DRO Deakin Research Online, Deakin University’s Research Repository Deakin University CRICOS Provider Code: 00113B

A decision-making formula for value engineering applications in the Sri Lankan construction industry

Citation of the final article: Karunasena, Gayani and Rajagalgoda Gamage, Kosala 2017, A decision-making formula for value engineering applications in the Sri Lankan construction industry, Journal of financial management of property and construction, vol. 22, no. 1, pp. 77-91.

DOI: http://www.dx.doi.org/10.1108/JFMPC-01-2016-0001

This is the peer reviewed accepted manuscript.

© 2017, Emerald Group Publishing

Reproduced with permission.

Downloaded from DRO: http://hdl.handle.net/10536/DRO/DU:30100218

1

DECISION MAKING FORMULA FOR VALUE ENGINEERING APPLICATIONS

ABSTRACT

Purpose - Construction industry in many developing countries is reluctant to apply Value

Engineering (VE) due to uncertainty of outcomes. Thus, the purpose of this paper is to examine

existing practices of VE techniques and make recommendations to organisations and national

construction regulatory bodies to standardise VE practices to achieve value for money for all

stakeholders. Further, a decision making formula is introduced to determine profitability of VE

applications prior to implementation.

Methodology - A broad literature review consisting of six case studies with 39 semi structured

interviews and six experienced professional’s interviews were conducted with construction

professionals having extensive knowledge on VE techniques in Sri Lanka, to gather data.

Building projects which applied VE were selected as case studies. Content analysis and cognitive

mapping were used to analyse data within case studies.

Findings - Findings revealed that application, knowledge and experience on VE techniques

among construction professionals is unsatisfactory. Recommendations include reducing

contractor’s design responsibility, introducing proper VE guidelines and statutory regulations.

Accordingly, a framework is introduced with recommendations to assist authorities to

standardise application of VE techniques. Finally, a decision making formula is suggested to

determine margins of contractor’s portion due to VE techniques and original profits gained.

Value - The formula can be used as a decision making tool by construction industry practitioners

to determine successfulness of proposed VE techniques and proposed framework can be used to

guide construction professional bodies to standardise VE practices to achieve value for money.

Keywords: Construction Industry; Decision making formula; Framework; Value; Value

Engineering.

1. INTRODUCTION

“The construction industry can be differentiated from other industries by its organisation and

products, stakeholders, projects, processes and operating environment,” (National Research

Council, 2009). The development of construction industry is based on government decisions,

2

procedures and regulations which has an obvious relationship with value for money

(Wijewardana et al., 2013).

Enhancing value of a project can create a worthy positive impact on the economy of a country (Rameezdeen and De Silva, 2002). Zhang et al (2009) said that VE is the most appropriate technique to regulate value in construction projects, as other techniques focus on time and quality than value. Many researchers contend that VE is a systematic method to elevate value of goods, products and services by undertaking an investigation of intention (Miles 1972; Parker 2001;Zar et al., 2011). Gudem et al (2013) stated that by implementing VE in projects cost can be reduced up to 26%, enhance operational performance by 40-50% and upgrade product quality by 30-50%. However, literature revealed that construction sector of most countries including Sri Lanka are reluctant to implement VE in projects due to lack of awareness among clients, uncertainty of outcomes, additional costs involved, lack of government support, more time consumed, lack of expertise, lack of regulations and policy applications (Kosala and Karunasena, 2015; Senarathne et al., 2014; Atmo and Duffield, 2014 ; Iran and Iyer, 1984; Mansour and Abueusef, 2015 ). In this context, this paper presents an overview of real practices of VE techniques in Sri Lankan

construction sector and provide recommendations to standardise VE practices to facilitate

achievement of value for money by all stakeholders. The research data was limited to building

projects which applied VE techniques in Sri Lanka and the paper consists of literature findings,

details on research methodology adopted and findings of real practices of VE applications,

recommendations to standardise and decision making formula.

2. LITERATURE SYNTHESIS: VALUE ENGINEERING AND CONSTRUCTION INDUSTRY

Value is a subjective term and is conspicuous in various ways such as desire, attitude, preference

need, criteria and belief (Leung and Liu, 2003). Thiry (2001) stated that value has several

definitions for various people, “best buy” for a customer, “the lowest cost” for a manufacturer

and “highest functionality” for a designer. “Without understanding the customer, the concept of

value is undefined, and without a tangible concept of value, waste is even more intangible”

(Bertelsen and Emmitt, 2005, p.74).

A fundamental issue for construction firms is to guarantee value in projects (Lozon and Jergeas,

2008). Kliniotou (2004) stated that various value measuring techniques can be found in industrial

sectors such as value management (VM), benchmarking, total quality management, financial

management techniques, cost-benefit analysis, supply chain management, project management,

whole life cycle costing and earned value management.

