How Can Technology Increase the Value of Value Engineering?

The growing demand to optimize capital projects investments and to do more with less funds, project owners and more than ever, are now adopting the best practices of value engineering to identify and eliminate unwanted costs, while improving project’s function and quality. The aim is to increase the value of projects, satisfying the project’s performance requirements at the lowest possible cost. This involves considering the availability of materials, construction methods, transportation issues, site limitations or restrictions, planning and organization, costs, profits and so on. As well as increasing the benefits that can be delivered include a reduction in life cycle costs, improvement in quality, reduction of environmental impacts, and so on.

Project Management Information Systems (PMIS) like PMWeb can add great value for the value engineering process. Not only it adds value in ensuring that the right data needed for value engineering is captured in a transparent and accountable format but provides the VE team with a better platform to evaluate, analyze, visualize and report this data. In addition, it enables the organization to transform this data into knowledge that can be of great value when the next

Value Engineering has three stages, Pre-Study where the project and team selection will be defined, VE Workshop or VE Study which includes five distinct phases: Information, Speculative/ Creative, Evaluation/ Analytical, Development/ Recommendation and Report, and the third stage is Post-Study which includes implementation and report results. The VE workshop stage is where most of the data for the VE analysis is generated and where technology shall be used to increase the value of Value Engineering.

Information Phase: During this phase, the VE team gains as much information as possible about the project design, background, constraints, and projected costs. The team performs a function analysis and relative cost ranking of systems and sub-systems to identify potential high cost areas. Function Analysis is a technique used to identify and understand the needs of the project, product or service, (what does it do, what must it do). In Function Analysis, functions are described in two- word Verb – Noun definitions that describe the needs of the project, product or service being examined. The two words used to describe a function include an active verb and a measurable noun. The measurable noun identifies something that can be described and quantified. In addition, the VE team needs to specify if the function is basic or secondary. The basic function of an item is the specific work it must perform. Secondary functions are those functions that may be desired but are not actually required to perform the specific work.

For example, the function of an electric cable is to “conduct current.” “Conduct” is the action verb and “current” is the measurable noun. Other examples are to “support load”, “contain heat” and “provide access”. The chart below explains the function analysis of a pencil.

If the VE Team who has access for a Project Management Information System (PMIS) like PMWeb, will have all project’s drawings, specifications and other contract documents stored on PMWeb document management repository. This will enable the team to access the latest project documents anywhere, anytime using any device. The document management repository will be also used to upload equipment catalogues and other documents including those needed to assess the life cycle costs needed during the value engineering workshop. The web-enabled document management repository will ensure true collaboration among the VE team in reviewing the same set of project documents.

The Function Analysis Phase report is an important deliverable for the information phase. The report will be produced in the desired form and format from the PMWeb cost estimating module. A cost estimate will be created for each project system and function. All cost and value items will be added to the cost estimate. In addition, new user defined fields will be created to capture the three values of Function Active Verb, Function Measurable Noun and whether the Function is Basic or Secondary.

Another very useful function for the VE Team that is readily available in PMWeb is the ability to create cost assemblies for the different project systems that are common for the organization’s type of projects. Those assemblies identify the cost estimate components for each system for which the cost will be automatically calculated by defining the project variables such as space size, inflation index, location of works, among others. The rates for resources and other cost items will be extracted from the PMWeb cost database that was created and maintained by the organization.

For project systems that the VE Team might require receiving proposals from vendors and suppliers, the VE Team will use the cost estimate module to generate the procurement items that will become the basis to send request for proposals for the selected suppliers and vendors to provide their cost estimate online for the needed scope of work. This data could be also used to verify that the cost estimate developed by the VE Team is correct.

The PMWeb Cost Estimate module will allow the VE team to attach all project documents like drawings, specifications, products catalogues, pictures from the site visit if needed, FAST (Function Analysis System Technique) Diagrams among others used in developing the cost and Value estimates. In addition, the details of all value engineering related meeting minutes which will be recorded in PMWeb meeting minutes module as well as related project’s communications will be linked to the cost estimate module.

Should the organization require to add governance for the Function Analysis process, a workflow will be assigned to the cost estimate to map the different workflow steps needed to review and approve the function analysis for each project system. The workflow steps could have conditions and rules to involve different roles in the review and approval process depending on the project system and the value among other attributes of the functional analysis.

Using the captured data, the Function Analysis report can be produced in any desired form or format. It can be designed to reflect the data that matters most for the VE Team and the organization’s management. The report can include selection filters to enable the VE team to display only the desired analysis information.

