Value Management concept @ 270218 presentation slides

COST CONTROL 2
VALUE MANAGEMENT
Team members: Jeremy Tsen I14005015
Ee Jun Huang I14004797
Seow Zhi Sheng I14005169
Lecturer: Ms Noorhidayah

PRESENTATION OUTLINE
1.0 Aim and Definition of VM
2.0 Terminologies Used in VM
3.0 Risk of VM in Construction
4.0 Cost Involved in VM
CONCLUSION

Definition
– VM is to examine and analyze alternative materials for the purpose of selecting the
one that provided same, better, or best function at the least cost.
Aim
– To unify the different views of values from various construction participants in order
to achieve the project’s goals using minimum resources.

(Cont’d)
– Objectives is to provide the best function at the possible overall cost, include:-
1. Management process;
2. Systematic approach;
3. Teamwork and multi-disciplinary principle;
4. Analysis of function technique;
5. Best value concept;
6. Stages of project or product;
7. Whole-life cost concept
8. Value for money principle; and
9. Issues relating to investment return

2.1 Value Methodology
– Refers to the process, principles and techniques adopted in the practice
of value management.
– It includes those practised at value planning, engineering, and analysis
phases.

(cont’d)
2.2 Value Planning
– Value management that is associated with achieving project value during the
planning stages of a project.
– In construction, this is associated with value at the early stage, namely,
conception, inception, feasibility, viability, and other planning-related activities
of the project.

(cont’d)
2.3 Value Control
– Managing value throughout all stages of a project where cost control is
practised.
– This indicates a direct link to cost control which is not the same as value
management, justifying the reason why the term is not common among
value management experts, analysts, or researchers.

(cont’d)
2.4 Value Analysis
– Associated with the post-construction or completion phase.
– Indicating that the practice is related to the value of completed project
– This is inclusive of the use and re-use stages of a project.
– Management is a general term inclusive of improvement and
assurance.
– It implying that ‘value improvement’ and ‘value assurance’ are
synonymous with value management.

(cont’d)
2.5 Value Engineering
– The closest term to ‘value management’ is ‘value engineering’.
– Study of value at the design, construction, and engineering stage of a
project.
– Explains all the concepts, principles, processes, and participants
required for each stage of the discipline in a project.

3.0 RISKS OF VM IN
CONSTRUCTION
• VM is done by combination of various tools, techniques, procedures and methods for the
purpose of planning, controlling and regulating people, events, procedure or practice.
• Some risk are inherent in the adopted tools which form part of the risks of the management
principles.

3.1 Sufficient time for the study
– One of the major risk
– Takes time to study
– Earlier approach, 40-h workshop (around one week time)
– Too much of time consume, difficult to be away from day-to-day activites
– New approach, introduced 3 days workshop
– However, time still need to be devoted in order to have meaningful and productive
VM exercise.
3.0 RISKS OF VM IN CONSTRUCTION (CONT’D)

3.2 Completeness of Cost Information
– Lack of full and necessary information of cost.
– Investment appraisal technique help to mitigate risk but various
investment appraisal is based on the probability of occurrence.
– Cost is a issue where it is difficult to predict inflation towards the price of
material and resources.

3.3 Related Functions of Components or Elements
– Components or elements of building can serve more than one function
– Difficult to determine their primary and secondary role
– For the most common example, window & wall
– Primary role (ventilation, aeration, natural lighting)
– Secondary role (sound insulation, water insulation)

3.4 Uniqueness of construction project
– Every project is different, despite for the similar one still there’s
something unique
– For example, column
– Project 1, act as main structure
– Project 2, for aesthetic purpose
– Value management team should be able to identify the function of
various elements bearing in mind the uniqueness of the project in
consideration

3.5 Quality of end product
– Predict the quality of end product with performing best quality at the
least possible cost
– Achieve through examine of current or past situations where the
product has been used.
– Three risk/ issue
– Availability of historical data and the required information of the
product
– Analysis of the difference in exposure to weather
– Relates to examining the conditions of the use of the products

