Applied Principles of Value Management and Engineering - Term Paper Example

PRINCIPLES OF VALUE MANAGEMENT AND ENGINEERING APPLIED ON SBE INNOVATIONS’ PROJECT WORKSHOP WITH AN ESSAY ON RISK MANAGEMENT Executive Summary The initial gist of this paper is that a company known as SBE Innovations Ltd. contacted us and asked our professional services to conduct value management and value engineering studies. This would entail a workshop, functional analysis and other tools and methodologies for a value management and engineering on a proposed recreation and commercial centre to be situated in a suburban area. We could not but consent to this request as we knew the importance of such a project, considering that we have initiated a brief visit to the site and scanned a few studies on the benefits it could create, both on the commercial and humanitarian aspects of the proposal. Our aim at present is to provide a brief background of our consultancy firm. We have been in this business for years, delivering professional service and expertise to companies and organisations in improving their strategic plans and in the conduct of value management and value engineering studies as we have vast knowledge of concepts and methodologies on this area. SBE Innovations Ltd., a partnership of private and public sectors, is a valued client. This paper is an initial report on the study that our VM/VE team conducted on the proposed recreation and commercial centre. The first part is a study on value management with a focus on the site inspection, the objectives for the conduct of VM/VE, the workshop, discussions and brainstorming, and other tools our team has conducted. Functional analysis provided the needs of SBE Innovations through recommendations to minimize unnecessary costs and maximize the potential benefits of the different functions of the project. The second part deals on value engineering involving imaginative and creative efforts, and methods and means to provide substitute materials, tools and processes which can give a valuing ‘map’ for the project. Introduction Value management is the first activity that we will apply at the early stage of the project. This is a step-by-step analysis, employing scientific methods, discussions, brainstorming, and all possible logical means to arrive at a low-cost with high value for the client’s project. This study will be a collaboration of the different stakeholders including department heads and key employees of SBE Innovations and our very own team. They will carry out a workshop to undertake value management and value engineering. The team will conduct functional analysis and provide suggestions, including inputs from the different stakeholders and the people in the field in order to provide the greatest value for the project. Through value management, we can evaluate the different aspects and functions of the construction project. Our objective is to minimise unnecessary costs and see to it that all functions have their important role in the entire project. This will utilise a structural functional analysis and other problem solving tools and techniques that will ensure low cost and great value for the project. We will identify the core values of the project and transform goals into actions to achieve the necessary results. Our ultimate goal is to help our client by introducing creative ways in ‘valuing’ the project, and providing recommendations and seeking solutions to the problems which are still unseen. Tasks and responsibilities of the VM study team: 1. Inspect the actual site of the proposed project - Duration: 1 week or as needed The members of the team will conduct the inspection and look for possible scenarios that may occur in the future, including seeing to it that the parts, stages, and the different functions are closely studied to attain maximum results. 2. Discussion - Discussion will take place every day or every after inspection. All personnel who participated in the on-site inspection and all stakeholders will be involved in the discussion. Discussion will take much of the time of the study. This will also include brainstorming, gathering data, ideas, suggestions, and everything that could be of use at present or in the future when construction is in full swing. The study team will conduct the following activities: 1. Define the value of the project and its parts, and provide basis for making decisions; 2. Provide clear briefs that reflect our objectives, priorities and expectations; 3. Provide an effective communication between our company and the stakeholders; 4. Provide the most cost-effective way of delivering the benefits, such as the value for money (VfM), and provide a basis for refining the requirements of business; 5. Arrive at innovative design solutions with improved communications and enhanced team working; 6. Do a way of measuring value, taking into account non-monetary benefits and demonstrating that value for money has been achieved. Total economic management of projects involves considering both cost and value. Value management occurs much earlier in a project’s life-cycle whilst cost management occurs in the later stages. (Kelly and Male, 1993, p. 72) The cost aspects of the service can be ascertained by the use of traditional quantity surveying services. The assessment of worth and its relationship to cost can only be ascertained with reference back to the views of the client or end-user. Cost management involves traditional ways of surveying skills, reducing costs, and using proven procedures. The team will brainstorm suggestions and ideas to ensure creativity from its members. Cost management does not mean introducing new stages to the project, but will only simplify some of the functions. The following processes will be executed by the VM study team: 1. Careful analysis and identification of project needs and scope. A clear project definition and scope analysis will be provided. 