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For this week’s Assignment, what do you feel would be the best course of action, the client’s method, YWE’s method, or would you suggest a third way? Whichever you choose, provide a rationale that explains your choice. Be sure to use references from the Learning Resources to support your work.

Be sure to support your work with specific citations from this week’s Learning Resources and any additional sources as appropriate. Refer to the APA guide to ensure the intext citations and reference list are correct.

Critical Success Factors for Value Management
Studies in Construction
Qiping Shen1 and Guiwen Liu2
Abstract: Value management å…±VMå…² studies often face pressure caused by limited time and resources. The identification of key factors
for value management success enables appropriate allocation of the limited time and resources in order to achieve better output. Most of
the related past work only identified critical success factors for value management studies in general. This paper seeks to distinguish these
factors according to their degrees of importance in relation to success. A questionnaire survey was conducted to gather views from experts
with experience in value management practice. The findings of the survey reveal the relative importance of the nominated success factors.
Two factors that had not been highlighted by previous research are identified as having a significant influence on the success of VM
studies. In order to explore the underlying construction among the identified critical success factors å…±CSFså…², factor analysis was adopted
to investigate the cluster of the relationship. The results indicate that the success of VM studies requires a combined effort from all parties
DOI: 10.1061/å…±ASCEå…²0733-9364å…±2003å…²129:5å…±485å…²
CE Database subject headings: Construction management; Value engineering; Surveys.
Value management å…±VMå…² is a structured, organized team approach to identifying the functions of a project, product, or service with recognized techniques and providing the necessary
functions to meet the required performance at the lowest overall
cost å…±SAVE International 2001å…². Although some schools of
thoughts tend to distinguish VM from other relevant terms such as
value engineering å…±VEå…² and value analysis å…±VAå…², it is more widely
accepted that the term VM can be used to represent other related
value methodologies. For simplicity, the term VM is used synonymously with VE and VA throughout this paper. VM has been
recognized as one of the most effective methodologies for achieving ‘‘best value-for-money’’ for clients since its introduction into
the construction industry in the early 1960s. Successful applications of VM in the construction industry have been observed in a
number of countries around the world å…±Norton and McElligot
1995å…². As a result of accelerating technology development and
furious market competition, an increasing challenge in current
VM practice is that clients demand shorter and more focused VM
studies, but the size and complexity of projects subjected to VM
studies are continually increasing. Many researchers have reported that the limited time and resources available for VM stud1
Professor, Dept. of Building and Real Estate, Hong Kong Polytechnic Univ., Hung Hom, Kowloon, Hong Kong. E-mail:
PhD Candidate, Dept. of Building and Real Estate, Hong Kong Polytechnic Univ., Hung Hom, Kowloon, Hong Kong. E-mail:
Note. Discussion open until March 1, 2004. Separate discussions must
be submitted for individual papers. To extend the closing date by one
month, a written request must be filed with the ASCE Managing Editor.
The manuscript for this paper was submitted for review and possible
publication on November 14, 2001; approved on August 22, 2002. This
paper is part of the Journal of Construction Engineering and Management, Vol. 129, No. 5, October 1, 2003. ©ASCE, ISSN 0733-9364/
2003/5-485– 491/$18.00.
ies have weakened the effect of this methodology, and a number
of measures have been proposed to alleviate this problem å…±Shen
1997; Kelly and Male 2001å…². However, these measures mainly
focus on improving the efficiency of VM studies with some new
tools or methods.
The identification of the critical success factors å…±CSFså…² will
enable the limited resources of time, manpower and money to be
allocated appropriately å…±Chua et al. 1999å…². A variety of factors
determine the success of VM studies. A clear understanding of
these factors will be instrumental in overcoming constraints
caused by the higher demands of clients. This study seeks to
identify CSFs among a set of nominated factors according to their
importance in relation to the success of VM studies. A questionnaire survey was conducted to solicit opinions regarding each of
the nominated factors from experts with adequate experience of
VM studies. Based on the data gathered from the survey, a scale
rating was employed to establish the importance ranking of these
factors. Factor analysis was used to explore the underlying construction among the identified CSFs.
