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UNDERSTANDING AND UNDERSTANDING AND SOLVING ROOT CAUSE OF THE SOLVING ROOT CAUSE OF THE

PROBLEM THROUGH VALUE PROBLEM THROUGH VALUE MANAGEMENT / VALUE MANAGEMENT / VALUE

ENGINEERINGENGINEERING

By:Assoc. Prof. Sr. Dr. Mohd. Mazlan Bin Haji Che Mat

PresidentInstitute of Value Management Malaysia (IVMM)

December 2008

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DEFINITIONS & DEFINITIONS & CONCEPT OF VALUE CONCEPT OF VALUE

MANAGEMENTMANAGEMENT

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Miles clarified Value Analysis as a Miles clarified Value Analysis as a

philosophy implemented by the philosophy implemented by the use of use of

a specific set of techniquea specific set of technique

a body of knowledge anda body of knowledge and

a group of learned skillsa group of learned skills

Definitions & Concept Definitions & Concept of VMof VM

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It is an It is an organized creative organized creative approachapproach which has for its which has for its

purpose the purpose the efficient efficient identification of identification of

unnecessary cost,unnecessary cost,

i.e. cost which i.e. cost which provides provides neither quality, nor use, nor neither quality, nor use, nor

life, nor appearance, nor life, nor appearance, nor customer featurescustomer features”.”.

Definitions & Concept of Definitions & Concept of VMVM

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Definitions & Concept Definitions & Concept of VMof VM

Che Mat MM (2004) - Value Management Che Mat MM (2004) - Value Management as a as a rigorous, systematic and rigorous, systematic and

innovative methodology with multi innovative methodology with multi disciplinary approachdisciplinary approach to achieve to achieve

better value and cost optimization for better value and cost optimization for projects, products, facilities, systems projects, products, facilities, systems and services and services without sacrificing the without sacrificing the

required performance levelsrequired performance levels..

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Definitions & Concept Definitions & Concept of VMof VM

Another relationship by Another relationship by Dell ‘IsolaDell ‘Isola , , Value = Value = F F ++ Q Q

C C

(F) Function =(F) Function =The specific work that a design/item The specific work that a design/item must must perform.perform.

(Q) Quality = (Q) Quality = The owner’s or user’s needs, desire’s The owner’s or user’s needs, desire’s and expectation.and expectation.

(C) Cost = (C) Cost = The life cycle cost of productThe life cycle cost of product..

Value = Value = The most effective way to The most effective way to reliably accomplish a reliably accomplish a functionfunction that will meet the user’s needs, desires that will meet the user’s needs, desires and expectation.and expectation.

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Definitions & Concept Definitions & Concept of VMof VM

As such Value can be increased by As such Value can be increased by the following approaches :the following approaches :

F + Q

CValue =

Costreductionapproach

Functionincreaseapproach

Compound approach

Expandgrowthapproach

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Definitions & Concept of Definitions & Concept of VMVM

Management of TechnologyManagement of Technology A Technology that enables work to be performed A Technology that enables work to be performed

efficiently and is applicable to all industries and job areasefficiently and is applicable to all industries and job areas

Development of specialised technologies

Rationalisation of Enterprise

Devt. Mangt. Tech

Time

I.E(1911) QC(1920) VA&VE(1942) Present

I.E Increase efficiency

QC Improves quality

VA&VE Increase value© MMCM

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Value Management

ValuePlanning

ValueEngineering

ValueAnalysis

The VM ‘Family’Source : Ashworth (2000)

Definitions & Concept of Definitions & Concept of VMVM

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VM promotes systems thinking VM promotes systems thinking VM establishes customer needsVM establishes customer needs Value management change proposal Value management change proposal

(incentive clause)(incentive clause) It encourages Staff developmentIt encourages Staff development It promotes PartneringIt promotes Partnering Is a Vehicle for ChangeIs a Vehicle for Change VM identifies unnecessary costs, VM identifies unnecessary costs,

which then can be removed.which then can be removed.

Why use VM ?Why use VM ?