2. Thorough planning of the project and subsequent work. Effective planning ensures that there is maximum cost efficiency with no unnecessary steps or wasted effort. 3. Identification of key functions so that opportunities can be enhanced. The project team’s goal is to enhance positive features of the project while keeping control of costs. 4. Development of alternatives to improve project value. There are several ways to enhance value, and this could be attained through careful study involving all members of the team. 5. Evaluation of alternatives, and development of proposals and action plans. Performing a no-nonsense analysis of the situation and select best choices to provide the best value yet low cost for the project. 6. Use of a performance monitoring system for tracking project value. The project team must have the means to accurately monitor the project, gain timely and actionable information, and make “on-line” decisions and choices among alternatives. 7. Ensure a free flow of communication between the departments and stakeholders. To effectively manage value, a cross-functional mind-set must prevail throughout the organisation, so that ideas, alternatives, and creative solutions have the widest possible arena for exploitation. (Venkataraman and Pinto, 2008, p. 9) At the beginning of this study, we will provide a way of exploring SBE Innovations’ needs by addressing inconsistencies and expressing these in a language that can be easily understood. Value Engineering Report Value management and value engineering are synonymous but the applications sometimes differ in context. For example we always refer value engineering to the technical side of the study, although value management can also be understood in this way. Sometimes too, the only difference is on the application of the study by the different study groups, or consultancy firms such as ours. The VE application for the recreation and commercial centre will recommend various modifications and improvements. Some stages and functions will be cut short, while other parts and materials have been reduced in their costs, without sacrificing quality. This will allow savings for the project. There have been many positive outcomes for value engineering. In our experience as a VM study group, we have seen value engineering as a construction tool to enhance the best benefits in engineering. One of the best processes is functional analysis which can provide a study of cheaper construction products without reducing quality. VE can be used as a means both of removing unnecessary cost from products and of improving design. The value engineering team will be composed of the project engineer and his team and our own engineers. This is the technical team who will recommend to the VE study team the various results of their technical study. SBE Innovations Ltd. is our ‘principal’ who will be represented by the project manager and his project committee. Technical study means a process of examining the different aspects of the project by way of applying engineering principles and practical ways to arrive at low cost but high value for the project. The VE team will recommend the parts and tools to be used in the different stages and functions of the project, ensuring that these will minimize unnecessary costs and provide maximum efficiency. Value engineering is very important in the ‘valuing’ process because it can provide the following processes: 1. Problem solving techniques that can trigger one’s imagination and creative abilities on a particular project life cycle including how and what methods can be used on the structures and objects under construction; 2. Offering ways and means to provide substitute particular materials and equipment in use that can provide the maximum benefits, at low cost but quality materials. (Male and Kelly, 1998, p. 204) The workshop The VE team will participate in the workshop which will include the contractor and key specialist sub-contractors employed by the main contractor. The workshop will study the ‘constructability’ and supply chain issues. (Male et al., 1998, p. 15) The workshop will have several stages, and these are the pre-brief workshop, the brief workshop, the concept design workshop and the detail design workshop. The pre-brief workshop will include the initial steps of the design. These four stages can correlate well with any project in the design stage, with utmost quality. (Kelly and Male, 1993, p. 83) This is a block diagram of how a workshop for value engineering can be conducted. The process involves a step-by-step implementation. First, the workshop will gather information on all possible scenarios of proposed entertainment and