Previous Studies
Investigation of the factors affecting the success of VM studies in
construction has attracted the interest of many researchers and
practitioners. Romani å…±1975å…² reported a set of key elements that
led to successful value management proposal implementation in
the U.S. Department of Defense. His study was based on a survey
among the prime contractors of this department, which were involved in contracts containing VM incentive clauses and which
submitted VM proposals for sharing the savings. The noticeable
elements were work experience of VE, professional training, duties assigned to value engineers, and cost of the value engineering
program. However, Romani’s observations only focused on the
behavior of contractors in VM studies, and the conclusions were
drawn within a very special environment.
A number of influential VM researchers placed a strong emphasis on function analysis 共Dell’Isola 1982; Zimmerman and
Hart 1982å…². They considered function analysis to be an indispensable factor contributing to the success of VM studies and making
VM different from traditional cost-reduction methodologies.
However, based on a research survey and case studies in construction in the United States, Palmer et al. å…±1997å…² challenged the
contribution of function analysis to the success of VM studies and
argued that the VM workshop itself was a critical factor. The
degree of success or level of output related largely to factors
within the workshop, such as the personalities of the participants,
the competence of the facilitator, the timing of the study, the
interaction of the VM team members, the input of the original
design team, and the role of the client.
Maurer å…±1996å…² developed an outline of key factors in two respects: å…±1å…² setting up a continuing VM improvement program
within an organization; and å…±2å…² conducting VM studies. The key
factors in setting up a VM program were support from management sponsors, integrating VM into the objective of the organization, having an independent VM administrator, training of workshop facilitators, a plan for VM proposal implementation, and
cooperation within the organization. The key factors in conducting VM studies included project selection, team selection, data
collection, workshop preparation, workshop management, VM
proposal review, and decision and implementation. In Maurer’s
outline, the two categories of factors were developed separately.
The impact of the former category on the success of VM studies
was not examined.
Through an international benchmarking study, Male et al.
å…±1998å…² highlighted ten CSFs for VM studies, given as follows: å…±1å…²
a multidisciplinary team with an appropriate skill mix; å…±2å…² the
skill of the facilitator; 共3兲 a structured approach through the ‘‘VM
process’’; 共4兲 a degree of VM knowledge on the part of the participants; 共5兲 the presence of decision makers in the workshop; 共6兲
participant ownership of the VM process output; å…±7å…² preparation
prior to the VM workshop; å…±8å…² the use of functional analysis; å…±9å…²
participant and senior management support for VM; and å…±10å…² a
plan for implementation of the workshop outcomes. The list of
CSFs was not only concerned with how VM studies should be
carried out, but also made VM different from other group
decision-making approaches å…±Woodhead 2000å…². However, these
CSFs were identified in general, and the importance degree of
each factor was not evaluated.
The CSFs identified in the previous studies ranged from general conceptual guidelines to more specific aspects. In reality, the
various factors contribute differently to the results of VM studies.
Therefore, it is worth measuring the importance of these factors in
order to gain a clearer understanding of their influence on the
success of VM studies. The impact of experience possessed by
key personnel on the outcome of a task has been widely recognized å…±Jaselskis and Ashley 1991; Sanvido et al. 1992å…². It would
be reasonable, then, to assume that experienced practitioners
would have composed a set of CSFs after testing them against
their experience. The approach in which experts are given a list of
factors and asked to assess the importance of these factors based
on a specialized scale has been widely used to identify CSFs
å…±Chan and Kumaraswamy 1997; Kaming et al. 1997å…².
