The concept of value engineering (VE) was born out of necessity almost immediately after World War II when, as a result of wartime shortages, substitute materials were used in innovative designs that offered better performance at lower costs. Much of this happened in the General Electric Company under the attention of Harry Erlicher, the Vice President of Manufacturing. Eventually, in 1947, Lawrence Miles, a staff engineer with the company, was assigned to formalize the approach. The program saved millions of dollars for the company. To replicate the success, value engineering became a mandatory requirement in the Armed Services Procurement Regulations (ASPR) in 1962. Subsequently, it was introduced to two of the largest contracting companies in the U.S., namely, the U.S. Army Corps of Engineers and the U.S. Navy Bureau of Yards. Eventually, its use spread to other companies and contracting agencies posing similar successes. 
Essentially, VE is a systematic approach to eliminate any unnecessary cost of an item that does not add to its required function. It does not simply reduce cost by using cheaper substitutes or lesser quantities. Instead, its methodology centers on the following questions: What must it do? What alternative material or method can perform the same function equally well? This is function analysis: the principal component in VE. Thus, in a construction project, VE involves analyzing the functional requirements of components, subsystems, and even construction methods.
The other aspects of VE are cost and worth. Total cost is the objective to be minimized in any value engineering exercise, while worth represents the minimum costs to achieve the required functions. Worth forms the means for generating alternatives and serves as the baseline against which various alternatives can be compared. Any reduction in unnecessary cost represents the savings achieved.