SBE Innovations Ltd.’s Value Management and Engineering

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Executive summary

SBE Innovations Ltd. hired this consultancy firm purposely to conduct a value management and value engineering study on construction of recreation and commercial centre.

Value management study will focus on the different sections of the project, in order to provide maximum usage at minimum cost. The parts of the establishments, the tools and equipment, will be examined and recommendations will be provided to attain minimum cost for the project.

The first part of the study focuses on value management which includes the four stages of the workshop. There are recommendations on the budget constraints of SBE Innovations, so that the amount could be maximised while reducing unnecessary costs.

The VM study determines how the functions of the construction can be simplified at the same time retaining the quality of the construction. Functional analysis in value engineering aims to reduce the cost.

Value engineering is based on the following premise:

1. Problem solving techniques that can trigger one’s imagination and creative abilities on a particular project life cycle including how and what methods can be used on the structures and objects under construction;
2. Offering ways and means to provide substitute particular materials and equipment in use that can provide the maximum benefits, at low cost but not sacrificing quality. (Male and Kelly 204)

The second part of the study focuses on value engineering. Although value management and value engineering are synonymous, they can mean two different things to a project engineer or to a VM study team. Value engineering focuses on the engineering aspects of the study. However, to gain maximum results, these two should go together, and cannot be separate.

Introduction

Providing better solutions or benefits to clients by increasing the value of a project is the foremost objective of our consultancy firm. Project participants are always concerned about project value improvement, but investment capital sometimes is not always available.

The precise scope, the different stages of the study, the life cycle, essential data and key milestones in the value management study, will be formulated. The cost, the business case, and the basis for costing are also stated in the value management process.

Value management will assemble a team to carry out the ‘valuing’ process. The team members should include the different stakeholders of the project, who will carry out a workshop to undertake the different steps in the process of value management. The VM study becomes a collaboration effort between the different stakeholders who will provide suggestions, including inputs from the different departments of the organisation and the client, to provide the greatest value for the project.

The principle of value management involves maximising value and minimising the use of resources and reducing unnecessary costs. Value management could be similar to risk management as both involve minimising risk, and enhances the chances of project success with minimum costs. (Dallas 1)

Value management evaluates every aspect and function of the construction project being undertaken. The primary objective is to minimize unnecessary costs and to see to it that all functions have their important role in the entire project. This will utilize a structural functional analysis and other problem solving tools and techniques that ensure low cost and great value for the project.

The VM study will identify the core values of the project, which are then transformed into goals and translated into actions to achieve the necessary results which SBE Innovations has envisioned beforehand. To ensure that the desired outcomes are achieved, the project committee and members of the team can interact with each other and problems are resolved at the value-goal transformation stage. (Leung, Ng, and Cheung 74)

Value Management and Value Engineering Report

Value Management study

For SBE Innovations entertainment and commercial centre, we will utilize a workshop as a central part of the study. The workshop will have the following format:

First stage: To ensure that all involved are properly briefed and that adequate preparations are made.

Here, the objectives will be set, and the expected benefits for the VM study, including the success factors, criteria for the study, and targets, will be explained to the SBE Innovations management or its representation. The workshop will go through the different phases, for instance, the initiation and information wherein the VM team will agree on the project and study objectives.

Phase 2 will identify constraints and opportunities, strengths and weaknesses. A functional analysis will be the speculative stage, until the team will arrive at recommendations.

Our team will review the project plan and assess the possibility of improving the project value. In other projects, we conduct value engineering normally at the early design stage. However, value engineering should not be ruled out at the construction stage as the contractor’s practical experience and expertise, innovative construction plan and construction methods, and improved construction logistics management can also lead to substantial cost savings, better quality, and earlier project completion.

The VM study team is composed of the following:

1. The project manager of SBE Innovations together with the project committee
   The project manager of SBE Innovations will act for the interests of SBE Innovations. The project manager will head the project committee which will be composed of heads of the different sections or departments of SBE Innovations. This group will act on the recommendations of the VM study team. The project manager and his team should be able to make major decisions on behalf of the SBE Innovations. Although this is only the initial stage of the study, the recommendations of the team will include all aspects of the study from start to finish, so that it is necessary that the management of SBE Innovations is clearly informed of every detail of the project.
   SBE Innovations management will approve the recommendations of the VM team, after the project committee will have done their part of studying the VM group’s recommendations.
2. A VM team from this consultancy firm composed of an engineer, an architect and five assistants, to carry out the task.
   The project committee composed of representatives of SBE Innovations and the team of this consultancy firm will be the main members of the VM study group.

