Value engineering (VE) can often feel like a losing game for architects. Even after multiple rounds of pricing and reworking designs, projects frequently go over budget, leaving architects to shoulder the cost of rework with little to no compensation for the extra effort. What’s going wrong, and how can architects better manage the value engineering process? The answer often lies in the contracts.

Why Architectural Contracts Need More Specificity

One of the primary issues is that many standard architectural contracts are vague when it comes to VE expectations. Architects often assume that their initial pricing work includes some degree of VE, but what happens when the contractor prices the design multiple times and the project is still over-budget? This ambiguity leads to frustration and wasted effort. The key is to outline specific terms related to VE right from the start. Here’s how:

Include VE in the Fee Structure: If the architect is expected to engage in value engineering, this needs to be clear in the contract. How many rounds of VE are included in the initial fee? What constitutes a round of VE, and how will the architect be compensated for additional rounds if the project continues to be over-budget? By setting expectations upfront, both the client and the architect have a clear understanding of the costs and scope of VE efforts.

Professional Cost Estimators Should Be Standard: Architects are often tasked with designing to a predefined budget. But without a professional cost estimator on board, the process of keeping the design in line with that budget can feel like shooting in the dark. Including an independent construction cost estimator as part of the design team, especially if designing to a budget is required, should be a standard practice. This estimator should provide detailed cost estimates at key design milestones to catch potential budget issues early, before they spiral into more rounds of VE and redesign.

Navigating Client Expectations and Contractor Relationships

Architects often feel trapped between client expectations and contractor realities. As discussed on the AIA Practice Management Knowledge Community Forum, architects are increasingly finding themselves having to absorb the costs of rework when projects go over-budget, despite VE efforts.

In many cases, clients may have unrealistic expectations regarding both design scope and budget. This is where revising contract language can be a powerful tool. Contracts should address the consequences of exceeding the budget due to factors outside of the architect’s control. Should additional services be needed for repeated rounds of VE, or if new designs are requested after the budget has been set, the architect must be compensated accordingly.

An example of this issue is highlighted by the following sentiment shared on the AIA forum:

“Despite having a CM@R contractor price the design multiple times (and we subsequently VE the project multiple times), the final price is still over-budget, and we are doing re-work.” – AIA Forum Post

This quote underscores the frustration many architects face. Repeated rounds of value engineering not only eat into the architect’s profits but also lead to strained client relationships. The solution often lies in better upfront communication and clearer contracts that outline the cost and process of rework.

Advice for Owners: Structuring Contracts to Avoid Budget Overruns

Architects aren’t the only ones who need to be mindful of how value engineering is managed. Owners can also play a significant role in preventing budget surprises when it’s time to break ground. One key method is ensuring your construction contract and delivery model fosters collaboration between architects and contractors from the very beginning.

To minimize the risk of going over-budget, consider structuring your construction contracts based on some of the collaborative delivery principles outlined in my article, “Industry Watch – Collaborative Delivery: How You Can Achieve the Benefits of Collaborative Delivery Using Conventional Contracts”.

A key step is the Pre-Design Phase, where an architect is hired to develop a program, perform site studies, and prepare a detailed conceptual cost estimate with the help of a professional construction cost estimator.

Many Owners tend to engage a GC early on to provide budgetary quotes based on little more than a few vague descriptions of the work. This is a fundamental flaw that many projects begin with.

If you bring an Architect in instead, you will have a more reliable and independent baseline to guide the rest of the project. By running a structured Pre-Design phase as a stand-alone contract, you’ll have clearer deliverables that inform both the scope of the project and the final construction budget.

Skipping this step or relying on free quotes from a general contractor often leads to inaccurate cost estimates and budget blowouts. By ensuring this phase is part of your process, you create a foundation for a more accurate and efficient project budget, reducing the need for last-minute VE exercises and cost-cutting measures.

Final Thoughts

By adopting these best practices, architects and owners can work together to reduce the burden of repeated rework. Contracts are not just legal documents—they are tools that can help set expectations, protect time, and ensure all parties are treated fairly.

Have you faced similar challenges with value engineering and project budgets? How do you handle construction budgeting? Tell me your stories.

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