought to derive from the project. The process involved re-evaluating the project’s layout and scope, and engaging in in-depth discussions with the architect. The changes proposed were not drastic, but they played a pivotal role in enhancing the efficiency of the build process. This pragmatic approach to tailoring the project to align with the client’s functional requirements enabled us to carve out an optimum path towards achieving the cost reduction goal without compromising on the project’s integrity or value.
Reassessment of the construction method
In our pursuit to streamline costs, the most substantial adjustments came from a thorough reassessment of the construction methods. We prepared four distinctive elemental cost plans, each corresponding to a different construction method: traditional cavity, RC frame, steel frame, and timber frame. In addition to this, we liaised with several specialist substructure contractors and proposed a shift from the conventional strip and pad foundations to a more cost-effective, proprietary pile and raft system. This comprehensive re-evaluation resulted in significant savings, with the superstructure modifications saving £1.2 million and the substructure adaptations contributing to a further reduction of £200k.
Ensuring product specifications are within budget
Upon the implementation of structural design changes, our team at Multiproject SE Ltd. collaborated closely with the architect and landscape designer during Stage 4 design. The primary objective was to ensure the proposed materials and finishes did not surpass the allocated budget. Regular bi-weekly meetings were scheduled, providing a platform for open dialogue, allowing us to critique the proposals, suggest cost-efficient alternatives, and agree on further adjustments to the finishes scope. This effective coordination and continuous refinement of the project plan led to a reduction of £300k in the finishes and fit-out budget. Our proactive approach not only ensured adherence to the budget but also maintained the aesthetic and functional value of the residential development.
An integral part of our strategy was to minimise project risk for both our client and the contractors. This was achieved through a meticulous presentation of the tender documents, allowing for a clear understanding of the project scope and requirements. Early identification of potential project risks and prompt implementation of mitigation strategies further streamlined the process, ensuring a smooth project flow with minimal surprises.
Additionally, we engaged with suitable contractors early on, facilitating open and honest conversations about the project risks. We believe this approach fostered a higher level of confidence in the project among contractors, which in turn reduced the amount of risk cover factored into their offers. This comprehensive tender de-risking strategy was instrumental in finding savings and delivering the project well within the client’s budget.
Our comprehensive value engineering process spanned across eight months, from our initial engagement to the contractor’s appointment. This meticulous attention to detail and unwavering commitment to client satisfaction culminated in the agreement of a construction cost for the project at £8.5 million. This figure was not only within the client’s desired budget but was £500,000 lower than the maximum amount the client had set out. This significant reduction in cost directly correlated to the amendments we proposed in both the superstructure and substructure. An added bonus that we’re extremely proud of is that the changes in the construction method led to a reduction in the construction programme by as much as six months. This unexpected benefit further amplifies the value our value engineering process brings to our clients.
This case study has clearly demonstrated the immense benefits of value engineering in construction projects. By applying a detailed functional review, evaluating alternative construction methods, reassessing material specifications, and ensuring a thoroughly prepared tender process, Multiproject SE Ltd. was able to deliver substantial savings to our client. Not only were we able to reduce the project’s construction cost to £8.5 million – significantly lower than the £9 million target set by the client – but we also managed to expedite the construction programme by an impressive six months.
In conclusion, our work at Multiproject SE Ltd. is a testament to the power of strategic value engineering in shaping efficient, cost-effective residential development projects. Our commitment to delivering high-quality service and significant cost savings has been the key to our client’s success, providing them with an end result that far exceeded their initial expectations. This case study underscores the value we bring to the table and reiterates our unwavering dedication to surpassing our client’s goals.