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That's a very good point. A competition would prevent (or at least) reduce the kind of value engineering that 99% of buildings go through.
Not in the slightest. If anything, it could make the result VE'd even worse than a typical non-competition proposal. Architects go nuts with competitions producing flashy renders and fancy models of buildings that are way over the top and essentially ignore a budget. There's a greater chance of that building getting ruined by being VE'd to death because it's so overbudget and outrageous than if the building was designed normally, under non-competition standards. As a whole, the building could retain its architectural integrity much more than the competition building that needs to be VE'd like crazy because it was being designed to be a "building" rather than a flashy "showpiece."
VE pretty much never occurs during the early phases and mainly happens as the CDs are being produced (and priced/cost estimate sets) and then during the CA phase after when budgets get reduced, run over, etc. No one goes into a project saying "I'm gonna build this out of crappy materials," competition or not.
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