Value Management: What It Is, Differences Between VM and VE

Introduction

Every organization that exists in the world today has one single purpose that overshadows all the others: to be successful in what it does. Success is a measure defined by the organization’s attitude as well as the processes that govern the organization’s overall operations. Each process is a set of functions aimed at achieving a specific business objective. These functions, hence, create value at each step that cumulatively combines to achieve the organization’s goals.

Values can be derived from the people, processes, or products and these can be both positive and negative. This is, however, the organization’s responsibility to effectively manage these values in order to maximize the efficiency of the entity that is being optimized, for further improvement.

These values are part of every function or step that is taken in the accomplishment of a process, product, or overall organization function, irrespective of the industry of operations. Value management has thus risen up becoming a discipline that shapes and effectively contributes to the overall enhancement and value derivation from businesses today, in a manner previously inconceivable, through studying, evaluation, improvements, and so on, to allow firms to compete more aggressively against changing market dynamics and trends.

This paper aims to discuss the discipline of value management, sometimes also referred to as value engineering, its overall role with special attention to how it functions in the construction business. We will also discuss how value management can be applied through a real-world case study, how it works and the modification of the overall value management process and methodology to achieve excellent results.

Value Management – What It Is?

Value management has many definitions that are used to describe its importance from one aspect or the other.

“Value Management is a well-established methodology for defining and maximizing value for money.” (Office of Government Commerce 2007)

“…the application of value methodology by an organization to achieve strategic value improvement.” (SAVE International 2007)

“…a systematic and structured process of team-based decision making. It aims to achieve the best value for a project or process by defining those functions required to achieve the value objectives and delivering those functions at least cost (whole life cost or resource use), consistent with the required quality and performance.” (Value Management in Construction 2002)

However, in my opinion, it’s all in the name. The value that can be relative to cost or other implicit benefits derived, and management, that emphasizes the governance of the process and the value derived from it in such a manner that results in achieving greater levels of profit as well as reputation.

As a whole, value management is a discipline, tool, or technique aimed at maximizing the value/output/performance derived from a process, product or organization, while minimizing cost and resistance. It is aimed at achieving consensus on the effort undertaken to optimize the outcome achieved as a result of the recommendations derived from the project study.

Value management process and methodology is highly regarded in the construction industry, also specific to this case study, as there is a high amount of cost and effort that requires cost minimization with expectations management of all stakeholders to ensure their buy-in in the effort to ensure best results with least costs involved.

Are VM and VE the same or are there any differences?

Before delving into the details of the case study and how to go about it, we must first understand a basic notion: Are VM and VE synonymous?

Value managers argue that these are not. There are specific, measurable differences between the two that allow us to identify with each other. Some of these are listed below that will allow the readers of this text to understand the methodology that is selected for the solution to the case study.

1. Value Management is concerned with the definition of value in a particular context, agreeing to a clear statement of objectives, and ensuring the compliance of solutions with objectives. Value Engineering, on the other hand, is concerned mostly with achieving defined functions at minimum cost (or whole life cost). (Value Management in Construction, 2002)
2. A major difference between the two is VM being a wider domain while VE covering only a limited subset of information. VE comes under overall value management. VM provides a framework under which VE comes as a methodology/discipline used to identify better value from projects, products, and services. (Value Management in Construction, 2002)
3. VM deals with why something is happening, which is happening. VE, on the other hand, addresses how the problem should be addressed under VM to allow for better performance from the same processes.
4. VM is about getting the right project, while VE is about getting the project right.

Case Study – New Cross Community Centre

The case study provides a vague design brief of different parts of the community center that will be the point of activity for people of the community. Information that has been collected for this process comprises the following:

1. Design Brief
2. Business Case, outlining the income and expenses incurred, once the facility is opened
3. Interviews with key personnel, to collect their inputs on various operational and strategic activities, to be used as the base to put in place the VM framework, and adopt a VE methodology to ensure that all expectations set are successfully met, in time and with a budget.

Value Management Study

This case study requires a comprehensive value management study to outline the overall processes that will govern the functioning of this community center serving the public. A major reason for undergoing a VM study is the fact that this community center is being built using grants from various bodies, each of these having different interests, opinions, preferences, and expectations from the center’s management that have to be addressed, in addition to the committee’s plan and expectations of the overall public. Another reason why this study is being referred to is the reason for the shortages of the grant as compared to the incurred expenses on the overall center.

This study is being taken while the design brief has been finalized and the grants from different organizations have been approved. It is now imperative that the VM study outlines a structured method that allows for ensuring the best value for money, while the least amount of finance is spent to achieve the overall goals.

