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Value Engineering Dr. Sadi Assaf Professor Construction Engineering and Management King Fahd University of Petroleum and Minerals Department of Construction.

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Presentation on theme: "Value Engineering Dr. Sadi Assaf Professor Construction Engineering and Management King Fahd University of Petroleum and Minerals Department of Construction."— Presentation transcript:

1 Value Engineering Dr. Sadi Assaf Professor Construction Engineering and Management King Fahd University of Petroleum and Minerals Department of Construction Engineering and Management

2 Introduction  Value engineering is multiphase process. Its success depends heavily on its organization and management.  Value engineering can be done at various stages of the construction project, like the concept phase, the development phase, the design phase, the construction phase and the op and maintenance phases.  the greatest potential for savings can be obtained when value engineering is applied at earlier stages of project development.

3 Cost Reduction Potential vs Cost to Change

4 The Study Plan  A study plan must be accomplished first in order to obtain resources for the performance of value engineering. The plan should contain the following information:  The objective and scope of the study;  The estimated study costs and expected savings;  The name of the team leader and his qualifications;  The names of the team members and their qualifications and the time required by each to perform the study;  The time limits for each phase of the value engineering job plan and the expected date of completion of the study.

5 Value Engineering Team Selection  Value engineering is a team effort.  A typical value engineering team should have multidiscipline markers representing a cross section of technical fields covering the area to be studied.  The team should have at least one, or two members from the major discipline that is related to the project under study.

6 Contd..  The value engineering study might be conducted by more than one team. The number of teams depends on several factors like:  project size, project complexity, constrains upon the scope of the study, and the degree of completion of the design.  If the study is conducted by more than one team value engineering team coordinator should be selected to lead the value engineering study and to coordinate bet different teams.

7 The Value Engineering Job Plan  The job plan consists of a series of steps, and is a disciplined system which combines the special technology of value engineering with other procedures and techniques to achieve the final goal of value engineering.  In conducting the value engineering study, it is very important to follow the logical sequence of the job plan phases.

8 Contd.. The job plan can be broken down in six phases: 1.Information phase (to gather information and provide data) 2.Speculation phase (to generate alternatives) 3.Analysis phase (to evaluate alternatives) 4.Development phase (to develop and recommend alternatives) 5.Presentation phase (present the proposal to decision making authority) 6.Implementation phase (to execute the proposal)

9 Information Phase  During this phase,the team members should gather all the information regarding the project under study.  This phase has two basic objectives. They are:  To educate the team members about the system, structure, or item under study.  To have a clear definition of the value problem by means of a functional description coupled with an estimate of the worth of accomplishing the basic and the required secondary functions.

10 Contd.. Questions to answer in this phase  What is this?  What does it do?  What must it do?  What does it cost?  What is the performance of the essential functions worth? Information and documents required by the team  Drawings  Specifications  Estimated Cost  Special information if any.

11 Contd..  The value engineering team might use Pareto’s Law of Distribution as a tool to identify items which significantly influence the cost of the project.  The cost model is a diagrammatic form for cost estimate that organizes and distributes the estimated cost into functional areas that can be easily defined and quantified.  The cost model is developed by breaking down the project into functional areas.

12 Pareto’s Law of Distribution

13 Contd..  A list of items, and components of desire should be prepared by the team members in order to perform a functional analysis for each.  The basic objective of the functional analysis is to find cut the unnecessary costs that the owner is paying which neither contribute to the quality nor satisfy the owner’s requirements.  The function of an item should be defined by t; words, a verb and a noun. This is done by answering the question, “what does it do ?

14 Contd..  After defining the functions of each item, the cost of the item should be compared with its worth. This is done by assigning a cost to each function and then determining the worth of the required functions.  the cost to worth ratio is measured for each item, which gives an indication to the efficiency of the design or the item.

15 Contd.. Function Analysis Systems Technique (FAST)  Function analysis systems technique is a graphical representation showing the logical relationship for the functions of an item, system, or design.  FAST is a method of stimulating organized thinking of the value engineering teem during the information phase of the value engineering job plan.  FAST helps in organizing the functions of an item or design being studied by identifying their level of indenture and by sorting the functions to basic and secondary functions.

16 Function Analysis Worksheet

17 Speculation Phase  The main purpose of the speculation phase is to generate alternative ways to perform the essential functions (basic and required secondary functions) of the item or the design that showed a high cost to poor value ratio.  The only question that is asked during this phase is In what alternative ways can the essential functions be achieved?  To get the maximum output of new ideas, the team leader should encourage all the team members to participate in this task.