Among these, VM is a unique application designed through the process of project value

measuring technique (Stenstrom et al, 2013). VM has great accuracy over other techniques

because all factors which affect value of a product are considered (Kelly et al, 2004). VM

ensures that construction value wanted by the client along with many processes such as public

3

relations, timeline and good neighbourship (Salvatierra-Garrido and Pasquire, 2011). According

to Potts (2008) and Male et al. (1998), systematic operation of VM can be simply separated into

three prime techniques, specifically Value Planning, VE and Value Analysis to certify that value

is conveyed to the project in an adequate manner.

VE is a disciplined and creative method which intends to submit a client with a trustworthy

opportunity for cost savings without detriment to quality or performance (Miles, 1972).

According to Othman (2008) and Fan and Shen (2011), VE investigates, analyses, compares and

selects amidst various alternatives to generate the desired function and encounter or surpasses

customer goals and expectations. Abidin and Pasquire (2007) said that VE is acknowledged as a

paramount contrivance in the management of construction projects all over the world.

VE has been progressively implemented in UK construction industry since 1980 and in

Malaysian since 1986, expanding and adjusting direction of its objectives over the years (Kelly

et al., 2004). The application of VE in USA became famous in 1993 with the introduction of two

bills that made the process mandatory for all government programmes (Fong and Shen, 2000). In

1996 President Clinton signed into law an act accommodating all executive agencies to establish

VE procedures and estimated savings were forecasted at $2.19 billion for 1996 (Thiry, 2001),

according to Shen and Liu (2004) when VE was introduced to Chinese construction industry in

1978.

Chen et al. (2010) has observed that, VE studies frequently result in a 10% to 30% diminution in

total cost of a project and often have an intense outcome on ultimate design. Vorakulpipat et al.

(2010) concurs noting that, when VE is carried out during the early phase of design, it can see a

10% to 30% reduction in total costs. For an example, taxpayers were released in the order of $ 1

billion alone in US Highways and Transportation Departments due to the application of VE

techniques (Jaapar et al., 2012). Dell’Isola (1997) yields typical VE savings as follows:

In construction programmes to a value of €10 million, savings typically range from 3 to

10 times the VE effort.

In programmes from €10-75 million, savings range from 5 to 15 times the effort.

In programmes over €75 million, savings range from 10 to 20 times the effort.

Bone and Law (2002) indicated that there are number of merits which a project can attain by

implementing VE during its project life. Bowman and Ambrosini (2010) have also introduced

several benefits of VE for construction projects such as, parties can get an opportunity to engage

in advancement of a project, elevated competitiveness and profitability, can get a full authorised

review of the total project, can generate a continuous improvements in quality and performance,

4

quantum increases in productivity of a project, diagnose and accommodate with project

betterments and crystalizes an organiser’s brief or project predominance. According to Hamilton

(2002), improved identification of merits of VE has caused for the affluence of market level in

worldwide.

Lack of flexibility, support, knowledge and awareness of VE in some regions are basis for its

minimal implementation (Cheah & Ting, 2005). Zhang et al (2009) stated that, participants can

get a negative and sometimes argumentative impression of VE with engineers searching to avoid

the obligation of design modifications by contractors and non-engineers, assuming the

expenditure and time of developing. The effect is that, they only suppose developing suggestions

with a particularly high cost reduction capability thereby reasoning the high cumulative impact

of minor savings to be lost (Vorakulpipat et al., 2010).

When price becomes the differentiator, all contractors want to be the lowest in bid, regardless of

the original scope of work (Kashiwagi, 2011). A transparent, fair and open procurement system

can attract contractors that can provide optimum arrangement of quality and whole life cost

(Phillips et al., 2007). Kashiwagi et al. (2009) stated that, if a contractor is forced and pressured

to submit the lowest possible price proposal, which will not raise the level of performance with

lowest labour, material and tighter inspection. For better VE proposals authorities should have

clear procedures, procurement strategies and policies (Phillips et al., 2007). Further, client and

consultant should provide freedom by bearing risk (Ratnasabapathy and Rameezdeen, 2007). In

general, clients and consultants minimise risk by using price based environment and value based

environment (Kashiwagi and Kashiwagi, 2011). Value based environment include involvement

of less parties and more efficiency, transparency, maximum accountability, minimisation of

project cost and time deviation where price based environment take the opposite.

According to Luu et al. (2003) VE applications is influenced by client requirements, client

characteristics, project characteristics and external environment. Client requirements can be

considered as the major criteria, where it will certainly help a client to make a project successful

by satisfying client needs and priorities (Ratnasabapathy and Rameezdeen, 2007). Chan et al.