Research Methodology
This paper expands on the current literature on this subject. A
questionnaire survey of experienced VM practitioners was conducted to gather the data required by the study. The questionnaire,
Fig. 1. Typical pattern of value management studies
which contained 23 nominated success factors for VM studies,
was developed as a result of an extensive literature review and
was consolidated by a series of pilot studies. The nominators
covered the factors mentioned in the previous section, but appropriate changes were made to their description for ease of understanding. The typical pattern of VM studies can be simplified as
shown in Fig. 1. Following this typical pattern, factors in the final
questionnaire were divided into four groups, as shown in Table 1.
The grouping was based on the natural progression of VM studies, i.e., preparation of workshop, VM workshop, implementation
of proposals after workshop, and supporting factors throughout
the whole process. The purpose of the grouping is to make a clear
display of the nominated factors and does not indicate a separation between each group of factors.
The questionnaire was emailed to 200 VM researchers and
practitioners. They were carefully elicited from the list of delegates attending the international conferences on VM hosted by
SAVE International and The Hong Kong Institute of Value Management in the past two years. Apart from some questions intended to capture the background information of the respondents,
the remaining questions in the questionnaire invited them to indiTable 1. Nominated Critical Success Factors for Value Management
Preparation of
VM workshop
Implementation of
generated proposals
Supporting factors
Clear objective of VM study
Qualified VM facilitator
Multidisciplinary composition of VM team
VM experience and knowledge of
5. Professional experience and knowledge of
participants in their own disciplines
6. Personalities of participants
7. Preparation and understanding of related
8. Timing of VM study
9. Structured job plan
10. Control of workshop
11. Attitude of participants
12. Presence of decision takers
13. Interaction among participants
14. Function analysis
15. Use of relative skills and techniques å…±such
as FAST, brainstorming, etc.å…²
16. VM proposals selection and development
17. Plan for implementation
18. Follow-up trailing and support for
19. Client’s support and active participation
20. Cooperation from related departments
21. Adequate time for study
22. Financial support
23. Logistics support
Table 2. Ranking of Critical Success Factors for Value Management Studies
Standard deviation
Client’s support and active participation 共CSF1兲
Clear objective of VM study å…±CSF2å…²
Multidisciplinary composition of VM team å…±CSF3å…²
Qualified VM facilitator å…±CSF4å…²
Control of workshop å…±CSF5å…²
Preparation and understanding of related information å…±CSF6å…²
Plan for implementation å…±CSF7å…²
Function analysis å…±CSF8å…²
Timing of study å…±CSF9å…²
Interaction among participants å…±CSF10å…²
Professional experience and knowledge of participants in their
own disciplines å…±CSF11å…²
Personalities of participants å…±CSF12å…²
Adequate time for VM study å…±CSF 13å…²
VM knowledge and experience of participants å…±CSF 14å…²
Cooperation from related departments å…±CSF 15å…²
cate the degree of importance of each factor in relation to the
success of VM studies based on a five-point scaling, i.e., extremely important⫽5, important⫽4, neutral⫽3, unimportant⫽2,
and extremely unimportant⫽1. To ensure consistency throughout
the respondents, a brief definition of each factor was provided.
Fifty-one respondents returned their completed questionnaires,
representing a response rate of 25.5%. To maintain the quality of
the opinions gathered by the survey, 36 out of 51 respondents
were carefully selected for analysis according to three criteria.
First, only those who had been exposed to VM for no less than 5
years would be considered. Second, the valid respondents should
have participated in at least 10 VM studies. Finally, the main
business of the valid respondents should be construction or something closely related to it. The final sample consisted of 20 consultants, 10 designers, and 6 client agents. Although the size of
the valid sample was relatively small, the knowledge and VM
experience accumulated by the respondents was adequate to make
a reasonable judgment about the CSFs of VM studies.
