This document discusses the principles and techniques of value management. It defines value management as a process that aims to identify the functional requirements of a project to achieve optimal function at minimum cost. The document outlines some key flaws with traditional approaches to problem definition, solution generation, and business case development. It argues that value management can help address these flaws by facilitating a team-based approach that properly defines problems, considers alternative solutions, and uses objective criteria to measure value.

1. Why ‘Value Management’
might just reveal what
managing projects is all
about!
PM in Practice Oct 2014
JOHN HEATHCOTE & ADAM ROBERT – OCT 2014

2. INTRODUCTION
Adam Roberts - Project Manager London Underground
(MAPM MSc) Full member of the APM
Committee member of the APM VM SiG
Final year of MSc. Strategic Project Management
John Heathcote – Senior Lecturer Leeds Beckett University
(MBA MAPM
HEA Senior Fellow) Full member of the APM
Chairman of the APM VM SiG

3. ANALYSING
• Combines functions with Value based techniques
• Function Analysis
• Function Cost Analysis
• Understanding of Requirements
- Source: APM BoK 6th Edition

4. WHAT IS VALUE?
V (Value) ∝ B (Benefits + Requirements) / £ (Cost)
– OGC (2010)
“Value increases when the satisfaction of the
customers needs augments and the expenditure of
resource diminishes”
– Source: Robert Tassinari (1995)

5. BALANCE
• Value is a balance of:
• Risk
• Resources
• Quality
• Detailed requirements ∝ Objective / Subjective
process
“Truly successful Project Managers understand that
Projects exist only to promote and Benefit the
organisation at large”
- Source: John C Goodpasture (Managing projects for Value)

6. DEFINITION OF VALUE?
“All cost is for function”
- Lawrence D Miles (1904 – 1985)
“A measure of how well an organisation, project,
product, or service, satisfies stakeholders’
objectives in relation to the resources consumed”
- Source: EN1325 - 1

7. WHAT IS VALUE MANAGEMENT?
“Value Management is the name given to a process
in which the functional benefits of a project are
made explicit and appraised consistent with a
Value system determined by the client”
– Source: Kelly. J et al (2004)
Value Management of Construction Projects

8. DEFINITION OF VM- (EN 12 973)
“Value Management is a style of Management,
particularly dedicated to motivate people, develop
skills and promote synergies and innovation, with
the aim of maximising the overall performance of
an organisation”
- Source: (EN12973)

9. DEFINITION OF VM - IVM
“The Institute of Value Management define Value
Management as a structured team based
approach to identify functional requirements of
Projects and / or contracts to achieve Optimum
Function for Minimum Cost”
- Source: Institute for Value Management website

10. What is Value Management (VM)?
VM might be described as: “as a process or methodology
which has been developed and adapted for the better
selection and design of better value outcomes for
projects.” source: Author
“It might have particular high value to Project management in
general if it becomes a way of thinking about projects, a
‘value’ perspective rather than a ‘transactional’ perspective
of projects” source: Author
Originally (Like many PM techniques, aimed at
manufacturing .. It has latterly been applied, (by ICE,
who provided a structured guidance about how it
might be applied to projects) to projects. ....
10

11. Value Engineering’s roots at General Electric
Value engineering began at General Electric Co. duringWorld
War II.
Because of the war, there were shortages of skilled labour, raw
materials, and component parts. Lawrence Miles, Jerry
Leftow, and Harry Erlicher at G.E. looked for acceptable
substitutes.
They noticed that these substitutions often reduced costs,
improved product, or both. What started out as an accident of
necessity was turned into a systematic process.
They called their technique "value analysis".
Source: http://en.wikipedia.org/wiki/Value_engineering
11

12. What is Value?
So if this is a process about arriving at more/optimum ‘value’, first we
should decide what value is.....
The APM VM SiG summarises this debate by reducing ‘value’ to:
V = Benefits/Cost
Previous APM BoKs have described value as.....
V = Stakeholder satisfaction/cost of resources
and
Value = Benefits &Key Stakeholder requirements/ resources used
We have a preference for the V = Benefits/£ as later we will describe
how stakeholder interests, whilst important can represent a
distraction, in some instances, from a value focus.
12

13. APM BoK 6th Ed
In this 2012 BoK edition, value management is seen as a sub-set
of ‘requirements planning’.
This is because the notion of value is sometimes related to the
idea of accurately specifying the functional requirements of
a project.
And greater functionality / cost is increased value.
So this is a similar viewpoint... And ..
A critical difference that the VM SiG would like to point out, is
this keeps projects within a “transactional” perspective,
and the SiG believe project management might be better
serves by moving to a “value” perspective.
13

