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Value Management

Sr Thomas Wong
(MHKIS, RPS(QS), MHKIVM, List B VM Facilitator)
Deputy Director
Beria Consultants Ltd.

28 March 2017

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Objectives:
To introduce the background of Value
Management (VM)
To introduce the concept of VM
To describe the activities / procedures
involved in VM
To describe its application in construction
industry
To describe its benefits and disadvantages

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Think about ?

How can you increase your


value () in your
company ?

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Value, Function and Cost

Value (V) = Function (F) / Cost (C)

F Satisfaction achieved
V=
C Resources consumed

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Value, Function and Cost
F
V=
C
Value = Function / Cost
Value can be increased when :-
a b c
F F F
V= V= V=
C C C

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Definition
Well known definition : Value management is a

Structured and analytical process which seeks to


achieve value for money by providing all the necessary
functions at the lowest cost consistent with required
levels of quality and performance.

Australian / New Zealand Standard for Value


Management, AS/NZS 4183:1994

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Definition
Well known definition : Value management is a

Value Management is systematic, multi-disciplinary


effort directed toward analyzing the functions of
projects for the purpose of achieving the best value at
the lowest overall life cycle project cost.

The object of VM is to improve value, but not to


reduce cost.

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Origin of VM
Value Management was developed
during the Second World War at a
manufacturing company, General
Electric Company, in the USA.
Mr. Larry Miles worked in General
Electric Companys Purchasing
Department in 1932, as a design
engineer.

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All functions cost
me money

Origin of VM
Mr. Miles was very aware of
unnecessary costs, and that often there
was better way of doing things.
Doesn't anyone in General Electric care
what thing cost?
His thinking was becoming more and
more What FUNCTION am I buying ?,
rather than what material
I am buying.
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Function
All Functions can be described into
two words : Verb and Noun

Verb Noun
Generate Heat
Examples :- Apply Force
Circulate
Reduce
+ Air
Moisture
Resist Corrosion
Transmit Current
Prevent Leakage
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Basic Function and SF SF
Secondary Function BF

SF SF
Two kinds of Functions
1) Basic Function & 2) Secondary Function SF

Basic Function is the specific work that the


product or process is designed to do, which
can satisfy the essential needs and
requirements of the Client.
i.e. What must it do ?
What is the basic & secondary function of a
Q.S. graduate ? (which verb & which noun)

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Function of Q.S. Graduate
All Functions can be described into
two words : Verb and Noun

Verb Noun
Evaluate Payment
Examples :- Supervise Sub-ordinate
Take-off
Build up
+ Quantities
Unit rates
Negotiate Price
Draft Front part
Assess Claims
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General Approach of VM
To identify the function(s) that must be
performed by a product or service.
To establish cost / function relationship.
To stimulate the desire to creatively
achieve function at the lowest possible
cost but without sacrifice of performance
or the delivery requirements.

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Six Key Questions in VM
1. What is it ? (the item or the project)
2. What does it do ?
3. What must it do ?
4. What does it cost ?
5. What else would do the job ?
6. What would that cost ?
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Test for Authentic VM
Four criteria must be satisfied to
characterize a service or activity as VM :-
Have an approved VM job plan.
Involve a multi-disciplinary team working
together.
Be facilitated or led by a qualified Value
Management Team Coordinator (VMTC)
Adopt the function analysis techniques.
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Procedures Involved in VM
A Typical Job Plan for VM
PRE-STUDY WORKSHOP POST-STUDY
PHASE PHASE PHASE
Held orientation meeting Information phase Report preparation

Select team structure Creative phase Implementation


phase
Decide study duration Evaluation phase Follow up phase
Arrange venue Development phase Improve VM results

Gather all information Presentation phase

Site visit

*A Workshop may be last for 40 hours within 5 days


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Procedures Involved in VM
Information Phase
Objectives Activities Involved

To establish a good Get all the facts


understanding of the project, Get information from best sources
including its design and Use good human relations
operation and the areas with Identify and classify functions
the greatest potential for Create FAST diagram
savings and improvements. Allow costs to functions

Questions to ask in this Phase :

What is it ? What does it do ? What must it do ?


