Do NOT “Value Engineer” your next project…
Thursday, September 6th, 2007you can’t afford it…
We were discussing a new project the other day…a retro-fit required to address on-going production issues…sounds typical right? the interesting part was the background…
In order to increase production capacity, the first train was “duplicated”…except for a couple of changes…most likely caused when someone suggested some “Value Engineering” ideas…a change to the pipe spec on a feed line, and a reduction in the physical size of the unit being driven by pipe slope…considered individually, both ideas sound like they could be justified…
let’s look at the impact, with some hypothetical numbers….yours may vary…
Original cost savings………. ($100,000)
Original Engineering costs to review cost savings……….. $20,000
New retrofit project costs……… $2,500,000
New engineering fee………. $250,000
Production losses (over 5 years)………. $2,500,000
Total Savings…….. Priceless
No one wants to actually look at situations like this, it would be political suicide on the operations side…
The lesson?…beware of false economies…