4/20/2017
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INTRODUCTION
TO VALUE
MANAGEMENT
PROGRAMME
The Concept of VM
Functional Analysis
VM Process
VM Approaches
Australian Standards & Revision
3 LEARNING OBJECTIVES
Outline of the concept of value and compare it
with quality, other parameters
Understand terminology
Understand the historical development
The value creation process
Understanding the implications on design4/20/2017
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4 BACKGROUND
GEC 1940 –Lawrence Miles Electrical Engineer for
purchasing
Evolved in the USA as a product optimisation method for
the manufacturing industry ‐2nd World War
Lead by Scarcity of resources
More for Less
Used in the construction industry –1963
Essential technique by 1972 –USA
Gathered momentum in the 80’s –UK
Introduced in late 70’s –Australia
IVE in 1977
Australian Standard for Value management 2007 was
released: AS4183:2007
$POTPMJEBUFE#-'0-JCFSBUPS
ChuichiNagumo–Japanese 1st
Air Fleet, 7 December 1941
At Willow Run Factory, 1 Bomber
completed every 56 minutes4/20/2017
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GE turbo-superchargers (from 50 per
week to 1000 per week), capacitors,
resistors…for expanding production of
B-29s
WORLD WIDEUSEOF VM
USA, Japan,
European
Industry
UK/Australian
Industry
VM Clients
•Cost Engineers/
•Cost Control
•Resource –based
•Quantity Surveyors
•Cost Planning/Historical
cost data
•AS 4183‐2007
•Glaxo/ BOC / Rank Xerox
•Shell / London Underground
•ICI / BAA / IBM
•BNFL / Whitbread / Railtrack
VM PROFESSIONAL BODIES
Society of American
Value Engineers (SAVE)
Institute of Value
Management Australia (IVMA)
Australian Institute of Building (AIB)
Royal Institution of Chartered Surveyors (RICS)
Australian Institute of Quantity Surveyors
(AIQS)4/20/2017
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THE CONCEPTOF VALUE
An amount, as of goods,
services, or money, considered
to be a fair and suitable
equivalent for something else; a
fair price or return
Worth in usefulness or
importance to the possessor;
utility or merit
A subjective concept, more
personal
Value is made up of: scarcity,
utility, cost of production, worth
in use, exchange, marginal utility
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11 MEANINGOF VALUE
Depends on the perception of individuals
Consumer, Manufacturer or Designer
Perceived usefulness, benefits and importance
To obtain required level of quality for a least cost
or the highest level of quality for a given cost
Doing more for less
Achieving optimum solution
Value = Functional Performance
Cost of Resources
12 WHATYOUSEEISWHATYOUWANT !!!4/20/2017
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VM TERMINOLOGY
Value Planning
•Briefing
•Sketch design
•Overall design
•Element
Value Engineering
•Detail Design
•Production stages
•Building Element
Value Analysis
•Post Production
•Use
•Reflection
•For future projects
VM ANDTHE AIA PHASES
Value Management
Value
Planning
Schematic
Phase
Value Engineering
Design
Development
Construction
Document
Bid or
Negotiation
Construction
Value
Analysis
Use &
Aftercare
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POTENTIALFOR VALUE
MANAGEMENT
BE1165
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Schematic
Design
Development
Construction
Documentation
Bib or
Negotiation
Construction Use & Aftercare
1 234 5 6
Cost
Cost of making changes
Value enhancement potential
VALUEFORTHECLIENT
Value is the benefit to the client
•Is the project worth doing
•Quantified in business terms
Value management
•Ensuring that the right choices are made
about obtaining the optimum balance of
benefit in relation to cost and risk
•Provides a structured approach in
achieving whole life value 4/20/2017 FOOTER TEXT
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AIMOF VM
Identify unnecessary expenditure
Challenge asumptions
Generate alternative solutions
Promote innovation
Optimise resources
Save resources (time, money, energy …)
Simplify methods and procedures
Eliminate redundant items
Meeting stakeholder requirements4/20/2017
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OBJECTOF VM
Time
Cost Quality
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Whole life cycle
Value
Value
20 DEFINING VM
Value management is a philosophy
concerned with providing the product
desired by a customer at the required quality
and the optimum cost.
