Value Management And Value Engineering Study Report

This Value Management and Value Engineering (VM/VE) Study Report summarizes the benefits of various proposals for a strategic level Value Management process followed by Value Engineering Study in order to obtain a better Value for Money (VFM) for any projects. This report is prepared specially for our Client M/s. SBEinnovations Ltd for the construction of the Mixed-Use Recreation and Commercial Centre Project. Value Management and Value Engineering is a technique on any projects that can be delivered in the most economical way. Normally, Value Management processes are carried out before Value Engineering Study to determine how it can add value to the Client business by a delivery of a project which is carried out during the initial Client brief of a project. It is an integral part of any projects. Whereas Value Engineering is a technical study on a selected design for its technical viability and cost studies which is carried out during detailed design stage. United Project Management (UPM) believes that VM and VE have the greatest influence and impact at the strategy and design stage respectively. It requires reliable and appropriate cost data, design information, ideas, past experience and uses brain-storming workshops by our team of experts under the direction of the Project Manager. Value Management is a continuous process from inception to completion. The purpose of conducting the Value Management workshop is to set up an effective partnership agreement which should seek to achieve the scope and benefits of the project with respect of time, cost and quality. The benefits of Value Management contribute towards this project especially since the project is still in its early stages. Some of the concepts through which SBEinnovations Ltd can obtain value for money (VFM) are mentioned below; 1. Reduced Learning Curve 2. Improved communications and decision procedures 3. Improved quality and programming This report also includes a recommendation on Value Engineering Study conducted before the completed design stage and construction activities. Issues targeted during VE study include: 1. Design Optimization 2. Selection of Procurement Route 3. Cost, Quality and Time 4. Organizational Breakdown Structure (OBS) Study 5. Stakeholders Coordination 1. Introduction This report explains how Value Management and Value Engineering studies can contribute value to the Client before commencement of a project. The report summarises the key principles of Value Management and Value Engineering in the context of construction project of mixed-use recreation and commercial centre for SBEInnovations Ltd. This report is prepared for SBEinnovations Ltd on their request for proposals for a strategic level Value Management and Value Engineering studies. The aim of Value Management Study is to assess the project requirement in terms of functionally and efficiency of achieving the requirements. Prime consideration needs to be given to the importance of Time, Cost, Quality, Safety and Client's satisfaction. The specific issues to be evaluated at the VM Study are divided into two categories. 1. Strategic Issues (which will be considered in Value Management) 2. Tactical Issues (which will be considered in Value Engineering) 3.1 Strategic Issues 1. The following are considered as project strategic issues: 1. Project Drivers 2. Project Type 3. Size and Location 4. Procurement 5. Initial Cost Estimate 6. Esteem 7. Politics 8. Organisational Management 9. Change Management 3.2 Tactical Issues The following are considered as project strategic issues: 1. Design 2. Structure of the Project Organisation 3. Detail of accessibility and planning procedure 4. Time and Quality: 5. Outline Specification 6. Coordination 2. Value Management Study This is the first process where carefully selected team members from various parties get together to discuss various aims, objectives, constraints and risk associated with the Project in order to formulate Client objective of the need of such project. Value management usually incorporates a series of workshops, interviews and reviews involving diversified teams members through whom the project requirements are evaluated against the means and methods of achieving them. VM process will be dependent on the procurement route selected for the project. VM and VE Studies are very important for successful delivery of any project. Failure to carry out these studies will cause problems at subsequent design and construction stages causing cost overruns, project delays, claims etc. Value Management can help to avoid or minimize these problems. At the outset of a project, Value Management provides an exceptionally powerful way of exploring the client’s needs in-depth by addressing inconsistencies and expressing these in a language that all parties, whether technically informed or new to the construction industry, can understand. The Value Management process works top-down, starting with needs and strategic goals and focusing on root causes, not symptoms. An early consensus is developed between the key stakeholders about the need for the project or service, the scope, deliverables, key functions and risks, in the context of the wider business objectives. Opportunities for innovation are explored and the most cost effective means of implementation developed, consistent with desired time and quality requirements. VM considers the whole project rather than components and the process are underpinned by consensus. A typical Value Management Study has the following characteristics: 1. A systematic, staged approach 2. Clear definition of objectives and scope at the outset – focus on the customer requirements 3. Consideration of the organizational environment – internal and external influences 4. Multi-disciplinary team effort – positive human dynamics 5. Function Analysis System Technique 6. A workshop format with a structured job plan that separates creativity from evaluation and development. 