commercial centres. The workshop proper will provide comments on the initial design, modifications, trimming, and evaluation, while the post workshop involves development and presentation to the SBE Innovations project committee and management. The VE study will be applied at a time when construction of the entertainment and commercial centres are already in full swing. The different areas that should be given focus are the areas where a great number of people are expected to flock. However, VE can also be conducted at the initial stage of the construction. The VE team will implement a methodology known as the ‘Job Plan’. A well-organized team is needed in applying value engineering in construction. This is actually an outline in the VE study. The aim of formulating a job plan is to analyse a product or service to find alternatives to achieve its required function. The Job Plan should include the following phases: Pre-study phase Value study phase Information phase Function analysis Speculation or creative phase Evaluation phase Development phase Presentation Phase Implementation phase Post-study phase (Kelly et al., 2004, p. 15) The orientation part is also known as the selection phase, which sets the objectives, the client’s purpose in commissioning the study, and other desirable characteristics. Anyone is allowed to air his side, to express his opinion and ideas, and to understand the different information provided for the project. Everyone will be encouraged to provide suggestions for the success of the study. The team will look at the cost and the value of each part of the project. There could be some redundancies in the construction proposal, this should be simplified. Simplification can lead to more savings, but quality must not be sacrified. At the information phase, the objective is to review all possible information of the project, and identify the functions of the whole or parts of the project, in order to erase doubts on certain areas. Information based on assumption or little knowledge should be cleared out. Data and evidence can be sourced from reliable people and departments about these ambiguous parts of the project. The milestones of the project should be formulated here. (Kelly et al., 2004, p. 57) The VE team can use the REDReSS technique which is an acronym for the important activities to be accomplished: Reorganisation. The client can reorganise what has been studied and recommended by the team, and the team should be flexible in the process. (Kelly et al. 2004, p. 58) Expansion. The project has to be assessed whether it will remain fixed or whether a further phase is likely. Disposal. There might be reconstruction or refurbishment of the entire project. When this stage is reached, some disposal activity will occur. Refurbishment and maintenance. Examples of policies could be that maintenance has to be carried out in a secure environment at predetermined times. Safety. Safety is one of the most important as this involves the team and all the personnel involved in the project. Security. This is as important as the rest for SBE Innovations. (Kelly et al., 2004, p. 58) Brainstorming sessions, generating ideas, drawing in creative solutions to problems and ambiguous areas of the project, are a valuable technique and tool in the VE study. Brainstorming sessions can produce positive results by first speculating the possible costs of each stage, and then arriving at a collective conclusion drawn out from experience and creativity of the study team. The evaluation phase provides for an opportunity for the study team to determine the costs of some parts of the project. The development phase can acquire suggestions and ideas from creative members of the team. Finally, at the presentation, everything is finalised, revised and more substantive moves have to be incorporated on the final plan. There will be realigning and more creative juices coming in. In the post study phase, everything is put to writing – a substantive written report. Part 2 - Essay Why the UK Construction Industry is a Risk Risks were simple when people were living without the amenities of technology and modern living. But risks multiplied during the industrial revolution, and subsequently at the introduction of high technology tools and equipment in homes and industries. There were more risks in the workplace when production increased as more work and labourers were needed. With the introduction of the internet, risks multiplied and diversified. This includes problems associated with various crimes, like fraud, privacy and intellectual property rights. Risks now include electronic fraud by computer hackers or even vandalism and terrorism through the use of the internet. The construction industry has multiple risks involved for it includes the environment, the health and well-being of the people living in the community where construction is undergoing, and the business side or the return of investment aspect of the construction. To talk about the UK construction industry is to indulge on the topic of risks. Risks include the health of the workers and the local population, but most paramount is the risk to the environment since constructions produce a vast amount of construction and demolition waste, added with pollutants and chemical hazards. These risks