© The College of Estate Management 2008

Paper 0952V3-0

Value Management 2

Contents

1. The roots of the discipline

2. Definitions

3. Eliminating unnecessary cost

4. Methodology

5. The value management intervention workshop phase in more detail

5.1 The information phase
5.2 The speculation phase
5.3 The evaluation phase
5.4 The development phase
5.5 The conclusion and recommendation phase

6. Value management intervention workshop programmes

Summary
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1 The roots of the discipline

The roots of the discipline are generally attributed to a man called Lawrence Miles, a
purchasing manager employed by the General Electric Company (GEC) in the USA
during the Second World War. The US manufacturing industry was working at
maximum capacity in order to supply the war effort and experiencing difficulties in
obtaining specified components.

Miles was assigned the task of addressing the problem and in so doing concluded
that:

‘If we can’t get the part, we must get the function.’

That statement led to an approach, the basis of which is to first identify the required
function of a component and then to source an alternative that will equally deliver the
same function. When applied to the problem of the day, it was observed that many of
the alternatives were not only delivering an equivalent function, but at a reduced cost
also. And so the underlying philosophy of value management was established, viz:

‘Eliminate all cost that does not contribute to the performance of the required
function.’

It is worth noting that the roots of the discipline were in the US manufacturing
industry, but it has been adopted and applied extensively by the Australian – and to a
lesser extent, the UK – construction industries.

The approach, which was initially called value analysis, was adopted by the US
military in 1954 into their Core of Engineers and so it became known as value
engineering.

After the US, Australia was the next country to become interested and it was here that
its application was adopted by the construction industry, by construction managers
and hence its current title of value management.

The approach began to become established in the UK in the late 1980s and is slowly
becoming recognised for the benefits it can bring to the construction development
process.
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2 Definitions
Although value management is the preferred term for the process, there are some who
still like to use the terms value analysis and value engineering. For the sake of
completeness, and to demonstrate the development over time, definitions for each of
these terms are given below:

z Value analysis – ‘If we can’t get the part, we must get the function’ (Miles,
1943).

z Value engineering – ‘A disciplined procedure directed towards the

achievement of necessary function for minimum cost without detriment to
quality, reliability, performance or delivery’ (Carter, 1991).

z Value management – ‘A proactive, creative, problem-solving or problem-

seeking service which maximises the functional value of a project by
managing its development from concept to use’ (Male and Kelly, 1998).

z Value management – ‘A style of management that has evolved out of

previous methods based on the concept of value and functional approach’ (BS
EN 12973: 2000).

The BS definition refers explicitly to the evolution of the process and concludes that
it is a management style. I suggest that it is a style akin to that of ISO 2000, ie one
that depends upon a whole systems approach.
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3 Eliminating unnecessary cost

Unnecessary cost can be defined as:

‘Cost that provides neither additional function, length of life, or user benefit.’

It is a widely held view that unnecessary cost is endemic in building design. Some of
the many reasons put forward to support this view are:

z The frequent lack of a robust brief.

z The method of paying designers; ie a percentage of the out-turn cost positively
encourages ‘over-design’.
z Inappropriate use of time during the design period.
z The absence of functional analysis to inform precisely what role the whole
building (or a component of it) is required to perform.

So a set of procedures that can be introduced in a planned, systematic and managed

way, into the brief development and design processes, designed to address these
problems is obviously very attractive.

The value management process takes as its starting point the notion that such
problems are best solved by drawing upon expertise from a wide range of
(construction) industry professionals. There is a great deal of empirical evidence to
support this view, not least of all the fact that in most professional design offices,
work is reviewed or checked independently before being issued.

Value management is an extension of that practice, one that opens the review to the
eyes and criticism of those beyond the team or discipline that originally created the
idea. Furthermore, it goes beyond checking etc of a solution, it positively contributes
to the creation of the original solution by first determining what the design must do,
its function.

Unnecessary cost must be taken to include aborted or reworked designs. The

application of the value management process during the briefing phase, ie prior to any
design work being done, precludes the inclusion of poor design and unnecessary cost.