(2001) argued that since client is the ultimate owner of a project, not only client’s requirements

but also characteristics should be considered. In addition, due to unique characteristics of each

construction project, most researchers have emphasised that project characteristic should also be

considered (Alhazmi and McCaffer, 2000). The rationale is different projects will have varying

degrees of complexity (Chan et al., 2001). Similarly, projects operate in different external

5

environments (Ratnasabapathy and Rameezdeen, 2007) and selection of a VE technique is

directly influenced by external environment factors (Luu et al., 2003).

With overview of VE applications in construction, next paragraphs will present detailed

procedure adopted for data collection and analysis.

3. RESEARCH METHODOLOGY

This study adopted qualitative research approach as it describes a situation as it exists without

formal hypotheses, focusing on social processes intensely. Under qualitative phenomenon, case

study was selected as it facilitates in-depth investigation. Further, it facilitates constituting

attitudes, emerged thinking and perceptions of body of engineering consultants and contractors

on VE concepts and subjectively examine and evaluate the need for, and potential benefits of,

VE services. The unit of analysis or case in this study is construction projects which applied VE

technique. 39 interviews were conducted within six selected case studies to gather information

on VE applications in Sri Lanka.

The cases were selected from building projects due to abundance of such projects and also to

avoid complexities which may occur when evaluating building and civil projects simultaneously.

Cases vary from super luxury residential to low cost housing projects and shopping complexes

procured under Design and Build and Lump Sum methods. Details of six case studies are

illustrated at Table 1.

Table 1: Case Study Description

Case Type

Contract

Sum (US$

million)

Duration

(Months)

Procurement

Method

Public/

Private

Sector

A Super luxury residential

project

35 26 D&B/ LS Private

B Low cost housing project 7-23 24 D&B/ LS Public

C Super luxury office complex 695 48 D&B/ LS Public

D Low cost housing project 8 24 D&B/ LS Public

E Super luxury office complex 60 36 D&B/ LS Public

6

F Hostel building 1.5 12 D&B/ LS Public

39 semi structured interviews were conducted face to face, as illustrated at Table 2. The

interviewees represent three significant groups of each project team: client’s representative,

consultant’s representative and contractor’s representative. The interviews were tape-recorded

(with permission of interviewees) to ensure a faultless reporting of conversations and avert loss

of data. Interview guideline was prepared to gather data on impacts of VE applications on

projects as well as stakeholders, benefits and suggestions for regulatory bodies. Ultimately,

interview transcripts were developed to form a sensible adaptation of interview data.

Table 2: Interview profile – case studies

Case Organisation

Designation Experience(Y)

A

Client/Consultant-

Mix Organisation

Contractor

General Manager

Project QS

Senior QS

QS

Project Architect

Engineer

Engineer

Engineer

Engineer

General Manager

Chief QS

Engineer

Engineer

Senior Site QS

35

14

22

07

14

12

08

06

25

37

08

14

22

10

B

Contractor I

Contractor II

QS

QS

Site Project Engineer

Site QS

Site Technical Officer

Site Technical Officer

Site Technical Officer

03

09

13

05

07

06

09

7

Contractor III

Contractor IV

Project QS

Site Engineer

Site QS

Site Technical Officer

Site QS

Site Manager

05

11

08

06

09

14

C Consultant Senior QS

Site Senior QS

QS

QS

21

08

06

05

D Contractor Site Senior QS 14

Contractor General Manager 08

E Contractor Site Engineer

Site QS

13

05

F Contractor Chief QS

Project QS

08

14

Institute Director of Development

Assistant Director

21

16

In addition, 06 interviews were conducted as confirmatory interviews to clarify and validate

research outcomes gathered through case studies, specifically on suggestions made to standardise

VE applications. Semi structured interviews were conducted with representative professionals

from client, consultant, contractor organisations and academia, each possessing more than 20

years of experience (Refer Table 3).

Table 3: Interview profile – Experienced professional’s opinions

Organisation Type Designation Experience (Y)

Client/Consultant General Manager 35

Consultant Director 22

Consultant Project Manager 22

Contractor Senior QS 37

Contractor Senior QS 42

8

University Senior Lecturer 22

Perry (1998) said that these findings should be justified by using ‘cross-case analysis’ to identify

interrelationships and differences between each case and afterwards, conclusions shall be made.

Content analysis, a technique to gather data, involves codifying qualitative information into pre-

defined categories (codes) to derive patterns in presentation and reporting (Guthrie et al., 2004).

