1. Value Management

2. Learning outcomes To distinguish between Value, Price, Cost and Worth
To understand the principles of Value Management
To explain the application of VM in a real case scenario

3. Cost  amount of money consumed by the production of the product
Is Value = Cost? /Price?/ Worth?
Cost  amount of money consumed by the production of the product
Price  amount of money which the product is exchanged
Worth  amount of money a buyer would be willing to pay to buy the product

4. Eg: Smart phone

6. Value is based on the relationship between satisfying needs and expectations and the resources required to achieve them
The benefits the buyer receives over the cost associated with acquiring and using the product
Benefits/expectations are hard to define as they are subjective (involves people and their judgements)

7. Value is ultimately judged by its stakeholders !!
Stakeholders with different levels of interest in construction projects have different expectations
Value is ultimately judged by its stakeholders !!

8. Value management
A systematic, multi-disciplinary effort directed toward analysing the functions of projects for the purpose of achieving the best value at the lowest lifecycle cost
The engagement of project stakeholders to determine ‘value’ is done through a series of well-timed workshops

9. Value management in construction
Value Planning
Value Engineering
Value Analysis
Value Management

10. Systematic process… Follows the JOB PLAN Pre-study
Information gathering
Creativity
Analysis
Evaluation
Presentation
Implementation

11. 1. Pre-study phase
Purpose: to ensure that all parties are well coordinated
The activities to be considered in Pre-study are;
orientation meeting
VM team structure and members
workshop duration (5 days/ 40hrs)
site visit
cost estimates, models

12. VM team (Multi-disciplinary)
Comprises of 5 to 7 people
The team represents those who
own the problem
impacted by the problem and;
support functional

13. VM team cont..
VMTC (Value management team coordinator)/Facilitator coordinates the meetings
He/She is not a primary team member but may contribute his/her subject expertise to the team.
The results of the study are dependent on the team and not the facilitator.

14. 2. Information gathering
Purpose: to get VM team to fully understand the major aspects /nature of the project
Presentations (architecture, cost, services integration)
Function analysis
functions are defined by a verb and a noun
classify functions (basic, secondary, required secondary)

15. 3. Creativity
Purpose: to develop a large number of alternatives that could fulfil the needed functions identified earlier
The VM team deliberately prepares for ‘brainstorming sessions’
The team goes well with a number of clever, new or previously overlooked ideas arise that have real merit

16. 4. Analysis/Evaluate
Purpose: to review the generated ideas (pluses and minuses)
The team considers how well the ideas address the basic and secondary functions
Ideas are evaluated against measurable criteria and ranked in a matrix
Ideas are combined and consolidated to produce a list of perhaps 5 or 6 that are worthy of further consideration.

17. Function Analysis Function analysis examines what something does
e.g USB pen drive  Store data
It considers the ways for increasing product value
FAST (Function Analysis System Technique) is often used to analyse functions

18. FAST diagram Horizontal axis considers ‘How’ vs ‘Why’
Vertical axis considers ‘Needs’ vs ‘Wants’
NEEDS: Items which are fundamentally necessary for operation of the project
WANTS: Items which the client would like to have but are not essential
Functions are organised in a hierarchy (basic, secondary, required secondary)
Stakeholders’ engagement is highly needed to position the ‘needs’ and ‘wants’

19. FAST diagram cont...

20. FAST diagram cont...
Window / Door / Wall

21. Weighted evaluation
weight elicitation is based upon the sum of the weights being equal to 1 for each group of attributes which derive from a single node
Capital
Cost
Softwood
Running
Window
Hardwood
Finish
Aluminium
Aesthetic
Durability

22. Weighted evaluation cont…
Alternatives
Cost (.55)
Aesthetic (.45)
Total 80 65
73.25 70
90.50 85 75
80.50

23. 5. Development
The ideas with the "best" potential are considered as alternatives.
The team develops these alternatives in sufficient detail to show the relative advantages and disadvantages of each

24. 6. Presentation
The team presents its findings and recommendations to the "owners" of the study topic
The presentation should allow for open and critical discussion of the alternatives, - how they were developed
- what assumptions were made
- advantages and disadvantages

25. 7. Implementation
The owner/users and other responsible parties determine
which proposals will be accepted (in whole or in part) or rejected?
how much money can be saved?
efficiency, quality and timeliness benefits

26. The determination of 'maximum value' is influenced by economic analysis techniques! Your questions???

27. Additional readings!