Value Management & Engineering

Origins of VM & VE Used by General Electric in the USA during World War II Shortage of materials led to substitutes being used to achieve the same function Many of these substitutions resulted in improved products - as well as better Value for Money This led to a formal process for evaluating design options GE called it “Value Engineering” The process was gradually refined to incorporate “Value Management”

The Value Management Process Define Project Objectives Define Options Evaluate Options Maximise Value for Money

What is Value for Money? What is Value for Money?

Benefits of Value Management Optimisation of cost, with early elimination of non-viable projects Clarified project objectives Greater confidence in the need for the project Common understanding of the project requirements

Value Management Phase 1 (VM 1) Undertake an early review of Project Objectives Link this with Risk Assessment study Involve Senior Management and Stakeholders Gain consensus for agreed hierarchy of objectives Score objectives so that relative importance can be determined

Objectives Hierarchy Key Objective Prime Objective or Reason Sub- Objective

Example of Objectives Hierarchy Travel to Office Arrive in time No breakdowns Comfort Departure time Convenience Safety Reliability

Importance Weighting WeightScoreWeightScoreImportance Arrive in time Reliability No breakdowns Safety Comfort Convenience Departure time Travel to Office

Value Management Phase 2 (VM 2) Separate activity during Feasibility & Definition Stage Consider all available Options Achieve best Value for Money by evaluating options against the importance weightings agreed for the hierarchy of objectives Link with Risk Analysis and Scenario Analysis to choose the optimum project configuration

Evaluating the Options Each option assessed to see how well it satisfies each of the objectives (score each out of 100) These Raw Scores are then weighted according to the Importance Weighting given to each objective The Weighted Scores are added up to give a Total Score for each option The Total Score for each option is then divided by the Life Cycle Cost to give a Value score Best Value for Money is obtained by choosing the option with the highest Value score

Evaluation Objectives:A: Arrive in time C: SafetyE: Departure time B: No breakdowns D: Comfort VALUE MANAGEMENT ASSESSMENT OBJECTIVEABCDEScoreCostValue OPTION Importance weighting Raw score RAIL Weighted score Raw score CAR Weighted score Motor Raw score Bike Weighted score

The Value Engineering Process Define Functional Requirements Consider Design Options Evaluate Options Maximise Value for Money

Objectives of Value Engineering Remove the cost of unnecessary functionality Reduced or eliminated late technical/design modifications Reduced or eliminated abortive technical/design costs

Functional Analysis System Technique - FAST Diagram

VM / VE Critical Success Factors Senior Management Full Support Accountability - so that results are not undermined Good Facilitation Commitment to the process - belief Right Timing - early enough to be effective, not just a last minute cost cutting exercise

Potential Saving £ Duration of project design Initial Investigation Feasibility Stage Purchasing Commitment Net saving potential Cost reduction potential Cost to implement changes