1 understanding and solving root cause of the problem through value management / value engineering...
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UNDERSTANDING AND UNDERSTANDING AND SOLVING ROOT CAUSE OF THE SOLVING ROOT CAUSE OF THE
PROBLEM THROUGH VALUE PROBLEM THROUGH VALUE MANAGEMENT / VALUE MANAGEMENT / VALUE
ENGINEERINGENGINEERING
By:Assoc. Prof. Sr. Dr. Mohd. Mazlan Bin Haji Che Mat
PresidentInstitute of Value Management Malaysia (IVMM)
December 2008
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Miles clarified Value Analysis as a Miles clarified Value Analysis as a
philosophy implemented by the philosophy implemented by the use of use of
a specific set of techniquea specific set of technique
a body of knowledge anda body of knowledge and
a group of learned skillsa group of learned skills
Definitions & Concept Definitions & Concept of VMof VM
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It is an It is an organized creative organized creative approachapproach which has for its which has for its
purpose the purpose the efficient efficient identification of identification of
unnecessary cost,unnecessary cost,
i.e. cost which i.e. cost which provides provides neither quality, nor use, nor neither quality, nor use, nor
life, nor appearance, nor life, nor appearance, nor customer featurescustomer features”.”.
Definitions & Concept of Definitions & Concept of VMVM
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Definitions & Concept Definitions & Concept of VMof VM
Che Mat MM (2004) - Value Management Che Mat MM (2004) - Value Management as a as a rigorous, systematic and rigorous, systematic and
innovative methodology with multi innovative methodology with multi disciplinary approachdisciplinary approach to achieve to achieve
better value and cost optimization for better value and cost optimization for projects, products, facilities, systems projects, products, facilities, systems and services and services without sacrificing the without sacrificing the
required performance levelsrequired performance levels..
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Definitions & Concept Definitions & Concept of VMof VM
Another relationship by Another relationship by Dell ‘IsolaDell ‘Isola , , Value = Value = F F ++ Q Q
C C
(F) Function =(F) Function =The specific work that a design/item The specific work that a design/item must must perform.perform.
(Q) Quality = (Q) Quality = The owner’s or user’s needs, desire’s The owner’s or user’s needs, desire’s and expectation.and expectation.
(C) Cost = (C) Cost = The life cycle cost of productThe life cycle cost of product..
Value = Value = The most effective way to The most effective way to reliably accomplish a reliably accomplish a functionfunction that will meet the user’s needs, desires that will meet the user’s needs, desires and expectation.and expectation.
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Definitions & Concept Definitions & Concept of VMof VM
As such Value can be increased by As such Value can be increased by the following approaches :the following approaches :
F + Q
CValue =
Costreductionapproach
Functionincreaseapproach
Compound approach
Expandgrowthapproach
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Definitions & Concept of Definitions & Concept of VMVM
Management of TechnologyManagement of Technology A Technology that enables work to be performed A Technology that enables work to be performed
efficiently and is applicable to all industries and job areasefficiently and is applicable to all industries and job areas
Development of specialised technologies
Rationalisation of Enterprise
Devt. Mangt. Tech
Time
I.E(1911) QC(1920) VA&VE(1942) Present
I.E Increase efficiency
QC Improves quality
VA&VE Increase value© MMCM
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Value Management
ValuePlanning
ValueEngineering
ValueAnalysis
The VM ‘Family’Source : Ashworth (2000)
Definitions & Concept of Definitions & Concept of VMVM
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VM promotes systems thinking VM promotes systems thinking VM establishes customer needsVM establishes customer needs Value management change proposal Value management change proposal
(incentive clause)(incentive clause) It encourages Staff developmentIt encourages Staff development It promotes PartneringIt promotes Partnering Is a Vehicle for ChangeIs a Vehicle for Change VM identifies unnecessary costs, VM identifies unnecessary costs,
which then can be removed.which then can be removed.
Why use VM ?Why use VM ?