14. So VM tends to concern itself with the PM
processes that are the most likely to have a
significant influence on the project’s delivery of
value..
They are:
Problem definition (Brief)
Solution generation/selection (Definition)
Business/investment case
A VM-type process has the potential to make a
disproportional positive influence on the project’s value
proposition, is because it will likely influence these three
aspects of the project positively.
14

15. Problem definition/Brief
Several writers on managing projects,
mention the idea that a project should solve a problem. (Kerzner; OU; Gardiner; Noguiera
2010)
Nogueira (2010) placed great emphasis on this aspect of the project. Projects should
be about solving problems*, and those problems should be clearly and carefully
defined... Before the solution is arrived at.
This idea of projects as solving carefully defined problems currently (2013) remains a
generally overlooked aspect.
It is critical to the VM process, & to projects in general that the ‘problem’ is defined.
This defining of the problem, might result in:
the project being abandoned, because, on analysis, there’s not really an issue to be
addressed;
or that the the original proposal for the project is radically re-defined.
Certainly ‘problem definition’ should lead to deeper understanding of the
issue/problem that is being addressed.
This single aspect of project management is the one which, being at is it, at the start
of the project, has most potential impact on value..
Root cause analysis is an important feature of problem definition and one of the
techniques used to assist in defining the problem, as is the Ishikawa or fishbone
diagram.
* An opportunity is defined by Nogueira as also being a problem. 15

16. Contemporary flaws with
Problem definition/Brief 2
This problem part of the VM process works, because tragically so few projects
proceed without a clear problem start, beginning instead with an assumed
solution, or a preferred solution, coming out of a strategic planning
process, or based on too many assumptions. Or, commonly, simply
because a budget exists and something ought to be done.
Of course contractors simply carry out the specifications in the contract,
assuming the client knows what they want, although research at Leeds
Metropolitan University (Bleier & Heathcote 2009) demonstrates
contractors believe this is a significant problem that prevents them
assisting their clients in delivering more value.
Some project areas, (such as public health in the UK) have highly defined ‘problems’,
they are able to predict where general health problems are and so develop
responses to prevent issues developing, such as smoking cessation.
Modern policing is similar, ‘intelligent policing’ for instance allows the UK police force
to also target known problems and so use their resources more effectively.
Both areas have brought about rapid improvements in recent times (Ref)
16

17. Solution generation/selection
(Definition)
Once the problem has been defined an ‘optimal’ solution can be sought.
VM facilitators will deliberately separate the problem definition work in a
team VM workshop process to prevent the most common logic error (the
availability error), this might be best illustrated by explaining the VM SiG’s
‘first good idea error’.
The first good idea error, is made when the project team goes with the first
reasonable idea they come up with, rather than spending any time or any
deliberate process to seek a more optimum solution.
Edward DeBono (1971) highlighted this problem in organisational decision
making and coined the term ‘lateral thinking’ seeking to better equip
people to be more creative in their decision making by seeking other,
better alternatives, by:
- Creating more options, to choose from;
- Thinking beyond ‘tried & tested’ solutions or the typical solution (he called
this pattern breaking),
- Or, critically for project management scenarios, the solution that came
with the project brief!
17

18. Contemporary flaws with
Solution generation/selection (Definition) 2
This problem part of the VM process works, because tragically so few projects proceed
without any thought been given to what a better solution might be.
Several factors conspire to prevent even a scant search for another alternative:
- Suspending judgement is difficult in non-facilitated meetings, options are too readily
evaluated thereby curtailing the search for other solutions.
- A ‘good’ solution might seem obvious. So going with that is socially easy on the team
process. (And objecting is likely to be seen as too challenging in to the group’s
coherence).
- The project brief, once allocated to the PM is likely to be described by the anticipated
solution, i.e. “The Millenium Dome” ..that describes the project as a solution, but
determining the solution it is addressing is much harder. Reviewing and changing the
project as it is handed to the PM might be seen as a challenge to management decision
making. And so difficult to do in some organisational cultures.
- A tired & tested technical solution might be ‘known’ by the technical ‘experts’ in the
team, for instance Civil Engineers tend to think of Civil Engineering solutions, & IT
Engineers, IT ones, often to the same problems. Moving away from a known solution
presented by the technical expert is likely to be perceived as risky!
- Examining this further IT programmers frequently report the client fails to understand the problem
well enough to allow the solution to be designed, though all proceed from the assumption IT will be
the answer, usually an IT solution also requires a business process redesign too.
18