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Procedures Involved in VM
Information Phase - Function Analysis
Functional Analysis System Technique (FAST )
leaves the verb-noun description of functions,
but provides a diagrammatic representation
of functions which displays their hierarchy
and identifies logical how-why relationships.

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Procedures Involved in VM
Information Phase - Function Analysis
How ? > Functions < Why ?
Components
Prevent
Waterproof levelling screed
water
Waterproof membrane
leakage(BF)
Surface channels

Protect roof Insulate Insulation board


slab heat (SF)

Support Wire mesh


fittings (SF) C/S screed
Plinths
BF : Basic Function
SF : Secondary Function Enhance Roof surface finishes with c/s bedding
Aesthetic (SF) Tile movement joint
A technical FAST diagram of roof covering 19
Procedures Involved in VM

Function Hierarchy
Model of a Library
Sources :
Brian R. Norton and William C. McElligott (1995)
Value Management in Construction
A Practical Guide. Macmillian

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Procedures Involved in VM
Creative Phase
Objectives Activities Involved

To compile an abundance of Generate a large number of


ideas regarding alternative alternative ideas
ways to achieve the various Use creative thinking
Do not judge
functions highlighted and
Brainstorming
discovered during the
Allow free flow of ideas
Information Phase.

Questions to ask in this Phase :


What else will perform the function ?
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Brainstorming : Splitting the judgmental
and creative minds
SCAMPER : New ideas are generated
from modification of something that
already exists
Mind mapping : Expand ideas in
different branches
Six hats thinking :Think ideas under
different hat/topics (e.g. emotion)
Gordon technique : Step away from the
particular problem
CREATIVE THINKING TECHNIQUES 22
CREATIVE THINKING TECHNIQUES
SCAMPER
S Substitute ? Replace all non-structural
R.C. walls with block walls
?
C Combine ? +
? Combine the Club House
with residential block

A Adapt conveying belt







M Modify ? ? Modify the layout.
?
?
scamper 23
CREATIVE THINKING TECHNIQUES
SCAMPER

P Put to Use external walls as


other climbing walls
?
uses ?

?

E Eliminate /? Omit the swimming


pool

R Reverse / ? Change the sequencing


Rearrang ? of works
e

scamper 24
Step right back from the Problem
Instead of asking How can I be promoted ?

But ask How can I make my boss happy?

Creative thinking
techniques
Gordon Techniques
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Avoiding defining the problem too
soon and limiting possible solution
Instead of asking What would you expect for
an ideal Sewage Treatment Project ?
But ask How can I improve my home
environment, house / landscape appearance ?

Creative thinking
techniques
Gordon Techniques
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Ideal Home / House Ideal Sewage Treatment Expansion

Play ground Play ground


Organic farm
Community farming
Swimming pool Swimming pool with reclaimed water
Fish pools
Solar panel Solar panel on roof of Admin. Building

Visits Information centre


With facilitates for tour guide
Double glazing to all Double glazing to north elevation of Admin.
windows Building
Replace all electrical Replace all electrical wires to all existing
wires buildings

Creative thinking techniques


Gordon Techniques
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Procedures Involved in VM
Evaluation Phase
Objectives Activities Involved

Establish economic criteria


To analysis and highlight the Establish non-economic criteria,
best ideas generated during such as aesthetics, environmental
the Information Phase. impact, etc.
Evaluate and select the best ideas
Categorize, rank or combine
ideas

Questions to ask in this Phase :


Will each idea perform the function ?
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Numerical 1 to 4
(Example)
4 Greatly improve designs / performance /
costs or reduce risks

3 Improve designs / performance / costs or


reduce risks

2 Good suggestions, but require further


analysis and investigation

1 Interesting ideas, but most likely will not be


considered

How to evaluate ideas ? 29


Poor values exist in construction.
It may be caused by U !