Agenda of the VM study

1. A clear, concise, and comprehensive study of the proposed project of a recreation and commercial centre, with functional analysis of the needed functions and parts of the centre
2. Recommendations to be formulated from the functional analysis of the entertainment and commercial centre

The architectural design is not yet final here and will only be finalized once the value management group has made its recommendation on the different parts and functions of the establishment.

Tasks to be undertaken, including time/scheduling:

1. On-site inspection
   • Three to five days
   • Personnel involved – VM study team and the stakeholders of the project
2. Discussion/forum
   • All personnel who participated in the on-site inspection, and all stakeholders
   • Discussion/forum will take much of the time of the study.
3. Brainstorming
   This will occur after every inspection. Brainstorming will include different topics in the functional analysis. The study will discuss and brainstorm the different aspects of the project, the initial stages of construction, what portions will first be undertaken, the cost of every portion of the project, the entire costs, the benefits, and the prospective value of the project. Suggestions will include how the design will be made in such a way that maximum usage of the facilities will be acquired but with minimum cost to the client.

The study team will conduct the following activities:

1. We will define the value of the project and its parts, and provide basis for making decisions.
2. We will furnish clear briefs that reflect SBE Innovations’ priorities and expectations. An effective communication between our company and the stakeholders will be provided.
3. We will ensure the most cost-effective way of delivering the benefits, such as the value for money (VfM), and provide a basis for refining the requirements of business.
4. We will provide innovative design solutions with improved communications and enhanced team working.
5. We will provide a way of measuring value, taking into account non-monetary benefits and demonstrating that value for money has been achieved (Dallas 2).

The VM study will provide analysis of every function and component of the project. All the stages of the project will be meticulously studied and undertaken to ensure that each stage will provide maximum benefits for which the project is to be achieved. (Kelly, Male, and Graham 11)

The objective of the VM study is to follow SBE Innovations, who is commissioning the project. SBE Innovations will examine if the results and recommendations of the study team can provide low cost and maximum value of the project.

Value management concerns defining what SBE Innovations means by value, in terms of the expected benefits and then applying certain structured techniques, throughout the life of the project, and to maximise the delivery of the benefits, while minimising the use of resources.

Related issues

The project will be sited in a suburban location and there are no significant planning restrictions. The site and its amenities will have to be examined and studied by the VM study group so as to avoid unnecessary costs and maximize the value and the costs incurred for the project.

The capital of £9 million will be used for the construction of the buildings to house the recreation and commercial centre. A return of investment will surely be delivered within one year after the completion of the project, considering that entertainment facilities and commercial activities are an attraction to the community located in a suburban area.

The VM study group for SBE Innovations will adapt a value management process that will achieve maximum effect, which will include the following:

1. The pre-brief workshop
2. The brief workshop
3. The concept design workshop
4. The detail design workshop (Kelly and Male 83).

The pre-brief workshop will include the initial steps of the design. These four stages can correlate well with any project in the design stage, with utmost quality. (Shen and Liu 2)

In the initial stage of valuing, the budget constraints for SBE will be addressed. The £9 million seed capital will be subdivided into several stages to ensure that there will be no unnecessary costs.

An important feature in the VM study is to determine the function of each stage or ‘portion’ of the construction. By determining the function and its usage to the entire building or construction, the VM study group can reduce the cost and recommend to SBE Innovations the necessary functions that should be undertaken in the construction activities.

Total economic management of projects involves considering both cost and value. Value management occurs much earlier in a project’s life-cycle whilst cost management occurs in the later stages. (Kelly and Male 72)

The cost aspects of the service can be ascertained by the use of traditional quantity surveying services. The assessment of worth and its relationship to cost can only be ascertained with reference back to the views of the client or end-user. Hence, value and its related term worth encompass subjective aspects associated with cost.

On the other hand, cost management involves traditional ways of surveying skills, reducing costs, and using proven procedures. Here, the team would involve brainstorming of ideas and creativity techniques to optimise their insight and expertise of arriving at valuable solutions. Cost management does not mean introducing stages to the project, but will only simplify some of the functions.