18 Contd..  There are a number of creative techniques that could be used to provide a method or a procedure to help the team in generating a number of alternative solutions to the value problem.  There are two ground rules that the team must follow in adopting those techniques to obtain successful results. 1. The first rule is the elimination of all judgment and evaluation of the generated ideas until all possible ideas are produced. 2. The second rule is to take into account all of the generated ideas and not to ridicule any idea, even the impractical ones.

19 The Brainstorming Technique  The brainstorming technique is considered the foremost approach to creativity in value engineering.  Brainstorming is defined by Webster's International Dictionary as, “To practice a conference technique by which a group attempts to find a solution to a specific problem by a massing all the ideas contributed by its members.”  Brainstorming is usually done in a situation like a conference session where the value engineering team sits around a table to produce ideas for the performance of the necessary functions.

20 Contd..  During the brainstorming session the free wheeling of ideas is encouraged.  The evaluation and the judgment of the generated ideas is deferred until the end of this session.  It is very important to record the idea at the same time it is suggested as this helps in not forgetting any idea.  It is recommended to list the ideas on a board so that all the team members can see the produced ideas and make them as a base to produce new ideas.

21 Why/How Logic Diagram for Brainstorming Rules

22 The Gordon Technique  In Gordon technique only the team leader knows the exact nature of the problem.  This allows the team members to think in a broader areas.  The only difficulty that faces the team leader in using Gordon technique is choosing a topic for the discussion which must be closely related to the problem at hand and at the same time does not reveal the exact nature of the problem.  At the end of this phase, the value engineering team will come up with a list of ideas that need to be evaluated and analyzed

23 Analysis Phase  The analysis phase, which is also called the evaluation or judgment phase, comes after the speculation phase.  In the analysis phase, the generated ideas are tested and evaluated by the value engineering team.  The purpose of the analysis phase is to evaluate and test the ideas generated during the speculation phase and to select the cost promising ideas for further development and refinement.

24 Contd..  The ideas are analyzed to find out if they satisfy special requirements.  The first requirement is to fulfill the owner’s need.  The second requirement is to examine the workability of the idea.  During the screening process many ideas are eliminated from the idea list.  The value engineering team should start their analyses or the remaining ideas by listing the advantages and the disadvantages of each alternative idea.

25 Contd..  According to the listed advantages and disadvantages and based c the value engineering team’ s experience and knowledge, the listed ideas are ranked using rating system of one to ten where ten represents the rank for the best alternative idea.  During this phase, a preliminary rough total cost estimate for each alternative idea is prepared by the team.  The team might use the weighted evaluation technique to rank the best alternative ideas that show high potential savings and evaluate them against other factors.

26 Idea Comparison Worksheet

27 Weighted Evaluation  Weighted evaluation is a technique used during the analysis phase of the value engineering job plan to help the value engineering team in selecting the best alternative between the different choices.  The weighted evaluation technique enables many factors other than costs such as aesthetics, safety, performance, implementation time, and so on to be considered in the evaluation of the alternatives.  This procedure of weighted evaluation consists of two sequential processes. The first process is weighting criteria. The second is matrix analysis.

28 Contd..  In the weighting criteria, the team should come up with a list of criteria, features or alternatives that are important in the selection of best alternative.  After listing the criteria, a letter of the alphabet is assigned to each. The degree of importance then is established for each criteria by pair comparison.  The ranking is as follows: Major preference 4 Medium preference 3 Minor preference 2 Slight or no preference 1

29 Format for Criteria Weighting Process

30 Contd..  The criteria arid weights developed are used to evaluate the alternatives against the criteria to select the best alternative.  A proper rank is assigned for each alternative compared with other alternatives under the sane criteria.  The rank of each alternative is then multiplied by the weight of each criteria and the total is entered into the upper half of each block.  The alternative having highest total points is considered the best alternative.

31 Format for Analysis Matrix

32 Development Phase  From ideas generated in the speculation phase, few have been selected in the analysis phase for further development and refinement.  The three objectives of development phase are: 1.To refine and test the selected alternative ideas in the preceding phase. 2.To perform life cycle costing on the selected alternatives. 3.To recommend the best alternative for implementation.