The data were analyzed using the Statistical Package for the
Social Sciences å…±SPSSå…². The reliability of the five-point scale
used in the survey was determined using Cronbach’s coefficient
alpha, which measures the internal consistency among the factors
å…±SPSS Inc. 2000å…². The value of the test was 0.8237 å…±F statistic
⫽18.006; p⫽0.000), which was greater than 0.5, indicating that
the five-point scale measurement was reliable at the 5% significance level. The analysis of variance å…±ANOVAå…² was performed to
clarify whether or not the opinions of the consultants, designers,
and clients were the same for each of the nominated factors. A
probability value p below 0.05 suggests a high degree of difference of opinion between the groups å…±SPSS Inc. 2000å…². The results
of the test in this study showed that the p values ranged from 0.24
to 0.86, which was much higher than 0.05, suggesting that there
was a consensus of opinion among the groups å…±consultants, designers, and clientså…². Therefore, the collected sample can be
treated as a whole. Two statistical analyses, namely, scale ranking
and factor analysis, were undertaken on the data. The procedure,
findings, and relevant discussion of the analyses are detailed in
the following sections.
Analysis, Findings, and Discussions
Ranking of Critical Success Factors
The first analysis ranked the nominated factors based on the mean
values of the responses. If two or more factors happened to have
the same mean value, the one with the lowest standard deviation
would be assigned the highest importance ranking among these
factors. The factors with means exceeding or equal to 4 were
recognized as CSFs based on the consensus of the respondents.
Fifteen factors were identified as CSFs having significant influence on the success of VM studies. Table 2 shows the ranking of
these factors according to the value of their means.
The CSFs identified in this study are largely in line with the
findings of the research by Male et al. å…±1998å…². However, it is
noticeable that ‘‘clear objective of the VM study’’ and ‘‘professional experience and knowledge of the participants in their own
disciplines,’’ which were not highlighted by previous studies, are
recognized by the respondents as two CSFs. They are listed in
Table 2 with ranks of 2 and 11. More discussion on these two
factors is given subsequently.
When Miles first introduced VM in the 1940s, his initial objective was to seek substitutes for material in shortage å…±Miles
1989å…². After about four decades of development in the construction industry, the objective of VM studies has gone far beyond its
original intention. Presently, VM studies are not only used to seek
alternative solutions for cost saving, but are also widely applied to
facilitate strategic decisions, to enhance communications and
reach a consensus among stakeholders, to define the scope for a
proposed project, and to set priorities for the requirements of a
project å…±Barton 2000; Mootanah 2000å…². The objectives of VM
studies are often determined by clients with the help of VM facilitators. They depend on many factors, such as the expectations
of clients, the characteristics of the project, and the level of the
study. A clear understanding of the study objectives is crucial for
directing the process of the VM study and concentrating the efforts of participants. As a flexible methodology, VM can be adjusted for enhancing the realization of different objectives. In recent years, a variety of improved VM models have been
developed for addressing the different requirements of VM stud-
Table 3. Correlation Matrix of Critical Success Factors

Note: Kaiser-Meyer-Olkin measure of sampling adequacy⫽0.524; Bartlett test of spericity⫽248.202; significance⫽0.0000.
ies. For example, Green’s SMART VM emerged as a leading
method for clarifying stakeholders’ value judgments 共Green
1994å…². Soft VM was developed by Barton å…±2000å…² for handling
strategic and conceptual planning problems. To ensure the success
of a VM study, the participants must have a clear understanding
of the objectives of the study and must adopt suitable methods.
Participants’ professional experience and knowledge in their
own disciplines were considered by the respondents to be one of
the CSFs. A number of writers have emphasized the multidisciplinary composition, size, and structure of the VM team å…±Kelly
and Male 1993; Norton and McElligot 1995å…². However, the professional experience and knowledge of participants å…±especially
technical participantså…² has not been given enough attention. VM
studies carry out consecutive and intensive tasks of understanding, auditing, creating, evaluating, and developing in a short period. Without an adequate accumulation of professional experience and knowledge, it is impossible to carry out this process
smoothly. In particular, the project is subjected to the study with
some complex technical problems. On the other hand, the experienced members in a VM team increase the credibility of VM
proposals. It is common for the output of VM studies to be confronted with a suspicious attitude from the original working team
å…±Kelly and Male 1993å…². This attitude can get worse if the team has
the impression that the VM team is assembled from inexperienced
persons. The superior professional experience and knowledge
possessed by some members of the VM team are deemed necessary to alleviate this suspicious attitude and enhance the acceptability of the VM proposals.
