Engineering value remains a key driver in the supply chain

Engineering value remains a key driver in the supply chain

Steve Martin, head of specialist groups at the Electrical Contractors' Association (ECA), looks at how value engineering principles can help data centre procurement.

Although the concept of value engineering was developed during World War Two, it is still as relevant today as it was when it was first conceived back in the 1940s. This might seem strange as cost and value have become almost interchangeable in today's business world as senior managers attempt to make budgets stretch as far as possible. A consequence of this is that the value something delivers is often perceived as being directly proportionate to the expense it incurs.
However, while businesses clearly need to make money, thinking cost and value mean the same thing can often be a mistake - and one which can backfire. Decisions taken to cut cost without an understanding of value can reduce the quality of the company's end product or service. Furthermore, it can damage morale among staff members and, in some cases, end up costing the business more in the long run - especially if additional investment is required to rectify any problems.
Data centre procurement is one area where this scenario is common. Efforts to cut costs here can have severe consequences in the long run – particularly if the attempt affects the data centre’s function or reliability. When this happens, the businesses affected by it can be forced to suspend their services, suffer an avalanche of negative publicity and may find their customers consider leaving them for a rival – or, even worse, take their business elsewhere. This is true even with a temporary fault, which can have far-reaching consequences for the firm, as well as the individual who oversaw the data centre's procurement.
Despite this, there's a growing trend for data centre procurement to be price-driven. While there's nothing wrong with being cost conscious, there's usually a reason why the more specialist data centre firms make higher estimates for this type of work. Typically, it's because of their commitment to using high-quality materials - ones which they have tested in conditions similar to the ones a data centre will operate in - and their refusal to use anything that doesn't pass their internal testing. This may mean the data centres they design and build require a greater investment, but they usually provide a closer match to the needs of the business they are being designed for – as well as some factors those procuring the data centre may not have considered.
Those overseeing the tender process need to be mindful of this, as selecting a contractor who makes the lowest priced submission may save money in the short-term, but it can also cause problems in the long run. This is especially true if something goes wrong with the data centre, as remedying any problems can often require a significant investment - and even the cost of the audit to determine them is likely to eat into any savings made from selecting the cheapest supplier.
It’s therefore clear that data centre procurement should focus on the value delivered by the contractor, and by the data centre they’re designing, building and installing rather than the cost of delivering it. But how do you define value? Well, according to the principles of value engineering, it’s a ratio of function to cost, with every change or modification made to a product or service either preserving or improving its function while maintaining or decreasing the overall cost of its development.
The emphasis on function is a crucial element of this discipline. Its early practitioners aimed to improve the "value" of goods or products and services by determining what alternative materials would preserve the end product’s function while reducing the cost of developing it. 
When it comes to data centre procurement, the principles are the same, although the function of the end product should be defined by its reliability and resilience. Those judging the tender submissions from potential suppliers should ask themselves whether a contractor who offers the cheapest quote will deliver a data centre that meets all the needs of the business - or whether a short-term saving may have an adverse effect in the long run.  Making this type of decision requires careful scrutiny of the tender submissions, including assessing the credentials of the firms bidding for work. Doing so allows those who make the final choice of which suppliers to work with to be fully aware of the facts and the potential consequences of going with a cheaper alternative. 
Effective scrutiny of tender submissions may sound like a time intensive task but it’s one that makes for a more educated approach to procurement. Furthermore, close analysis increases the likelihood that the data centre once commissioned will help increase a business' profit, rather than potentially eroding it.