33 Contd.. During this phase, an in-depth study should be devoted to the development of specific recommendations for successful implementation of the recommended alternatives. It is essential to ensure that the selected alternatives meet the user’ s requirements. During this phase the team should refine their estimates to develop more realistic and accurate estimates to each of the selected alternatives to use those estimates in performing life cycle costing for each of the selected alternatives.

34 Contd.. Life Cycle Costing  Life cycle Costing is an economic assessment of the design alternative considering the total ownership cost including construction, cremation, maintenance, and replacement costs over the economic life of the project.  The decision of the value engineering team should not be based only on the initial costs of the alternatives.  Operation and maintenance cost of a completed project might represent up to five or six times the initial construction cost depending on the type of project and its economic life

35 Contd..  The value engineering team should be able to estimate the following items for each alternative:  Initial costs;  Operation costs;  Maintenance costs;  maintenance tasks;  Replacement costs.  There are two basic approaches usually used to perform life cycle costing. They are  The annualized method, and  The present worth method.

36 Contd..  A series of sensitivity tests might be performed by varying interest rate, escalation rate, and economic life of the project to find out under what condition the economic alternative right change.  Disadvantages of life cycle costing technique:  It is very difficult for the value engineering team to forecast the future costs and to decide upon the economic life of the project.  The discount rate is not constant over the years it is subjected to changes due to many factors such as inflation and escalations in energy prices.

37 Presentation Phase  The objective of this phase is to prepare and present a proposal containing the results of the value engineering study to the decision makers for approval.  The end result of this phase usually is a decision by the authority to implement all or some of the recommended alternatives.  A formal written report called as Value Engineering Proposal is prepared by the value engineering team. The proposal summarizes the results of value engineering study and condenses the efforts of the team.

38 Contd..  The systematic approach of the value engineering job plan should be followed in preparing the proposal to lead the reader to the logical sequence of the job plan.  The report is usually prepared in a summary book covering the value engineering study including the results and the recommendations.

39 Contd..  A complete summary book usually contains the following: 1. An executive brief including a brief description of the study project, the problem summary, and recommendations. 2. The function analysis results of both the existing and proposed designs. 3. Sketches showing the proposed changes in the design. 4. Technical data that support the recommended alternative.

40 Contd.. 5. Estimated cost for existing and proposed designs including all associated costs as well as the cost to implement the proposed design. 6. A summary of the potential savings including initial cost savings and life cycle savings. 7. An implementation plan including required actions to be taken and a suggested implementation schedule. 8. Reasons for accepting the recommended alternatives. 9. Acknowledgement of people who contributed to the study.

41 Contd..  A capable person from the value engineering team is selected to present the value engineering study.  The presentation should not last long and should include: 1. Identification of the value engineering team, members and their leader. 2. Identification of the project studied. 3. Identification of the area of the project studied that showed high potential savings.

42 Contd.. 4. Description of the original design. 5. The cost of the original design. 6. Results of function analysis, highlighting basic and secondary functions. 7. A description of ideas considered with the advantages and disadvantages of each. 8. An explanation of the recommended alternatives and reasons for acceptance.

43 Contd.. 9. Technical data supporting recommended alternatives. 10. Cost estimates of the recommended alternatives. 11. Before-and-after design sketches, showing the proposed changes. 12. A proposed implementation plan. 13. Implementation costs, including redesigning costs. 14. Implementation time and the effect on project duration.

44 Contd Estimated net saving in initial cost on the life cycle cost. 16. Acknowledgement of contributions by others. 17. A summary statement with the necessary action that should be taken by the authority to approve the proposal.

45 Implementation and Follow up Phase  The objective of this phase is to execute the approved recommendations in the value engineering proposal.  Throughout this phase, the value engineering team should maintain an active interest.  First by continuous monitoring to minimize delay during the proposal, approval, redesign, and/or construction.  Secondly, the value engineering team has to provide consulting services and resolve any problem that way arise during the execution of the proposal.

46 Contd..  Thirdly, it is important that the value engineering team insures that the recommended alternatives are being implemented as conceived with no modification or changes from the contractor.  To end the job plan, the value engineering team should collect all of the actual data and information regarding the specific project from the designer, the owner, the contractor, and the site.  Finally, to close the records of the project, the value engineering proposal and the actual data collected are filed to be referred to for future use.

47 An Overview of the Value Engineering Job Plan Start Finish Information Phase Speculation Phase Analysis Phase Development Phase Presentation Phase Implementation and Follow up Phase

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