PM Habits and attitudes

Lack of an idea

Temporary circumstances
Lack of information
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VM in Construction
VALUE MANAGEMENT

Value Planning Value Engineering Value Analysis

BRIEFING SKETCH PLANS WORKING DRAWINGS CONSTRUCTION POST-


CONSTRUCTION
Inception Feasibility Outline Scheme Detail Production Bills of Tender Construction Post-Occupancy
Proposals Design Design Information Quantities Action Evaluation
RIBA (Royal Institute of British Architects) Plan of Work

(extracted from Norton, B.R. and MaElligott, W.C. (1995) Value Management in Construction
A Practical Guide, Macmillan Press)

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The Timing of Application of VM

Cost reduction potential


Cost
Net savings
potential

Cost to implement

Time Concept Design Construction


(extracted from John Kelly & Steven Male (1993) Value Management in Design & Construction, E
& FN Spon)

Maximum cost reduction is in the Concept & Design Stages


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VM in Construction
HK Government Requirements
Technical Circular 35/2002 by Environment,
Transport, and Works Bureau in 2002 (subsumed)

In general, whenever it is perceived that there are likely to be


net benefits, a Value Management (VM) study should be
conducted for every major project with an estimated project cost
exceeding $200M. Adequate support from top management must
be obtained before commencing any VM study. For a complex
project, the VM study should be conducted at the feasibility study
stage. For a less complex project, which does not require a
feasibility study, the VM study could be deferred to the earlier
parts of the preliminary design stage.
(Project Administration Handbook for Civil Engineering Works 2016 Edition, Chapter 1.4.2)

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VM in Construction
General Objectives
To determine objectives of the project
and prioritize needs;
To evaluate opportunities for efficiency
in design while maintaining required
standards;
To ensure that the project or program
is cost effective; and
To identify alternative value-added
solutions 34
VM Study Example
Public Mortuary Buildings

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Programme for a One-day VM Workshop
Time Activities Remark
9:00 Registration
9:15 9:30 a.m. Introduction & Client / Facilitator
Workshop Objectives
9:30 10:00 a.m. 1. Information Phase Project overview
10:00 - 11:00 a.m. 2. Function
Analysis Phase
11:00 11:15 a.m. Break ) to complete Function
) Diagram
11:15 a.m. 12:45 2. Function
p.m. Analysis Phase
12:45 2:00 p.m. Lunch
2:00 3:00 p.m. 3. Creativity Phase Brainstorming
3:00 3:15 p.m. Break
3:15 3:45 p.m. 4. Evaluation Phase
3:45 - 4:30 p.m. 5. Development Phase
4:30 Closing Speech Client
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INFORMATION PHASE

Building College Hospital Funeral Public


Home Mortuary
() ()
High
Order
Educate Treat Arrange
?
Function
Students Patients Funeral
?

V+N
37
INFORMATION PHASE

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CREATIVITY PHASE
Related Functions Ideas No. Nos. of
Ideas

a) Enhance image 3, 4, 7, 8, 10, 14, 6

b) Handle & store bodies 1, 6, 20, 21, 24, 26 6

c) Care for bereaved families 17, 18, 19, 25 4


()
d) Utilize space 2, 5, 11, 12, 13, 23 6

e) Facilitate operation 9, 15, 16, 22 4

Total 26

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EVALUATION PHASE
4 marks Greatly improve designs / performance / costs or
reduce risks
3 marks Improve designs / performance / costs or reduce
risks
2 marks Good suggestions, but require further analysis and
investigation
1 mark Interesting ideas, but most likely will not be
considered and be dropped from consideration

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CREATIVITY PHASE
Idea Idea Proposer Marks Related Follow-
No. Functions up
Parties
3 Automatic body transfer Client 16 Handle BSE
line (idea bodies
conveying belt
)
10 Add canteen area Architect 32 Care for Architect
bereaved
families ()
15 Provide folding partition BSE 10 Utilize space Architect
in multi-purpose room to
police to allow usage
flexibility
20 Wall painting e.g. Undertaker 16 Care for Architect
bereaved
families ()
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Think about :
Benefits of Application of VM ?

Disadvantages of Application of VM ?

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Summary
1. What is it ?
2. What does it do ?
F
3. What must it do ? V=
4. What does it cost ? C
5. What else would do the
job ?
6. What would that cost ?

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Reference Readings
John Kelly, Steven Male & Drummond Graham (2004) Value
Management of Construction Project. Blackwell Publishing

Brian R. Norton and William C. McElligott (1995) Value


Management in Construction A Practical Guide. Macmillian

John Kelly and Steven Male (1993) Value Management in Design


and Construction. E & FN Spon

Environment, Transport and Works Bureau Technical Circular


(Works) No. 35/2002

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