can become real and not just imagined danger to us if we do not institute measures and stringent laws to regulate and control construction firms with their innumerable projects. According to Thompson and Perry (1992, cited in Ahmed et al., 1999, p. 225), risks in construction include location, type of contract, familiarity with the work, and breakdown in communication. How to deal with these risks is a big challenge to contractors and owners of construction of project, as well as the enforcers of the law, the government. Moreover, there are other risks, such as the risks involved in environmental conditions which include unexpected earthquakes, unforeseen rain, and unpredicted climatic changes during the project operation. Proper risk management planning should be enforced in order to minimise damage during environmental disaster. Some effective risk reduction strategies include building earthquake proof foundations, proper scheduling of tasks by considering the rain forecast, and applying personal security measures in order to reduce personal safety risks. Construction wastes can also be minimised with careful planning. In the UK construction industry, the ‘principal’, or the one who commissions the project, makes the decision to invest. He takes the risk in the project. He can reduce the risk by acquiring the services of the best professionals or engineers, who are called ‘agents’. (Flanagan and Norman, 1993, p. 3) There is also the design assumption risk which occurs when the structural design of a building is prepared without proper consultation with the client who invests in the development of that specific building. Value management and engineering have to be applied to minimize the various risks that will be generated by the construction project. Other risks go farther than the business risks, because the principal and the contractor have to look after the environmental threat that the construction activities will generate. The construction industry produces hundreds of tonnes of waste and pollutants which form part of the environment and the atmosphere. It is a major generator of waste, accounting for 50% of the waste deposited in a typical landfill. (Institution of Civil Engineers, 1995, p. 1) Constructions have always posed serious problem to the environment. The government has instituted measures but there are many things yet to be done. A close partnership and cooperation between the private and public sector has to be instituted and continuously encouraged. Climate change will exacerbate if the public and the private sectors remain complacent in their actions to undertake measures to avoid environmental abuse. There is a poor record of safety and health promotions for construction workers and the community population where construction is on-going. Workers are at greater risk than the people in the community of sicknesses like cancer. The industry is one of the most risk-related sectors. Reports of accidents are among the highest with fatalities ranked the third of all industries. (Pritchard, 2004, p. 172) Small construction firms do not have appropriate programmes for waste minimization and waste disposal. Companies should know how to identify risks and the keys towards a successful implementation of their strategic plan. (Ahmed et al., 1999, p. 225) A construction project that starts without the necessary consultation between the principal and the agent will create many risks as the project progresses. It will be a project without adequate risk management. Value management and value engineering are not applied. There could be risks in the design and in the implementations, particularly in minimizing risks caused by natural accidents, fire, earthquakes and other natural calamities. Further changes that may be applied in mid-construction may cause an irreparable damage. The client and the value engineering team should conduct the study and confer with each other on some specific functions of the project. All loopholes and possible problems should be discussed and given possible solutions before construction starts. Laws and regulations for environmental protection need to be enforced and followed. Environmental laws such as prevention of all sorts of pollution, from ozone depletion, and from dumping wastewater at streams, seas and other bodies of water, have to be carefully studied and enforced. Partnership with the public and private sectors is of paramount importance. Implementation should involve all stakeholders in the construction industry. In their efforts to resolve the issue, the public and private sectors have made moves to protect the environment by implementing the Site Waste Management Plan (SWMP). This program is all about environment protection and following the requirements on environmental preservation. There are penalties against violators, the construction firms which have no proper waste management. The procedures include auditing processes, on how the stipulations of the SWMP are being implemented. This may include pre-auditing, auditing and post-auditing. There are industry groups like the United Kingdom’s Construction Industry Research and Information Association (CIRIA) which provide guidance documents (Uren and Griffiths 2000, cited in Christini et al, 2004, p. 331). However, there’s still much to