In other words it attempts to find similar cognitions under a same concept or about its meaning

rather than actual content of segment. After developing interview transcripts, key themes (codes)

emerging from findings were identified in each case. Study selected the software program NVivo

(NUD*IST Vivo Version 10.0.281.0) produced by QSR (Qualitative Solutions and Research

Ltd.) for coding function. Coding structure consists of the codes to presents the real VE

applications in the construction industry as illustrated at figure 1. Accordingly, process, factors

affecting, benefits, drawbacks and impacts of VE applications to stakeholders are analysed in

details.

Figure 1: Coding structure used in analysing empirical data

This presents an overview of VE applications in Sri Lankan construction industry,

recommendations for standardised VE applications and decision making formula derived

through empirical data analysis.

4. RESEARCH FINDINGS

4.1 OVERVIEW OF VE APPLICATIONS IN SRI LANKAN CONSTRUCTION INDUSTRY

Almost all respondents mentioned that there is no predefined way to apply VE techniques in

construction industry. It is revealed that most stakeholders do not consider life cycle cost of a

9

project before application of VE techniques. Further, construction stakeholders understand and

apply VE techniques in projects as compatible with their knowledge and experience.

Accordingly, stakeholders of construction industry prefer different stages of VE application

based on their expertise. However, it was revealed that key objective of VE applications is to

reduce cost while time and quality is considered less. Consultants and contractors preferred cost

and time reductions while maintaining quality of a project. Most stakeholders believe client as

the most significant person affected by VE proposals than contractors.

Most respondents said that intangible benefits which are hard to achieve in normal construction

processes can be achieved through VE techniques which makes the end product more compatible

with surroundings and occupants achieving better value for money invested by client. When

there is a need for VE proposals for a project, contractors use experience and latest technology

available to suggest better VE proposals compatible with project requirements. Ultimately, client

gets a project with latest technology while contractor gains cost and time benefits. Contractors

can also use his subsidiary products in a project with prior approval of consultant.

Some respondents mentioned about the management system is impacting the performance. As

noted more management, control, rules and regulations will not increase the efficiency, quality

and production. To increase efficiency, quality and production, the entire system has to be

changed. It is the responsibility of the client and consultants to change the system because they

are the determiners of current system. Clients and consultants are reluctant to change the system,

due to fear of losing control over contractors and.

Risk is another key factor influencing VE. When a contractor makes a VE proposal that

contractor has to bear the risk. Non-transparency, more bureaucratic, lack of accountability,

more documentation and number of decision makers on client's side cause inefficiency. In this

context, government, clients and consultants have to;

Minimise client’s decision making, management, direction and control.

Identify the contractor as the expert and not the client's representative.

Uses a contractor proposed contract as a risk management tool instead of a control

mechanism.

Increase transparency which in turn will increase accountability

Encourage quality assurance instead of quality control

Minimise deviations in project cost and project duration

Identify the client's intent, but allow the contractor to determine the final deliverable

Change ideas from reactive, price based to proactive and value based

10

Lower cost and increase value and quality, efficiently by minimising transactions and

alignment of resources

Utilises expertise instead of management, direction and control to minimise risk

Conversion of a ‘win lose’ environment to a ‘win-win’ environment

Experienced professionals stated that it is difficult to change the environment of construction

industry.

For an example, a client with a construction idea having strict restrictions on time, cost and

quality will assist design firm to translate his expectation into a constructed project. The design

firm realises that if they disagree with the client’s perception of initial conditions (cost, time and

expected construction quality) the firm will not be selected. Thus, the firm designs the project

without informing the client of any misalignment or over expectations. During the design

process, client makes alterations and design team is forced to make further decisions. After the

design is completed the firm advices the client to select a contractor through tendering. Finally,

the designer attempts to manage, control and direct the contractor to make client’s expectations a

reality. In this context, applying VE into that project is useless with clients and consultants who

try to dictate. Thus, most contractors attempt to use more technical personnel to increase

management and control. However, experienced professionals clearly stated that this will never

increase the contractor’s performance.

Experienced professionals with overseas exposure mentioned that most developing countries

(Eg. Sri Lanka, India, Bangladesh, Malaysia) are faced with the problem of contractors’ low

performances. Nihas et al (1992) highlighted a research conducted in India using Construction

Industry Structure Model (CISM) which move from inefficient price based environment to

efficient best value environment. In the Netherlands also a research team has conducted a similar

research using Performance Information Procurement System (PIPS) and achieved good results.

According to Kashiwagi and Kashiwagi (2011), PIPS can increase value and quality and

minimise delivery cost and time. Perera et al (2011) stated that Northern Ireland has made good

use of VM process but lack of formality in execution effects performance and efficiency of a

country.

Accordingly, findings revealed that VE proposals must be executed with broader understanding

of project requirements and viewpoints of client, consultant and contractor. VE proposals have to

fit with the needs of the project and its’ stakeholders. Further, it is influenced by external factors

such as political, government rules and regulations, economical and environmental. According to

11

respondents, stakeholders are required to accept, avoid, share or transfer details of factors to have

better outputs through VE applications.

