VALUE MANAGEMENT IN CONSTRUCTION PROJECTS

Ever heard of the following words; Value Management, Value Engineering and Value for Money? This might sound confusing as there is a high possibility of you defining them the same way.

Value Management (VM) maximizes project value through performance, functionality, and cost optimization. It analyzes functions, components, and costs to enhance value throughout the project lifecycle, considering long-term client requirements.

Value Engineering (VE) reduces costs while maintaining or improving functionality and quality. It analyzes project components to identify alternatives that offer enhanced value at lower costs. VE is a technique within Value Management.

Value for Money (VfM) aims for optimal performance, quality, and cost-effectiveness. It considers whole-life costs, including maintenance, to allocate resources efficiently and achieve desired benefits. VfM encompasses both Value Management and Value Engineering

To link the three terminologies we can say that, Value Management is the overarching approach that encompasses both Value Engineering as a specific technique and the broader concept of Value for Money. Value Engineering focuses on cost reduction while maintaining functionality, while Value for Money considers the overall value achieved throughout the project's lifecycle.

Value Management (VM) is specifically organized to identify and eliminate unnecessary costs, although it should not be interpreted as solely a cost-cutting exercise. This might sound disconcerting but the aim is to optimize value for money by reviewing costs, quality and function. There is no guarantee, therefore, that the initial costs will be cut, but a more efficient project should almost certainly emerge. Value management is an organized effort to analyze functions, value, costs and sustainability.

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Brief History of Development of Value Management

The process developed in the industrial community of the United States and an early anecdote outlines its origins. The story goes that in the early 1950s Lawrence Miles, a purchasing engineer of the General Electric Company during the Second World War, was assigned to procure materials to expand the production of the B24 bomber from 50 to 1000 aircraft per week.

At the time there was a shortage of materials and consequently, he initially had problems sourcing supplies. However, Miles discovered many substitute components that were not only cheaper but better than the original products. Hence the idea of value management was born and was associated with cost cutting.

Value Management gained traction in the 1960s as construction costs rose. Public agencies and private organizations implemented value engineering programs to control expenses and enhance outcomes. The Construction Specifications Institute (CSI) played a crucial role in promoting value engineering. In the 1970s, industry associations like the American Society of Civil Engineers (ASCE) and the Society of American Value Engineers (SAVE) developed guidelines and standards for Value Management.

It gained international recognition in the 1980s and 1990s, becoming a standard practice. Governments and construction companies mandated its use in public projects. Value Management integrated with Lean Construction and BIM, emphasizing waste reduction and improved decision-making. It continues to evolve with new technologies like AI and data analytics, remaining critical for delivering projects that maximize value and resource utilization.

In the present day, Value Management has expanded its scope and is closely linked to achieving value for money. This involves optimizing the overall costs of a project throughout its lifespan to fulfil the client's long-term needs (HM Treasury 2006: 7).

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The usual way value management is implemented is through structured workshops, led by an independent facilitator, to take account of design, construction, operation and management issues. In short, value management workshops are multi-disciplined. The aim is to review the performance and costs of a project throughout its life cycle. The prototype value management workshops were organized to take place over several days (often up to one week), but recently the trend has been for these events to be compressed into a far shorter time frame. Research evidence suggests that half-day sessions are becoming the norm, and in certain circumstances, this is even reduced to a couple of hours.

In theory, nothing is stopping a value management review from taking place at any stage of the process. Indeed, the theoretical literature even recommends that a kind of post-occupancy review should be carried out to document the lessons learnt and provide feedback. In practice, however, it has been found that the process rarely proceeds beyond the early stages, as although the value of post-completion exercises is accepted, these are rarely carried out (Ellis et al. 2005: 486).

For effective value management, early involvement is key. Participants agree that joining the project cycle at its outset allows for clear decision-making. For instance, a workshop examining the business case helps stakeholders understand the project, enhancing efficiency and value for money. Holding the event before the tender stage enables discussing options, seeking better solutions, and reducing costs. In exceptional cases, multiple value management events can be scheduled during the project's progress or spread over several years.

In some cases, the value management exercise also includes the assessment of non-monetary benefits, such as travelling time and reducing the impact on nesting eagles, alongside the assessment of conventional monetary benefits such as construction and maintenance costs.

