Infrastructure and building owners continue to face a familiar challenge: delivering increasingly complex projects within constrained budgets and schedules while meeting ever-higher expectations for performance, sustainability, quality, and stakeholder value.
Despite advances in technology and project management practices, cost overruns and schedule delays remain common. Traditional delivery methods, particularly Design-Bid-Build (DBB), often separate design decisions from construction expertise, making it difficult to manage risk, optimize value, and maintain cost certainty throughout the project lifecycle.
Over the past three decades, alternative delivery models such as Design-Build (DB), Design-Build-Finance-Maintain (DBFM), Alliance Contracting, Progressive Design-Build (PDB), and Integrated Project Delivery (IPD) have emerged to address these challenges. While each model has unique characteristics, many share a common principle: creating greater alignment among stakeholders through collaboration and early engagement.
One of the most powerful concepts to emerge from this evolution is Target Value Delivery (TVD).
TVD represents a fundamental shift in project delivery thinking. Rather than designing a project and then determining its cost, TVD establishes the project's value objectives and allowable cost at the outset and continuously validates design decisions against those constraints throughout the project lifecycle.
TVD was adapted for construction projects from Lean Product Development used in manufacturing. TVD is supported by the Lean Construction Institute.
What Is Target Value Delivery?
Target Value Delivery is a Lean-based project delivery approach that focuses on maximizing value while maintaining alignment with cost and schedule objectives. Unlike traditional approaches, where estimating often follows design development, TVD integrates cost, schedule, scope, and value considerations from the earliest stages of project planning.
The objective is straightforward:
Design and deliver the project to meet the owner's value objectives within an agreed allowable cost and delivery timeline.
This approach requires continuous collaboration among owners, designers, constructors, suppliers, and operators throughout the project lifecycle.
Why Traditional Delivery Models Struggle
Traditional Design-Bid-Build delivery remains widely used across both public and private sectors. While it can be effective under the right circumstances, it brings with it several challenges:
- Design and construction expertise are often separated.
- Owners typically retain the majority of project risk.
- Cost certainty is limited during early design phases.
- Value engineering frequently occurs late in the process after significant design effort has already been invested.
- Budget overruns and schedule extensions often result in redesign, scope reductions, or compromised project objectives.
In many cases, value engineering becomes a reactive exercise aimed at reducing cost rather than a proactive process focused on optimizing value.
TVD seeks to address these shortcomings by embedding cost and value considerations into decision-making from the very beginning.
The Three Cost Levels in TVD
A defining feature of TVD is the establishment of three interconnected cost benchmarks.
Allowable Cost
The Allowable Cost represents the maximum amount the owner can justify spending to achieve the project's business objectives and expected value. This cost is driven by the business case rather than by the design itself.
Expected Cost
The Expected Cost represents the anticipated cost of delivering the project based on current assumptions, market conditions, and available information. This cost reflects what the project would likely require if delivered using conventional methods and assumptions.
Target Cost
The Target Cost is the collaboratively developed cost objective established by the project team. It becomes the working cost target against which design and construction decisions are continuously evaluated.
The relationship between these three costs creates constructive tension within the project team. When the Expected Cost exceeds the Allowable Cost, the team must seek innovative solutions that preserve value while reducing cost.
This process occurs before major design commitments are made, reducing the need for late-stage redesign and traditional value engineering exercises.
Target Value Delivery Throughout the Project Lifecycle
- Business Case Development
Every project begins with a business case that defines the owner's vision, objectives, and desired outcomes.
Within a TVD environment, this phase includes:
- Early feasibility analysis
- Development of reliable cost models
- Preliminary risk assessment
- Early engagement of key stakeholders
- Establishment of the Allowable Cost and Target Value
One of the most important differences from traditional delivery models is the involvement of construction and implementation expertise much earlier in the process.
- Validation Phase
Validation is one of the most critical phases of TVD.
During validation, the project team continuously assesses whether the proposed solution can achieve the owner's objectives within the established cost and schedule constraints. This phase includes repeated Go/No-Go decision points that allow stakeholders to evaluate project viability before significant resources are committed. Unlike traditional stage-gate, or end-of-phase reviews, validation in TVD is a continuous process rather than a one-time event.
- Design and Construction
Throughout design and construction, cost, schedule, and value are continually monitored and validated.
Design decisions are evaluated against their impact on:
- Project value.
- Cost performance.
- Schedule performance.
- Risk exposure.
- Long-term operational objectives.
Continuous estimating becomes a critical management tool, allowing the team to identify potential deviations early and take corrective action before they become significant issues. The objective is not simply to reduce cost but to maximize value within agreed project constraints.
- Post-Project Evaluation
The TVD process continues beyond project completion.
Lessons learned, performance outcomes, cost data, and schedule performance should be captured and analyzed to improve future projects and strengthen organizational benchmarks. This continuous learning cycle is consistent with Lean principles and supports long-term organizational improvement.
Lean: The Foundation of Target Value Delivery
TVD cannot succeed without Lean thinking.
While TVD establishes the project's cost and value objectives, Lean provides the management system that enables project teams to achieve them. At its core, Lean seeks to maximize value while minimizing waste.
Within the context of project delivery, this means:
- Optimizing the entire process rather than individual components.
- Focusing on value generation for the owner and end users.
- Eliminating activities that do not contribute value.
- Improving workflow reliability.
- Promoting transparency and collaboration.
- Pursuing continuous improvement.
Lean transforms project teams from independent organizations pursuing individual objectives into a unified team focused on a shared outcome.
Conditions for Successful TVD Implementation
Based on experience across collaborative delivery models, several conditions consistently determine whether TVD succeeds or fails.
- Early Stakeholder Engagement. Owners, designers, constructors, suppliers, operators, and maintainers must be engaged as early as possible. The greatest opportunity to influence cost and value exists during the earliest project phases.
- Clear Definition of Value. Success depends on establishing a common understanding of what constitutes value. Different stakeholders often define value differently. Alignment must occur before major decisions are made.
- Reliable Cost Information. TVD relies on accurate and continuously updated cost information. Cost models must be transparent, credible, and supported by all stakeholders.
- Strong Owner Leadership. Owners must actively participate in decision-making and value definition. TVD is not a process that can be delegated entirely to consultants or contractors.
- Trust and Transparency. Collaboration requires trust. Open communication, transparent cost information, and shared problem-solving are essential to maintaining team alignment.
- Experienced Project Leadership. Project managers play a critical role in facilitating collaboration, managing stakeholder expectations, and maintaining focus on project objectives. Experience with Lean principles and collaborative delivery environments is often a significant contributor to project success.
- Continuous Validation. Project assumptions must be challenged and validated continuously. Frequent Go/No-Go reviews help identify risks early and prevent costly downstream impacts.
- Alignment of Commercial Structures. Contracts and commercial arrangements should support collaboration rather than encourage siloed behaviour. The most successful TVD projects align incentives around overall project performance rather than individual organizational outcomes.
Common Misconceptions About TVD
Several misconceptions continue to limit adoption of Target Value Delivery. It’s important to understand that:
- TVD is not simply another form of value engineering.
- It is not solely a cost-reduction exercise.
- It is not a procurement model.
- And it is not limited to Integrated Project Delivery projects.
Rather, TVD is a management philosophy and decision-making framework that can be applied across a range of collaborative delivery environments.
