By Paul Martin
The Target Value Design Process (TVD)
Having practiced the principles of TVD since 2010, I’ve found the process to be a revolutionary way of working that vaults the estimator into a key management role during design. As a result, “cost isn’t a surprise to the outcome of design; it’s a partner to the design.”
The TVD approach keeps the estimator informed of all potential design changes during the preconstruction stage. Changes can only be approved if the team understands the cost impact from a thorough analysis managed by the lead estimator. If managed correctly, the TVD process will deliver a project that meets or exceeds all expectations.
Most estimators can relate to design-build or design-assist projects with reactive costing cycles. This is not, most certainly, by the estimator’s choice - but the result of a traditional approach that has been accepted as “the norm.”
Many parts of the processes examined in this overview may be familiar to most estimators; you may already be practicing various components of TVD and not labeling it as such. Committing to TVD project delivery is the opportunity to formalize best practices and the process itself.
Customizing the process specifically for a project is often necessary, due to unique variables such as size, structural, mechanical code, calculated load elements, preconstruction makeup, and project complexity. However, for team success, there are important fundamentals that should always be included as the team’s process is formalized.
For this TVD Process Overview, Some Paramount Understandings Must Be Established:
• The team should be made up of leaders from design, engineering, construction, owner and estimating. All members of the team have to become advocates for delivering customer value.
• The lead estimator is director of the process.
• The process is a culture built on commitment, collaboration, and mutual learning that must be created and understood early in the formation of the team. This, most likely, will require educating your team on TVD culture and expectations. It is important that all team members are on board with the process.
• In the process, an important order of thought is “cost is to be proactive and not reactive.” Designers should seek out information and input from the team on design ideas as they are developed. There is a tight fit between “cause and effect” as it relates to design and cost. This is a concept that is important for all team members to embrace.
• The success of the TVD project also relies on the team having the ability to think of innovative time- and money-saving ideas. The team should have an open mind to alternate approaches, such as simplification of details and use of manufactured systems in lieu of field constructed, just to name a couple.
Target Value Design is More than a Process
Target Value Design is a process and a culture that will deliver a project within the defined goals of the team. These goals are collaboratively defined at the onset of the project, and are to be continuously reinforced and used to guide the team to a successful conclusion. The owner’s needs and goals are clearly understood very early in the process, and the owner’s goals define the goals and culture of the project team.
These goals are typically categorized as:
• Key design criteria and elements
• Budget that matches business case (target cost)
• Level of quality and/or value
Although these are the most common categories, they are certainly not the only ones. Each owner and project is unique and has slightly different priorities.
To ensure these goals are fully recognized and understood, the TVD team conducts comprehensive collaborative sessions with the project architect, design/consulting, trade partners (subcontractors), general contractor and owner. It’s important that these meetings be productive and set the expectations and tone for the rest of the project.
During the entire process it is inevitable that complex scenarios and unforeseen variables will confront the team. Three principles are paramount to guide the team. They should not deviate from these grounding ideals:
The Three Target Value Design Principles:
1) The Cardinal Rule
The total Target Cost of the facility must not be exceeded.
2) The Corresponding Rule
The buyer’s satisfaction with the result is equally important.
3) The Fundamental Challenge
Anything unnecessary to the delivery of value is considered waste.
Establishing a Target Cost
There are many ways that the project target cost is established. In some cases, the owner may simply have only a specified dollar amount for the project. In other instances, the owner or the team may use market historical costs. The target cost can also be established based on historical costs adjusted slightly for market conditions. No matter what process is used to set the target, the team must not exceed that cost.
Design to Target
It is a fact that most designers and engineers have little experience with means, methods, or pricing the cost of construction. In TVD, the team works together to identify the design solution most effective at delivering customer value. This special collaboration is unique to the industry and, most importantly, is always a great experience for everyone involved. It becomes a great opportunity to learn from each other and to see issues from a slightly different viewpoint. Having key trade partners (subcontractors) on the TVD team is also essential. Successful TVD teams that include involvement from their major subcontractors experience exciting innovation, discover practical solutions, and have a high level of confidence in the accuracy of cost reporting during design. (see Figure #1, #2)
This is an example of how collaboration between the designers and subcontractors resulted in a tremendous cost savings. This one condition was repeated many times on many floors. As a result of the team’s TVD process, plumbing and drywall framing trade partners experienced a substantial savings to the project.
This is an example of a visual aid tool that helped the designers understand the plumbing contractor’s suggestions on options for plumbing fixtures that were within the budget parameters. Using this visual aid, the designers could easily visualize what was being proposed and integrate it into their work. This illustrates how visuals can be used in many ways that will unify the understanding of the end product.
Estimating & Value Identification Occurs Simultaneously With Design
In a traditional approach, the design of a given project will have progressed considerably before a cost analysis is performed. Unfortunately, this approach has the potential for design, unknowingly, to move away from the original cost target; forcing redesign. The TVD team approach must be that cost will “mirror design”. This is achieved by collaborative feedback and timely cost analysis. To ensure accurate and timely cost options as well as enable proper feedback, the subcontractor’s involvement to a “real time” costing approach is another valuable asset for making informed decisions for basis of design.