19. Business/investment case
To properly develop the carefully selected solution, it should be p[resented in
terms of ‘objective criteria’ Ury & Fisher (1999) suggested problems &
solutions should be presented using ‘objective criteria’, that’s to say
measurable criteria that allow the Business case to be measured,
monitored and evaluated later on, (See link with Benefits Realisation)
For instance measurable criteria might include:
– Anticipated increase in sales;
– New revenue;
– Increased performance;
– Reduced operational costs;
– Improved market share;
– Greater no.s treated, compared to pre-project.
What is should NOT be, are un-measurable claims, such as:
– To improve the reputation of the company/org;
– Because a stakeholder/manager will be ‘pleased’ with it;
– It meets a policy directive, (It might do, but demonstrate a measurable value
too!)
19

20. Contemporary flaws with
Business/Investment Case 2
Benefits & their costs have RISKS...
– Each business case should reveal the risk s associated with
the promised benefits, for instance:
• Each benefit should have a minimum & maximum expectation;
• Each cost associated with each benefit should also show how
reliable that estimate is.
Project business cases in recent times (Gray report;
Flyvberg) have demonstrated a remarkable capacity to
exaggerate their benefits, while underestimating risk.
A ‘Conspiracy of Optimism’ (Gray report 2009)
http://www.bipsolutions.com/docstore/ReviewAcquisitionGrayreport.pdf
20

21. The [facilitated] Team
Much of the VM process outlined in this shortened presentation
identifies critical parts of the early project lifecycle to illustrate the
thinking required to make VM be a positive influence on projects.
It is largely presented as better decision making, deciding on the
problem first before looking at solutions, thinking about other
alternative solutions and using objective measurable criteria to
present the ‘value case’.
To support that better decision making VM-type processes advise
using a team approach (so more information is available), a
workshop, and a facilitator who facilitates the rational decision
making process (and doesn’t get involved in the detail).
So VM-type processes tend to be focussed around team working,
workshops, lasting 1 or 2 days typically. (Often perceived as
expensive, but these are minimal costs compared to most VM
outcomes.)
21

22. The [facilitated] Team: The ‘Job Plan’
Here’s a simple outline of a team workshop
process:
1. Present the Information we have. (Info Phase);
2. Define the problem;
3. Generate options for solution;
4. Evaluate the options (using risk and objective criteria for
defining benefits);
5. Make a recommendation... Supported by a business case
22

23. When VM/VE is flawed?
In the VM SiG’s road show tours to APM UK branches repeating
themes reoccur from APM members:
As a process many people who have a good faciLove it or Hate it...
litated workshop experience become converts! However the
processes are (abused?) in some instances to simply reduce project
costs to fit within an assigned budget perhaps, in such cases value is
stripped out of the project faster than cost and leaves a sour taste
in the APM member.
A good deal of criticism is aimed at the cost cutting use of VE. While
reducing cost can add value, functionality or benefit should be
protected and the chief concern of the team.
Mentioned earlier where:
- Exaggerated business case benefits; Risk should accompany
estimates to demonstrate to decision makers the reality of the
situation.
- Benefits realisation processes will help with this, to ensure there’s
audit of the business case promises.
23

24. Concluding short guidance to PMs
If you only remember 3 things, about VM remember:
1. If there’s no (defined) problem there’s no project!
2. Don’t succumb to the 1st good idea error; have a
longer think, consult..
3. Make sure your business case has measurable
objective criteria, so you don’t fool yourself and
others!
24

25. Limitations of this presentation version
It’s Just an outline,
Tries to demonstrate the ‘thinking’ principles behind Value
Management.
To do so it leaves out (for later),
Much about the myriad of methodologies that might be utilised: VM, Value
Engineering; Value Analysis; Lean; Six Sigma; Waste Stream Mapping; etc.
& it leaves out:
details about the important ‘facilitator’ role;
How the VM process might be used apart from just at the start of
projects;
How VM ought to be thought of as an iterative process;
Methodologies to support better problem definition;
Methodologies associated with option generation, lateral thinking
& innovation.
25

26. VM SIG WHITE PAPER
• Value Management greatly Enhances Value for
Money
• Benefits should not be accepted at any price
• There is not always a link between TCQ and
benefits
• Value Management / Engineering techniques
creates Value early in the life of a project
- Source: APM VM SiG (Peter Langley)

27. WHAT VALUE MANAGEMENT IS NOT
Value Management / Engineering / Analysis is
definitely NOT a cheapening process!
Reliability and performance should never be
sacrificed just for the sake of cutting costs…

28. SUMMARY
1. If there is no defined Project, then there is no
Project
2. Don’t succumb to the 1st good idea error; have a
longer think, consult.
3. Make sure your Business Case has measurable
Objective Criteria, so you don’t fool yourself and
others!

29. APM Value Management Specific
Interest Group
Join
Or follow the SiG work & events
At: http://www.apm.org.uk/group/apm-value-management-
specific-interest-group

30. This presentation was delivered at an
APM event
To find out more about upcoming
events please visit our website
www.apm.org.uk/events