The value management process includes the assembling of multidisciplinary teams

under the direction of a facilitator to define, challenge and question the role or
function of either the whole project or an individual component part. It is by
assembling such teams and channelling their combined yet divergent range of
expertise in a controlled environment that the quest to remove unnecessary cost can
be satisfied.

It is important to understand (and referring back to the definitions should help) that
the objective of value management is to eliminate unnecessary cost. It is not a cost-
cutting exercise, but it is through the removal of unnecessary cost that it is possible to
enhance value.
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4 Methodology
As mentioned previously, value management is a process. A process is defined as:

‘A structured, measured set of activities producing a specific outcome.’

(Graham, 2000)

Strictly speaking, the value management process is a parasite. It depends for its
(justified) existence upon the design process, linking into that process through a series
of interventions.

Construction development projects are, of course, all bespoke or unique and so the
actual design process and the corresponding value management process intervention
points are also unique but they generally fit the following pattern:

Design stage: Pre-brief or Brief or Concept Detail Site

Business brief Technical brief design design operations

Value management
intervention point: × × × × ×

Returning yet again to the basic philosophy of value management – the elimination of
unnecessary cost – it well known that the opportunity to achieve that objective
diminishes over time. Furthermore we can improve or remove the need to ‘eliminate’
cost by not allowing it into the project in the first instance. The opportunity to exclude
unnecessary cost must be taken at the earliest opportunity, ie in the briefing stages. A
brief that is in any way inadequate will allow into the design solution unnecessary
cost.

This point can be illustrated by an extreme example: during the business brief phase it
was established that there was no need for a project at all. If this point was recognised
at any later stage, all expense incurred (management and design fees and construction
costs) would be unnecessary but unable to be eliminated.

Each intervention point in the value management process adopts the same generic
structure of:

1. Planning and preparation

2. Execution or delivery – the ‘workshop’ stage
3. Recording and reporting.

During the planning and preparation stage, the following issues need to be
addressed:

z What the objectives are of this particular intervention.

z Who the appropriate people are to resolve the issues/deliver the objectives.
z What the agenda is; collecting together necessary background data including
any undocumented information such as thoughts, fears, anxieties and ‘hidden
agendas’.

This planning and preparation work is essential to the successful outcome of the
intervention and thus contributes to the overall success of the process. It usually takes
place over a period of weeks, in a quiet, behind-the-scenes atmosphere.
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In contrast, the execution, delivery or workshop stage takes place over a

concentrated period of time (usually less than five days) and it should be loud and
exciting and generate an electric atmosphere. As ever with value management, there
are no fixed rules. The agenda will have mapped out a suggested format for the
particular workshop but this must be flexible, constantly reviewed and revised in
response to the energy flows created by the workshop participants.

The following is a guide towards how the workshop might be structured:

z The information phase – sharing the previously gathered information,

clarifying and confirming the workshop’s objectives with particular attention
being given to the function(s) of the element of attention.

z The speculation phase – using appropriate tools and techniques to generate

potential alternative ways of providing the function(s) identified in the
previous stage. The output of this stage should be a long list of ideas.

z The evaluation phase – the alternatives generated above are evaluated in

terms of their economic and practical feasibilities. By default, some of the
long-listed ideas will be less feasible than others and to be practical, the list is
usually refined to five or six ideas considered worthy of further, more detailed
consideration and development.

z The development phase – the shortlisted ideas are examined and developed in
more detail paying particular attention to the interfaces with essential
adjacencies (physical as for a component or metaphorically as in an
organisational or strategic context).

z The conclusion and recommendation phase – the most favourable solution

or solutions are identified and recommended for adoption or further
development as appropriate.

At the end of the workshop period, the evaluation team disbands and returns to their
‘day jobs’. This may be a permanent or temporary disbanding depending upon the
circumstances, leaving the facilitator to collate and produce a report for the project
sponsor or employer.

The recording and reporting stage overlaps the workshop stage. If possible a
member of the facilitation team records, in a report format, the output of each of the
workshop phases. If this is not possible, care must be taken to ‘preserve the
evidence’ (flip-chart sheets, post-it notes etc) so that they may be converted into a
report format.