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Solves immediate and high priority problems Solves immediate and high priority problems Establishes least cost goalsEstablishes least cost goals Identifies and defines stakeholders aims and Identifies and defines stakeholders aims and

objectivesobjectives Optimize the unit/component costOptimize the unit/component cost Produces unique solutionsProduces unique solutions Increases the marketing potentialsIncreases the marketing potentials Improves communicationImproves communication Improves quality Improves quality Reduces timeReduces time Reduces commercial risksReduces commercial risks Helps to increase the co-operation between Helps to increase the co-operation between

departmentsdepartments Encourages fresh thinkingEncourages fresh thinking Spreads cost-consciousnessSpreads cost-consciousness Develops hidden abilities Develops hidden abilities Helps to provide better appreciation of the other Helps to provide better appreciation of the other

man’s jobman’s job

Other Benefits of VMOther Benefits of VM

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Misconception About Misconception About VM VM

There is a There is a view held by someview held by some that Value that Value Management is simply just another Management is simply just another cost cost cutting toolcutting tool, however it , however it misses an important misses an important featurefeature of Value Management of Value Management which is which is creativity and systems approach to validate a creativity and systems approach to validate a certain proposalcertain proposal. .

The The fundamental contributionfundamental contribution by the Value by the Value Management exercise is Management exercise is to eliminate the to eliminate the unnecessary costunnecessary cost which does not contribute to which does not contribute to the Value of the services, products, systems the Value of the services, products, systems and that includes the construction projects.and that includes the construction projects.

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Value Studies are Value Studies are mandatory in:mandatory in:

All US federal projects > $ 2 MAll US federal projects > $ 2 M All Japan projects > $ 2 MAll Japan projects > $ 2 M All Saudi Government projects > $ 5 All Saudi Government projects > $ 5

MM All RC of J&Y projects > $ 5 MAll RC of J&Y projects > $ 5 M All Saudi Aramco projects > $ 10 MAll Saudi Aramco projects > $ 10 M Also in UK, Germany, France, Also in UK, Germany, France,

Australia, Korea, India, …etc.Australia, Korea, India, …etc.

Source: Al-Yousefi (2008)Source: Al-Yousefi (2008)

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Saudi Ministry of Finance Mandate Saudi Ministry of Finance Mandate (October 2001):(October 2001):

Emphasis on Function, LCC and ROIEmphasis on Function, LCC and ROI Perform VE during early design stagesPerform VE during early design stages Train employees on VETrain employees on VE Include VE clauses in the Design contractsInclude VE clauses in the Design contracts Apply VE as follows:Apply VE as follows:

Typical repeated projects that is > SR 5 MTypical repeated projects that is > SR 5 M Projects that are > SR 20 M (about $ 5 M)Projects that are > SR 20 M (about $ 5 M) O & M contracts that are > SR 5 MO & M contracts that are > SR 5 M

Source: Al-Yousefi (2008)Source: Al-Yousefi (2008)

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VALUE MANAGEMENT VALUE MANAGEMENT JOB PLANJOB PLAN

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Five Steps of the VM Five Steps of the VM Job PlanJob Plan

PRE-STUDYINFORMATION

SPECULATION

JUDGEMENT

DEVELOPMENT

RECOMMENDATION &REPORTING

POSTSTUDY

The The five steps of the Job Planfive steps of the Job Plan are shown diagrammatically in are shown diagrammatically in figure above. The significant of the arrows is that, whilst a figure above. The significant of the arrows is that, whilst a cascade system is used, with cascade system is used, with each phase following on from each phase following on from and using the output of the preceding phaseand using the output of the preceding phase, there is , there is frequently frequently reversion to a previous phasereversion to a previous phase, as a result of some , as a result of some discovery or unexpected development.discovery or unexpected development.© MMCM

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Function AnalysisFunction Analysis

Conventional conceptConventional concept To find possibilities for cost reduction by To find possibilities for cost reduction by

analysing each factor of total costanalysing each factor of total cost

PROFIT

LABOUR & EQUIPMENTS

MATERIAL COST

WASTAGEBU

ILT

-UP

CO

ST

OVERHEAD

PLANT & MACHINERIES

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Function AnalysisFunction AnalysisVM/VE ConceptVM/VE Concept To focus on functions and thereby achieve To focus on functions and thereby achieve

revolutionary cost reductionrevolutionary cost reduction

Secondary Functions

Profit

Unnecessary FunctionsFunction incorporated in the design stageP

RIC

E

Functions expected by CustomerBasic Functions

Potential cost reduction

Review methods of achieving functions

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Function AnalysisFunction Analysis

TYPE OF FUNCTIONSTYPE OF FUNCTIONS

Basic Function:Basic Function:

The purpose or performance feature which The purpose or performance feature which must bemust be attained if an item is to work or attained if an item is to work or perform. It is a "must" type of objective in perform. It is a "must" type of objective in that it is the feature of the item which is its that it is the feature of the item which is its primary reason for existence from the users primary reason for existence from the users point of view. point of view.

