Design To Cost Vs Design To Value Flashcards
What is design to cost
Requirements and designs constrained by target cost
Control costs within available price to achieve desired value
Not a cost minimisation process
What is design to value
Requirements and designs maximise value
Understand gains and losses of functionality in relation to target cost
Principles of design to cost
Implemented within price - price is unchanged unless change proposed
Focuses on costs to the contractor
Tries to establish effective cost control procedures
Target costs cannot be exceeded
Scope of work cannot increase
Costs monitored continuously
Project broken down into clusters, each with its own cross-discipline design to cost team
Role of target cost
To protect profit, not minimise cost
Promotes disciple in design teams by focusing their attention
Target cost is less than initial design cost
VE improves design to achieve target cost
Importance of setting a target cost
Results in more cost reduction than having no target
Provides cognitive anchor towards which cost reductions are focused
Defines “success”
What are the 5 steps of the cost control process
Comparison (locate problem)
Forecast (predict magnitude of problem)
Analysis (determine reason for problem)
Corrective action (select low cost alternative)
Revised forecast (reflect impact of corrective action)
Prerequisites for cost control
Management attitude that emphasises cost control
Cost conscious design and construction teams
Capable cost control organisation
Full time cost follow up
Good costing tools and resources
What are cost control blackouts
Periods of project activity during which cost control becomes difficult or impossible
What is the cost floor
Minimum cost to fulfil client requirements
What is the cost ceiling
Maximum spend available within the tolerable price while achieving desired profit margin
Target areas for design to cost
Materials
DfMA
Tolerances and specifications
Logistics
How do D2C and D2V processes differ
D2V adds target value into the process through adding other project goals to target cost
Also adds evaluation of project performance against project objectives / functional requirements
Prerequisites for contractor use of VE
Must have an incentive (e.g. pain/gain target costing)
Genuinely collaborative relationships with client and supply chain
Opportunity to critique design/method during tendering
Advantage of client facing VE proposals to contractors
VE is an excellent way of redistributing risk
Disadvantage of client facing VE proposals to contractors
Once VE proposals are accepted they become common knowledge meaning commercial advantage is in jeopardy
