Section S
Value Management/Engineering
Value analysis (VA) tends to focus on the end product, Value engineering (VE) tries to improve the design before it is incorporated into the next stage, and Value management (VM) tries to take a holistic approach. VA tends to be done by an individual, and VE and VM tend to be carried out using a quality circle approach. Quality circles are a multidisciplinary group brainstorming process for identifying and solving quality problems. They all try to do much the same thing and are traditionally most effective in the mass‐production manufacturing environment. Nevertheless, there is still some benefit to be obtained in the one off project environment since the work processes are repetitive in this context.
The main emphasis of VM/VE should be in the conceptual phase whilst the owner is formulating the project. However, it will depend on the contracting arrangements for the contractor, and the most effective area is likely to be during the feasibility study. It is about identifying the functional requirements of a project to achieve an optimum solution for the least cost.
Value is regarded as a measure of how well an organization, project, product, or service satisfies stakeholders and achieves the objectives in relation to the resources consumed. Nevertheless, value management should be regarded as a means of finding a better way of doing things rather than just a cost‐cutting exercise. It is a creative, innovative, group process.
During the early development stages of a project, the objective of value management is to produce a technical scheme that will produce an attractive return for the investors on their capital investment. The focus will be on life‐cycle costing. In commercial building development, the focus is on the use of space and functionality. It is more business focused.
During the later execution stages, it becomes more specialist‐ and engineering‐focused where the objective is to optimise the plant layout for piping, cabling, and steelwork. Alternately, in building development, it will seek to optimise the building services in order to reduce the use of the budget and or operating costs.
VM/VE can be applied at numerous stages as the project moves through the various phases of development. Nevertheless, the principles of value engineering stay the same. It should be identified as a key milestone(s) in the project schedule.
As a project develops, the number of people who can be involved increases considerably, from a few generalists in the early phases to a large number of specialists in the execution phases.
1 VM/VE Process
1.1
The VM/VE starts as a subjective process and eventually becomes more objective with the focus on benefits and costs. It has four distinct phases:
- Information gathering. Do not forget lessons learned from previous projects.
- The creative group process.
- The analysis stage. Cost analysis, functional analysis, understanding requirements.
- The development of a proposal for submission to the top management team.
1.2
The process should be initiated or led by the project manager to demonstrate commitment to the process. They need to discuss the number of people to be involved in the process and the departmental representation.
1.2.1
The project manager must specify the terms of reference of the group. Is it advisory, or does the project manager request presentations on ideas where they might want to exercise a veto on a particular line of attack?
1.2.2
Alternatively, the project manager may delegate authority to the team to make changes on its own without further permission.
1.3
The project manager defines:
- The objectives for what is to be achieved
- The issues involved
- The evaluation criteria
- The process to be used
- The ground rules for timing, breaks, chairmanship, records, and so on
- The reporting relationship to line management and explains the purpose of the group to the remaining team members.
1.4
Some pre‐work should be issued to be done as individuals or in pairs.
1.5
Team members post their pre‐work ideas on the wall and ask for clarification or additional explanation. There are no bad ideas – only ones to be improved.
1.6
Issue everyone with their own sheets of flipchart paper and wall space for them to write up their own ideas. Brainstorming rules apply where no idea is ruled out. See Part VI, Section K Problem Solving Techniques, subsection 1.
1.7
Every idea must have a cost saving assigned. The cost engineer, therefore, gives a quick ‘guestimate’ (quick rather than accurate) of the cost saving for each idea.
1.7.1
Quality assurance should be involved to ensure that the technical integrity of standards is not compromised.
1.8
The team agrees priorities for discussion (see Part VI, Section H Prioritising Techniques) and the interaction between ideas. Choices have to be made:
- Price or purchasing cost
- Quality or reliability
- Materials or design
- Production or manufacture
1.8.1
Do not make changes to two areas at the same time. For example: do not change the material and the design. See Section M Risk and Risk List, paragraph 1.3.
1.8.2
The group discussion bounces around to find new ideas. The group leader for this session allows the debate, discussion, to continue for as long as the creativity is effective. They write the ideas up on the wall as they occur and the cost engineer evaluates the cost savings.
- Evaluate:
- Substitutions
- New materials
- Alternative processes
- Improvements
- Modify:
- Adapt parts
- Shape/size/colour
- Change:
- Non‐standard elements
- Manufacturer
- Suppliers
- Examine Procedures:
- Change working methods
- Evaluate necessity of each step
1.9
The team selects (see Part VI, Section H Prioritising Techniques) the best set of ideas for development. They decide on the sequence for the discussion and the time allocation for each idea. Team members then retreat to work areas and write down an approach to be pursued for each idea. The outline plans developed include evaluations for:
- Risk
- Safety
- Feasibility
- Acceptability
- Quality
- Cost‐saving efficiencies – defined by how much it will cost to make how much saving.
1.10
A final prioritised list is then developed within the delegated authority given to the team.
1.11
The team members make presentations to the top project management team (the project manager and their direct reports) with the preliminary implementation plans, indicating the savings made and the associated risks and liabilities.
1.11.1
Alternately, if the top management team or client is directly involved in the process, the presentation will be made to the client or corporate management.
1.12
The top management team (or client) undertakes to review the individual plans and respond.
1.13
The project plan is modified to incorporate the agreed changes and implemented.
- Monitor progress
- Quantify savings and improvements
- Identify elements for re‐examination
2 Group Process
2.1
The VM/VE process is totally dependent on a good group process. Thus if client, joint venture partner, or consortium partners are to be involved, then it becomes an extremely difficult process. People become too focused on defending their own interests.
2.1.1
Do not underestimate the difficulty of creating a group that will work together creatively and thinking outside their normal work constraints and company mindset.
2.2
It requires Edward de Bono's Six Thinking Hats 18 creative processes.
2.3
It will be most effective if the work is done in an offsite workshop environment.
2.4
The team should be comprised of the people who do the work (a supervisor may well need to be involved at some appropriate point). Also, a cost engineer estimator who has a good knowledge of cost algorithms and can generate numbers quickly is necessary.
2.5
The process will require achieving consensus among a group of specialists with divergent views. Consequently, consensus with qualification will be required – “I don't necessarily agree, but I can live with it.” See Part VI, Section B Leadership and Motivation, paragraph 1.2.