?Given the frequent recognition that ‘value’ is created on drawing boards not on building sites, and that designers and architects have found that conversations about how things are constructed can throw up many possibilities, value engineering could easily become commonplace on public sector projects in our country in the next decade. Finally, it should not be forgotten that value management equally provides an excellent opportunity to build a competent team and achieve effective collaboration between clients and contractors. ?

VALUE MANAGEMENT PARTICIPANTS

Value Study Director: Their primary function is to oversee and coordinate the entire value management study. They are responsible for initiating the value management process, forming the value management team, and defining the study objectives and scope.

Value Manager: This is the facilitator and leader of the value management study. Their function involves guiding the value management team through the process, from information gathering to idea generation and evaluation. The Value Manager encourages creative thinking, ensures all stakeholders are actively engaged, and fosters a collaborative environment. They analyze the gathered data, coordinate brainstorming sessions, and lead discussions to identify value-improvement opportunities.

Design Team: Their function involves providing technical expertise and knowledge of the project's design and construction requirements. During the value management study, the Design Team presents the project's current design and specifications, highlighting areas that might potentially improve value. They actively participate in brainstorming sessions, exploring alternative design solutions that can enhance functionality and reduce costs while maintaining project quality.

Quantity Surveyor: They are responsible for providing detailed cost data and analysis of the project. During the value management study, the Quantity Surveyor assists in assessing the cost implications of proposed value-improvement ideas.

Client: This is the project owner. Their function involves defining project objectives, requirements, and priorities. During the value management study, the Client articulates their expectations and provides feedback on proposed value-improvement ideas.

Overall, the effective collaboration and participation of all these value management participants are essential for successful value management practice in construction projects. Their diverse expertise and perspectives contribute to the identification of valuable opportunities, leading to optimized project outcomes, improved efficiency, and enhanced cost-effectiveness

APPROACHES IN VALUE MANAGEMENT IN CONSTRUCTION PROJECTS:

Value management approaches refer to the overall strategies and methodologies used to implement value management principles in construction projects. Different approaches may prioritize various aspects, such as cost optimization, sustainability, innovation, or collaborative decision-making. Some common value management approaches include;

Traditional Value Engineering (VE): The classic approach involves analyzing the project's design and specifications to identify cost-saving opportunities without compromising functionality or quality. It focuses on "value engineering change proposals" to achieve the desired project objectives within budgetary constraints.

Value Analysis (VA): It concentrates on studying the functions of various project elements and exploring alternative solutions to optimize performance and minimize costs. Value analysis aims to identify the best value alternatives without considering the existing design.

Value Planning (VP): This is a proactive approach that incorporates value management principles from the project's inception. It ensures that value is maximized throughout the entire project life cycle, emphasizing collaboration among all stakeholders to achieve better outcomes.

Value Innovation (VI): This is a more strategic approach that aims to create new value propositions for construction projects. It encourages disruptive thinking, challenging industry norms, and exploring entirely new ways to deliver higher value to clients and end-users.

Function-Based Value Management (FBVM): This approach emphasizes the understanding of project functions and their relationships to achieve the best value.

Collaborative Value Management (CVM): CVM emphasizes the active involvement and collaboration of all project stakeholders. It fosters open communication, creative thinking, and shared decision-making to achieve collective value objectives.

Sustainable Value Management (SVM): SVM integrates environmental, social, and economic sustainability principles into value management practices. It aims to optimize the project's sustainability performance while minimizing resource consumption and environmental impacts.

Agile Value Management: This approach adapts value management processes to the dynamic nature of construction projects. It involves iterative evaluations, quick decision-making, and frequent value assessments to accommodate changes and uncertainties throughout the project's lifecycle.

Risk-Based Value Management (RBVM): RBVM focuses on identifying and mitigating risks that may impact the value of the construction project. By addressing potential risks early on, the approach seeks to protect the value and avoid costly deviations during project execution.

Lean Value Management (LVM): LVM applies lean principles to value management, aiming to eliminate waste, optimize processes, and enhance value delivery. It focuses on continuous improvement and efficiency to maximize value while minimizing costs and resources.

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VARIOUS TYPES OF VALUE MANAGEMENT TOOLS USED IN CONSTRUCTION PROJECTS:

Value management tools are specific techniques, methods, and instruments used during the value management process to gather information, analyze data, generate ideas, and make decisions. These tools are used as aids to facilitate the value management process and are selected based on the project's objectives, complexity, and the preferences of the value management team. They include;

Function Analysis System Technique (FAST): Helps break down the project's functions and identify opportunities for value improvement.

