1 Presented by Abdulaziz S. Al-Yousefi, CVS –Life, FSAVE Dubia, Jan 2016 The Synergy between Value Engineering & Sustainable Construction

2 Value studies are mandatory in … All US federal projects > $ 2 M All Japan projects > $ 2 M All Saudi Government Project > $ 5 M All RC of J&Y projects > $ 5 M All Saudi Aramco projects > $ 10 also in UK, Germany, Francs, Australia, Korea, India, Malaysia,..etc. Why is that ?!!

3 VE Studies done since the start of VE in the GCC in 1978 More than 10,000 VE Studies More than 150,000 participants Done at the rate of 300 /year Improved the Quality of our projects Saved More than $ 50 billion Saving ranged from 5-30% Rate of return is 1 : 100 VE Accomplishments in the Gulf Area

4 Finally Conclusion & Recommendations This 20-minut presentation is about What rather than How What is it? Why we do it? What makes it different? VE Benefits for SC Recorded results

5 Definitions The Synergy between VE & SC

6 Definitions Sustainable Development (SD) : “ Development that meets the needs of the present without compromising the ability of the future generations to meet their own needs “ WECD, 1987 Sustainable Construction (SC) : “ The creation and responsible management of health built environment based on resources efficient and ecological principles “ Hill & Brown, 1997

7 An organized team effort aimed at analyzing Functions and Quality of projects (goods, services and processes) in order to generate practical cost-effective alternatives that meet customer requirements., Al-Yousefi, 1996 VE is a task oriented STUDY … and can be defined

8 Value Engineering (VE) Concept The Synergy between VE & SC

9 Total Value Management … TVM !!! Quality ? VE, TQM BPR, 6sigma, Kaizen, BSC, QFD MBO CPI SPC JIT QLF RE ZQC ZD VRP LCC AHP TPM Every now and then we have a new buzz word

10 What is VALUE Value Engineering Benefits & Usefulness

The VE main discussion issues Function Cost Quality Value

What is Function … Needs Let’s first define …. The reason for its existence Answering … What does it do? Normally … it is fixed … it is either does it or does not do it

What is Quality? Quantity is what you count Quality is what you count on Conformance to Requirements Value-Added benefits It is variable.. It is different from one person to another Fit For Use

Quality Quantity is what you count Quality is what you count on Conformance to Requirements Requirements could be needs or desires Does Quality mean ….. Tough, Durable, Strong, last long…. Etc. …. not necessary … Fit For Use or Fit for purpose Cone Cup

days Coordination Data Preparation Team Selection Modeling Pre-Study 3 – 5 days Information Function Analysis Idea Generation Evaluation Development Presentation VE Workshop VE Study Report Implementation Plan Follow-Up Post-Study 1 – 4 week The Stages of the VM Study

The 7 Phases of The VE Workshop Information Implementation Follow up Yes Decision Function Analysis Presentation Creativity Evaluation Development Value Circle No What Why How All What How When Who

17 A VM-TQM Integration TVM Total Value Management When do we do it ?

18 VEP VE2 DR Cost & Effort Planning & Analysis Schematic Design Development Working Drawings Construction Documents Construction Operation & Maintenance When to apply VE ? Project Life Cycle Implementation Saving Acceptance level Goals, Objectives, Requirements Design Criteria, Scope of work Detailed VE Alternatives to the design, Define Systems Conformity to Code, standards, specs Make sure that VEP of VE 2 are implemented

19 Why we do it ! TVM

20 Who are the most influencers ? In any organization, Who are the Decision Makers ? Technical, workers Mangers SM Top Circle of SM influence

21 Where do senior managers invest their time … Actual What they Say... Common Sense is not always Common Practice القيادة الإدارة العليا الإدارة الوسطى التنفيذيين According to a survey (In Saudi Arabia, Dubai & USA 1996) 1- Marketing 2- Human Resources 3- Projects 4- Finance 5- Quality