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Solves immediate and high priority problems Solves immediate and high priority problems Establishes least cost goalsEstablishes least cost goals Identifies and defines stakeholders aims and Identifies and defines stakeholders aims and
objectivesobjectives Optimize the unit/component costOptimize the unit/component cost Produces unique solutionsProduces unique solutions Increases the marketing potentialsIncreases the marketing potentials Improves communicationImproves communication Improves quality Improves quality Reduces timeReduces time Reduces commercial risksReduces commercial risks Helps to increase the co-operation between Helps to increase the co-operation between
departmentsdepartments Encourages fresh thinkingEncourages fresh thinking Spreads cost-consciousnessSpreads cost-consciousness Develops hidden abilities Develops hidden abilities Helps to provide better appreciation of the other Helps to provide better appreciation of the other
man’s jobman’s job
Other Benefits of VMOther Benefits of VM
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Misconception About Misconception About VM VM
There is a There is a view held by someview held by some that Value that Value Management is simply just another Management is simply just another cost cost cutting toolcutting tool, however it , however it misses an important misses an important featurefeature of Value Management of Value Management which is which is creativity and systems approach to validate a creativity and systems approach to validate a certain proposalcertain proposal. .
The The fundamental contributionfundamental contribution by the Value by the Value Management exercise is Management exercise is to eliminate the to eliminate the unnecessary costunnecessary cost which does not contribute to which does not contribute to the Value of the services, products, systems the Value of the services, products, systems and that includes the construction projects.and that includes the construction projects.
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Value Studies are Value Studies are mandatory in:mandatory in:
All US federal projects > $ 2 MAll US federal projects > $ 2 M All Japan projects > $ 2 MAll Japan projects > $ 2 M All Saudi Government projects > $ 5 All Saudi Government projects > $ 5
MM All RC of J&Y projects > $ 5 MAll RC of J&Y projects > $ 5 M All Saudi Aramco projects > $ 10 MAll Saudi Aramco projects > $ 10 M Also in UK, Germany, France, Also in UK, Germany, France,
Australia, Korea, India, …etc.Australia, Korea, India, …etc.
Source: Al-Yousefi (2008)Source: Al-Yousefi (2008)
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Saudi Ministry of Finance Mandate Saudi Ministry of Finance Mandate (October 2001):(October 2001):
Emphasis on Function, LCC and ROIEmphasis on Function, LCC and ROI Perform VE during early design stagesPerform VE during early design stages Train employees on VETrain employees on VE Include VE clauses in the Design contractsInclude VE clauses in the Design contracts Apply VE as follows:Apply VE as follows:
Typical repeated projects that is > SR 5 MTypical repeated projects that is > SR 5 M Projects that are > SR 20 M (about $ 5 M)Projects that are > SR 20 M (about $ 5 M) O & M contracts that are > SR 5 MO & M contracts that are > SR 5 M
Source: Al-Yousefi (2008)Source: Al-Yousefi (2008)
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Five Steps of the VM Five Steps of the VM Job PlanJob Plan
PRE-STUDYINFORMATION
SPECULATION
JUDGEMENT
DEVELOPMENT
RECOMMENDATION &REPORTING
POSTSTUDY
The The five steps of the Job Planfive steps of the Job Plan are shown diagrammatically in are shown diagrammatically in figure above. The significant of the arrows is that, whilst a figure above. The significant of the arrows is that, whilst a cascade system is used, with cascade system is used, with each phase following on from each phase following on from and using the output of the preceding phaseand using the output of the preceding phase, there is , there is frequently frequently reversion to a previous phasereversion to a previous phase, as a result of some , as a result of some discovery or unexpected development.discovery or unexpected development.© MMCM
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Function AnalysisFunction Analysis
Conventional conceptConventional concept To find possibilities for cost reduction by To find possibilities for cost reduction by
analysing each factor of total costanalysing each factor of total cost
PROFIT
LABOUR & EQUIPMENTS
MATERIAL COST
WASTAGEBU
ILT
-UP
CO
ST
OVERHEAD
PLANT & MACHINERIES
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Function AnalysisFunction AnalysisVM/VE ConceptVM/VE Concept To focus on functions and thereby achieve To focus on functions and thereby achieve
revolutionary cost reductionrevolutionary cost reduction
Secondary Functions
Profit
Unnecessary FunctionsFunction incorporated in the design stageP
RIC
E
Functions expected by CustomerBasic Functions
Potential cost reduction
Review methods of achieving functions
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Function AnalysisFunction Analysis
TYPE OF FUNCTIONSTYPE OF FUNCTIONS
Basic Function:Basic Function:
The purpose or performance feature which The purpose or performance feature which must bemust be attained if an item is to work or attained if an item is to work or perform. It is a "must" type of objective in perform. It is a "must" type of objective in that it is the feature of the item which is its that it is the feature of the item which is its primary reason for existence from the users primary reason for existence from the users point of view. point of view.