The report is essential not only to advise the project sponsor and to inform the next
stage, but also to serve as an audit trail. An audit trail is important not only to satisfy
any organisational governance rules but also to serve to remind people how a
recommendation was arrived at and to prevent the subsequent attempts to ‘reinvent
the wheel’.
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5 The value management intervention workshop

phase in more detail
As the intervention workshop phase involves a number of people (and therefore is
probably the most expensive element of the process) and requires active and reactive
facilitation, it is considered worthy of a little further amplification.

5.1 The information phase

Beyond the initial downloading and sharing of previously gathered information, this
phase places great emphasis on functional analysis. The overall aim of value
management is to eliminate unnecessary cost while maintaining the function(s).
Depending on the timing of the intervention, the focus of the workshop might be on
the whole project or on an individual component, but whatever the focus, the
objective of this phase is to identify the various functions being performed.

A significant part of this phase is therefore devoted to establishing answers to the

questions: ‘What does it do?’ and ‘How does it do it?’ This is really little more than
‘defining and understanding the nature of the problem’ (part of an established
approach to general problem solving) but concentrating people’s efforts on producing
as many answers as possible to these simple questions is a useful way for them to
focus on the task in hand in a very specific and efficient manner.

Having produced a series of answers to the What and How questions and thus
identified the function(s), the next phase concentrates on generating a range of
potential alternative ways in which that function might be delivered.

5.2 The speculation phase

The emphasis in this phase is on creativity and it is probably the most difficult phase
for all concerned but there are a number of techniques available to help. These are
designed to stimulate innovative ideas and the most commonly used is known as
brainstorming. Brainstorming is an easy-to-use technique with just a few simple
rules, including:

z There must be no judgement or criticism.

z Anything goes, the wackier the idea the better.
z The more ideas, the merrier.
z Cross-fertilisation, exploitation and development of other people’s ideas is to
be actively encouraged.

The objective of a brainstorming exercise is to provide a structured environment in

which participants are actively encouraged to think and express themselves without
inhibition or fear of rebuttal – to ‘think out of the box’. If the facilitator allows
criticism, it will destroy the free flow of ideas. This is why brainstorming sessions
must be performed in isolation (separated perhaps by a coffee break) from the
subsequent evaluation stage. And the reason for aiming at a large number of ideas is
because it is easier to eliminate ideas than to try and create a few more later in the
process.

Critical to the success of this phase is the ability of the facilitator to create and
maintain a conducive atmosphere and to encourage the participants to break away
from their familiar ways of thinking.
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5.3 The evaluation phase

During this phase, the task is to select those ideas that appear to offer the greatest
potential for further development and ultimately success. It is important to view the
exercise in terms of justifying the idea rather than rejection. It is perhaps all too easy
to argue that an idea will not work (especially if it is not yours) and so this procedure
helps to maintain a positive and professional climate.

Each idea must be carefully evaluated, its advantages and disadvantages examined
without bias. Those that fail to satisfy the criteria, ie to perform the desired function,
must be eliminated. A shortlist of ideas that will satisfy the criteria is established by a
process of elimination, expanding and consolidating ideas that are then taken forward
into the development phase.

5.4 The development phase

In theory it should be possible to develop any number of ideas but in practice it is
usually appropriate to limit the number to five or six. Ideas not developed at this stage
are not necessarily rejected; they may be brought back for development later if
appropriate.

The work of this phase is to refine potential solutions and can be a very time-
consuming and specialised exercise requiring access to bulky databases etc. It might
therefore be appropriate to suspend the workshop, commission the necessary work
and reconvene the workshop when the necessary information is available.

A subjective ‘cost-benefit’ decision needs to be made here, as a great deal of time and
money might be expended producing unnecessary data (which in itself might be
spurious, such as future interest rate predictions). However, some analysis and fact is
probably better than relying totally on intuition or experience.