22 According to a survey (In Saudi Arabia, 1991) Q. Are you satisfied with what you’ve got ? When asked … after the completion of the facility:- A. 61 % 26 % 13 % TVM

23 According to KSU Research, 1999 Q. Are you satisfied with what you’ve got ? When asked … after the completion of the facility:- A. 75 % 21 % 4 TVM

24 Codes, Regulation, standardizations, specification Saudi annual loss of not having standards according to KFUPM research: - Doors & Windows> one B illion SR - Electrical Plugs> 600 M illion SR That is 1.6 B out of 5-7% of the total initial cost of the project

25 Level of Influence on Cost Who influence the total cost ! Life Cycle Costing

26 Reasons for unnecessary Costs (Poor Value) How many projects do you know that have some of these?  Shortage of time  Misleading information  Ambiguous goals, objectives, scope etc.  Hasty decisions based on false assumption  Lack of ideas  Lack of funds  Resistance to Change  Unrealistic temporary circumstances  Politics  Bad habits and attitudes, beliefs  Over design & Unrealistic safety factors  Continues changing in the owner requirements  Lack of communication coordination  Using unsuitable standards & specification  No LCC estimate …… and more….

27 What makes it different? It has many Tools & Techniques that Quantify Quality & Measure Value Value Engineering

28 VE Objective.. WE Study and Evaluate the Three Main Financial Operation Technical

29 TVM clearly define Most projects do not have clearly defined or measurable Goals and Objectives

30 Value = Function + Quality Cost = F + Q C The Value Index If You can not Measure it You can not Improve it

31 The Value Equation Function Cost Quality Value

32 The Value Equation C V= F Q

33 Efficiency vs. Effectiveness In order to implement any VEP, it has to be both Effective Efficient Do things right Do the right thing Function Cost V = Quality Function Quality Cost

34 Can we …. Quantify the Quality Let’s first define …. Can we measure the Quality ? Can we measure beauty? The answer is not only yes …. But actually we should

35 QBS, Structural System Non-Monetary Criteria How Important 2 points for Major Preference 1 points for Minor Preference 1 point each for Same preference Q CV Weight QualityLCCValue Index % of the total PointsSRQ / C Rates : (5) Excellent, (4) Very Good, (3) Good, (2) Fair, (1) Poor = Q / C A. Insulation B. Schedule C. Durability D. Flexibility E. Maintenance A A/1 B A/2 B/2 C A/2 B/2 D/1 D A/2 B/1 C/ED/E E Pre-cast Double Wall Steel Frame Quantifying Quality

36 QBS, Laptop Computer Non-Monetary Criteria How Important 2 points for Major Preference 1 points for Minor Preference 1 point each for Same preference Q CV Weight QualityLCCValue Index % of the total PointsSRQ / C ThinkPad T42 Rates : (5) Excellent, (4) Very Good, (3) Good, (2) Fair, (1) Poor = Q / C A. Speed B. HD Capacity C. Cash Memory D. Wireless, LAN E. Warranty A A/1 B A/1 C/1 C A/D B/D C/D D A/1 E/1 C/ED/E E TOSHIBA Satellite M DELL Inspiron 6000/2 IBM Quantifying Quality

37 Quality Model ( Star Diagram for a Housing Project) User Comfort Safety & Security Engineering Performance Operation Effectiveness Environmental Impact Flexibility Image ( Site & Facility) Schedule Balance Maximum Minimum Quality Profile Setting the priorities

38

Aesthetics Coordination Resource Optimization Hygiene Safety & Security Ease of Implementation Work Methodology Work Efficiency SOW Accuracy Schedule

40 Study Area Selection Matrix Satisfaction Importance High Low High

41 DA I B j A C EFG Importance Low High Satisfaction LowHigh

42 Current Situation Housing unit Layout Quality Issues Building Material Modification to Housing unit by tenants Speed of Construction Ease of O&M Building codes & Regulation Social Issues Wanted Situation Quality Model ( Jubail Housing - Jalmudah Project)

