Value Management in Construction and Real Estate

Methodology and Applications

Geoffrey Q. P. Shen, Ann T. W. Yu, Geoffrey Q. P. Shen, Ann T. W. Yu

• Publisher: Routledge
• Year: 2015
• Topic: Technology & Engineering
• eBook ISBN:
  9781317527527
• Subtopic: Real Estate
• Index: Technology & Engineering

This cutting edge study explores alternative methods and tools to obtain value for money while maintaining quality in construction projects, especially large and complex ones. Extensive references throughout will help the reader develop a deeper understanding of the methodology, and self-study questions help to keep you on track. Ideal as a reference for practitioners and the perfect intro for students of construction or real estate.

1 The VM Methodology

Geoffrey Q.P. Shen, Ann T.W. Yu, and Jacky K.H. Chung

1.1 Introduction

This chapter introduces the background and methodology of Value Management (VM). It provides definitions and the historical development of VM, discusses the rationale behind VM, and identifies the key components of VM.

1.2 Learning Objectives

Upon completion of this chapter, you should be able to:

1. Provide a definition of VM

2. Summarise the historical development of VM

3. Explain the methodology of VM

4. Identify the key components of VM

1.3 Definitions

What is your definition of VM? Please write it down and compare it with the definitions given below.

Value analysis is a problem-solving system implemented by the use of a specific set of techniques, a body of knowledge, and a group of learned skills. It is an organised creative approach that has for its purpose the efficient identification of unnecessary cost, i.e. cost that provides neither quality nor use nor life nor appearance nor customer features.

Miles (1972)

Value engineering is a creative, organised approach whose objective is to optimize cost and/or performance of a facility or system.

Dell’Isola (1982)

Value Engineering (synonymous with terms value management and value analysis) is a function-oriented, systematic team approach to provide value in a product, system, or service. Often, this improvement is focused on cost reduction, however, other improvement such as customer perceived quality and performance are also paramount in the value equation.

SAVE (1998)

VA is a management technique which analyses, by means of a systematic approach, how to reduce cost whilst taking into account customer requirements; it not only assesses the degree of innovation desired or allowed for in the product or service, but also covers the implementation and follow-up of solutions proposed and therefore strengthens companies’ innovative capacity and competitiveness.

Commission of the European Community (1991)

Value management is a structured and analytical process which seeks to achieve value for money by providing all the necessary functions at the lowest cost consistent with required levels of quality and performance. [This definition uses the term value management synonymously with the terms value analysis and value engineering].

AS/NZS 4183:1994

Value Management is a service which maximizes the functional value of a project by managing its evolution and development from concept to completion, through the comparison and audit of all decisions against a value system determined by the client or customer.

Kelly and Male (1993)

Value Management is an organised function-oriented systematic team approach directed at analysing the functions and costs of a system, supply, equipment, service or facility, for the purpose of enhancing its value, through achieving the required functions specified by the clients at the lowest possible overall cost, consistent with requirements for performance.

Shen (1993)

1.4 Historical Development

Lawrence D. Miles of the General Electric Company, USA, founded the VM methodology after the Second World War. The major events in the historical development of the VM methodology are summarised in Table 1.1.

Table 1.1 VM History and Major Developments

Year	Major Historical Developments
1947	Function Analysis and the VM job plan were first developed by Lawrence D. Miles of the General Electric Company (GEC) in the USA.
1947	Function Analysis was developed in the practice of work study by Imperial Chemical Industries Plc. in the UK.
1954	US Department of Defence adopted VM when the Navy’s Bureau of Ships set up a formal VM programme for cost improvement during design. They called it ‘value engineering’.
1959	Society of American Value Engineers (SAVE) was established.
1962	USA’s Ministry of Defence set up VM programmes in large scale bidding procedures.
1963	Dell’Isola first applied VM to buildings by introducing Value Engineering to the US Navy’s Facilities Engineering Command. The US General Service Administration began to use VM shortly thereafter.
1965	Function Analysis System Technique (FAST) was introduced by Charles Bytheway of the UNIVAC Division of Sperry Rand Corporation, at the 5th SAVE National Conference.
1966	The Value Engineering Association was established in the UK. The present name of the society is the Institute of Value Management.
1969	The National Aeronautics and Space Administration began formal VM studies and training.
1970	The US congress endorsed contractor incentive clauses for the Department of Transportation (the Federal Register, Vol. 34, No. 173, 1970).
1972	SAVE 12th annual conference emphasized the application of VM in the construction industry.
1975	The US Environmental Protection Agency mandated that VM be used during the design of all wastewater treatment facilities over $10 million.
1988	RICS published ‘A Study of Value Management and Quantity Surveying Practice’, by Kelly and Male, which demonstrated the potential of the QS profession using VM in the UK. A second report, ‘The practice of Value Management: Enhancing Value or Cutting Cost’, was published in 1991.
1990	Under the funding of the European Community’s Strategic Programme for Innovation and Technology Transfer (SPRINT), a number of research projects into VM were launched in several countries of the Community.
1993	US H.R.133 ‘Systematic Application of Value Engineering Act of 1993’ requires US Federal agencies to apply value engineering to programmes, projects, systems and products comprising 80% of an agency’s budget.
1993	US H.R.2014 ‘Value Engineering Better Transportation Act of 1993’ was introduced. This innovative bill provides incentives to US State Transportation agencies to conduct VE by increasing the percentage of Federal grant money based on performance and savings.
1994	Introduction of Australian/New Zealand Standard on Value Management.
1994	The Central Unit of Purchasing of H.M. Treasury in the UK commissioned Davis Langdon Consultancy to draw up recommendations for a VE Guide for project sponsors.
1995	The Hong Kong Institute of Value Management was established.
1998	Works Bureau Technical Circular 16/98 and Planning Environment and Land Bureau Technical Circular 9/98 ‘Implementation of Value Management’ called for VM studies in all major public sector projects in Hong Kong.
1999	First European Standard on Value Management ‘EN 12973’ was approved, including minimum training requirements for value management practitioners.
2001	Hong Kong’s Construction Industry Review Committee recommended the use of VM.
2002	Hong Kong’s Environment, Transportation, and Works Bureau released technical circular 35/2002, calling for wider use of VM in the public sector.
2002	Hong Kong’s Works Bureau recommends VM for projects over HK$200 million.
2003	Hong Kong’s Transport Department and the Correctional Services introduce VM.
2003	The Professional Services Development Scheme of the HKSAR approves the ‘Enhancement of Construction Value Management Professionalism for the New Generation’ scheme to update the VM knowledge and skills of the construction industry professionals.
2006	The Professional Services Develop...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Illustrations
• Notes on Contributors
• Preface
• Foreword
• 1 The VM Methodology
• 2 The VM Process
• 3 Group Dynamics in VM
• 4 Group Facilitation in VM
• 5 VM Implementation
• 6 VM Applications
• 7 GDSS in VM Studies
• 8 Value Briefing
• 9 Performance Measurement of VM
• 10 VM Case Studies
• Appendices
• Index