The following processes will be executed by the VM study team:

1. Careful analysis and identification of project needs and scope
   • A clear project definition and scope analysis will be provided.
2. Thorough planning of the project and subsequent work
   Effective planning ensures that there is maximum cost efficiency with no unnecessary steps or wasted effort.
3. Identification of key functions so that opportunities can be enhanced.
   The project team’s goal is to enhance positive features of the project while keeping control of costs. Carefully weighing the cost/benefit analysis for a project is the key to enhancing value.
4. Development of alternatives for exploiting the identified opportunities for improving project value.
   Multiple paths may be available for enhancing value, some of which are more cost effective than others.
5. Evaluation of alternatives, and development of proposals and action plans
   Performing a clear trade-off analysis can help create alternatives and select the best choices for improving value.
6. Use of a performance monitoring system for tracking project value
   The project team must have the means to accurately monitor the project, gain timely and actionable information, and make “on-line” decisions and choices among alternatives.
7. Ensure a free flow of communication between the departments and stakeholders
   To effectively manage value, a cross-functional mindset must prevail throughout the organization, so that ideas, alternatives, and creative solutions have the widest possible arena for exploitation. (Venkataraman and Pinto 9)

At the beginning of this study, we will provide a way of exploring SBE Innovations’ needs by addressing inconsistencies and expressing these in a language that can be easily understood.

Proposals for a follow up Value Engineering study

It has been a traditional practice of our consultancy firm to use value engineering as a definitive tool to improve the value of a particular project system.

Value management applied to construction is known as value engineering, although value management and value engineering are sometimes interchanged. (Younker, qtd. in Mao, Zhang, and AbouRizk 417)

Value engineering has some positive results in the project, i.e. without compromising the original functions. We have used value engineering as a construction tool to enhance the best benefits that could be achieved in engineering work. This process of function analysis produced cheaper overall products without reducing quality. It can be used as a means both of removing unnecessary cost from products and of improving design.

The diagram in Figure 1 shows how the value engineering team will conduct the process. The pre-workshop will gather information. The workshop proper will initial design, modifications, trimming, and evaluation, while the post workshop involves development and presentation to the SBE Innovations project committee and management.

The VE study will be applied at a time when construction of the two facilities, the entertainment and commercial centres are already in full swing. The different areas that should be given focus are the areas where a great number of people are expected to flock.

The VE study group will be composed of the project manager and the project committee to represent the client, the VE study team representing this consultancy firm. Engineers from the project committee and this consultancy firm will see to it that the value engineering will apply value analysis on the project.

Tools to be used

1. Value analysis
   We can use value analysis as a method of extracting the fundamental functions expected by the SBE Innovations project.
   Functional analysis is an approach to lower the costs of the functions involved in the project. The term ‘lowest’ refers to the price or monetary consideration for the delivery of the project, or in other words, the price of the project.
   There are instances in the entertainment and commercial centre that a duplication may occur in the project. This can be avoided and minimized, but the construction will not be altered. Some construction materials can be reduced without sacrificing quality.
2. FAST diagram
   Functional analysis system technique (FAST) diagram will define the ‘value map’ of the project. (Cariaga, El-Diraby, and Osman 761)
   It further determines the objectives and functions of the design of the commercial and entertainment complex. The analysis will be conducted on the engineering aspect of different functions of the project. The costs will also be enumerated here.
3. Quality function deployment (QFD)
   This method establishes a particular matrix that defines the value of the different options available for a particular function. SBE Innovations will select and decide which options can suit best to their needs and budget requirement. This consultancy firm will recommend the best options.

Our framework therefore can have the ability to provide the requirements of SBE Innovations through the use of the functional analysis technique, design options (which will answer the ‘HOWs’ of the project through the use of QFD, and help SBE select the best alternative.

The process of functional analysis on the entertainment and commercial complex will be executed in such a way that goals and objectives of SBE Innovations are set in the different functions of the project. (El-Bibany, Bechtel, Branch, and Ault 171)

Recommendations of the VE study team

1. Functions for both the entertainment and commercial – some value-adding functions can be incorporated in the complex that should include a recreation area which is adjacent to the commercial complex. These two must not be separated in order to reduce the cost of construction and adding value to the commercial site.
2. Active management – There should be an active facility management.
3. Areas to be added include a site where morning and afternoon activities for the community are enhanced.

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