4.2 FRAMEWORK FOR RECOMMENDATIONS TO STANDARDISE VE APPLICATIONS

Figure 2 presents recommendations to construction organisations and national construction

regulatory bodies to standardise VE practice in Sri Lankan construction industry.

Recommendations which are suitable for construction organisations and national level

construction regulatory bodies are presented in three main levels as project level, organisational

level and national level. The framework provides support for professionals to measure value of a

project and apply VE techniques in various forms to achieve value where ordinary procedures

cannot meet. Thus, it can lead to increased application of VE techniques in construction projects.

12

Figure 2: Framework for recommendations

13

Outdated standards and specifications, over and inaccurate designs (Eg. concrete and

reinforcement), inadequate information (mechanical and electrical), failures of VE proposals due

to concealing of real impacts, unavailability of skilled labour, plant and equipment were

identified as project level barriers. Economical status (Eg. high price fluctuation), social culture,

political influence and local standards were identified as barriers at national level.

Recommendations to construction organisations

Stakeholders look for profit through projects and they will not perform if there are no incentives.

There must be some incentive system to encourage consultants and contractors to propose VE

techniques in projects. Most respondents stated that consultants and contractors are bound by

contract to the client and due to such there are many cost, time, quality and responsibility

constraints in projects. Reduction of those constraints will comfort consultants and contractors to

propose more flexible VE proposals.

Providing more opportunities to site staff to share their ideas through meetings, workshops and

discussions will lead to development of better VE applications and reducing contactor’s

responsibility for design will encourage doing more VE proposals at project level.

Establishment of proper procedures with adequate power and encouraging alternative proposals

at pre-construction stage will be more competitive and beneficial to a client at organisational

level. Ultimately this will increase competitive VE proposals reducing defective proposals and

contractors also will get a fair chance and more competitive advantage among other contractors.

Media is a powerful source which can create awareness through programmes and discussions

(Eg: television, newspaper and radio) about VE techniques and its benefits and further through

dissemination of real data on benefits gained by stakeholders. In addition, promote green

building certificates to gain for projects which apply VE techniques which eventually reduce

energy consumption, wastage and increase ease of maintenance. Along with that introduction of

point system or award system to select the best VE proposals which eventually push construction

companies to do more and more VE in their projects.

According to research findings minimum involvement of client and his representatives will allow

more efficiency and performance in the project. Using minimum standards, using quality

assurance instead of quality control, minimise transactions (direction, meetings, management,

negotiations, inspection and direction) can reduce the pressure of contractor resulting more

performance. According to Kashiwagi et al (2009), when the value environment process was

separated from construction industry and run on $1.5B of services at Arizona State University

14

and the research team saved over $100M as efficiency. It is 6.67% saving to the construction

industry and to the country.

Recommendations to national construction regulatory bodies

National construction regulatory bodies are the governing party in Sri Lanka who have authority

to regulate VE techniques by law. Respondents gave contradictory suggestions about regulating

VE technique. Most respondents stated that it is better to have such kind of law; otherwise

stakeholders will not use VE techniques in projects, specially by government. However, most

experts stated that it will not be possible to regulate VE directly in construction, but regulatory

bodies can regulate other things such as energy efficiency, wastage reduction and green building

concept which need VE techniques to meet those goals.

Government projects need to be more transparent than private sector as it involves public money.

However, government projects are influenced by factors such as rigid rules and regulations, audit

queries and political influences. Thus, procedures need to reduce rigidity and have more

flexibility to practice VE applications. In parallel, government must regulate VE techniques by

law to succeed in procedures. As an example, request for submission of a VE report to get

permission for design prior to actual construction for selected projects. Along with that,

awareness and knowledge on VE techniques is necessary for regulatory bodies to be successful

in said endeavour.

Thus, regulatory bodies are required to take necessary actions to satisfy stakeholder interest in

VE techniques through incorporation of relevant clauses in Standard Conditions of Contracts to

eventually reduce country’s burden and ensure protection of national interests.

According to Kashiwagi and Kashiwagi (2011), Netherland government is politically involved to

increase value in the construction projects by issuing a political Action Agenda in November

2003, based on five main objectives as follows;

Restoring trust between the government and the sector

Developing effective markets and a properly functioning sector

Enhancing professionalism in procurement

Instilling high standards in the supply chain

Less, but more effective, regulation

These objectives minimised the unnecessary involvement of clients and client’s representatives

and thereafter Netherland gradually achieved high efficiency and high performance. This

scenario is possible in any country with the willingness of the government of that country. Perera

15

et al (2011) stated that there is a skill gap in VE, resulting limited usage of VE in projects.

