VALUE ENGINEERING AND VALUE MANAGEMENT – IS THERE ANY DIFFERENCE?

A Client Practice Note by Dr Roy Barton, Australian Centre for Value Management (ACVM)

MICA (P) 166/03/2013 Publication of KPK Research – July 2012 Issue

CLIENT PRACTICE NOTE

VALUE ENGINEERING AND VALUE MANAGEMENT – IS THERE ANY DIFFERENCE?

This Client Practice Note is an inaugural issue of a series of featured articles from our invited specialist expert contributors.
In this first article, Dr Roy Barton of the Australian Centre for Value Management (ACVM) examines the distinguishing
differences between Value Engineering and Value Management

Many a time, one is often asked “What is the difference between ‘Value Management’ and ‘Value Engineering’?” This practice
note shall deal with this question in the context of the Singapore construction sector.

In Singapore, as in other parts of the world, the terms Value Engineering and Value Management are sometimes used
synonymously and sometimes as though they are different processes. What actually makes them different, however, is usually
not defined. Where there is a distinction in use, Value Engineering seems always to be associated with the pursuit of cost
reduction (the classic “Value Engineering” definition is finding the lowest cost to perform required functions) whereas Value
Management may not necessarily be focused on cost reduction at all, but on much broader project-considerations of value.

Sadly, there seems to be a widespread view throughout the Singapore construction sector that “Value Engineering” is just
another name for “cost cutting”. Why “sadly”? This is because there is a complete misconception of what Value Engineering is
and does. When we are thinking about Value Engineering, it is important to recognise that value or value for money must be part
of the consideration. There is no exception to this. The world is peppered with projects where costs have been cut without
considering value and value for money. Unwanted compromise is the result, often leading to even higher costs and poor
performance.

This widespread misunderstanding of the term Value Engineering as a “cost cutting” process, might also apply to the term Value
Management, but perhaps less so. There is, however, at least some cynicism suggesting that recent government initiatives
relating to Value Management are simply “government cost-cutting” measures by another name. The points made above about
value and value for money apply here, too. In any Value Management study, there must be consideration of value or value for
money.

Regarding differences between Value Engineering and Value Management, the truth of the matter is that there is no universally
agreed distinction between the terms “Value Engineering” and “Value Management”. Both terms are in current use, sometimes
being used in different ways, with different applications. Many people and organisations use the terms quite synonymously. Even
a cursory review of the international literature will verify this. The most recent (2011) publication from the United States Defence
Department, for example, quite explicitly states that Value Engineering and Value Management are to be considered
synonymously. In writing the first edition (1994) and the current second edition (2007) of the Australian Standard on Value
Management, we wrestled at length with this question of distinguishing Value Engineering from Value Management, and, on both
occasions came to the same decision. We chose to use the single term “Value Management” as an “inclusive phrase” that also
embraced the terms “Value Analysis” and “Value Engineering” in exactly the same way that the United States Defence
Department has now also done. This was not an easy decision, yet with the passage of time, it is believed to have been the most
appropriate one.

In arriving at this decision, we (the members of the Australian Standards committee) noted that regardless of which term (Value
Engineering or Value Management) was used, the core process (for each) centres around a multi-disciplinary workshop in which
a series of prescribed steps are followed where value, or value for money is a primary consideration (these steps are referred to
in the United States of America as a “job plan”, and in the Australian Standard as a “work plan”). This was a major factor in

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VALUE ENGINEERING AND VALUE MANAGEMENT – IS THERE ANY DIFFERENCE?
A Client Practice Note by Dr Roy Barton, Australian Centre for Value Management (ACVM)

guiding our decision not to distinguish between the terms. Clearly, any difference was to do with application, not core method.
The prescribed steps (as listed in the Australian Standard) are:

 Build shared knowledge and understanding of the context, value factors, and project details.
 Generate ideas to enhance value and value for money.
 Evaluate the ideas.
 Develop proposals.
 Make recommendations.
 Produce an action plan.

We must understand, therefore, that any distinction that we make between Value Engineering and Value Management is
completely a matter of choice. Any organisation is free to distinguish between the terms however it wishes. The terms “Value
Engineering” and “Value Management” have no legal protection and no universally agreed distinction between them.

