Target Value Design (TVD) consistently yields projects 15% to 20% below typical market prices, while also improving cost predictability and reducing the need for large contingency funds. This isn’t accidental: a clear model explains why TVD works, and why traditional approaches often fail.
The Problem with Traditional Construction Costs
Most construction projects are built on fragmented incentives. Designers are paid by the hour, with little stake in keeping costs down. Contractors can exploit missing details in plans (legally, as established in Spearin vs. United States, 1918) by issuing expensive change orders. The owner ends up footing the bill for miscommunication, uncertainty, and poor coordination.
This isn’t about malice—it’s about the system. Without shared risk, there’s no pressure to minimize waste or collaborate effectively.
Figure 1: Project cost breakdown showing how forces increase total cost.
The TVD Solution: Shared Risk, Shared Reward
TVD flips this model. Designers and contractors pool their profits into a shared risk pool. If the project comes in under budget (meeting the owner’s conditions), everyone shares the savings. If it goes over, everyone’s profits shrink. This immediate alignment of incentives drives efficiency.
TVD also encourages collaborative approaches like Design-Build or Integrated Project Delivery (IPD). These methods emphasize early contractor involvement, co-location, and digital modeling (BIM) to reduce errors and improve communication.
Figure 2: Forces that increase and decrease project costs.
A Physical Analogy: Forces and Momentum
Think of a construction project like physics. Isaac Newton showed that the sum of forces determines an object’s momentum. Similarly, the sum of forces (positive and negative) determines a project’s cost trajectory.
Traditional projects often lack the forces pushing costs down. TVD actively introduces them: collaboration, aligned incentives, and risk-sharing. While risks like miscommunication still exist, TVD creates a counterbalancing force to mitigate them.
The Key Takeaway
Construction cost isn’t fixed; it’s a dynamic outcome. At any stage, opportunities exist to save money, but also risks that can inflate expenses. TVD doesn’t eliminate risk, but it shifts the system so that everyone benefits from controlling it.
By aligning incentives and encouraging collaboration, TVD fundamentally alters the forces at play, making cost overruns less likely and predictable savings more achievable.
This model is not just theoretical—it’s proven in practice. TVD isn’t about cutting corners; it’s about building smarter.