43 Quality Profile A - Design Approach E – Scraping Facilities B – Pipe Route C – Pipe Length, Material/Specs G – Staging of Construction D – Valves, fittings, flanges..etc H – Future Expansion F – Hydraulic analysis Fuel & Feedstock pipeline for Jubail 2, Stage 1

44 Improve Value TVM Optimize Cost 5 – 10% saving Customize Quality

45 VE Exam ines LCC Life Cycle Cost Total Cost Life Cycle Costing

46 Pareto’s Law the 80/20 rule 80% of the cost of any project comes from 20% of its components 20% Components Cost 80%

47 Pareto’s Law the 80/20 rule % of Items % of Total Cost % of the items Makes up 80% of the cost

48 Finishes Structural Mechanical Electrical Doors & Windows Auditorium Elevators Site development & Landscaping Insulation Equipments Metal Work Office building Pareto’s Law the 80/20 rule

49 Where are the hidden Costs Running, Follow on or Ownership cost Are all the associated cost of running the facility. It covers energy, maintenance, repair replacement, staffing.. etc. Initial SingleCost Annual Cost The 3 kinds of costs of LCCRunning Cost Cost We use the Present Worth Analysis What we normally see Hidden costs

50 Where are the “ Hidden Costs “ ? Fees Capital cost Site Cost Occupancy Cost Furnishing Operating Cost Maintenance Cost Energy Cost The Client

51 Life Cycle Costing 300 Bed Hospital - Life span is 25 years Case 1 : Initial Cost = SR 365 Millions 8 %

52 Life Cycle Cost Revenues Annual Expense For an Economical Life Span of 25 years And Discount rate of 6% Our annual Net is 6.3

Revenues Annual Expenses If our revenue is 16 Million And annual cost of 2 Million The break even will be in year 40 Life Cycle Cost

Buildings & Infrastructures Energy Usage Buildings & Infrast. Contribution to the overall atmospheric emission Buildings & Infrast.

The Synergy between VE & SC – Pre Study Obtain senior management concurrence and support. Obtain project data and information. Obtain key documents such as SOW, drawings and project estimate. Identify and prioritize strategic issues of concern. Determine the scope and objectives of the study. Develop the study schedule. Undertake competitive benchmarking analyses. Identify Value team members. Estimate the Life Cycle Cost (LCC) of the project. Gather appropriate customer/user information about the project. If possible, invite customers or stakeholders to participate in the VE study. Distribute information to team members for review. Clearly define the requirements for a successful VE study results. VE Activities

The Synergy between VE & SC - Information Project Team presents the original design concepts Identify program issues and constraints. Confirm the most current project concept. Visit site or facility. Confirm success parameters. VE Activities SC issues to be discussed  Minimization of resources consumption.  Maximization of resource reuse.  Use renewable or recyclable resources  Protection the natural environment.  Creation of a healthy and non-toxic environment.  Pursue quality in creating the built environment.  Designing for minimum waste.  Target for lean construction.  Conserving water resources;  Considering people and their local environment.

The Synergy between VE & SC - Function VE Activities SC issues to be discussed Identify functions of the project systems and components. Identify high potential SC issues to be discussed Classify the functions. Develop function models. Select functions to focus the creativity phase.  Defining the functions of the SC issues defined in the information phase.  Dimension the function model with cost drivers and SC performance attributes  Select function related to SC in order to focus on them during the creativity phase.

The Synergy between VE & SC - Creativity VE Activities SC issues to be discussed Creative warm-up exercises. Explanations that establish rules that protect the creative environment being developed. Generate alternate ideas that may improve value.  Minimizing energy in use and Avoiding pollution.  Preserving and enhancing bio-diversity.  Conserving water resources and Setting SC targets.  Enhance the quality of life and offer customer satisfaction,  Provide and support desirable natural and social environments.  Maximize the efficient use of resources  Decrease the use of raw materials and energy.  Optimize the consumption of renewable resources.  Decrease the amount of harmful emissions and waste.  Enhancing indoor environmental quality.