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Function AnalysisFunction Analysis
TYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)
Required Secondary Function:Required Secondary Function:
Dell ‘Isola developed other function Dell ‘Isola developed other function which he called required secondary which he called required secondary function. It is the function that must be function. It is the function that must be achieved to meet codes, standards, or achieved to meet codes, standards, or mandatory other requirements. mandatory other requirements.
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Function AnalysisFunction Analysis
TYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)
A Supporting Function:A Supporting Function:
Any characteristic of an item which is not Any characteristic of an item which is not essential to the user for the desired essential to the user for the desired application of the item and does not application of the item and does not contribute directly to the accomplishment contribute directly to the accomplishment of a basic function. of a basic function.
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Function AnalysisFunction AnalysisTYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)
An Unnecessary Function:An Unnecessary Function:
An element or a characteristic which is An element or a characteristic which is not necessary for the item to work or not necessary for the item to work or sell. Unnecessary functions are usually sell. Unnecessary functions are usually the result of honest wrong beliefs and the result of honest wrong beliefs and assumptions, or the perpetuation of assumptions, or the perpetuation of obsolete requirements. obsolete requirements.
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Space Function AnalysisSpace Function Analysis
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ComponentComponent FunctionFunction KinKindd
CostCost WorthWorth ValueValue RemarkRemark
Admin. BlockAdmin. Block VerbVerb NounNoun Area Area (m2)(m2)
Area Area (m2)(m2)
IndexIndex
GROUND GROUND FLOORFLOOR
1. LOBBY1. LOBBY RECIEVRECIEVEE
VISITORSVISITORS SS 72.072.0 7272 1.01.0 NO NO CHANGECHANGE
2. STORAGE 2. STORAGE AREAAREA
DISPLADISPLAYY
EXHIBITS EXHIBITS / /
COLLECTIOCOLLECTIONN
BB 619.5619.5 619.5619.5 1.01.0 NO NO CHANGE CHANGE
3. 3. LABORATORYLABORATORY
TESTTEST EXHIBITSEXHIBITS BB 238.5238.5 238.5238.5 1.01.0 NO NO CHANGECHANGE
4. SERVICE 4. SERVICE (M&E)(M&E)
HOUSEHOUSE SERVICESSERVICES RSRS 444.5444.5 444.5444.5 1.01.0 NO NO CHANGECHANGE
TOTALTOTAL 1,374.1,374.55
1,374.1,374.55Space Function for Administration Block (Ground Space Function for Administration Block (Ground
Floor)Floor)
Note: B = Basic, RS = Required SecondaryNote: B = Basic, RS = Required Secondary
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Space Function AnalysisSpace Function AnalysisComponentComponent FunctionFunction KinKin
ddCostCost WorthWorth ValueValue RemarkRemark
Admin. Admin. BlockBlock
VerbVerb NounNoun Area Area (m2)(m2)
Area Area (m2)(m2)
IndexIndex
FIRST FIRST FLOORFLOOR
1. OFFICE1. OFFICEPROVIDPROVID
EE
WORKING WORKING AREAAREA BB 369.0369.0 157.0157.0 2.42.4
REDUCE REDUCE BY 57%BY 57%
2. LOBBY2. LOBBY FACILITAFACILITATETE
ENQUIRIEENQUIRIESS
SS 72.072.0 36.036.0 2.02.0 REDUCE REDUCE BY 50% BY 50%
3. STORE3. STORE STORESTORE EXHIBITSEXHIBITS BB 859.0859.0 859.0859.0 1.01.0 NO NO CHANGECHANGE
4. SERVICE4. SERVICE HOUSEHOUSE SERVICESSERVICES RSRS 414.0414.0 355.2355.2 1.251.25 14% 14% REDUCTIOREDUCTIO
NN
TOTALTOTAL 1,714.1,714.00
1,407.1,407.22
Space Function for Administration Block (First Space Function for Administration Block (First Floor)Floor)
Note: B = Basic, RS = Required SecondaryNote: B = Basic, RS = Required Secondary© MMCM
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FAST DIAGRAMFAST DIAGRAM FAST Diagram are prepared which:FAST Diagram are prepared which:
1.1. Shows the specific relationship of all functions Shows the specific relationship of all functions with respect to each other,with respect to each other,
2.2. Tests the validity of the functions under study,Tests the validity of the functions under study,3.3. Helps identify missing functions, andHelps identify missing functions, and4.4. Broadens the knowledge of all team members Broadens the knowledge of all team members
with respect to the projectwith respect to the project
At first glance, FAST appears to be similar At first glance, FAST appears to be similar to a PERT Chart. However, the basic to a PERT Chart. However, the basic difference between FAST diagramming difference between FAST diagramming and other techniques is that the FAST is and other techniques is that the FAST is function-oriented and not time-oriented.function-oriented and not time-oriented.