In this paper, if we are to make a distinction between Value Engineering and Value Management (recognising that many people
and organisations make no distinction at all) then that distinction will be to do with the application of a common, core process. The
core elements of the process of Value Engineering and Value Management are, for all intents and purposes, identical; but the
way in which the core process is applied may be very different from circumstance to circumstance. This is particularly so
regarding approaches taken to group-facilitation. Conventional Value Engineering literature makes no reference (or minimal
reference at best) to group facilitation, but in most of the Value Management literature, group facilitation is considered to be a
major part of the exercise.

One way of making a distinction in the application of Value Engineering and Value Management is to consider the nature of the
problem being dealt with. Through the last decade or so, such distinction has often been based on the perceived “hardness” or
“softness” of the problem.

An example of a “hard” problem situation is a choice between reinforced concrete and structural steel for the frame of a high rise
building. Such a case is ideally suited to a “hard”/quantitative methodological analysis and lends itself to conventional Value
Engineering. A group of technical experts (as typified by conventional Value Engineering) would be able to work through each
phase of the Value Engineering work plan and, based upon function analysis and life cycle costing, arrive at a decision which
delivers the required functions for the lowest cost. This is “classic” Value Engineering.

An example of a “soft situation” is the question of “what to do” about traffic congestion at a suburban main road intersection. This
problem situation is highly complex, as there are many potential solutions to this situation. These include implementing “non-
build” solutions such as a demand-management strategy to reduce the number of vehicles; providing more public transport;
changing travel habits of road users; or demolishing the buildings and constructing a flyover. There may also be combinations of
these options. There is no algorithm to solve this. The measurements used are likely to be “soft”/qualitative (greater than/less
than; better than/worse than and the like). There are many people potentially affected by the decision. There is no single
customer. There are many interest groups. There is no simple cause/effect relationship. A group-process is needed that brings
together the key stakeholders – hence the emphasis on group facilitation. The Value Management work plan provides an ideal
structure for the group-process.

In cases like this, although we are still using the Value Engineering or Value Management work plan, it should be clear that the
exercise is not about identifying the functions of component parts (concrete, steel, and so on as in the first example of the framed
structure) and then selecting the lowest cost alternatives. We could do this once a decision had been taken about inclusion or
exclusion of component parts. But in arriving at that decision, we need a much “softer” approach, dealing with many qualitative
parameters and many stakeholders.

In both of the examples cited, the prescribed work plan will be followed, but the workshops themselves will “look and feel” very
different. In the one dealing with choices between structural steel and reinforced concrete, the outcomes should be a technical
recommendation that shows the lowest life cycle costs have been achieved through the use of structural steel and/or reinforced
concrete. In the second case (what to do about the traffic problem at the major intersection), the likely outcome could be a set of
principles on which planning and design should proceed or, depending upon how far the initial work has progressed, to identify a
number of concept options to go forward for detailed evaluation. Value for money will be factored into all of this.

If we are using different terminology, we would, in all likelihood, refer to the first example as Value Engineering and the second
example as Value Management. But there is no “law” or universal agreement about this.

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VALUE ENGINEERING AND VALUE MANAGEMENT – IS THERE ANY DIFFERENCE?
A Client Practice Note by Dr Roy Barton, Australian Centre for Value Management (ACVM)

The following table presents examples of different applications of Value Engineering and Value Management in the
Singapore construction industry. The table is not in any way intended to be prescriptive, but simply sets out some
differences between Value Engineering and Value Management for those who wish to distinguish between the terms.

Distinguishing between Value Engineering and Value Management *

Characteristics
Value Engineering
Typical objectives Reducing capital costs without compromising
quality or performance.
Selecting the best option (satisfying all
requirements at lowest cost) from a range of
options.
Choosing between component types such as
structural steel or reinforced concrete.
Value Management
Developing guiding principles (including
principles to achieve best value for money) for
planning and design at the briefing stage of
projects.
Selecting the best concept design options from a
range of options.
Developing proposals to enhance value for
money at concept or detailed design stage.

Resolving planning and design issues.

Typical focus “Hard” – technical focus – physical building or “Soft” – concepts, “people-activities”,
component parts. preferences.

Stage of project There is likely to be at least a concept design, Most likely to be at the early stages of project
development and more likely, some detailed design work. In development, even before a project brief has
some cases, design work may be complete or been prepared.
nearly complete.

Many Value Engineering studies are undertaken

during construction stage, especially when
projects are running over time and over budget.

Participants Strong technical focus. Broad participation by stakeholders from

management, strategic planning to operational.

Number of Normally tighter in numbers, 8 to 15. Typically 15 to 25 but sometimes up to 40 or 50

participants people.