7. Effective use of methods and tools – independent facilitation 2.1 Early Application of Value Management and its benefits The design is still at the very early stage. The Client has not yet committed with any design teams for project design. The client aims to innovate with creativity and to enhance the health, wellbeing and quality of life of its citizens. It is very important to get a feedback of its citizens of the Client intentions for such a project, because the clients’ and the citizens’ aim and objectives are totally different and conflicting ones. Therefore it is recommended that Value Management study at such early stage is carried out involving the all parties who have interest on the projects so that later in the projects the problems and risk will be minimized to a greater extent. As such the following benefits can be expected by applying Value Management to this specific project. 1. It defines what both the client and the citizens of the local area mean by value, and provide the basis for making decisions, throughout the project, on the basis of value. It provides a means for optimising the balance between private developer and public sector local authority having different aims and objectives out of the project. 1. It provides the basis for clear briefs that reflect the client’s priorities and expectations, expressed in a language that all can understand. This improves communication between both stakeholders so that each of them can understand and respect other’s constraints and requirements. 1. It ensures that the project is the most cost-effective way of delivering the business benefits and provides a basis for refining the business case. It addresses both the monetary and the non-monetary benefits. 1. It supports good design through improved communications, mutual learning and enhanced team-working, leading to better technical solutions with enhanced performance and quality, where it matters. 1. It provides a way of measuring value, taking into account nonmonetary benefits and demonstrating that value for money has been achieved. Project Objectives: In a construction project objectives shall be clearly defined. In clearly defining the project objectives value management plays a vital role and it is the starting point of value management in a project. Client Function, Activities and Stakeholders: Value management plays crucial role in ascertaining the client functions, requirements, stakeholder needs, briefing, gathering information pertaining to the project. Project Size and Location: In deciding the project size and location both value management and value engineering will be applied as value management will focus on the location, political situation, environment and others will focus, whereas value engineering will focus on the type of foundation to be used is suitable for the soil conditions, floor area index on the area and other design issues. Budget: It is a crucial in a construction project and the main purpose of the value management is to gain the maximum value for the money and for that budget is important and also careful budgeting is crucial for the success of the project, here value management will be applied. Procurement Option: In deciding the contract for the project the best procurement option is to be chosen, it depends on the scope of the project, requirements, budget and other external factors. To choose the best procurement option value management and value engineering both plays a vita role. Design and built option value management plays a vital role, value engineer plays a vital role in other types of procurement options as designs are being verified in this option. Design Change and Variation: happens during the course of the project, value engineering plays a lead role. In the design changes and variations as the changes will have an impact on the original design to be checked? The proposed changes can be accommodated or not also to be checked, also the cost impact, constructability and other design related parameters to be verified. Organization Structure: Many discrepancies arise due to unorganized organization structure, due to that construction and project gets delayed. Value management is employed, during the initial stages itself giving the requirements for organization and key personnel and appropriate accounting provision will be given in the costing. All the above will be applied in value management. Quality Control, Health, Safety and Environmental Issues: are crucial in project success, here both value management and engineering will be applied as quality cannot be compromised and design team will clearly indicate the minimum quality requirements and also HSE issues cannot be compromised it is a combination of both the above. The following graph illustrates the potential cost savings possible against time when VM is applied in a project. It is clear the when VM is applied at the early stage of a project, the saving will be far less to adopt the changes proposed by the Value Management since the design is yet not commenced and hence it is easy to incorporate any kind of design change proposal due to VM process. Fig 1: Cost Impact of Making Changes Over Time 2.2 Development of Value Management within project scenario: UPM suggests the budget should be equally divided among the different elements of the project. Some suggestions provided by UPM are: 1. Sports Centre Proper design management should be applied for the construction of Seating/Scoring or/and Spectator Seating arrangements. 2. Culture recreational centre Public community should be comfortable with different recreational centres. Their satisfaction is the primary goal to be achieved. 