Factor Analysis
Factor analysis was used to explore and detect the underlying
relationships among the identified CSFs. This statistical technique
identifies a relatively small number of factors that can be used to
represent relationships among sets of many interrelated variables
å…±SPSS Inc. 2000å…². Various tests are required for the appropriateness of the factor analysis for the factor extraction.
Factor analysis can be used either in hypothesis testing or in
searching for constructs within a group of variables å…±Bartholomew and Knott 1999å…². It is a series of methods for finding
clusters of related variables and hence an ideal technique for reducing a large number of items into a more easily understood
framework å…±Norusis 2000å…². It focuses on a data matrix produced
from the collection of a number of individual cases or respondents. In this paper, factor analysis is used to explore the underlying constructs of the identified CSFs for VM studies.
In this study, 15 CSFs were subjected to factor analysis using
principal components analysis and varimax rotation. Principle
components analysis is a common method in factor analysis. It
involves the generation of linear combinations of variables in the
way of factor analysis so that they account for as much of the
variance present in the collected data as possible. Such an analysis summarizes the variability in the observed data by means of a
series of linear combination of ‘‘factors.’’ Each factor can, therefore, be viewed as a ‘‘supervariable’’ comprising a specific combination of the actual variables examined in the survey. The advantage of this method over other factor analytical approaches is
that the mathematical representation of the derived linear combinations avoids the need for the use of questionable causal models
å…±Johnson 1998å…².
The first stage of the factor analysis is to determine the
strength of the relationship among the variables, i.e., the 15 identified CSFs, measured by the correlation coefficients of each pairs
of the variables. Table 3 gives the matrix of the correlation coefficients among the CSFs. The matrix is automatically generated as
a part of results of factor analysis with the software SPSS. The
results of the correlation coefficients show that the CSFs share
common factors. The Bartlett test of spericity is 248.202 and the
associated significance level is 0.000, suggesting that the population correlation matrix is not an identity matrix. The value of the
Kaiser-Meyer-Olkin measure of sampling accuracy is 0.524,
which is higher than 0.5 and hence considered acceptable. The
results of these tests show that the sample data is appropriate for
factor analysis.
In order to prevent confusion between the extracted factors
å…±which represent the relationships among the 15 CSFså…² and the
same word used in previous sections å…±which indicates the attributes for the success of VM studieså…², it is necessary to rename
the extracted factor as a ‘‘cluster’’ in the interpretation of the
results of the analysis.
Four clusters with eigenvalues greater than 1 are extracted.
The cluster matrix after varimax rotation is presented in Table 4.
Each of the CSFs weighs heavily to only one of the clusters, with
Table 4. Cluster Matrix after Varimax Rotation
Cluster 1
Cluster 2
Cluster 3
Cluster 4
the loading exceeding 0.5. Table 5 shows the final statistics of the
principal component analysis, and the clusters extracted account
for 72.148% of the variance.
Interpretation of Clusters
For further discussion, it is necessary to assign a new name to
each of the groupings. Based on an examination of the inherent
relationships among the CSFs under each of the clusters, the four
extracted clusters can be reasonably interpreted as follows: cluster
1 represents VM team requirements; cluster 2 is clients’ influence;
cluster 3 is facilitator competence; and cluster 4 is relevant departments’ impact. The associated explanations regarding these
clusters are provided in the following paragraphs.
