Value Management in Design and Construction

John Kelly, Steven Male

• Publisher: Routledge
• Year: 2003
• ISBN:
  9781135833640
• Edition: 1
• Topic: Architecture
• Subtopic: Architecture General

This book looks at the transfer and further development of value management procedures, as practised in North America, in a United Kingdom and Commonwealth construction industry context.

PART ONE
THE DEVELOPMENT AND PRINCIPLES OF NORTH AMERICAN VALUE ENGINEERING

CHAPTER 1
INTRODUCTION TO VALUE MANAGEMENT

1.1
A DEFINITION OF VALUE MANAGEMENT

Value management is the name given to a service in which the sponsor of a project, the client, transmits a clear statement of the value requirements of that project to the project designers. Once realized, the client’s value system can be used to audit:

• The client’s use of a facility in relation to its corporate strategy;
• The project brief;
• The emerging design;
• The production method.

The characteristics which separate value management from an accounting vision of an audit are:

• A positive and pro-active approach through the use of a multi-disciplinary team-oriented creative process to generate alternatives to the existing solution;
• The use of a structured systems method;
• The relationship of function with value.

Value management should not be seen as a conflict-oriented design review, cost reduction or standardization exercise.

Maximum value as defined by Burt (1975) is obtained from a required level of quality as least cost, the highest level of quality for a given cost or from an optimum compromise between the two. Value management is therefore the management of a process to obtain maximum value on a scale determined by the client. A number of techniques are identified as being useful in this enterprise but none are compulsory.

A useful one sentence definition of value management is:

a service which maximizes the functional value of a project by managing its development from concept to completion and commissioning through the audit (examination) of all decisions against a value system determined by the client.

1.2
BACKGROUND TO VALUE MANAGEMENT

A number of authors, Markus (1967), Broadbent (1973), Jones (1981) and Cross (1989) have discussed design method in the context of building design. They have investigated both formalized and philosophical approaches to the provision of maximum value. However, in North America, coincidentally over the same period of time, a technique originally developed for manufacturing was being refined and applied to construction. This North American technique is marketed under the name ‘value engineering’.

This book describes and reviews North American value engineering as it is represented by both books and practice. The better parts from this review are integrated with established design method and management techniques into a system for full value management in a British context. The authors have adopted the term ‘value management’ rather than the term Value engineering’ since the former is widely used throughout Europe. It has also been adopted by the European Community in its SPRINT programme (Strategic Programme for Innovation and Technology Transfer) as an important business procedure. Furthermore, the term value management encapsulates a broader impetus for the management of ‘Value’ for the client, commencing deep within the client organization and related to its on-going strategic management process, of which the contracted-out design and construction services provided by the industry are only one contributing part.

1.3
VALUE MANAGEMENT AND THE CHANGING BRITISH CONSTRUCTION SCENE

This section briefly reviews the changing construction scene in the UK in order to set value management within this context. A number of forces have been at work in the past decade that have resulted in major changes in the way that the construction industry now operates and will operate in the future. These forces can best be summarized as:

• A stable government committed to the philosophy and ideology of the ‘market’;
• A macro-economic climate that has changed from recession to boom to recession over the decade;
• The introduction of competitive fee bidding for construction consultants’ services;
• The emergence of a diversity of procurement routes for projects;
• Clients that have become more demanding and knowledgeable of the construction process;
• The emergence of the European dimension with the establishment of the Single European Market from 1993 onwards;
• A re-definition of roles in the industry;
• A move towards single-point responsibility and management of the total construction process.

A re-definition of roles in the industry

A number of major reports have been issued within the last ten years that have suggested the redefinition of roles that are now occurring in the industry (MAC, 1985; NEDO, 1988; PRS, 1987; RICS, 1991). Also, there is no doubt that competitive fee bidding has accelerated the rate of change when coupled with the other forces at play in the industry. There are three major groupings that are now changing the manner in which they are responding within the industry, namely, construction firms, the surveying and design professions.

The large construction companies are diversifying their service base and involvement throughout the construction process. They have moved increasingly towards offering services directly for the client and have also become involved in property development. They are using their management skills to manage ‘the process’. The surveyors in private practice, especially the large practices, are diversifying their service base away from traditional roles towards managing the total process. There is an increasing number of surveyors now working in client organizations for ‘knowledgeable clients’, who are also able to have a greater input into the total management of ‘the process’. Finally the designers, the architects and engineering consultants, are increasingly finding their management/ supervisory roles under threat, primarily from the surveyors and construction firms, and this has been exacerbated by the alternative procurement options which are now allowing different administrative and contractual choices to be exercised for managing design and construction. In addition, the traditional roles of the architectural and engineering consultants have stressed a design orientation and this is now being procured as the primary service either as a function of client or consultant choice. Furthermore, in a complimentary fashion to the surveyors, the design professions are also working in greater numbers in-house for client organizations and assisting them in managing ‘the process’.

This re-definition of roles, primarily in the larger organizations within construction, has resulted in a convergence of different types of organization towards offering a service to manage the total process for the client in order to gain a competitive edge in the market place. This has resulted in the notion of providing ‘added value’ in service provision coupled with a diversification of commercial risk away from a narrowly defined technical core business. The result will be increasing competition among larger firms—the construction companies and consultancies—to manage the total process and a restructuring of the industry that will create pressures on the medium and small sized technically based firms.