3. Hotels Lighting is a large cost item. The impact it has on energy and guest experience influence to a great extent the operation and spacing cost. 4. Shopping malls Primary objective here is to obtain maximum customer satisfaction keeping returns in mind. Quality should be maintained throughout the lifecycle of the project. 5. Parking space The financial cost for parking space depends on three factors: Total number of parking space required, ‘opportunity cost’ of parking land and cost per parking land available. Careful planning and brainstorming helps to obtain maximum value for land. 6. Food court Proper economical and environmental friendly techniques could be arranged for waste disposal. 7. Cinema Multiplex Natural Ventilation could be installed thereby reducing the cost and power consumption. Value Management Team Selection and Value Management Workshop VM is undertaken as a series stakeholder workshops held at key stages during the development of the project. Value Management Team forms an important aspect in decision making process. It is a flexible, team-based activity, planned and directed by an independent VM facilitator and driven by consensus. Team selection for the Value Management workshop is very critical to success to ensure that the full range of influences are properly addressed by people with the right balance of knowledge, skills, experience and judgment. Where particular stakeholders are not able to take part, or it is not politic to involve them, specific team members should be tasked as champions of those stakeholder interests. As such, the team should include the following participants: 1. Project Sponsor The Project Sponsor is responsible for endorsement of the study objectives. They are responsible for monitoring outcomes, action plans, client’s vision, timeframe, values and constraints. 2. Value Management Coordinator Usually, a client representative may designate this post. Before the workshop is developed, a number of activities need to be decided upon: 1. Developing brief for Facilitator 2. Identifying the Scope of Work 3. Engaging the Facilitator 4. Organizing the schedule for the workshop 5. Date and Venue confirmation 6. Arrangement of objectives of study 7. Selection and invitation of participants 8. Preparation of agenda These roles and the corresponding tasks may vary depending on nature of Value Management topic, the organizations involved and the scale to which Value Management activities undertaken by the parties. 3. Value Management Facilitator He initiates their evaluation at the beginning of the pre-workshop process, helping the client towards clearly defining the aim, assumptions and viewpoints of each stakeholder. The facilitator should specialise in assisting the process by providing support and advice to the sponsor. During Pre-workshop stage, the facilitator focus should be more towards process than content. The facilitator manages time, determines appropriate progress, manages the group, promotes collaboration within the group, and seeks agreement or a method of understanding between teammates at key stages. However, the facilitator should maintain client confidentiality and ensure every member contributes equally to the achievement of value. 4. Project Manager The Project Manager should be included within the workshop because he/she acts as a reference and as a team catalyst for continued action. 5. Stakeholders They should be included in the team as they give a clear cut idea about the objectives, needs and constraints. 6. Technical Experts SBEinnovations Ltd. members who have specialist skills in a particular area are to attend the workshop. Their responsibilities include providing advice and suggestions in the specialist area for which they are invited. 7. Relevant compliance agency Value Management briefing papers should be forwarded to relevant compliance agencies so that they can be affirmed that the steps followed are as per ‘Practice Guidance’. Though, it is not compulsory that their presence should be essential at the workshop. Value Management Workshop and Agenda Following are the three components of a VM Workshop: 1. Job Plan 2. Functions and Functionality 3. Multi-Disciplinary Team The VM Job plan of the workshop will have the following 5 phases 1. Information Phase 2. Creativity Phase 3. Evaluation Phase 4. Development Phase 5. Presentation and Reporting Phase All of the above phases will be covered in 3 weeks workshop as described below. TOOLS AND TECHNIQUES USED IN VM STUDY There are number of tools and techniques which can be used in VM study. However, the following are recommended by UPM. 1. Function Analysis System Technique (FAST) Diagram: It is a graphical representation of logical relationship of functions that need to be performed and how they are linked together into HOW-WHY logical connections to deliver the project. HOW and WHY questions are asked to develop the logic of a function. While defining any function, we ask HOW that particular function can contribute towards developing a more standardized and specific approach. This method of questioning and thinking is referred and summarized from left to right. To solve the problem to a higher level, we ask WHY that particular function is performed. This process of logic is read from right to left. 1. Risk Analysis Risk analysis is a financial tool used to identify risks that can potentially affect the project. The analysis looks at the costs involved, time constraints and other variables that may negatively affect the outcome. As a tool, risk analysis helps managers make decisions and find alternatives. 1. SWOT Analysis SWOT is an acronym that stands for â€Å"strengths, weaknesses, opportunities and threats,† which is precisely what the SWOT analysis aims to identify. The SWOT helps management see the company's strengths and weaknesses on paper as well as the potential opportunities and threats looming in the industry. Management can then find ways to maximize the company's strengths in order to capitalize on opportunities while minimizing potential threats and weaknesses. 