First definition,
an organised approach to providing the
necessary functions at the lowest cost
All products contain unnecessary cost
21 DEFINING VM
Second definition
an organised approach to the identification and
elimination of unnecessary cost where unnecessary
cost is that which provides neither use, life, quality,
appearance, nor customer features
(Kelly & Poynter‐Brown, 1991)
At least 10% cost saving achieved through the
application of VM –removing unnecessary costs
A structured and analytical process which follows a
prescribed Work Plan to achieve best value or,
where appropriate, best value for money (AS 4183)4/20/2017
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WHATAREUNNECESSARY
COSTS?
•Utility of the components, elements, space
•Duplication of spaces
Use
•Contribution to the life of product
•Anti‐corrosive layer
Life
•Contribution to improving quality, subjective
•Additional layer of insulation, in the loft
Quality
•Form follows function with unique spatial
configurations
Appearance
•Corporate image
•Glossy effect: shop fronts
Customer
Features
? $12
? $80
? $10
? $8
SOURCESOF UNNECESSARY
COSTS
Unnecessary Component Costs
UnnecessaryMaterial Costs
Unnecessary ‘Buildability’ Costs
Unnecessary Life Cycle Costs
Unnecessary opportunity costs4/20/2017
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FORMFOLLOWSTHE
FUNCTION?
CORPORATE IMAGE
UNNECESSARYCOMPONENT?
Cork Remover; (£64.00)
B&W TV
Colour TV
100Hz TV
Digital LCD
Plasma HD
3D HD TV
SUHD LED
OLED4/20/2017
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UNNECESSARYMATERIAL?
UNNECESSARYMATERIAL?
BUILDABILITY? MODULARITY? 304/20/2017
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Titanic
WLC COMPATIBILITY
WLC
Construction
Space Frames
Portal Frames
Columns and beams
OPPORTUNITY COSTS
BENEFITSOF VM
A better understanding of the business needs, including the flexibility
required to meet future needs
Simple, clear definition of specific stakeholder needs
Consideration of all options, alternatives and innovative ideas
Achievement of optimum value for money while satisfying the range
of user requirements
Prevention of unnecessary expenditure through reducing waste and
inefficiency
Improved teamworking with joint ownership of solutions
334/20/2017
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USESOF VM
Establishing what value means to the client in terms of business benefits and priorities
Identifying and agreeing business needs
Identifying and evaluating options (including private finance initiative options) for meeting
business needs (a construction project may be one such option)
Selecting and agreeing the best option to meet business needs (that is, confirming whether
or not a project is required)
Defining clearly and agreeing the project objectives (through stakeholder buy‐in)
Selecting and agreeing the best project option, drawing on the expertise of independent
client advisers
Setting and weighting the selection and award criteria for the appointment of the
integrated supply team
Evaluating the integrated supply teams’ bids against the selection and award evaluation
criteria
Refining the design to maximise value and eliminate waste and those aspects not directly
related to meeting the project objectives
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VALUE VS COST
VM is not cost cutting
•By product
VM focused on improving whole‐life value
•Increase in capital costs may still reduce whole‐life costs
VM aims at achieving a optimum balance in whole life cost, time and quality
Structured auditable and accountable process
•Multidisciplinary
•Creative
•Issues of health and safety, sustainability, design quality, buildability, operation and
maintenance and disposal
Cutting cost without proper analysis may reduce value
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ADDITIONAL READING
Norton BR & McElligottWC (1995) Value
Management in Construction: A Practical Guide,
Macmillan
Chapters in VM in the following text:
Ashworth A and Perera S (2010 ‐2015) Cost Studies
Of Buildings, Pearson, Prentice Hall
Ferry DJ, Brandon PS & JD Ferry (1999) Cost
Planning of Buildings (7th ed) Blackwell Science
Ashworth, A & Hogg, K (2002‐11) Will’s Practice &
Procedure for Quantity Surveyors, Blackwell Science
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