Using value management to optimise project outcomes

This Issue This is a part of the Life cycle costs feature

By - , Build 101

Application of value management is becoming accepted as a key contributor to successful construction projects. But what is it?

Value management is a project planning technique used on large projects to improve outcomes and provide best value for money. It is based on a clear and logical sequence of project planning review and can be applied throughout most industries, on all types of projects. In the construction industry, it has been used on major projects with some outstanding results.

Several major New Zealand projects, currently in the planning stage, are utilising value management, including a number of hospital and commercial office block developments, tourism, retail centres and industrial complexes. One high profile public sector project that is utilising the value management method to good effect is TAKITINI, the major redevelopment of the Ohakea Air Base.

Workshop early in planning stage

The value management process is most useful during master planning and preliminary design stages – later on, it has less opportunity to make beneficial changes without causing significant disruption.

Usually, an independently facilitated value management workshop is arranged involving key stakeholders. In construction projects, this should include the project sponsor/owner, primary building occupants/users and the project design team. Contractors may also be involved. Workshops follow a five-step agenda, and usually involve the minimum of a full-day session, and often a subsequent part-day workshop follow-up session to refine and confirm recommendations.

The first step in the workshop agenda involves a shared information review, including confirmation of project objectives, appreciation of current design proposals, and identification of key issues that need resolution and assumptions that should be challenged.

The next step provides a ‘functional analysis’ to identify the most important key functional requirements, essential outcomes and deliverables, without which the project will not meet its primary objectives.

In step three, the workshop participants generate proposals that will resolve key issues to best effect, challenge and address key assumptions made and identify alternative means of delivering key functional requirements. All these have cost-effectiveness objectives.

Participants then evaluate all proposals and recommend project elements that will best deliver outcomes and provide best value for money.

The final step is to create a clear action plan and timeframes for the value management implementation.

Reaction to budget blowout

The decision to apply value management is often made as a reaction when it is realised that the anticipated cost of a project will seriously exceed the budget. If this occurs in the early design stage, the value management process can be of considerable benefit in achieving cost targets without significantly compromising key project objectives and essential functionality.

Value management can also, perhaps ideally, be used in advance of the need for financial correction, which avoids design progress disruptions and promotes team collaboration.

The process is not just about cost efficiency – it also provides a highly effective tool in situations where other major problems and issues require well-founded and considered resolution and a high level of acceptance by all stakeholders.

Alternatives found to improve functionality and reduce costs

Value management workshop outcomes are varied but usually provide robust review and are of considerable benefit. Better business decisions are aided by providing a sound basis for choice, facilitating technical and organisational innovation, generating improved team-wide communication and providing shared understanding of the main success factors.

The workshop approach encourages and assists the process of exploring best outcome alternatives for resolution of key issues and essential functional requirements. Workshop participants can freely identify opportunities for improved project functionality and propose a range of opportunities for cost reduction without impairing effectiveness. Improved value is frequently achieved through eliminating waste, avoiding duplication and unnecessary expenditure, maximising simplification and efficiency, and considering whole-of-life cost principles, sustainability and energy efficiency.

One outstanding example of the use of value management involved a major public building restoration. An essential functional requirement was to accommodate occasional large meetings, and initially, it was thought that this would need to be in an existing historic space. Alternatives to cost-intensive modification of the building were explored, and the outcome was that alternative venues could be used in special circumstances, with significant saving of project time and cost.

In another example, the planning of a major tertiary institution facility, a value management workshop identified the potential to eliminate major building space proposals, by thinking innovatively about how core business services could be delivered.

Preparation and open-minded participants needed

The success of value management is highly reliant upon adequate preparation and involvement of appropriate key stakeholders. It is essential that open-minded participants able to provide a positive contribution become involved, with an appropriate balance of participant numbers representing each key stakeholder organisation. Selection of a suitably sized and appropriate venue is important, as this can have a significant impact on the quality of participant involvement.

Workshop facilitations in New Zealand are advised to follow the principles and guidelines of the Australian Standard AS 4183: 2007 Value management.

Courses available

Value management courses are held in: Australia (through the Australian Centre for Value Management, www.acvm.com.au); the UK (through the Institute of Value Management UK); and the United States (through the Society of American Value Engineers).

In New Zealand, there are a number of value management facilitators operating in the construction industry sector, most within project management organisations.

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