3.6 Selection of Team members
– Major attribute is multi-disciplinary in that members of the team are
varied and unlikely to be drawn from the same area of practice or sector
of the economy
– Risk associated is the selection of the wrong people who may contribute
nothing or negatively to the success of the practice.
– It is difficult to select other members who were not part of the original
design team

3.7 Representation of Original Design Team
– For an effective VM exercise, existing design team members of the
project included as members of the team that can contribute positively
to the exercise.
– It becomes a risk if:
– The existing team members are unwilling to agree and accept changes
to the project that arise from the exercise,
– The numbers of existing team members is too large and cost of paying
for their service, so need to establish the criteria for the selection of
VM team members.

3.8 Choice of Facilitator
– VM team leader who possess:
– Leadership
– Team control
– Competence
– Attribute to conduct a VM exercise
– Characteristics:
– Knowledge, understanding and experience of a VM workshop
– Able to:
– Guide and control other team members in line with the principles and
practice of the discipline

3.9 Support for the Practice
– Major risk in the adoption of VM is the level of support from statutory
bodies or top management staff of an organisation

3.10 Timing of the Exercise
– Right stage/ timing of a project at which to implement VM, wrong timing will
cause risk
– For example,
– VM introduced BEFORE production of final drawings
– Insufficient information for the team to work with and make reasonable
suggestions and recoomendations
– VM introduced AFTER production of detail drawings
– VM will be produced late (delay)
– Cause amendments and alterations of the existing design which may be at extra
cost to the design team.

3.11 New concept for Stakeholders
– The conclusions and recommendations of value management exercise
can alter or change completely the existing proposals made by various
members of the design team.
– This may not be welcomed by some of the members, especially if they
perceive it as challenging their professional competence and capability

4.0 Cost Involved in VM
4.1 Cost of Facilitator
– A facilitator is an experienced value manager.
– Responsibilities of planning, controlling, and managing a value
management exercise and reporting the outcome to the clients.
– The cost may include a professional fee, transport costs, etc.
– The payment may depend on experience of the facilitator, the type and
nature of the project, the mode of engagement, as well as the size and
cost of the project.

4.0 Cost Involved in VM (cont’d)
4.2 Cost of other Participants
– These people may or may not be experienced in value management,
professionals, experienced in construction, and members of original
design team.
– The payment method should be decided and settled before the exercise.

4.3 Cost of Venue
– Venue is expected to be good enough for members of the team to be
able to perform their function without any form of hindrance.
– Depending on factors such as the type of client, the nature of project,
and the procedure of the workshop to be adopted, the cost of the venue
does not only include the cost of securing or renting the venue but also
that of siting the venue in the right environment

4.4 Administrative Cost
– It is necessary to allocate cost for administration purposes.
– These may include insurance, office supplies, wages and benefits of
accounting staff, wages and benefits of secretary(s), wages and benefits
of legal personnel, among others where applicable.

4.5 Information Gathering Cost
– The implies that the more detailed information is available about them.
– The better ability of the value management team to identify the best
alternative, using the principle of function and cost.
– Cost of collecting information regarding function, cost (initial, annual,
running, maintenance), lifespan, and the physical characteristics of
elements.

4.6 Indirect and Other Costs
– Costs that are not directly associated with the actual value
management exercise but are necessary in achieving the goals.
– Indirect cost may include:
– cost of buying equipment, actualise recommendations emanating
from the value management exercise.
– costs required changing the original design to accommodate
proposals from the exercise.
– cost of following up on the understanding and the
implementation of the recommendations.

CONCLUSION
• Identify the aim & objective clearly
• Understand the terms before conducting VM
• Analyse the risk in using the tools to conduct VM
• Understand what are the cost involve in VM
OUTCOME: Best function, lowest possible overall cost

Value Management concept @ 270218 presentation slides

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