Academic institutions and professional bodies have to take action for greater awareness and

training to the construction industry authorities and stakeholders on VE process.

4.3 DECISION MAKING FORMULA FOR VE APPLICATION

Reduction of construction cost will affect the profit margin of a contractor. Both consultant and

contractor need to be aware on VE technique and its profitability. To ease this process, a formula

as given below was developed.

Original construction cost of the item = A

Actual overhead and profit percentage = b

Original profit of the Contractor = Ab

Revised construction cost of the item = C

Overhead and profit percentage given by the = d

consultant

Revised profit of the contractor = Cd

According to general practice in the industry, the formula should be;

Contractor’s portion due to VE technique = (A+Ab-C-Cd)+ Cd

2

= (A+Ab-C+Cd)

2

But for contractor to get a profit

contractor’s portion due to VE technique > Original profit of the contractor

(A+Ab-C+Cd) > Ab

2

A+Ab-C+Cd > 2Ab

C (d-1) > A (b-1)

C < A (1-b) (1-d)

16

Above formula validated by applying actual figures of case A is as follows.

Original construction cost of the item = $.396,825.40 (A)

Actual overhead and profit percentage = 34% (b)

Overhead and profit percentage given by the consultant = 10% (d)

Revised construction cost of the item = $.158,730.16 (C)

C < A (1-b)

(1-d)

C < 396,825.40 (1-34%)

(1-10%)

C < 396,825.40 (0.66)

(0.9)

C < 396,825.40 x .0.73

C < 289,682.54

To obtain a real profit to a stakeholder, revised construction cost of item should be lower than

the answer(C). In above calculation, C = $ 158, 730. 16, and it is lower than the answer

$.289,682.54. Therefore, this VE proposal is beneficial to stakeholders.

The formula will be useful to both contractors and consultants. This formula is to determine a

margin between contractor’s portion due to VE technique and original profit of the contractor.

As actual figures satisfy above formula, it is proposed to adopt such VE proposals. Professionals

can easily calculate and figure out the feasibility of a VE proposal, as per above.

5. CONCLUSIONS

The formula is based on research findings to facilitate professionals to understand real VE

practices in the construction industry. Further, the framework provides VE techniques to apply in

various forms in achieving value where ordinary procedures cannot meet. The formula is simply

17

trying to determine a margin between contractor’s portion due to VE techniques and original

profit of contractor. Professionals can easily calculate and figure out feasibility of a VE proposal.

Findings revealed that the main reason for less performance and inefficiency is unawareness of

VE techniques and processes. Other researchers also conveyed the same conclusion that VE

technology has to reach every professional in the construction industry. Government of a country

has a major role in establishing more favourable grounds for VE. Recommendations to construct

organisations and national level construction regulatory bodies suggest general requirements and

improvements to construction industry. This study can be further extended to civil construction

projects as well as possibilities of integrating VE to new trends in construction, such as Building

Information Modelling.

REFERENCES

Abidin, N.Z., and Pasquire, C.L., 2007. Revolutionize value management: A mode towards

sustainability. International Journal of Project Management, 25(3), 275-282.

doi:10.1016/j.ijproman.2006.10.005

Alhazmi, T., and McCaffer, R., 2000. Project procurement system selection model. Journal of

Construction Engineering and Management, 126(3), 176-184. doi:10.1061/(ASCE)0733-

9364(2000)126:3(176)

Bertelsen, S., and Emmitt, S., 2005. The client as a complex system. In: Proceedings of the 13th

International Group for Lean Construction Conference: Proceedings International Group on

Lean Construction. 73-83. Available from:

https://www.researchgate.net/profile/Sven_Bertelsen/publication/236841941_THE_CLIENT_A

S_A_COMPLEX_SYSTEM/links/00463519510067d805000000.pdf [Accessed 15 February

2016].

Bowman, C., and Ambrosini, V., 2010. How value is created, captured and destroyed. European

Business Review, 22(5), 479-495. doi:10.1108/09555341011068903

Chan, A.P.C., Yung, K.H.E., Lam, P.T.I., Tam, C.M., and Cheung, S.O., 2001. Application of

Delhi method in selection of procurement systems for construction projects. Construction

Management and Economics, 19(3), 699-718. doi:10.1080/01446190110066128

Cheah, C.Y., and Ting, S.K., 2005. Appraisal of value engineering in construction in Southeast

Asia. International Journal of Project Management, 23(2), 151-158.

doi:10.1016/j.ijproman.2004.07.008

18

Chen, W. T., Chang, P. Y., and Huang, Y. H., 2010. Assessing the overall performance of value

engineering workshops for construction projects. International Journal of Project

Management, 28(5), 514-527. doi:10.1016/j.ijproman.2009.08.005

Dell'Isola, A., 1997. Value engineering. 1st ed. Kingston, Mass: R.S. Means Co.