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RESURFACE RUNWAY
RESIST SKIDDING
PROVIDE RIDING
QUALITY
ENABLE LANDING & TAKE OFF
MAINTAIN SAFE
LANDING & TAKE OFF
MEET STANDARD
HOW?WHY?
PROVIDE STRENGTH
PROVIDE EMERGENCY
ACCESS (ROAD)
DISCHARGE WATER
PROTECT BASE (FOUNDATION)
PREVENT INGESTION
ELIMINATE F.O.D (Foreign Object Debris)
FAST DIAGRAM OF RUNWAY RESURFACING
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RESURFACE TAXIWAY
ACCOMMODATE MOVEMENT
PROVIDE RIDING
QUALITYREDUCE
OCCUPANCY (RUNWAY)
MAINTAIN SAFE MOVES
MEET STANDARD
HOW? WHY?
PROVIDE STRENGTHPREVENT
ACCIDENT
PROVIDE ROUTE
PROTECT BASE (FOUNDATION)
ALLOW EFFICIENT
USE (RUNWAY)
DISCHARGE WATER
PREVENT INGESTION
ELIMINATE F.O.D
CONNECT RUNWAY
PROVIDE HOLDING
CONNECT APRON
ENHANCE SAFETY
FAST DIAGRAM OF TAXIWAY RESURFACING
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CONSTRUCT DRAINAGE
CHANNEL WATER
DISCHARGE WATER
PREVENT FLOODING
CONFORM TO FLOW RATE OF WATER
HOW? WHY?
COLLECT WATER
ENSURE PEDASTRIAN
SAFETY
SUPPORT DRAIN
FAST DIAGRAM OF DRAINAGE CONSTRUCTION
PROTECT ROAD PROTECT
EMBANKMENT
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Project: Education Faculty for UTM
(Initial Design cost RM35M, after VM RM7M)
Achieved
Effective Planning of Space to Layout to customer
requirements
•
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Project: Library for USM, Penang
(Initial Design cost RM24.9M,after VM RM11.9M)
Achieved
Effective Planning of Space to suit Site Provided to customer requirements •
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Project: Darul Ridzuan Islamic College, Perak
(Initial Design cost RM120M after VM RM57M)
Achieved
Effective Planning of Layout and Design to customer requirements
•
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Project: Projek Jalanraya Simpang Pulai – Lojing - Gua Musang - Kuala Berang (Pakej 8)
Outcome
Identified many areas in the existing solutions where value improvements can be made without loss of functions
•
These improvements would lead to cost savings in the order of RM18 m from the initial cost
of RM 92 m.
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Project:Pakej 3/1A : Jalan Simpang Pulai – Lojing - Gua Musang – Kuala Berang
Results
• More effective design (Safety, Environmental & Maintenance requirement)
• (Cost Reduction ~ 3.8%) from estimate cost of RM112.8 M
No. Of Ideas
Ideas for Evaluated
Ideas for Action
Group A 34 22 15
Group B 22 16 9
Group C 20 7 1
Group D 20 18 7
TOTAL 96 63 32
Percentage 100% 79% 23%
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Project: Klinik Kesihatan Jenis 3
Results
• More Effective Design (fulfilled User requirements)
• (Cost Reduction ~ 5.1%) from original cost of RM6.8 M
No. Of Ideas Ideas for Evaluated
Ideas for Action
Group 1 73 64 5
Group 2 12 10 2
Group 3 42 25 2
Group 4 11 10 2
TOTAL 138 109 11
Percentage 100% 79% 8%
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Project: High End Apartment Project
ORIGINAL TARGET AFTER VM STUDY
Gross Development Value (GDV) Gross Development Cost (GDC) Gross Profit (GP) % GP/GDV
RM 45.1m
RM 42.9m
RM 2.2m
4.81%
RM 45.1m
RM 37.0m
RM 8.1m
17.9%
RM 47.8m
RM 38.5m
RM 9.3m
18.9%
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ConclusionConclusion
The application of this technique has proved to be very successful in various human endeavors. The systematic process that it offers promote creativity & innovation towards achieving customers satisfaction and in many cases producing results that are beyond expectations.
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