be seen or worked out in the industry. Small-time construction workers don’t get much attention and therefore do not apply the law to the letter. The big industry players have their programmes and are following the law. SWMP should be implemented by construction firms before construction begins. The SWMP provides a structure for waste delivery and disposal at all stages of the construction project (Department of Environment, Food and Rural Affairs). This supposed framework can help the construction firm in its effort to preserve the environment, meet the requirements of the law on environmental compliance, and help in acquiring savings for the firm. SWMP can bring many benefits for the organisation. Management of construction firms should do their part in health promotions of the workers and in preventing accidents in construction sites. SWMP also enables the contractor and the owner of the project to agree on the practical ways to dispose of the construction waste and environmental hazards before construction project starts. Value management and value engineering are some of the activities that should help in managing risks in construction projects. Partnerships of the government and private sectors are a good start. But this should be improved with more funding coming from many sectors. Trainings and seminars on value management and value engineering should be required because these concepts add to risk management in construction. More laws and guidelines and information campaign should be added on the programmes. Value engineering should be a part of the requirements for licensing approval and certification. Organisations should take a closer look at value engineering and its many benefits. VE looks at problems and the many perspectives of construction projects. First, problems which are still unseen can be detected. This occurs at the initial stage of ‘valuing’ when the VE study team examines the different functions. Through the process, risks can be avoided and measures can be instituted before those risks become real and inflict considerable damage to the entire project. All stakeholders should work together as a team to enforce the necessary measures for the protection of the environment. Big responsibility is upon the shoulders of the management of the construction firm, but workers and management should also work together to protect the environment and the fulfilment of their mission and objectives. There are other important and effective means of reducing waste in construction. Waste management can increase profitability through the 3Rs – recycle, reduce and reuse. These three concepts of waste management have been effective in minimizing construction and demolition waste and one way of maximizing profitability. Construction firms have their own recycling personnel who take charge of the proper ways of discarding the recyclable and unrecyclable materials in construction. This is also one of the significant issues addressed to in value engineering, as a way of risk management. There are instances that the traditional procedures are adopted, in which all parties involved in the project tend to make use of materials and procedures that would provide them with optimum benefits, while the effects on the environment or people in the surroundings do not gain a significant consideration. Environment, people’s health and well-being, and the business aspects should be addressed to in risk management. References Ahmed, S. et al., 1999. Risk management trends in the Hong Kong construction industry: a comparison of contractors and owners perceptions. Engineering, Construction and Architectural Management 1999 6/3, 225-234. Christini, G., et al., 2004. Environmental management systems and ISO 14001 certification for construction firms. Journal of Construction Engineering and Management, ASCE, May-June 2004, 10.1061/~ASCE!0733-9364~2004!130:3~330. Department of Environment, Food and Rural Affairs (www.defra.gov.uk), 2008. Non-statutory guidance for site waste management plans. Available at: http://www.defra.gov.uk/environment/waste/topics/construction/pdf/swmp-guidance.pdf (Retrieved 6 December 2010). Flanagan, R. and Norman, G., (1993) Risk management and construction, Oxford, UK: Blackwell Publishing Ltd. p. 3. Dallas, M., 2006. Value & Risk Management. UK: Blackwell Publishing Ltd. Institution of Civil Engineers, (1995)Managing and Minimizing Construction Waste: A Practical Guide. London: Thomas Telford Publications. Pritchard, C., (2004) Building for Health? The Construction Managers of Tomorrow. The Journal of the Royal Society for the Promotion of Health 2004; 124. DOI: 10.1177/146642400412400409. p. 172. Kelly, J. and Male, S, 1993. Value Management in Design and Construction: The Economic Management of Projects. New York: Taylor & Francis Group. Kelly, J., Male, S., and Graham, D., 2004. Value management of construction projects. UK: Blackwell Publishing Company. Male, S. and Kelly, J., 1989. Organizational Responses of Public Sector Clients in Canada to the Implementation of Value Management: Lessons for the UK Construction Industry. Construction Management and Economics, 1989, 7, 203-216. DOI: 0144-6193/89. Venkataraman, R. and Pinto, J., 2008. Cost and Value Management in Projects. New Jersey: John Wiley & Sons, Inc. Read More