Value Management & Engineering. Origins of VM & VE Used by General Electric in the USA during World War II Shortage of materials led to substitutes being.

Value Management & Value Management & EngineeringEngineering

Origins of VM & VEOrigins of VM & VE

Used by General Electric in the USA during World War II

Shortage of materials led to substitutes being used to achieve the same function

Many of these substitutions resulted in improved products - as well as better Value for Money

This led to a formal process for evaluating design options

GE called it “Value Engineering” The process was gradually refined to incorporate

“Value Management”

The Value Management The Value Management ProcessProcess

Define Project Objectives

Define Options

Evaluate Options

Maximise Value for Money

What is Value for Money?What is Value for Money?

Benefits of Value ManagementBenefits of Value Management

Optimisation of cost, with early elimination of non-viable projects

Clarified project objectives Greater confidence in the need for the project Common understanding of the project

requirements

Value Management Phase 1 Value Management Phase 1 (VM 1)(VM 1)

Undertake an early review of Project Objectives Link this with Risk Assessment study Involve Senior Management and Stakeholders Gain consensus for agreed hierarchy of

objectives Score objectives so that relative importance can

be determined

Objectives HierarchyObjectives Hierarchy

Key Objective

Prime Objective

or Reason

Sub-Objective

Example of Objectives Example of Objectives HierarchyHierarchy

Travel to Office

Arrive in time

No breakdowns

Comfort

Departure time

Convenience

Safety

Reliability

Importance WeightingImportance WeightingWeight Score Weight Score Importance

20 0.67 Arrive in time 0.25

15 0.38 Reliability

10 0.33 No breakdowns 0.12

30

10 0.25 Safety 0.25

10 0.50 Comfort 0.19

15 0.38 Convenience

40 10 0.50 Departure time 0.19

20 1.00

Travel toOffice

Value Management Phase 2 Value Management Phase 2 (VM 2)(VM 2)

Separate activity during Feasibility & Definition Stage

Consider all available Options Achieve best Value for Money by evaluating

options against the importance weightings agreed for the hierarchy of objectives

Link with Risk Analysis and Scenario Analysis to choose the optimum project configuration

Evaluating the OptionsEvaluating the Options

Each option assessed to see how well it satisfies each of the objectives (score each out of 100)

These Raw Scores are then weighted according to the Importance Weighting given to each objective

The Weighted Scores are added up to give a Total Score for each option

The Total Score for each option is then divided by the Life Cycle Cost to give a Value score

Best Value for Money is obtained by choosing the option with the highest Value score

EvaluationEvaluation

Objectives: A: Arrive in time C: Safety E: Departure timeB: No breakdowns D: Comfort

VALUE MANAGEMENT ASSESSMENT

OBJECTIVE A B C D E Score Cost Value

OPTIONImportance

weighting.25 .12 .25 .19 .19 1.00

1 Raw score 90 70 90 70 60

RAIL Weighted score 22.5 8.4 22.5 13.3 11.4 78.1 48 1.63

2 Raw score 70 90 80 100 80

CAR Weighted score 17.5 10.8 20 19 15.2 82.5 55 1.50

3 Motor Raw score 80 80 60 40 90

Bike Weighted score 20 9.6 15 7.6 17.1 69.3 45 1.54

The Value Engineering ProcessThe Value Engineering Process

Define FunctionalRequirements

ConsiderDesign Options

Evaluate Options

Maximise Value for Money

Objectives of Value Objectives of Value EngineeringEngineering

Remove the cost of unnecessary functionality

Reduced or eliminated late technical/design modifications

Reduced or eliminated abortive technical/design costs

Functional Analysis System Functional Analysis System Technique - FAST DiagramTechnique - FAST Diagram

VM / VE Critical Success VM / VE Critical Success FactorsFactors

Senior Management Full Support Accountability - so that results are not

undermined Good Facilitation Commitment to the process - belief Right Timing - early enough to be effective, not

just a last minute cost cutting exercise

Potential SavingPotential Saving

£

Duration of project design

InitialInvestigation

FeasibilityStage

PurchasingCommitment

Net saving potential

Cost reduction potential

Cost to implement changes