Value Management as a tool to better manage construction projects
View(s):The need for value management(VM) on construction projects used to solve problems and identify and eliminate unwanted costs, while improving function and quality has become more important than ever, experts say.
Construction projects have been the subject of frequent reviews and reports and the need for adversarial nature of operation and contractual relationships and the need to move away from the cheapest option towards the ‘best value’ option have got those in the construction industry gearing towards Value Engineering (VE), Prof. Chitra Weddikkara, Chartered Architect and Chartered Quantity Surveyor told the Business Times.
“The principles and methodology of value management are not only necessary in construction projects to achieve better value from the resources, but also to deliver ancillary benefits such as better communication, improved team-working, better alignment of the supply chain and a better understanding of project objectives.”
The application of value management in construction projects will largely depend on the value of a particular project and the level of the risks involved, she added noting that for strategic – critical projects (high risk, high value), a full value management process is almost always justified. For strategic – security projects (high risk, low value) and tactical – profit (low risk, high value) projects, the necessity of value management will depend upon the merits of each project. For tactical – acquisition projects (low risk, low value) a value management exercise may not be necessary, she said.
Value management can be a very low-cost, high-benefit exercise. “When integrated into the project management methodology early in the project life cycle, the cost may become almost negligible because of the reduced need for subsequent reviews and opportunities for substituting value management for some of the routine appraisals and quality audits that are always necessary,” Prof. Weddikkara said.
She added that benefits of a value management review are often perceived in terms of improved quality and reduced cost. “However, the ‘invisible’ benefits can be just as, or more valuable. Consensus and mutual understanding between stakeholders, clear objectives, reduced risk of changes in scope and improved communications will help ensure that the project meets the objectives of the client and is delivered within the relevant parameters.”
To achieve maximum benefit, value management should be carried out from the very early stages of a project, not simply introduced when problems occur, she noted adding that the process of value management includes value engineering, which is a more systematic approach to ensuring specific functions are satisfied to the required standard for the least cost. It assesses a range of possible solutions against the values required by the client.
Value management exercises can also be used to recover cost divergence (costs diverging from the budget) that may become apparent when design reports are prepared. Under these circumstances, the client may have to choose priorities, or decide to increase the budget.
The client and the full consultant team should take part, along with the contractor, construction manager or management contractor if appointed.
There are costs associated with value engineering; therefore, it is probably impractical to use it on every project, Prof. Weddikkara added. “However, it is good idea to apply value engineering if it will usually result in costs saving in the order of 5 to 10 per cent, or in many cases a higher percentage, applying value engineering to high cost projects is almost always cost effective.” A value engineering study affords an opportunity to get expert second opinions, she said noting that using value engineering, team members who are independent from the original design team for very technically complex project, getting a second opinion is almost always an excellent idea. “When an organisation is involved with repetitive type construction project those which they tend to build many times in various locations, the utilisation of value engineering is usually very cost effective because the cost reduction ideas can be incorporated in each of the latter project of the same type.”
The old saying ‘haste makes waste’ is especially true with regard to construction projects, she said noting that whilst value engineering is an added requirement which can tend to add to projects programmes, this time can be minimised if the value engineering activity is properly coordinated with the design programmes.
VM methodology can increase customer satisfaction and add value to an organisation’s investment in any business or economic setting, she added. “Practitioners apply VM methodology to products and in industries such as corporations and manufacturing, construction, transportation, government, health care and environmental engineering. Further from the research they found out that VM methodology easily produces savings of 30 per cent of the estimated cost for manufacturing a product, constructing a project or providing a service. The return on investment that public and private organisations derive from implementing VM programmes averages 10 to 1. That is, for every dollar invested in a VM study, including participants’ time and implementation costs, 10 dollars in net saving results.”