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Habitat Magazine Business of Management 2021

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ARCHIVE ARTICLE

Value Engineering

Any co-op or condo board that has tackled a major capital project knows about trade-offs. Boards are forever trying to shave costs while maintaining the highest possible level of quality in materials, workmanship and, in many cases, aesthetics. Though they may not realize it, whenever boards engage in this dance, they’re doing what’s known as value engineering.

A textbook illustration took place recently at an Art Deco beauty in the Hudson Heights neighborhood of Upper Manhattan. The board at this 234-unit co-op, located in a pair of 1938 buildings, had completed upgrades of interior common spaces and was now ready to put the maraschino on the sundae of its list of capital projects: a facelift for the two entryways, where patched brick walls, harsh lighting and cracked sidewalks and planters said “service entrance” instead of “welcome home.”

“We wanted to bring the buildings back to what they should look like,” says Eric Martinsen, the president of the co-op board, who is a founding partner at Fiskaa Engineering, a consulting firm on mechanical, electrical and plumbing systems. “But we had a budget, and we wanted to be cost-effective. This project was pretty strictly value-engineered.”

The forum for that value engineering was the five shareholders and board members who made up the Building Committee, which was chaired by Martinsen and included the co-op’s managing agent, Alan Warshavsky of Gumley Haft, and its architect, Monty Freeman, the founding principal at Belmont Freeman Architects. They all knew they were working with a budget of $750,000, which had been set aside when the board refinanced the underlying mortgage in 2016 and earmarked funds for an array of capital projects.

“Most people value engineer when they go over budget,” Martinsen says. “It may not be intuitive, but we thought of value engineering as part of the process of selecting materials and establishing the scope of work. When we made choices on cost, they fit with our goals.”

 

Weighing Value Against Cost

Some people claim, only half-jokingly, that “value engineering” is a fancy euphemism for “cost cutting.” In fact, as the Washington Heights entryway project illustrates, value engineering requires more than a slavish devotion to the bottom line. Ideally, it takes into account the trade-offs that can be made to cut costs – and then determines if the dollar savings are worth the sacrifice in quality, appearance and durability. In a sense, it’s a weighing of value against cost.

For the Building Committee, choosing materials was a big piece of the puzzle. Both of the three-sided entryways were in sorry shape. The brick walls from the ground to the bottoms of the second-story windows were shoddily patched. The pairs of granite step-downs and each of the downward-sloping concrete walkways were cracking, as were the precast concrete planters and decorative details. The lighting was harsh.

“The discussions we had with the committee were holistic,” Freeman says. “We tried to decide as a group where the money would be best spent.”

Case in point: What to do about those shoddy brick walls? One cheap fix would have been to patch the mismatched bricks. Other ideas were to cover them with one of a variety of materials, ranging from cheap tiles to precast concrete or more costly limestone. There were some sharp disagreements among the committee members. “It was quite cordial, but people had firm opinions,” Freeman says. “Some were interested in the design and the materials, and others were very budget-conscious. We had to justify all the design moves and costs, and we had some lively discussions. The committee was smart people who could see the value added by a high-quality restoration with some slightly luxury touches.”

In the end, the committee compromised and decided to replace the unsightly bricks with four-inch-thick blocks of precast concrete. “That was the key to value engineering this project,” Martinsen says. “It was Monty Freeman’s idea. Precast concrete looks like stone, it’s very durable, very uniform and you don’t have to quarry any stone. It was cost-effective, it was done quickly, it’s low-maintenance, and it was a fraction of the cost of limestone. It was a win all around.”

Next question: Should the walkways be replaced with bluestone or with the original poured concrete? “We had some serious discussions over whether bluestone was worth the added expense,” Freeman says. “One committee member said shareholders will be disappointed that we’ve gone to all this trouble and haven’t upgraded from concrete. The committee decided that the bluestone was worth it. It’s easily sourced on the East Coast, and it’s less expensive than granite.” The committee also decided to level the section of each walkway between the two step-downs in order to minimize the risk of slips and falls, then add two steps to each step-down. The original granite steps were salvaged when possible, replaced when not.

The final challenge was the handrails that would run along the planter boxes. Instead of going cheap, the committee decided on stainless steel for several reasons. Like precast concrete, it’s handsome, durable and low-maintenance. And, in the committee’s opinion, worth the extra expense.

“Every choice we made,” Martinsen says, “we tried to get the best value.”

 

Money Well Spent

After reaching unanimous agreement, the Building Committee presented its final design to the shareholders at an annual meeting. “That’s when you get some comments out of left field,” says Freeman, who serves on the board of his Upper West Side co-op. “There were people who wanted to know why on earth we were spending so much money. Some people are terrified of maintenance increases, but they don’t realize that most maintenance increases pay for property taxes, not capital projects.”

Once the design was approved and work began in 2018, the project was kept under strict supervision. “As the board president and an engineer, I was very involved,” Martinsen says. “Instead of hiring an outside project manager, we relied on the contractor, our property manager, the Building Committee and our super, who was there every day.”

The project took about 18 months, longer than expected thanks to the surprise discovery that there were undulations in the bedrock the buildings sit on, which complicated the laying of the foundations of the walkways. Though a bit behind schedule, the project came in on budget.

It turned out to be aesthetically pleasing to most of the shareholders – and, thanks to value engineering, worth the expense. “The reaction has been very positive,” Freeman says. “Now that it’s done, everyone loves it. And that’s what counts.”

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