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VALUE MANAGEMENT
(VM) CONCEPT
Prepared by:
Suria Bt. Musa
College of Business, UUM Sintok, Kedah
E-mail : suriamusa@uum.edu.my
Room : 3060
Ext. : 7122
CHAPTER OUTLINE:
• Reasons for VM
•Issues
•Unnecessary cost
• Benefits of VM
• The Value Philosophy
• Concepts of VM
• Timing for VM
• Misconception & Resistance
towards VM 2
Necessary of Value Management
WHY
VALUE
MANAGEMENT??
Because we have
so many ways to waste
Money, Time and efforts
ISSUES ON
PROJECT
IMPLEMENTATIO
N
SOURCE: VM seminar by K-PROVAM
Issues on Pr oject
Implementation
Some of current issues and problems faced by the client in project
implementation:
9
Cur r ent issues on
Pr oject
Implementation
Construction Phase
Handing Over procedures was not properly developed resulting in improper safe
keeping of the contract documents and records which is not limited to the following:
- Certificate of Practical Completion
- Certificate of Making Good Defects (CMGD) Certificate
- Operation & Maintenance Manual
- As-built drawings
- Warranty Certificates
- Contract Documents
- Final Certificate
11
Reasons for unnecessary Costs (Poor Value)
Poor
Value
Cause Effect
Reasons for unnecessary Costs (Poor Value)
♦ Lack of information
♦ Lack of Ideas How many
♦ Temporary circumstances projects do you
♦ Honest, but wrong beliefs know that
♦ Bad habits and attitudes have some of
♦ Change in the owner requirements these?
♦ Lack of communication & coordination
♦ Using unsuitable standards & specification
♦ Shortage of time
♦ Over design (unrealistic safety factors)
♦ No LCC estimate
♦ Others
Codes, Regulation, standardizations, specification
Staff development
WHY USE VALUE MANAGEMENT??
Partnering
CONCEPT
EARLY DESIGN
early sketch
final sketch
FINAL DESIGN
design
development
final documentation
Return on Investment - ratio accrued savings to cost of value
study VM Manual 1990 : PWD NSW Government
THE VALUE PHILOSOPHY
In VM, there must always be a VALUE OUTCOME.
What is
VALUE ??
CONCEPTS OF VM
According to Carlos Fallon.
Value = Worth
Cost
Value = F + Q
C
Value
Cost
Function
Quality
F uncti on
Effe cianc y
Cost
Fair
Value
Customer Requirements
Customized
Quality
When purchasing an item
Function
Customer Needs
Quality Cost
Customer Desires + Customer LCC
When Evaluating a project
Function
Customer Needs
Quality Resources
Offered Available
Expected Required
How do you measure VALUE??
Q R V
Quality Resources
Offered Available
Value
Expected Required
If
You can not
Measure it
You can not
Improve it
Value =
Function + Quality
Cost Val
=
F+Q
C
The Value Index Example (3 AC systems)
Function + Quality
Value =
Cost
Value
AC System Function Quality Cost F+Q
V=
C
A 8 5 6 2.16
B 7 10 10 1.7
C 9 7 7 2.29
Quality Base Selection (QBS)
Non-Monetary Criteria How Important
Rates : (5) Excellent, (4) Very Good, (3) Good, (2) Fair, (1) Poor
Flooring for Training Room
Non-Monetary Criteria How Important
TOSHIBA 5 5 5 4 5
Satellite M30-114 125 60 95 100 95 475 7.79 61
DELL 5 5 5 5 4
Inspiron 6000/2
125 60 95 125 75 480 4.99 96
IBM 5 5 5 4 5
ThinkPad T42
125 60 95 100 95 475 8.99 53
Rates : (5) Excellent, (4) Very Good, (3) Good, (2) Fair, (1) Poor
WHEN TO
APPLY VM?
W hen to appl y VM
Cost
VEP VE2 DR
100
Saving
Cost
&
10 Acc
Effort
epta
nce tation
e m enleve
l l
Imp
1
cost plan
cost limit cost checks cost analysis
A B C D E F G H J K L M
R.I.B.A
outline scheme detail production bills of tender project site Management
inception feasibility proposal design design information quantities action planning operation completion feedback Terminology
Handbook
BRIEFING SKETCH PLANS WORKING DRAWING SITE OPERATIONS
The Contractor’s
Organisations
Supplier An internal window of The Client’s
organisation Value opportunities value opportunity Value opportunities organisation
s exists with the
contractor controlling s
the linkage between
the client and the
Strategic alliance or suppliers in Design
collaborative
relationship
The client/contractor window of
value opportunity where previous
research has concentrated
% of Value Management % of
value workshop value
created created
Management support
VM vs. Others
Success rates - comparative analysis
Source : Abdulaziz S. Al-Yousefi (2005). 40-hour VE Training Workshop. Putrajaya, Malaysia.
80
Why VM is successful
70 70%
Team effort
60
It is Task oriented
50
It takes short time
40 40%
It gets Quick results
30
10
Acceptable Solutions
0
BP R TQM VE
Electronic Documenation 52
Construction MANAGEMENT 33
Design/Build 32
Smart Growth 32
Value Engineering 29
Virtual Reality 23
Sustainable Builidings 19
Facility Managemnt 14
0 10 20 30 40 50 60
Source : Abdulaziz S. Al-Yousefi (2005). 40-hour VE Training Workshop. Putrajaya, Malaysia.
REFERENCES
Abdulaziz S. Al-Yousefi (2005). 40-hour VE Training Workshop.
Putrajaya, Malaysia.
Dell’ Isola, A.(1997). Value Engineering: Practical Applications for Design, Construction,
Maintenance and Operation. United State of America: RS Means.
Kelly, J. & Male, S. (1993). Value Management In Design And Construction – The Economic
Management of Projects. London: Spon Press.