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Value management and value engineering for any project

Paul Sancandi
October 23, 2012

There is generally confusion between the terms ‘value management’ and ‘value engineering’; this article attempts to clarify the distinction between the two concepts as well as suggesting the optimum times to apply each of the concepts and how the most can be achieved out of the process for the benefit of the project.

Value management

All clients would like to achieve real value in return for their investment. The specific criteria of value, however, depend upon the client and for a project to be a success, these criteria need to be properly established by a well-defined and recorded process.

John Connaughton and Stuart Green, in their 1996 book Value Management in Construction:
A Client’s Guide
, defined value management as: “a structured approach to defining what value means to a client in meeting a perceived need by establishing a clear consensus about the project objectives and how they can be achieved.”

Another general definition of value management is: “a systematic review of essential project functions or performance, focused on achieving the best value for the money. It takes an overall view of the project function including capital and recurrent costs.”

Colin Gray and Will Hughes (Implementing Value through Lean Design Management, 2001) suggest the following approach to value management. The introduction of value management into a project is ideally through a facilitated value management workshop either at the business case stage (feasibility) or at the outline design stage (concept design) or both. Value management provides analytical tools and recording techniques that greatly assist clients and the design team to articulate and prioritise their ideas.

Value management should go through the following three stage process:

  1. Developing a value hierarchy. The value hierarchy is a method of taking primary project objectives and breaking these down into their own sub-objectives. Each sub-objective is a means to achieving the main objective.
  2. Develop the value tree. This involves a process of weighting the objectives and sub-objectives of the value hierarchy that produces an ordering of priorities between all the conflicting demands in the project. The weightings are arrived at by group consensus during the workshop.
  3. Develop a decision matrix. Once the weightings to the various project objectives and sub-objectives have been set then it is necessary to decide which of the options will provide the best value when set against the objectives, that is, how well they meet the targets that have been set.

Many of the assessments resulting from the value management process will be subjective, but the essential characteristic of value management is the fact that the decisions are a consensus view of everyone involved in the process. The analytical techniques used in value management enable the client briefing document to be used throughout the project lifecycle as the clear basis of all judgements on the values of the various issues involved.

Value engineering

Value engineering is defined as: “a systematic approach that seeks to enhance value by eliminating unnecessary cost while maintain function” (Value Engineering by Stuart Green and Peter Popper, 1990).

The greatest return from a value engineering exercise is during the schematic design or design development stage prior to proceeding into the detailed design stage. When value engineering occurs later it simply becomes a cost cutting exercise that is generally then undertaken in a hostile environment thatprevents it from achieving the desired objective.

Value engineering is normally undertaken in a facilitated workshop environment covering typically five stages as follows:

  1. Information gathering
  2. Speculation or brainstorming
  3. Evaluation
  4. Development
  5. Presentation.

Subject to the complexity of the project, workshops can vary from the classic 40-hour (5-day) workshop to a one-day intensive workshop.

Value engineering should not be assumed to be what good planners and designers do as a matter of routine; it is in fact not part of the typical design development process. A value engineering exercise is more rigorous than the typical project review: it should seek to bring together an impartial team of professionals with the common purpose of improving the project design.

Similarly, a value engineering exercise is not a cost cutting approach. In a proper value engineering exercise, cost cutting is achieved by making a design more efficient without reducing essential performance, reliability, or maintainability. Conversely, traditional cost cutting exercises will focus on material substitutions, and reducing or eliminating specific elements.  This approach frequently results in reduced quality or performance.

Performing a value engineering exercise is also not the same as a typical quality assurance review. The quality assurance review will answer questions such as: does the design meet code and standards requirements? The value engineering exercise will answer questions such as: what else will achieve the same function for a lower cost?

What has been your experience with value engineering in projects?

The above question was recently raised in an online survey to a number of professionals in the construction sector in the context of the following possible responses:
a) Saved significant cost and added value—do again
b) Attended workshop but no real action as a result
c) Not facilitated properly—limited value
d) Done too late in the design process
e) Design team not enthusiastic about process
f) Best undertaken with peer reviewers present
g) Other?

In summary, the responses from these professionals across all sectors of the construction sector indicated that generally the experience with respect to value engineering had been most if not all the above response scenarios.

Understanding the difference between value management and value engineering and when and how to best employ these two principles on projects is essential, along with proper facilitation of workshops and getting buy in and support from all stakeholders and the design team. Preparing formal reports, obtaining approval to incorporate the recommendations and then monitoring implementation of the recommendations into the design will ensure the maximum benefit of both the value management and value engineering exercises is achieved.

Paul Sancandi
Paul Sancandi is a senior design manager with InfraSol Group. He has a technical background as a structural engineer, owned an architectural and engineering practice and has worked in Australia, Asia and the Middle East on a wide range of small to mega projects over the past 32 years.
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7 thoughts on “Value management and value engineering for any project

  1. I see Value Management (VM) as a broad category – much broader than Value Engineering (VE). To me, it is not really fair to compare the two.

    VM is a process used throughout the project – from scope through commissioning. VE is an event used to audit the design/process and develop alternatives (not always cost reductions) early in the design process.

    In addition to those processes you have listed, to me VM may also encompass but is not limited to :
    + Pareto Analysis – the 20/80 rule.
    + Cost benefit analysis.
    + SWAT Analysis – An identification of strengths, weaknesses, opportunities and threats.
    + FAST Analysis – Identification of functions and a focus on client needs and/or wants.
    + Risk Analysis
    + Value Analysis
    + Life Cycle Cost Analysis

  2. Having read the threads of conversation which respond to your initial article, I have sympathy with the points that Dominic raises. In the tendering process there is rarely enough time to correctly carry out a true value engineering exercise. However more often than not overdesign has already been built into the project at this stage by Clients consultants who adopt a belt and braces approach knowing that the Client only wants the cost to reduce, not increase. This generally leads to an exercise of finding known “value engineering mins” within the project. I think Geoffs comment is accurate when he suggests that Value Engineering is of higher quality when the process is carried out jointly with the Client and his team.

  3. dear sir,
    after quoting a job and submitting to client, may i ask the trades who already gave me a price according to designer to submit a value engineering? this is just to be ahead of the game.

    1. Some free contract management advice: you can ask, but they might charge; if you want the trades to do anything, it must be in the contract.

  4. Excellent summary on these distinct disciplines. This is a must read. My most educated and experienced collegues misuse these terms consistently. Everyone in this industry must be aware of the nuance of the difference.

  5. Can I know the source of the definition below?

    Another general definition of value management is: “a systematic review of essential project functions or performance, focused on achieving the best value for the money. It takes an overall view of the project function including capital and recurrent costs.

  6. Its worth commenting, that VM is such a valuable process that I’ve used it to benefit clients undertaking organisational change, strategy reviews and applied to to a value-based approach to risk. I also used the VM framework in human services program development, applying it to the ‘program logic model’ development for a number of large social programs.

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