A Value-Based Approach to Revolutionize Construction Projects

In an era where industries strive to deliver value-added products and services, the construction industry lags behind with outdated practices. The traditional process of translating needs into requirements, then creating drawings and specifications, has barely evolved since the last century. These practices, conceived in a less complex business environment, no longer meet the changing expectations of modern organizations. The construction industry often justifies its adherence to these outdated practices by citing the fragmented nature of the industry and the rigid legal framework. However, there is a growing need to improve and innovate. The objective of this article is to shed light on initiatives that aim to transform the industry by adopting a value-based approach to managing construction projects.

The Need for Change

The construction industry has traditionally focused on cost-based procurement processes, where choices are made solely based on the lowest bid. This approach hinders innovation and fails to prioritize meeting the client's requirements and expectations. In construction, value is best described as fulfilling clients' requirements while minimizing wasteful practices. However, the traditional approach to construction projects often prioritizes cost reduction over meeting user expectations and ensuring client satisfaction.

One of the main challenges in the construction industry is the disconnect between clients and consultants. The consultants, not the clients, often define the requirements. This disconnect leads to a gap between the initial client requirements and the final project outcome. Additionally, the technical jargon used in defining requirements often makes it difficult for clients to relate them to their business needs. The lack of systematic approaches to defining functional and technical requirements further exacerbates the problem.

Managing Scope with a Value Perspective

Value, in the context of construction projects, should be defined as meeting clients' requirements with minimal waste. However, the traditional approach to construction projects often prioritizes cost reduction over meeting user expectations and ensuring client satisfaction. The cost-based procurement process used in construction often places the responsibility of defining and delivering the end result on the producers (consultants and contractors), with cost being the primary performance measurement. This approach leads to a disconnect between clients' requirements and the final project outcome.

To address this gap, a shift is required towards a value-based approach that prioritizes client requirements and focuses on delivering the desired outcomes. Value Management (VM) and Value Engineering (VE) are disciplines that can contribute to this shift. VM focuses on achieving identified functions at minimum cost, while VE aims to deliver the required functions at the lowest cost without compromising quality and performance.

The British Governments Paradigm Shift

The British government's initiative to transform the construction industry involved a multi-pronged strategy focused on developing a continuous improvement culture. The strategy aimed to increase clients' ability to plan and manage construction projects, change the procurement process from confrontation to collaboration, and provide industry support for self-improvement.

To increase clients' capabilities, the government introduced tools like the "client charter" to help real estate consumers measure project readiness and build a business case and project charter. Within the public service, the Office of Government Commerce (OGC) played a crucial role in transforming the public service into an exemplary client. The OGC implemented standardization across departments, emphasized organizational maturity and total quality improvement, and focused on measuring performance and meeting targets.

The British government also focused on changing the procurement process from a cost-based to a value-based approach. By making clients the owners of requirements and allowing producers to find and deliver the best value solution, the government aimed to maximize value generation and improve efficiency and effectiveness.

Engineering a Value-Based Construction Paradigm in Canada

In Canada, the National Steering Committee for Innovation in Construction recognized cost-based procurement as a roadblock to innovation. A research project proposed using disciplines derived from System Engineering (SE), such as Requirement Management, to enable value-based procurement. The Department of National Defence (DND) in Canada had successfully implemented SE practices, particularly in project requirement management. The DND's approach involved tracking requirements, implementing configuration management, and using off-the-shelf software tools to streamline the process.

The research project aimed to enhance the existing Project Delivery System (PDS) at Public Works and Government Services, Canada (PWGSC) by applying requirement and configuration management principles. The goal was to ensure that all development activities focused on delivering the desired solution and meeting client expectations.

Conclusion

The construction industry must shift from a cost-based to a value-based approach to meet the evolving expectations of modern organizations. The British government's transformation plan has demonstrated the benefits of investing in a value-based strategy for managing construction projects. By prioritizing client requirements, improving procurement processes, and promoting collaboration, the industry can deliver better-designed, more efficient, and cost-effective buildings.

To successfully implement a value-based approach, clients must become the owners of their requirements and develop in-house capabilities to effectively define and manage them. This shift requires increased abilities in organizational project management and the adoption of practices derived from System Engineering (SE).

By adopting a value-based approach and embracing practices like requirement and configuration management, the construction industry can revolutionize project delivery and achieve better value for money. The key to success lies in the collaboration between clients, consultants, and industry stakeholders to create a culture of continuous improvement and innovation.