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Function AnalysisFunction Analysis

TYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)

Required Secondary Function:Required Secondary Function:

Dell ‘Isola developed other function Dell ‘Isola developed other function which he called required secondary which he called required secondary function. It is the function that must be function. It is the function that must be achieved to meet codes, standards, or achieved to meet codes, standards, or mandatory other requirements. mandatory other requirements.

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Function AnalysisFunction Analysis

TYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)

A Supporting Function:A Supporting Function:

Any characteristic of an item which is not Any characteristic of an item which is not essential to the user for the desired essential to the user for the desired application of the item and does not application of the item and does not contribute directly to the accomplishment contribute directly to the accomplishment of a basic function. of a basic function.

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Function AnalysisFunction AnalysisTYPE OF FUNCTIONS (Cont’d)TYPE OF FUNCTIONS (Cont’d)

An Unnecessary Function:An Unnecessary Function:

An element or a characteristic which is An element or a characteristic which is not necessary for the item to work or not necessary for the item to work or sell. Unnecessary functions are usually sell. Unnecessary functions are usually the result of honest wrong beliefs and the result of honest wrong beliefs and assumptions, or the perpetuation of assumptions, or the perpetuation of obsolete requirements. obsolete requirements.

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Space Function AnalysisSpace Function Analysis

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ComponentComponent FunctionFunction KinKindd

CostCost WorthWorth ValueValue RemarkRemark

Admin. BlockAdmin. Block VerbVerb NounNoun Area Area (m2)(m2)

Area Area (m2)(m2)

IndexIndex

GROUND GROUND FLOORFLOOR

1. LOBBY1. LOBBY RECIEVRECIEVEE

VISITORSVISITORS SS 72.072.0 7272 1.01.0 NO NO CHANGECHANGE

2. STORAGE 2. STORAGE AREAAREA

DISPLADISPLAYY

EXHIBITS EXHIBITS / /

COLLECTIOCOLLECTIONN

BB 619.5619.5 619.5619.5 1.01.0 NO NO CHANGE CHANGE

3. 3. LABORATORYLABORATORY

TESTTEST EXHIBITSEXHIBITS BB 238.5238.5 238.5238.5 1.01.0 NO NO CHANGECHANGE

4. SERVICE 4. SERVICE (M&E)(M&E)

HOUSEHOUSE SERVICESSERVICES RSRS 444.5444.5 444.5444.5 1.01.0 NO NO CHANGECHANGE

TOTALTOTAL 1,374.1,374.55

1,374.1,374.55Space Function for Administration Block (Ground Space Function for Administration Block (Ground

Floor)Floor)

Note: B = Basic, RS = Required SecondaryNote: B = Basic, RS = Required Secondary

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Space Function AnalysisSpace Function AnalysisComponentComponent FunctionFunction KinKin

ddCostCost WorthWorth ValueValue RemarkRemark

Admin. Admin. BlockBlock

VerbVerb NounNoun Area Area (m2)(m2)

Area Area (m2)(m2)

IndexIndex

FIRST FIRST FLOORFLOOR

1. OFFICE1. OFFICEPROVIDPROVID

EE

WORKING WORKING AREAAREA BB 369.0369.0 157.0157.0 2.42.4

REDUCE REDUCE BY 57%BY 57%

2. LOBBY2. LOBBY FACILITAFACILITATETE

ENQUIRIEENQUIRIESS

SS 72.072.0 36.036.0 2.02.0 REDUCE REDUCE BY 50% BY 50%

3. STORE3. STORE STORESTORE EXHIBITSEXHIBITS BB 859.0859.0 859.0859.0 1.01.0 NO NO CHANGECHANGE

4. SERVICE4. SERVICE HOUSEHOUSE SERVICESSERVICES RSRS 414.0414.0 355.2355.2 1.251.25 14% 14% REDUCTIOREDUCTIO

NN

TOTALTOTAL 1,714.1,714.00

1,407.1,407.22

Space Function for Administration Block (First Space Function for Administration Block (First Floor)Floor)

Note: B = Basic, RS = Required SecondaryNote: B = Basic, RS = Required Secondary© MMCM

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FAST DIAGRAMFAST DIAGRAM FAST Diagram are prepared which:FAST Diagram are prepared which:

1.1. Shows the specific relationship of all functions Shows the specific relationship of all functions with respect to each other,with respect to each other,

2.2. Tests the validity of the functions under study,Tests the validity of the functions under study,3.3. Helps identify missing functions, andHelps identify missing functions, and4.4. Broadens the knowledge of all team members Broadens the knowledge of all team members

with respect to the projectwith respect to the project

At first glance, FAST appears to be similar At first glance, FAST appears to be similar to a PERT Chart. However, the basic to a PERT Chart. However, the basic difference between FAST diagramming difference between FAST diagramming and other techniques is that the FAST is and other techniques is that the FAST is function-oriented and not time-oriented.function-oriented and not time-oriented.

