Contemporary Economic Modelling
VALUE MANAGEMENT 1
Lecture ObjectivesIntroduce Concept of ValueDefine value managementIdentify value management interventionsDiscuss key techniques and their
application
Introduction To ValueWhat is Value?
Value and COST Value and FUNCTION Value and BENEFITValue and TIME
“Adding Value”
Value – a compromise?
Concept of Value
Value =
Satisfaction of NeedsUse of Resources
EN12973 The concept of value relies on the relationship between the
satisfaction of many differing needs and the resources used in satisfying them.
A relationship not an equation
Source: Sweett Group
Obtaining Value COST VALUE = WORTH (worth = the lowest cost that enables
the required functions to be provided)• Maximum benefit at minimal cost
Value Management• Determining Client requirements – this
is not always as simple as it seems!
• Delivering those requirements without unnecessary cost
Value Management History & Definitions
• History Lawrence Miles, purchasing engineer
with GEC in WW2 Value analysis: an organised approach
to providing the necessary functions at the lowest cost
This is NOT cost cutting - quality is not reduced.
Value Management History & Definitions(2)
• Value analysis - an organised approach to the identification and elimination of unecessary cost.
• Unecessary cost - cost which provides neither USE, nor LIFE, nor QUALITY, nor APPEARANCE nor CUSTOMER BENEFIT(S)
Development of V(M!)• US Dept of Defense• UK – 1960s use in manufacturing• Formation of VE Assoc. in 1966 (IVM in 1972)• Common use throughout Europe• Growth in UK Construction (BAA, Whitbread,London
Underground)• Guidance Notes (e.g. BRE 1997; CIB 1997; HM Treasury)• British Standard BS EN 12973 2000 Value Management• Egan• Best Value
Value Management Interventions
Timing Issues dealt with Structure of VM Team The Barriers to VM
Timing
Source BS EN 12973:2000
Overall process
Processes
Value ManagementOPTIONS APPRAISAL
BUSINESS CASE
OUTLINE DESIGN
FINAL SKETCH PLAN
DETAIL DESIGN
1st REVIEW
2nd REVIEW
3rd REVIEW
CONCURRENT STUDIES
CONSTRUCTION
HANDOVER
CONTRACTORS CHANGEPROPOSALS
POST PROJECTEVALUATION
Value Management Interventions
Source: Standing, N (2001) Value Management Incentive Programme Telford
Issues dealt with(1)• Value Planning (Value Management)• VM1 – pre-brief/briefing
– Is a built solution required– Stakeholder requirements– Priorities
• VM2 – Outline proposals– Reviewing criteria– Selection of best value alternative
Issues dealt with(2)Value Engineering
Engineering the developing design to eliminate unecessary costWorkshop(s)Contractor’s Change ProposalsValue incentive clauses
Value Analysis Analysing value in finished product to inform
future decisions
Structure of VM TeamIndependent VM team
Early American ApproachAdvantages and dis-advantages
Using Project Team MembersDepends on nature of project and timing of intervention
Importance of Client top management support and appropriate representation on VM team
Source: Cyril Sweett & Ptnrs
No Time
Waste of Time Too
Expensive
Too Difficult
Too Complex
I Do It Anyway
Not Interested
Don’t Want Outsiders
The Barriers
Value Management Workshop Methodology
• Pre-study Phase• Study(Wokshop) Phase Alternative approaches The Job Plan
• Post Study Phase
Pre-study Phase• Briefing
– VM (understanding client’s requirements)
– Participant’s• Practical preparations
– Venue etc– Documentation
• Information pack/briefing document
Study(Wokshop) Phase• Alternative approaches
– Degree of structure may depend on project, participants (and their experience), time available
The Job Plan – Based on Lawrence Miles original approach
Value Management Methodology(2)
• The Job Plan Information Phase Creative Phase Evaluation Phase Development Phase Presentation Phase
Post Study Phase• Report –summary of decisions and
actions• Further development• Follow-up
TechniquesFunctional AnalysisFAST diagram (Charles Blytheway)• Functional
• Analysis
• System
• Technique
Fast Diagram (2)
Example of Fast Diagram
Scope Line
What is VM• Value Management
– A structured approach to defining what value means to a client in meeting a perceived need by establishing a clear concensus about the project objectives and how they can be achieved
• Value Engineering– A systematic approach to delivering the required
functions at lowest cost without detriment to quality, performance and reliability
Lecture ObjectivesIntroduce Concept of ValueDefine value managementIdentify value management interventionsDiscuss key techniques and their
application