For a value management study to be carried out, we will start from Stage II – Strategic Diagnosis – Study Planning, since we have all the information collected from sources that outline problems with the current project as well as the nature of the decisions to be made. There can be some limitations when not starting from scratch, that is, the Preliminary phase, since we might not have sufficient or adequately collected information according to value management’s practices. In the VM domain, we can move ahead with ‘The Job Plan’ to bring all of the stakeholders to the same level of understanding of the project objectives and what we intend to achieve at the end of this project. Initiating the job plan requires identifying the stakeholders whose involvement will be required to conduct the project successfully.

Project Stakeholders

Based on the information collected from various resources, the following individuals have been identified as stakeholders in the project for their input and commitment to ensure the success of the project:

1. Raymond Mackenzie, CEO
2. Archie Fleming, Director of Leisure and Recreation
3. Alistair Riley, Project Architect
4. Dr. Jamie Macdonald, Community Medical Officer
5. Keith Bennet, Director of Housing
6. Director of Roads & Sewers

Project Plan

The project is faced with two kinds of problems: budget and expectations. With stakeholder expectations rising amidst a limited budget received as a series of grants, the VM activity should be planned in such a manner so as to reduce the overheads and deliver more in less amount of time.

1. Orientation will be the key phase marking the start of the project, in which a dedicated facilitator, preferably hired from outside, will align the team member’s objectives to the goals of the project, and ensure that their understanding of the project objectives, deliverables, and roles is clear. Orientation will comprise the facilitator, a value manager (determined by the team), and the team members. This will require 2-3 days since most of the team members already know their parts.
2. Once the team is on board, the Diagnosis phase will be staged to identify the problems with the current process, determination of functions, workshop objectives, project scope, and constraints with the help of stakeholders. In this session, the format of the workshop will also be finalized with scheduling and allocation of resources. This will require 3-4 days.
3. The workshop is an activity requiring a highly participating group to address the decision-making process and to achieve the workshop’s objectives set by the facilitator. The duration of this activity will be 1-2 days. During this activity, we will break down the project into a set of functions through a series of steps: team briefing, functional analysis, option identification, appraisal and improvements, initiative development, resolution building, and implementation.
4. The activity will then turn towards implementation, once action points are developed and resources allocated to work on the points. Each action point will be identified with respect to the follow-up activity requirement (if any) against the point. Due dates are defined for the activity; resource constraints and abilities are identified and scheduled for the implementation. This is usually a lengthy process that may take up to 3-4 weeks.

The design of the process undertaken for VM is illustrated below:

VM Workshop

Once the team has gone through the diagnosis phase, we will have a clearer understanding of the problems at hand. This will in turn, help the facilitator identify and set the objectives for the workshop. Based on the learning I have received from this assignment, I suggest the following points to serve the agenda:

1. To highlight the importance of a concrete design brief at hand. This may require revisiting the design brief, analyzing the shortcomings in the previous one, and suggest improvements that would benefit the community centre.
2. To prioritize the primary preference of sports for optimal use of the awarded grant. This should discuss if tennis should be adopted over football just because of the constraints of the granting committee or football, which is favorite among the community members.
3. To discuss cost cutting measures to be employed to ensure effective use of the grant.

All team members will first be briefed on the overall status of the project with a reminder of what we intend to achieve. Once this is done, discussion on each of the point in the agenda will begin, sequentially. Team members may have points of their own, which may or may not be included in the study. Once discussion is complete, voting on each recommendation will be required. Consensus will determine further implementation.

VM Methodology Used

I recommend using Value Engineering for Value Management since it provides a structured, tighter and efficient approach to problem solving. The VE process should comprise the following stages:

1. Information Gathering (3-4 days)
2. Functional Analysis (3-4 days)
3. Speculation (1-2 days)
4. Evaluation (2 days)
5. Development (3 days)
6. Decision Implementation (1-2 weeks)

Recommendations for Workshop

For workshop related activities, I recommend the following team members to attend:

1. Raymond Mackenzie – His input and recommendations are highly required.
2. Archie Fleming – Being the face of community centre
3. Alistair Riley – Modifications to the design can be adjusted more frequently and effectively with the presence of this individual.
4. Keith Bennet –
5. Director of Roads & Sewers – The actual input is required from this individual

Works Cited

Office of Government Commerce, London. Value Management in Construction – Case Studies. London : Crown Publishers, 2007. Case Studies.

SAVE International. Value Standard and Body of Knowledge. Dayton : Save, 2007.

Hammersley, Harry. Value Management in Construction. Warwickshire : Hammersley Value Management Limited, 2002.