Function analysis Conventional function analysis of individual Primary purposes; beneficial outcomes, important
components. characteristics that must be achieved – at the
“whole entity” level.

More detailed function analysis where required.

Cost comparisons Can generally be more precise in terms of capital Possibly indicative, generally comparative
and recurrent costing and models. (greater than/less than) if costs are even
conceivable – eg 50% more than this one.

There might not even be a budget at the early

stages. The Value Management workshop can
provide the basis for establishing one.

* This table presents examples that are sometimes used to distinguish Value Engineering from Value Management in the
Singapore construction industry. It is important, in reading the table, to recognise that there is no universally agreed distinction
between Value Engineering and Value Management, neither in the international literature, nor in international practice and
many practitioners and authors use the terms Value Engineering and Value Management interchangeably and synonymously.
However, if there is to be difference in use, then the above examples might be helpful in making the distinction. The table is not
intended for use outside of this context.

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 CONSTRUCTION COST SNAPSHOT

This Construction Cost Snapshot provides a concise reference guide on the construction cost for
July 2012
various building types based on information current as of July 2012. It is published solely for
information purposes and should not be used as a basis for investment strategy decisions or as a Unit Cost per
substitute to carry out detailed cost estimates and feasibility studies. Gross Floor Area
($ per m2 GFA)
Retail and Standard 3,000 - 3,800
Commercial Offices
Prestige 3,800 - 4,800
Standard 2,900 - 3,600
Shopping Centres
Prestige 3,600 - 5,200

Hotels 3-Star 3,400 - 4,200

4-Star 4,200 - 5,300
Hotels and
5-Star 5,300 - 6,500
Service Apartments
Resort Hotels 4,800 - 6,500
Service Apartments 3,300 - 4,100

Industrial Factories and Standard Factories 1,800 - 2,300

Warehouses Standard Warehouses 1,500 - 2,300

Institutional Primary 1,300 - 1,600

Schools and
Secondary 1,600 - 2,100
Tertiary Institutions
Tertiary 2,500 - 3,800
Healthcare Hospitals 3,000 - 4,800

Residential Terraced Homes 2,800 - 3,300

Semi-Detached Homes 3,300 - 4,200
Landed Homes
Bungalows 4,200 - 5,200
Cluster Homes 3,500 - 3,800
Standard 2,500 - 3,000
Condominiums Prime 3,000 - 4,200
Prestige 4,200 - 5,800
Special Standard
Category Offices Fit-Out (comprising partitions, floor, wall and ceiling finishes 800 - 1,800
and minor adaptations to existing property)

NOTES
All rates shown are current as at July 2012 and include a fair allowance for preliminaries, foundations, mechanical and electrical services (M&E) and
associated external works.
No allowances have been made for professional fees, accredited checker’s and registered inspectors’ fees, developer’s site supervision expenses, land
costs, financing charges, legal charges and authority fees, development charges, quality mark, green mark certification and award provisions, furniture,
fittings and equipment, infrastructure works, services diversions and connection fees, show units, advertisement and promotion costs, fluctuations in
material prices and goods and services tax.
Gross floor area (GFA) is the total floor area of a building comprising all enclosed and covered spaces (excluding any car parks whether in basement
and/or above ground) calculated for the purpose of planning submissions under the Urban Redevelopment Authority.
KPK makes no representation on the accuracy CONTACT
Mr Soh Chye Hian
and/or completeness of the construction cost
information set out herein which is subject to Manager (Research and Advisory Group)
changes. Direct line: +65-6305 3140 Email: chyehian@kpkqs.com.sg

Published by KPK Research.  All rights reserved.

Disclaimer: The information presented in this publication is intended as a general guide only and is current at the time of publication. Whilst
every effort has been made to ensure accuracy, KPK shall not, in any way, accept liability for any loss resulting from its use.
KPK Research Pte Ltd undertakes research on a myriad of topics ranging from construction KPK GROUP: SINGAPORE | CHINA | INDIA | INDONESIA | MACAU |
costs, procurement strategy to contract forms and conditions, hybrid procurement approaches, THAILAND | VIETNAM | UNITED ARAB EMIRATES | MALAYSIA (Kuala Lumpur
professional practice and contract administration essentials. Some of the research findings are Johor Bahru Pulau Pinang Sarawak Sabah)
reflected and consolidated in various publications, conference papers and published articles. KPK website: www.kpkqs.com
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