Fan, S., and Shen, Q., 2011. The effect of using group decision support systems in value

management studies: An experimental study in Hong Kong. International Journal of Project

Management, 29(1), 13-25. doi:10.1016/j.ijproman.2010.01.008

Fong, P.S.W., and Shen, Q., 2000. Is the Hong Kong construction industry ready for value

management?. International Journal of Project Management, 18(5), 317-326. Available from:

http://ac.els-cdn.com/S0263786399000289/1-s2.0-S0263786399000289-

main.pdf?_tid=77300e04-e0b7-11e3-b292-

00000aab0f6b&acdnat=1400656613_e9947cf335a5f61c 5e549abee907331c [Accessed 31 July

2015].

Fong, P. S. W., Shen, Q., and Cheng, E. W., 2001. A framework for benchmarking the value

management process. Benchmarking: An International Journal, 8(4), 306-316.

doi:10.1108/14635770110403800

Gudem, M., Steinert, M., Welo, T., and Leifer, L., 2013. Redefining customer value in lean

product development design projects. Journal of Engineering, Design and Technology, 11(1),

71-89. doi:10.1108/17260531311309143

Hamilton, A., 2002. Considering value during early project development: A product case

study. International Journal of Project Management, 20(2), 131-136. doi:10.1016/S0263-

7863(00)00052-1

Jaapar, A., Maznan, N. A., and Zawawi, M., 2012. Implementation of value management in

public projects. Procedia-Social and Behavioral Sciences, 68, 77-86.

doi:10.1016/j.sbspro.2012.12.208

Kashiwagi, D. and Kashiwagi, J., 2011. Case study: performance information procurement

system (pips) in the Netherlands. Malaysian Construction Research Journal, 8(1). Available

from: http://pbsrg.com/app/wp-content/uploads/publications/papers-intro/Case-Study-

Performance-Information-Procurement-System-PIPS-in-the-Netherlands-02-2011.pdf [Accessed

10 February 2016].

Kashiwagi, D., 2011. Case study: Best value procurement/performance information procurement

system development. Journal for the Advancement of Performance Information & Value, 3(1).

Available from: http://pbsrg.com/app/wp-content/uploads/publications/papers-intro/Case-Study-

19

Best-Value-Procurement-Performance-Information-Procurement-System-Development.pdf

[Accessed 03 February 2016].

Kashiwagi, D., Kashiwagi, J. and Savicky, J., 2009. Industry structure: misunderstood by

industry and researchers. In 2nd Construction Industry Research Achievement International

Conference, Kuala Lumpur, Malaysia, CD-Day, 1(1), 3-5. Available from:

https://www.researchgate.net/profile/Dean_Kashiwagi/publication/267942951_Industry_Structur

e_Misunderstood_by_Industry_and_Researchers/links/55cb747a08aeca747d6c1a9e.pdf

[Accessed 15 February 2016].

Kelly, J., Male, S., and Graham, D., 2004. Value management of construction project. Oxford:

Blackwell Publishing.

Kliniotou, M., 2004. Identifying, measuring and monitoring value during project

development. European Journal of Engineering Education, 29(3), 367-376.

doi:10.1080/03043790310001658613

Kosala, R.G., and Karunasena, G., 2015. Value Engineering practices and its impact to

construction industry. In: Proceeding of The 4th World Construction Symposium 2015:

Sustainable Development in the Built Environment: Green Growth and Innovative Directions,

538-546. Available from: http://dl.lib.mrt.ac.lk/handle/123/11268 [Accessed 10 September 2015]

Leung, M.Y., and Liu, A.M., 2003. Analysis of value and project goal specificity in value

management. Construction Management and Economics, 21(1), 11-19.

doi:10.1080/0144619032000065081

Leung, M.Y., Ng, S.T., and Cheung, S.O., 2002. Improving satisfaction through conflict

stimulation and resolution in value management in construction projects. Journal of

Management in Engineering, 18(2), 68-75. doi:10.1061/(ASCE)0742-

597X(2002)18:2(68)

Lozon, J., and Jergeas, G., 2008. The use and impact of value improving practices and best

practices. Cost Engineering, 50(6), 26-32. Avalilable from:

http://cat.inist.fr/?aModele=afficheN&cpsidt=20476771 [Accessed 12 September 2015].

Luu, D.T., Ng, S.T., and Chen, S.E., 2003. Parameters governing the selection of procurement

system–an empirical survey. Engineering, Construction and Architectural Management, 10(3),

209-218. doi:10.1108/09699980310478458

Male, S., Kelly, J., Fernie, S., Gronqvist, M., and Bowles, G., 1998. The value management

benchmark: Research results of an international benchmarking study. London: Thomas Telford.