This re-definition of roles is also creating the requirement for a new skill base within the industry for managing the total process.

The new skill base

The move towards managing the total process for the client either in-house or by the larger organizations in the industry requires two distinct but interrelated sets of skills—skills of ‘strategy’ and skills of ‘implementation’. This skill base requires an ability for: conceptual thinking in, and problem solving through the use of, teams of specialists.

Skills of implementation involve: people skills; organizational skills; programming skills; negotiations skills; resource allocation skills and team skills.

These two distinct sets of abilities come together under the generic title of skills for ‘managing projects’.

The framework for managing projects

The perspective adopted in this book places value management in the context of contributing towards the management of the total process, that is, the management of the construction process as a project from its inception to completion and commissioning. The framework for managing the total process is effected by three interlocking components:

1. The organizational framework under which the construction process is administered;
2. the procurement strategy that is adopted that sets up the organizational and administrative relationships between the constituent parties;
3. the legal framework that binds the parties together contractually.

In this context the management of projects is concerned with controlling: time; cost; quality. In the context of function, which is client determined and assessed through the tools and techniques of value management.

1.4
AN OUTLINE OF THE BOOK

The book is in four parts. Part One gives a background to the development of value engineering in North America and describes the principles evolved during the first twenty years of its use.

Part Two describes in detail the use of value engineering in North American construction. Chapter 3 provides an account of North American value engineering practice applied to construction. Chapter 4 outlines four diverse case studies as examples of value engineering in practice. Chapter 5 outlines three different implementation strategies adopted by North American clients, two of which could be described as being successful and the third less so. Chapter 6 is a case study of one of the major value engineering consultancies in the States.

Part Three is a critique and analysis of the implementation of value engineering in North America and abstracts the principles learned from this research work for further elaboration in Part Four. Chapter 7 is a critique of North American value engineering based on data gathered through case studies, interviews and questionnaires. Chapter 8 distinguishes between cost and value management in a European context and introduces the notion of project economics and the client value system related to project management.

Part Four develops the insights gained from the earlier chapters into a proposal for UK implementation of value management. Chapter 9 explores in detail functional analysis, the cornerstone of value management practice. Chapter 10 describes the principles of life-cycle costing as a decision making tool in value management. Chapter 11 discusses group dynamics and team skills in the context of the leadership of value management studies, providing a number of tools and techniques that can be utilized in practice. Chapter 12 introduces a proposed UK value management methodology. Chapter 13 identifies key issues to be considered by practice in the application of value management.

CHAPTER 2
NORTH AMERICAN VALUE ENGINEERING PRINCIPLES

2.1
BACKGROUND AND DEFINITION

North American value engineering provides a well-documented basis upon which to build a value management method and is therefore considered in this context.

Value engineering is based on the work of Lawrence Miles who, in the 1940s was a purchase engineer with the General Electric Company (GEC). At that time, manufacturing industry in the United States was running at maximum capacity which resulted in shortages of a number of key raw materials and components. GEC wished to expand its production and Miles was assigned the task of purchasing the materials to permit this. Often he was unable to obtain the specific material or component specified by the designer so Miles reasoned, ‘if I cannot obtain the product I must obtain an alternative which performs the same function’. A characteristic of value engineering from the beginning was the team approach to creativity which allowed the generation of many alternatives to the existing solution. Where alternatives were found they were tested and approved by the product designer.

Miles found that many of the substitutes were providing equal or better performance at a lower cost and based on these observations he proposed a system which he called value analysis. The definition of value analysis is:

an organized approach to providing the necessary functions at the lowest cost

From the beginning, value analysis was seen to be a cost validation exercise which did not affect the quality of the product. The straight omission of an enhancement or finish would not be considered value analysis. This led to the second definition:

Value analysis is an organized approach to the identification and elimination of unnecessary

cost Unnecessary cost is:

Cost which provides neither use, nor life, nor quality, nor appearance, nor customer features

In this context:

1. Use refers to the utility of the component. This utility is measured by reference to the extent to which it fulfils the required function.
2. The life of the component or material must be in balance with the life of the assembly into which it is incorporated. For example, unnecessary cost may be incorporated if a component is specified which has a life of 12 years within a product which will be redundant in four years.
3. Quality is a subjective function, but however it is perceived it must be preserved. The philosophy of value engineering looks towards reducing cost without sacrificing quality.
4. The appearance of a product is often one of the most important features to a customer. In appraising a motor car the appearance of the outside and passenger compartment will not be questioned.
5. Customer features are those which sell. The graphic often applied to products is an example.

2.2
US GOVERNMENT PATRONAGE

In 1954 the US Department of Defense Bureau of Ships became the first US Government organization to implement a formal programme of value analysis. It was at this time that the term val...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• DEDICATION
• PREFACE
• PART ONE: THE DEVELOPMENT AND PRINCIPLES OF NORTH AMERICAN VALUE ENGINEERING
• PART TWO: THE PRACTICE OF NORTH AMERICAN VALUE ENGINEERING
• PART THREE: AN ANALYSIS, CRITIQUE AND EVALUATION OF NORTH AMERICAN VALUE ENGINEERING
• PART FOUR: A PROPOSAL FOR A UK IMPLEMENTATION OF VALUE MANAGEMENT
• REFERENCES