5.5 The conclusion and recommendation phase

In this, the final workshop phase, the facilitator summarises the work of the team and
proposes what the recommendations should be. Any key issues or phrases should be
recorded at this time as this will make the report easier to finalise but it is not usually
practical to produce the report itself at this time.

Before the team disperses, the time and place for the next intervention workshop (as
appropriate) should be established and an outline of its agenda agreed. Finally the
team should be asked for their feedback on the workshop process itself, the quality of
the venue and, most importantly, on the facilitator themselves.
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6 Value management intervention workshop

programmes
As should be clear by now, to obtain the maximum benefit from the value
management process requires a flexible approach to all aspects of its planning. This
point has already been made in respect of the timing of interventions, the approach to
which must be flexible, but certain guidelines are available to draw upon.

The same condition applies to workshop programmes. One of either of two durations
seem to be appropriate for use. They have become known as the 40-hour workshop
programme and the two-day workshop programme.

For either programme, having been previously approached and briefed, the team is
brought together, ideally at a neutral location. Hotel conference rooms are often used
because, although they are often boring and bland, they do tend to:

z Help focus the team’s minds on the job in hand – there are no everyday
distractions.
z Demand commitment – especially if they are located at a distance from the
normal place of work.
z Mitigate against partial attendance.

The 40-hour programme is usually split over four or five days, the first of which is
devoted to the information phase followed by a half-day working on the speculation
phase. The next two and half days are spent on the evaluation and development
phases and the final half-day summing up and concluding the results.

This approach, involving perhaps 15–20 people plus conference facilities and maybe
travel and hotel accommodation expenses, might be viewed as extravagant in terms of
both time and cost, but it should be seen as both an investment and a demonstration
by senior management of their commitment to the project.

The four or five days do not, of course, have to be consecutive; as has already been
explained, it might be appropriate to break off and reassemble when certain data
collection/preparation work has been completed.

In order to merit the investment and commitment, the facilitator must thoroughly
prepare for the workshop or serious damage will be done to the credibility of the
process as well as to the person.

The two-day workshop follows the same series of phases compressed into a shorter
timescale. The information and speculation phases are covered in the first half-day,
speculation and evaluation in the second half of the first day. The second day starts
with development and concludes with the conclusions and recommendations phase.
With just two days, it is not usual to break away for further research and data
gathering and the quality of the output will reflect this.

This, however, is not always a problem as in the earlier interventions such detail
might not be required. This emphasises an important point concerning the application
of the value management process – that it is a flexible process which must be applied
appropriately according to the specific objectives or timing of the intervention.
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It is also worth reiterating the fact that it is a process as opposed to a one-off exercise
(unless, of course, the project is abandoned after the first intervention). As in all
processes, continuity is advantageous and so the process team leader or facilitator
should be identified and appointed at the earliest opportunity.

The facilitator takes responsibility for all of the necessary research and preparation
work, for monitoring the progress of outside or in-between workshop activity, for
producing and circulating the conclusions report and for ensuring any recommended
follow-up action is taken.

Summary
Value management has evolved over the past 50 years or so, changing its name on the
way but always being concerned with the elimination of unnecessary cost without any
reduction in the required quality.

It must be seen as a process, and a key to the success of its application is the adoption
of a flexible approach within a prescribed framework. The structure of that
framework is a series of appropriately timed intervention points. The activity
surrounding each intervention is in three parts: planning, execution and reporting.

The execution part is usually delivered through either a 40-hour or a two-day

workshop (or a combination of the two). Whichever is adopted must be appropriate to
the situation. They both follow a similar format.

Any methodology can be designed and adopted but the underlying principle is first to
discover the function of the project or component part and then to identify an
alternative way of providing that function at a reduced cost.

REFERENCES
BS EN 12973: 2000, Value Management.

Carter (1991) Unpublished lecture notes.

Graham M (2000) Unpublished PhD Thesis, University of Leeds.

Male S and Kelly J (1998) The Value Management Benchmark, Thomas Telford,
ISBN 072772729X.

Miles L D (1943) Quoted in Miles L D (1972) Techniques of Value Analysis and

Engineering, Higher Education, ISBN 0070419264.