20

Male, S., Kelly, J., Gronqvist, M., and Graham, D., 2007. Managing value as a management

style for projects. International Journal of Project Management, 25(2), 107-114.

doi:10.1016/j.ijproman.2006.09.001

Miles, L.D., 1972. Techniques of value analysis and engineering. New York: Mcgraw-Hill.

National Research Council, 2009. Advancing the competitiveness and efficiency of the U.S.

construction industry. Washington, DC: The National Academies Press. Available from:

http://modular.org/marketing/documents/NRC_USConstructionIndustry_Report.pdf [Accessed

21 July 2015].

Nihas, S., Barlish, K., Kashiwagi, J. and Kashiwagi, D., 2013. An analysis of the construction

industry structure in India. Journal for the Advancement of Performance Information & Value,

5(2). Available from: http://cibw117.com/journal/index.php/performance-info-and-

value/article/view/132 [Accessed 07 February 2016].

Norton, B.R., and McElligott, W.C., 1995. Value management in construction: A practical

guide. New York: McMillan.

Othman, A.A.E., 2008. Incorporating value and risk management concepts in developing low

cost housing projects. Emirates Journal for Engineering Research, 13(1), 45-52. Available from:

http://cpas-egypt.com/pdf/Ayman_Othman/R/002.pdf [Accessed 03 September 2015].

Parker, D.E., 2001. Determining building worth. Washington, D.C.: Donald E. Parker.

Perera, S., Hayles, C.S. and Kerlin, S., 2011. An analysis of value management in practice: the

case of Northern Ireland's construction industry. Journal of Financial Management of Property

and Construction, 16(2), 94-110. doi:10.1108/13664381111153097

Phillips, S., Martin, J., Dainty, A. and Price, A., 2007. Uncertainty in best value decision

making. Journal of Financial Management of Property and Construction, 12(2), 63-72.

doi:10.1108/13664380780001094

Potts, K., 2008. Construction cost management. 1st ed. London: Taylor & Francis.

Rameezdeen, R., and De Silva, S., 2002. Trends in construction procurement systems in Sri

Lanka. Built Environment Sri Lanka, 2(2). 2-9. Available from: http://dl.nsf.ac.lk/handle/1/8303

[Accessed 15 August 2015].

Ratnasabapathy, S., and Rameezdeen, R., 2007. A decision support system for the selection of

best procurement system in construction. Built Environment Sri Lanka, 7(2). 43-53.

doi:10.4038/besl.v7i2.1943

21

Salvatierra-Garrido, J. and Pasquire, C., 2011. Value theory in lean construction. Journal of

financial management of property and construction, 16(1), 8-18.

doi.10.1108/13664381111116043

SAVE International., 2006. Value methodology standards and body of knowledge. USA: The

Value Society.

Shen, Q., and Liu, G., 2004. Applications of value management in the construction industry in

China. Engineering, Construction and Architectural Management, 11(1), 9-19.

doi:10.1108/09699980410512629

Stenstrom, C., Parida, A., Kumar, U., and Galar, D., 2013. Performance indicators and

terminology for value driven maintenance. Quality in Maintenance Engineering, 19(3), 222-232.

doi:10.1108/JQME-05-2013-0024

Thiry, M., 1997. A framework for value management practice. USA: Project Management

Institute.

Thiry, M., 2001. Sensemaking in value management practice. International Journal of Project

Management, 19(2), 71-77. doi:10.1016/S0263-7863(00)00023-5

Vorakulpipat, C., Rezgui, Y., and Hopfe, C. J., 2010. Value creating construction virtual teams:

A case study in the construction sector. Automation in Construction, 19(2), 142-147.

doi:10.1016/j.autcon.2009.11.016

Wijewardana, C., Jayasena, H.S., and Ranadewa, K.A.T.O., 2013. Impact of government policies

and regulations when adopting alternative procurement methods. In: Proceeding of The Second

World Construction Symposium 2013: Socio-Economic Sustainability in Construction, 253-260.

Available from: http://www.suranga.net/publications/2013_gov_policy_proc.pdf [Accessed 17

July 2015].

Zar, F.I.M., Razaee, Z.S., and Karbasian, M., 2011. A fuzzy case based reasoning approach to

value engineering. Expert Systems with Applications, 38(8), 9334-9339.

doi:10.1016/j.eswa.2011.01.124

Zhang, X., Mao, X., and AbouRizk, S.M., 2009. Developing a knowledge management system

for improved value engineering practices in the construction industry. Automation in

Construction, 18(6), 777-789. doi:10.1016/j.autcon.2009.03.004