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RESURFACE RUNWAY

RESIST SKIDDING

PROVIDE RIDING

QUALITY

ENABLE LANDING & TAKE OFF

MAINTAIN SAFE

LANDING & TAKE OFF

MEET STANDARD

HOW?WHY?

PROVIDE STRENGTH

PROVIDE EMERGENCY

ACCESS (ROAD)

DISCHARGE WATER

PROTECT BASE (FOUNDATION)

PREVENT INGESTION

ELIMINATE F.O.D (Foreign Object Debris)

FAST DIAGRAM OF RUNWAY RESURFACING

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RESURFACE TAXIWAY

ACCOMMODATE MOVEMENT

PROVIDE RIDING

QUALITYREDUCE

OCCUPANCY (RUNWAY)

MAINTAIN SAFE MOVES

MEET STANDARD

HOW? WHY?

PROVIDE STRENGTHPREVENT

ACCIDENT

PROVIDE ROUTE

PROTECT BASE (FOUNDATION)

ALLOW EFFICIENT

USE (RUNWAY)

DISCHARGE WATER

PREVENT INGESTION

ELIMINATE F.O.D

CONNECT RUNWAY

PROVIDE HOLDING

CONNECT APRON

ENHANCE SAFETY

FAST DIAGRAM OF TAXIWAY RESURFACING

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CONSTRUCT DRAINAGE

CHANNEL WATER

DISCHARGE WATER

PREVENT FLOODING

CONFORM TO FLOW RATE OF WATER

HOW? WHY?

COLLECT WATER

ENSURE PEDASTRIAN

SAFETY

SUPPORT DRAIN

FAST DIAGRAM OF DRAINAGE CONSTRUCTION

PROTECT ROAD PROTECT

EMBANKMENT

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RESULTSRESULTS

Project: Education Faculty for UTM

(Initial Design cost RM35M, after VM RM7M)

Achieved

Effective Planning of Space to Layout to customer

requirements

•

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Project: Library for USM, Penang

(Initial Design cost RM24.9M,after VM RM11.9M)

Achieved

Effective Planning of Space to suit Site Provided to customer requirements •

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Project: Darul Ridzuan Islamic College, Perak

(Initial Design cost RM120M after VM RM57M)

Achieved

Effective Planning of Layout and Design to customer requirements

•

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Project: Projek Jalanraya Simpang Pulai – Lojing - Gua Musang - Kuala Berang (Pakej 8)

Outcome

Identified many areas in the existing solutions where value improvements can be made without loss of functions

•

These improvements would lead to cost savings in the order of RM18 m from the initial cost

of RM 92 m.

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Project:Pakej 3/1A : Jalan Simpang Pulai – Lojing - Gua Musang – Kuala Berang

Results

• More effective design (Safety, Environmental & Maintenance requirement)

• (Cost Reduction ~ 3.8%) from estimate cost of RM112.8 M

No. Of Ideas

Ideas for Evaluated

Ideas for Action

Group A 34 22 15

Group B 22 16 9

Group C 20 7 1

Group D 20 18 7

TOTAL 96 63 32

Percentage 100% 79% 23%

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Project: Klinik Kesihatan Jenis 3

Results

• More Effective Design (fulfilled User requirements)

• (Cost Reduction ~ 5.1%) from original cost of RM6.8 M

No. Of Ideas Ideas for Evaluated

Ideas for Action

Group 1 73 64 5

Group 2 12 10 2

Group 3 42 25 2

Group 4 11 10 2

TOTAL 138 109 11

Percentage 100% 79% 8%

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Project: High End Apartment Project

  ORIGINAL TARGET AFTER VM STUDY

Gross Development Value (GDV) Gross Development Cost (GDC) Gross Profit (GP)  % GP/GDV

 RM 45.1m 

RM 42.9m  

RM 2.2m  

4.81%  

 RM 45.1m  

RM 37.0m  

RM 8.1m  

17.9%  

 RM 47.8m  

RM 38.5m  

RM 9.3m  

18.9%  

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ConclusionConclusion

The application of this technique has proved to be very successful in various human endeavors. The systematic process that it offers promote creativity & innovation towards achieving customers satisfaction and in many cases producing results that are beyond expectations.

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THANK YOUTHANK YOU