The Synergy between VE & SC - Evaluation VE Activities SC issues to be discussed Build shared understanding of all ideas. Discuss how ideas affect project, cost, and SC parameters. Establish evaluation criteria. Rank, select, and prioritize ideas for further development Explain how ideas are to be written  Offer flexibility and the potential to cater for user changes in the future.  Maximize the efficient use of resources  Increase serviceability, durability and reliability over the entire project Life.  Minimizing non-renewable energy consumption.  Using environmentally preferable products.  Protecting and conserving water.  Enhancing indoor environmental quality.  Optimizing operational and maintenance practices

The Synergy between VE & SC - Development VE Activities Prepare a written proposal of ideas selected for further development. Assess and refine SC issues. Conduct benefits analysis. Generate sketches and information needed to convey the concept. Confirm that a proposal should be further developed. Estimate the cost difference of each VE Proposal.

The Synergy between VE & SC-Presentation VE Activities Prepare presentation and supporting documentation. Exchange information with the project team. Ensure management has full and objective information upon which they can make good decisions. Outline an anticipated implementation schedule.

The Synergy between VE & SC - Implementation VE Activities Review the preliminary report. Conduct implementation meetings to determine the disposition of each VE Proposals. Establish action plans for those alternatives accepted and document the rationale for the rejected alternatives. Obtain commitments for implementation. Assign a timeframe for review and implementation of each VE Proposal. Track value achievement resulting from implemented alternatives. Validate benefits of implemented change. Ensure that new practices become embedded by establishing and managing an implementation plan.

The Synergy between VE & SC – Post-Study VE Activities Prepare a report of the results of the study, lessons learned, or other items to be recorded and/or tracked through implementation. Identify where opportunities were missed. Identify roadblocks to innovation and understand why they existed. Reflect on the value study and consider how the experience has developed new capabilities.

64 Conclusion The Synergy between VE & SC

65 VE is a quick task oriented approach VE Has many tools & techniques VE Improve quality and save recourses Therefore, VE help to plan better SC VE improve Technical, Operational & Financial issues This proposed integration between VE and SC may encourage other to explore more synergy The Synergy between VE & SC – Conclusion

66 Value Management (FITT Program ) How to assure the success of the VE Program Management We need the right Leader or Facilitator F Information I Timing T Team T

67 TVM Road Mapخطة طريق ادارة القيمة Information Phase Function Analysis Idea Generation Evaluation Phase VEP Development Presentation Phase Implementation & Follow up

68 Prescription … for assuring VEP implementation Do VE before 30% design stage. Begin with the end in mind. Apply the 80/20 principle in approving VEP. Adopt 20% of the VEP that get you 80% of the results. Positive contribution of Designer and Project Manger. Choosing the right VE Team members. Do LCC estimate before the start of VEW. Adopt Just in time Training (JITT)

69 VE & SC Benefits Value Engineering

70 Improve your project performance. Improve your project performance. Come up with many practical solution in short time. Come up with many practical solution in short time. Improve your project design Improve your project design Customize your project Quality and scope Customize your project Quality and scope Save Money, time and effort (5-10%) Save Money, time and effort (5-10%) Avoid unnecessary cost during O$M Avoid unnecessary cost during O$M Minimize risk Minimize risk Simplify complicated ad open ended issues Simplify complicated ad open ended issues Benefits for your organization

71 Certify in VE (AVS, VMP, CVS) … and PMP. Certify in VE (AVS, VMP, CVS) … and PMP. increase your decision making ability. increase your decision making ability. Differentiate between alternatives using VE tools. Differentiate between alternatives using VE tools. Enhance your team work participation. Enhance your team work participation. Gain new innovative management techniques. Gain new innovative management techniques. Benefits for individuals

72 Planning, Coordination & Miscommunication Customer Definition PM AnalystProgram Consultant Documents InstalledInvoiceSupports Customer Needs

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