Rapid feedback of cost and other significant information is essential for potential changes that naturally occur during a collaborative design process. Fast and efficient analysis is essential and must be continuous and thorough for a successful TVD process. There is a benefit to rapid cost reporting which accurately reflects the team’s collaborative understanding of the current design. The team can make timely decisions that are based on these cost report outs. Furthermore, these “snapshots” will help the team calibrate and refine the design direction to meet the cost objective.
In a traditional approach, when a project master estimate is performed early in the design, the focus is typically on systems dollars, which are driven by large aggregate units. The TVD process should move slightly away from the traditional aggregate or “big picture” unit cost numbers, and train its focus on detailed unit costs.
The detailed unit-cost method approach allows the team to track early design items which would typically be concealed within larger unit-cost categories. Of course, the challenge is to produce an accurate cost with incomplete information. The process offers great collaboration and mutual learning from all of the estimators on the project, i.e. general contractor, estimator, electrical estimator, mechanical estimator etc. The ability to collaborate with other trade-specific estimators in a TVD environment is a unique opportunity for more accurately pricing incomplete information. Of course, as the design progresses, more definitive quantities are available and are updated in the master estimate.
Leveraging technology, such as BIM, is also a valuable tool in the TVD process. The project model should always be constructed with estimating quantity analysis in mind. The estimator must work with the modeling team to set early expectations of what is needed from the model, at various stages of design, to accurately inform the required quantity analysis.
A good team will consistently utilize various components of the project model for various analyses. There are always challenges to leveraging the model for required levels of information before components of the model have matured to a trusted state. It is important the estimator works with the modeling team to understand the current state of the model. That aside, working with the modeling team can be an extremely productive and accurate way to retrieve some components of quantities for analysis.
Regular Monitoring of Cost & Value
Detailed and current design cost analysis should be performed and presented to the team on a weekly or bi-weekly basis. Although reporting periods may change from project to project, in all TVD environments, they should be frequent - simply because the design can easily fall out of sync with pricing. Updated cost results should be made visible to the entire team in graphical form; this helps the team understand the cost movement of various design and logistic components.
If the team’s cost report outs are to be relevant and productive, then “real time pricing snapshots” become critical during the TVD process. As the design moves forward, the team must act on timely design and cost data. Frequent cost updates, or “snapshots”, show the pulse of the design in relation to cost. The process must also never lose sight of the project stated goals -- including value and quality.
The TVD process must be flexible enough to reflect timely and frequent cost study analysis needed to compare various design options. The entire team can then make informed decisions with the full knowledge of their implications to the goals. Because the team works together, all decisions are transparent and contribute to the success of the project goals. (See Figure #3)
Frequent cost report outs are presented to the team. This makes cost targeting calibrated and transparent.
Cost report outs are used to highlight areas in which the team will need to focus innovation of cost and design. The advantage to report outs are that the entire team knows where each trade is in relation to the cost targets. The TVD Director (lead estimator) must hold all team members accountable to the budget report outs. If a cost spike occurs, questions and solutions are the next in the sequence of events.
All Parties Must Accept Equal Responsibility for the Goal
The TVD process is not maintained by just a few members of the team. The process is successful only because the entire team is unified by the goals set early in the project, creating a culture of commitment and responsibility to reach those goals together.
The team is built with members that understand the important principal that “we are all equally responsible for the project goals.” This team culture strengthens mutual learning, collaboration and continuous improvements that nurture the team’s project success.
From an Estimator’s Perspective
From an estimator’s perspective, I have found the process to be exciting, intriguing and a great opportunity to engage more in the design process than an estimator would typically enjoy. Furthermore, a successful TVD process will yield a final design that meets the entire team’s expectations and budget.
A previous version of this story appeared in American Society of Professional Estimators’ “Estimating Today”. It is reprinted with permission.
The American Society of Professional Estimators serves construction estimators by providing education, fellowship, and opportunity for professional development. For more information visit http://www.aspenational.org
Special thanks to Paul Klemish, Herrero Contractors, Inc. and Rob Purcell, Herrero Contractors, Inc., for their review and input.
* For more information on “Model Quantity Analysis” reference:
Estimating Today, May 2011 - “Model-Based Quantity Takeoff and
Estimate Validation” (Authors: Dr. Hung Nguyen and Paul Martin)
Paul Martin is a Senior Estimator for Herrero Contractors, Inc., in San Francisco. He is a LEED-Accredited Professional and serves as Vice President of the Bay Area Chapter of the American Society of Professional Estimators, and is on the National Education Standards Board. Martin is also currently the Senior Estimator for the Cathedral Hill Hospital Project, a $1 billion acute care hospital in San Francisco. He has extensive construction estimating experience, with projects ranging from health care, hotels and parking structures to public works projects. He has in-depth, practical knowledge of the Target Value Design Process, a new type of delivery process that is impacting the estimating profession. Martin is a nationally recognized leader in quantity analysis based on three-dimensional modeling and its application to estimating. He has published several articles and gives lectures throughout the country on the subject. Martin also teaches Construction Estimating 1 and 2 at the University of California, Davis Extension.