Most projects in the Themed Entertainment industry face the overwhelming prospect of running over budget. Invariably it falls on the project team to find cost cutting solutions that will reign in the financial overruns. But cost cutting alone is not considered a wise approach as it can have a detrimental effect on the guest experience. This is where Value Engineering plays its part to balance cutting costs with the quality of experience by weighing the most important aspects of each discipline and its impact on the overall project. As an engineer that specializes in the design and implementation of technological systems for Themed Entertainment, my focus is always on the effect of the systems that operate behind the scenes. I have participated in these exercises on many projects, as have many others, and it has become a standard practice across a broad spectrum of industries from construction to health care. Quite often a client stresses the importance of cutting costs at the expense of a quality experience and more often don’t realize that these cuts can come back to haunt the project later.

What Is Value Engineering?

The basic definition of Value Engineering, also known as Value Analysis or Value Methodology, is a process meant to help an owner improve efficiency and decrease operating costs. In Themed Entertainment it is most used to reduce capital costs during design, fabrication, or construction. But to simply reduce the cost without considering quality is not value engineering.

According to The Society of American Value Engineers International (SAVE International) value engineering is a “function-oriented, systematic, team approach to provide value in a product, system, or service.” The definition further explains that while the process is often “focused on cost reduction, other improvements such as customer-perceived quality and performance are also paramount in the value equation.” (Howard & Haas, 2005)

Scott Cullen of Hanscomb Consulting defines value engineering as “a conscious and explicit set of disciplined procedures designed to seek out optimum value for both initial and long-term investment.” (Cullen, 2016)

Shortly after WWII, an engineer at General Electric, Larry Mills, widely held as the father of value engineering, devised an equation to show the interdependency of function and cost. His equation is still used today and extensively promoted by multiple organizations. Value engineering helps achieve an optimum balance between function, performance, quality, safety and cost. The proper balance results in the maximum value for the project and it can be calculated like this:

Value = Function Performance / Resources

Value is the reliable performance of functions to meet customer needs at the lowest overall cost. Function Performance describes the capacity of the subject under study to provide key customer or user functions. Resources are the expenditure needed to create it in terms of monetary or time-based units. (SAVE International, n.d.)

Each of these definitions provides a broad sense of what value engineering is and how it can be applied. Basically, value engineering is a systematic approach to obtain an optimum value for every dollar spent. While it is applicable to multiple industries with a variety of approaches, it is important to examine the procedure and its potential saving or cost.

The Process

Value engineering involves a multistep process to determine the best possible outcome during the exercise. Many organizations have formal procedures in place to address the process, while others have no official procedures at all. It generally relies on experienced team members to understand the steps and implement them as required. To help understand the process, here is a summary of the basic steps but others may also be included:

Information Gathering – Areas of possible value engineering are identified and studied to receive a clear picture of the overall goal of the project.

Function Analysis – Each element of the function identified are analyzed, categorizing them into two key forms: ‘primary functions’, vital to the experience of the final product, and ‘secondary functions’, significant but not crucial.

Creative Speculation – Here alternative ideas are considered that would provide a feasible solution that maintains the desired outcome. All viable options should not be discounted at this stage.

Evaluation – Assessment of the alternative solutions against the original are discussed and evaluated. It is important to consider the clients expectations as well.

Cost Analysis – Allocating the cost of each solution is an important step in the process, especially if the goal is to reduce the financial burden of the project. Accurate cost estimates are important.

Development – The alternatives with the highest probability of success should be developed further. This could include sketches, estimate verifications, decision validation, implementation plans and advantages and disadvantages of each alternative solution.

When to Value Engineer

Too many times value engineering happens at a very late stage of the project, after construction has begun and orders have been placed. There is no wrong time to value engineer, technically, but the closer the process is to the beginning of the project the better. If it happens later in the project, it is more likely to cause rework or delays that could significantly reduce the value.

There is one area where the design team should never concede: safety. Any solution that results in a violation of codes or endangers the health and well-being of the guest should be rejected immediately.

It is critical to note that value engineering should not be a knee-jerk reaction to avoid going over budget. The goal is not to trim the bottom line, but to maximize function at the lowest possible cost. Value engineering is an approach that ensures the client is not over-paying for quality when an equally effective, less expensive option exists.

The Real Cost

Finally, to the point. This section is based on my personal experience on projects over the past couple decades using real world observations.

Frequently in Themed Entertainment it is the technological systems that are targeted first. Scenic elements are generally overlooked as potential sources of increasing value because that is what the guests see. Technology resides behind the scenes but is still a significant part of the guest experience. This is especially true in the ever-increasing interactivity that has been introduced into Themed Entertainment venues across the globe.

I have worked on several projects, more recently than not, with clients or owners that are only concerned with the capital cost of the initial investment and do not consider the operational cost. I can’t count the times I’ve been asked to cut equipment cost, and I reiterate that it will increase the operational costs. They don’t seem to care. Owners should care as much about the operational expenditures as they do the capital expenditures. Most concerning is when the accounting or purchasing departments embark on value engineering without consulting the relevant subject matter experts. This can result in equipment substitution or wholesale cuts that, while ultimately reducing the bottom line, affects the guest experience or long-term viability in ways that are not readily foreseeable by departments that only look at numbers.

So what is the real cost? It boils down to three major items:

• Guest Experience and Engagement – In the highly technological society of today, guests have come to expect increased engagement and interactivity in their leisure activities. Due to the high cost of the systems required, these are often cut or scaled back to save capital expenditure.
• Higher Operating Costs – As I have observed on multiple projects, value engineering can have a major impact on operating costs. It could manifest in additional staff required to operate and maintain the attraction, or with lower quality equipment that may need to be repaired or replaced more frequently.
• Higher Rework Costs – Often times the value engineering exercise removes or replaces components that later need to be integrated back into the experience. Implementing these after installation or even after opening greatly increases the cost compared to the value achieved.

It is increasingly important during a value engineering exercise to weigh all the factors that will impact the end product, especially in Theme Entertainment. Subject matter experts need to be involved and operating costs need to be compared to the capital savings. Keep this in mind the next time your project ventures into Value Engineering.

References:
Feature Photo by Edwin Soto. Retrieved from pexels.com.
Cullen, Scott W. (2016, Aug 2). Value Engineering. Retrieved from Whole Building Design Guide.
Howard, Steven; Haas, Anthony J. (2006, June 30). The good and the bad of value engineering. Health Care Design Magazine
SAVE International. (n.d.). About the Value Methodology. Retrieved November 12, 2022, from SAVE International.
Various. (n.d.). MINDS@UW Madison. Retrieved from The Lawrence D. Miles Value Engineering Reference Center Collection.