Speculative/Creative Phase: The VE team uses a creative group interaction process to identify alternative ideas for accomplishing the function of a system or sub-system. This phase involves an open discussion without any restrictions on the imagination or inventive thinking of individual team members. The objective of the Speculative/Creative Phase is to generate a completely free interplay of ideas between team members to create an extensive list of alternative ideas for later evaluation. The key to successful results is the deferral of any critical judgments or comments which might inhibit any of the team members.

The ideas should be listed by system, subsystem, and component to facilitate effective organization of the study. The Idea Listing and Evaluation form created in PMWeb using the form builder will be used to capture those ideas. The organization can select to build a form that will be used to capture all ideas generated for a specific system and function or have a separate form for each generated idea which will enable more granular approach in reporting, evaluating and analyzing ideas. Regardless of the type of form used, all analysis, evaluation, or judgement of the ideas generated is delayed until the Evaluation/Analytical Phase.

Evaluation/Analytical Phase: During the Evaluation/Analytical Phase, the ideas developed in the Speculative/Creative Phase are examined to assess which have the best opportunity for implementation, cost savings, and value improvement. The VE team evaluates the feasibility of each idea by identifying its advantages and disadvantages. The ideas are then rated on a scale of one to ten. A ten represents either the best technical idea or the one with the greatest potential for cost savings and value improvement.

Another method used for rating and evaluating ideas is based on providing an A, B and C rating where “A” – Good idea without apparent downside “B” – Good idea with downside (additional cost, maintenance, staging, etc.) and “C” – Don’t evaluate this idea. The ideas evaluation is based on a matrix with two variables, Benefit of Implementation and Difficulty of Implementation as shown below. For example, an idea with a “medium” benefit that is “easy” to implement would receive a score of 8. Usually, “A” and “B” ideas that receive a “6”, “8” or “9” should be developed for recommendation.

In addition, the VE team will report the advantages and disadvantages of each identified idea. Those could consider areas that could answer questions like Are the aesthetic, performance, quality and reliability requirements met or exceeded? Will excessive redesign or project delay be created? Is there improvement in operation and maintenance? Will life cycle cost savings be achieved? Does the idea have a reasonable chance of acceptance and implementation?

The data captured in the Idea Listing and Evaluation form can be reported on in any desired form and format. The report data can be limited to single project or a portfolio of projects. The report will include filters for building system and functions. The real value of the Idea Listing and Evaluation report is that this report will have access on all reported ideas for each building system and function along with the reported advantages and disadvantages for each idea for all projects. This will include both current and completed projects. This active directory of value engineering ideas can prove to be of great asset to the organization.

Development/Recommendation Phase: In the Development/Recommendation Phase, the best ideas from the Evaluation/Analytical Phase are developed into workable VE proposals. The VE team researches and develops preliminary designs and life cycle cost comparisons for the original designs and the proposed alternative ideas.

The data generated during this phase will be captured in the Value Engineering Proposal form which will be another form created in PMWeb using the custom form builder. The form will include the following details for each VE proposal:

·        Project System, Item and Function

·        Description of the original design and the proposed design (which is the VE Proposal) for the alternative idea.

·        List of the advantages and disadvantages of the alternative idea including its impact on life cycle costs and other key facility issues.

·        Discussion and Justification of the Value Engineering Proposal

·        Cost estimate and a life cycle cost analysis if necessary, for the original design and the alternative idea.

In addition, the VE Proposal form should include as attachments sketch of the original design and the alternative idea, the details of the cost savings calculation using net present value (NPV) along with other documents that could be needed. Similar to the other forms in PMWeb, a workflow can be assigned to the VE Proposal to formalize the submission and approval of the form.

The data captured in the VE Proposals can be reported on any desired form and format. The main objective is to provide the VE team with a real-time access and visualization for the VE proposals developed during the VE workshop. This report along with the other VE reports will be also used in the next phase, VE Report, when the VE team needs to submit their recommendations for the VE proposals to be implemented.

Report Phase: The VE Team will produce a preliminary written VE Report which is intended to represent the results of the VE workshop activities, and meet the VE Program objectives. The report will also include the Value Engineering Proposals summary report which summarizes the anticipated cost savings from the approved VE proposals.

The value engineering analysis data captured across the organization’s complete projects portfolio will provide executive management with an overview on the performance of the organization’s value engineering practice. For each project, the performance dashboard will report on the details of all ideas generated for each building system function, how many of those ideas were shortlisted and how many of those shortlisted ideas were developed into VE proposals. The dashboard will also detail how many of those developed VE proposals were rejected due to increased costs and not commensurate with benefits, VE Proposals considered for Design improvements, rejected VE Proposals after general considerations, accepted VE Proposals for further consideration and accepted VE Proposals at the Preliminary Design. The dashboard also details the initial cost savings, O&M cost saving and total LCC cost savings. The dashboard will also display a tabular log of those details which can be filtered by project or group of projects.