6. VALUE ENGINEERING STUDY Value Engineering is a subset of Value Management. Once the Client is decided on the project, then before the detailed design will commence, the Value Engineering study will be carried out. 6.1 Recommended timing for VALUE ENGINEERING study: In order to expect the greatest return from this project, SBEinnovations Ltd. is suggested to include value engineering exercise during the early design stage and before 60% of the design commitment is reached. Value Engineering workshop should be carried out during the schematic design stage and the detailed design stage. If the Value Engineering occurs later it probably will be seen as a cost cutting exercise but it will be undertaken under a hostile climate that will prevent SBEinnovations from achieving the desired requirements and objectives of  £9M. 6.2 Recommended VE Team The number of participants should be a minimum of five and a maximum of ten. Although more members could participate, we recommend that a larger group may cause difficulties in one-to-one communication. Participants should involve: 1. Project Managers from SBEinnovations Ltd.: These Project Managers help to define the procurement routes and contract administration in the most effective way by putting to use their skills earned by experience. 2. Architects, Quantity Surveyors and Structural Engineers: While conducting brainstorm sections, Comments and views from Engineers, Architects and Quantity Surveyors are valid for active participation. 3. Value Engineering Facilitator: The facilitator should be someone apart from the project manager, the chief design engineer, or the client. The VE facilitator will guide the discussion to confirm and approve, but not to criticize the project approaches and details. 6.3 Value Engineering Workshops VE workshops are concerned with the detailed technical appraisal of alternative solutions proposed by the project team to meet the client’s requirements. Duration for VE workshop will be normally longer than that of VM Workshop. One of the following approaches could be used by SBEinnovations Ltd towards achieving a successful Workshop session: 1. Mini Workshops: A value engineer should join the design team at the briefing stage and be promoted as the facilitator throughout the project. Two mini-workshops should be organized following the job plan format and then reviewed at about 20% and 40% design completion. 2. The two-day workshop: All members of the team focus on issues in an intense and focused way. 6.4 Elements of the Scheme for VE study: Design Optimization As long as the bid documents and the process to detail design are open enough to allow for adjustment of the design, then a buildable design will rise. Design ideas for mixed use commercial and recreational centre should be developed during Value Engineering workshops keeping in mind the constructability and purpose for which it serves. This should include health, safety and security of the local community. Procurement Route The suitable Procurement route should be studied identified and applied by SBEinnovations Ltd. taking into consideration the pros and cons of that particular procurement route and its benefits to the client and the employer. Quality, Time and Cost Maximum return can only be achieved through proper quality, time and cost management. Value Engineering study team should be keen to attain maximum Value for Money (VFM) by proper planning and scheduling of works to ensure cost lies within  £ 9M within the stipulated time frame. Organizational Breakdown Structure (OBS) Study OBS review would be done during the VE workshop which helps to identify roles and responsibilities. Stakeholders Coordination Coordination should be justified during VE studies so as to dissolve any interference between Stakeholders. Part 2 – Risk Management Essay Risk Management in Infrastructure Projects Introduction All large projects face risks. Project risk is an activity, event or action which tends to cause a negative impact on the planned goals of project scope, quality, performance, execution time or cost. Inevitably, risks and uncertainties are substantially inherent in infrastructure projects. Problematically, many infrastructure projects could not have achieved project goals satisfactorily. Therefore, it is very important for the identification and treatment of these project risks. Project risks always contribute to the poor performance leading to cost and time over run. Their major reason is the occurrence of external and internal project risks and uncertainties throughout project stages from planning, bidding, contracting to construction. This essay intends to provide a useful insight into the inherent risk into infrastructure projects, and will discuss about the management of these risks. The essay will also enable the reader to understand and application of the key concepts and techniques used in management of risk in infrastructure projects. For the purpose of this essay, Railway Projects in the MENA region is considered. History has shown that railways have always been central to any country’s growth ambitions. Thus it comes as no surprise that the GCC countries have embraced railway networks as their best hope for expanding and consolidating future economic growth. By providing a low cost alternative to shipping and air, the GCC member states allow for increased trade and thus further economic prosperity. As a result of this increased focus, it’s no surprise to find that railway networks account for nine of the ten biggest infrastructure projects in the Middle East. With ambitious plans to produce a GCC wide network within the next decade, the countries are working to develop their own interior networks in preparation. The following Table shows a list of top 10 infrastructure projects (ongoing and planned) in the MENA area.