Cost-Benefit Analysis: This involves the evaluation of the potential benefits of implementing value management ideas against their associated costs.

Life-Cycle Costing: This includes assessing the long-term costs and benefits of various alternatives throughout the project's life cycle.

Value Management Matrix: This is a tool used to prioritize and assess the feasibility of value-improvement ideas based on their impact and ease of implementation.

Benchmarking: This involves a comparison of the project's performance and costs with similar projects to identify areas for improvement.

Value Management Workshops: ?These are interactive sessions where stakeholders analyze the project and propose value-improvement ideas.

Function-Cost Analysis: Analyzes the cost of project functions to identify opportunities for cost reduction.

Value Management Software: Computer-based tools that aid in data analysis, cost estimation, and project optimization.

SWOT Analysis: This tool identifies the project's strengths, weaknesses, opportunities, and threats, aiding in value management decision-making.

Function-Cost Outlines: This summarizes the functional requirements and associated costs for each component of the project.

Performance Metrics: Quantitative measures used to track the project's progress and assess the effectiveness of value management initiatives.

Interviewing and Surveys: Gather input from stakeholders to understand their needs and expectations for value improvement.

Risk Analysis: Assesses potential risks associated with implementing value-improvement ideas.

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The main benefits of a value management exercise include:

Cost Optimization: Value management involves a detailed analysis of project components, looking for cost-saving opportunities without compromising quality or functionality. By examining alternatives and assessing their cost-effectiveness, value management ensures that resources are allocated efficiently, leading to reduced expenses and increased cost savings.

Improved Efficiency: Value management focuses on streamlining processes and eliminating wasteful practices. Systematic evaluations and collaboration, help identify bottlenecks and inefficiencies, leading to optimized workflows and improved project productivity.

Enhanced Functionality: By prioritizing the core functions of project elements, value management ensures that design solutions meet the project's objectives effectively. This approach prevents the inclusion of unnecessary features or complexity, resulting in more purposeful and functional outcomes.

Innovation and Creativity: Value management encourages stakeholders to think creatively and challenge conventional practices. This fosters innovative solutions, promotes new ideas, and facilitates the exploration of cutting-edge technologies or design approaches.

Collaboration and Communication: Value management requires active involvement from all stakeholders, including clients, designers, engineers, and contractors. This collaborative approach improves communication, enhances the understanding, and aligns everyone's efforts toward shared project goals.

Reduced Project Risks: Value management involves proactive risk assessment and mitigation strategies. Addressing potential risks early in the planning phase minimizes the likelihood of unforeseen issues, delays, or cost overruns during project execution.

Client Satisfaction: Value management ensures that the project's outcomes align with the client's needs and expectations. By delivering optimal value within budgetary constraints, value management enhances client satisfaction and fosters positive relationships.

Sustainable Practices: Integrating sustainability principles into value management helps identify eco-friendly and socially responsible solutions. This promotes environmentally conscious design, reduces environmental impacts, and contributes to a more sustainable built environment.

Continuous Improvement: Value management instils a culture of continuous improvement among project stakeholders. This mindset encourages ongoing evaluations, refinements, and optimization throughout the project's life cycle, driving better project outcomes.

Budget Compliance: By systematically evaluating cost-saving options and adhering to budgetary constraints, value management ensures that the project stays within financial limits. This mitigates the risk of budget overruns and potential financial strain on the project.

Flexibility and Adaptability: Value management encourages iterative assessments and decision-making, allowing projects to adapt to changing circumstances, new information, or evolving client requirements. This flexibility increases the project's responsiveness to dynamic situations.

Risk Reduction: Early identification and mitigation of risks during value management contribute to minimizing project uncertainties and potential issues. Addressing risks at an early stage helps avoid costly changes or rework later in the project, enhancing overall project success.

In summary, value management brings numerous advantages to construction projects, ranging from cost optimization and improved efficiency to enhanced functionality, innovation, and sustainability. By promoting collaboration, risk reduction, and client satisfaction, value management ensures that projects achieve their objectives effectively and deliver maximum value to all stakeholders involved.

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