Target value design: using collaboration and a lean approach to reduce construction cost

TLDR

Target costing, a long‑used manufacturing technique, is adapted as target value design to improve construction cost predictability, quality, and delivery, building on existing similar approaches such as partnering and target‑cost contracts. Target value design was developed through action research on 12 U.S. construction projects, establishing its process framework.

Abstract

Target costing is an effective management technique that has been used in manufacturing for decades to achieve cost predictability during new product development. Adoption of this technique promises benefits for the construction industry as it struggles to raise the number of successful outcomes and certainty of project delivery in terms of cost, quality and time. Target value design is a management approach that takes the best features of target costing and adapts them to the peculiarities of construction. The concept of target value design is introduced based on the results of action research carried out on 12 construction projects in the USA. It has been shown that systemic application of target value design leads to significant improvement of project performance—the final cost of projects was on average 15% less than market cost. The construction industry already has approaches that have similarities with elements of the target value design process or use the same terminology, e.g. partnering and target cost contracts, cost planning, etc. Following an exploration of the similarities and differences target value design is positioned as a form of target costing for construction that offers a more reliable route to successful project outcomes.