Cluster 1: Value Management Team Requirements
The five extracted CSFs significant for cluster 1 are all related to
the requirements of a VM team. Good preparation and understanding of the related information are obviously important for
the VM team to run a smooth VM workshop. Norton and McElligot å…±1995å…² stressed that the quality and comprehensiveness of
the information upon which the VM study is based is crucial to
the quality of the resulting proposals. Under the guidance of the
facilitator, large amounts of effort should be made by the VM
team prior to the formal VM workshop on preparing and assimilating the related information, such as project specifications, cost
data, site conditions, and project constraints. If some participants
do not have a good understanding of VM, it is necessary to give
them a brief introduction on VM before the workshop, preferably
with the guidance of the facilitator.
Multidisciplinary composition, which is stressed by many researchers and practitioners as one of the key reasons for the success of VM studies 共Kelly and Male 1993; Dell’Isola 1997兲, can
Table 5. Final Statistics of Principal Component Analysis
of variance
Cumulative percentage
of variance
also be regarded as the most crucial requirement for the VM team
formation. The composition of the team is dependent on project
characteristics and the objectives of the VM study. Essentially,
team members should include all relevant disciplines and/or
stakeholders to fully cover the issues under the study.
The remaining three CSFs in this group indicate the main requirements associated with team members, i.e., professional level,
VM experience and knowledge, and personalities. The importance of the professional level of the participants has been explained in previous sections. It is not mandatory that all of the
VM team members should have VM experience and knowledge,
but members’ good knowledge and experience in VM would be
beneficial to conduct a VM study smoothly and efficiently. On the
other hand, if a large number of the participants are not familiar
with VM, the facilitator has to spend additional time introducing
the methodology before or during the workshop. This might break
the continuity of the VM program and divert the attention of the
VM team. In addition to the professional and VM knowledge
level, individual personalities should also be considered in team
member selection. In terms of the personalities of the participants
in VM studies, it is recommended to have team members who are
open-minded, creative, and easy to communicate with, and who
have a positive attitude toward new ideas and a strong desire to be
Cluster 2: Clients’ Influence
This cluster consists of the client’s support and active participation, the clear objective of the study, the timing of the study, and
the adequacy of time for the VM study. These CSFs address the
client’s influence on VM studies. Adding VM to a project’s development process often means a huge change from the traditional way. As change often incurs resistance, it is not uncommon
for VM studies to encounter opposition from the departments or
persons who will be influenced by the process and/or output of
VM studies. It has been argued that the clear support and active
participation of the client is the only possible way to overcome
such opposition and drive the acceptance of VM studies å…±Norton
and McElligot 1995å…².
The objectives of a VM study are often set up by clients with
the help of facilitators. The timing and duration of the VM study
also heavily depend on the requirements of the client. Theoretically, VM can be used in any stage of project construction. However, it is widely agreed that the majority of building costs are
committed during the early stages of the design process å…±Ferry
and Brandon 1984å…². Based on this, the Institution of Civil Engineers å…±ICEå…² å…±1996å…² in the United Kingdom recommends that clients apply VM as early as possible in order to benefit from its full
potential. Adequate time is deemed helpful for acquiring a fruitful
output from a VM study. However, VM can delay the design
process, because all design activities are suspended for the duration of the workshop. Additionally, VM workshops require that
the participants involved continuously leave their original positions during the period of the workshop. This inevitably affects
the operation of their original departments, especially for participants holding senior positions. Therefore, the duration of VM
studies should be determined following deliberate consideration
of a set of items such as the objectives and scope of the study, the
project characteristics, the participants, and the overall requirements of the project.
Cluster 3: Facilitator Competence
The four CSFs in this cluster suggest the main requirements of
facilitator competence. The VM facilitator controls and leads a
group of individuals working together to reach the objectives of
the study. It has been recognized that the VM facilitator performs
a pivotal role in the VM process and is a significant attribute in
the degree of success achieved å…±SAVE International 2001å…². A
qualified VM facilitator should demonstrate competence in a wide
range of skills, including group management, communication,
analysis, interpretation, questioning, and lateral thinking å…±Joint
Technical Committee 1994å…². Although a qualification from the
related VM societies å…³such as Certified Value Specialist å…±CVSå…²,
Associate Value Specialist å…±AVSå…², and Value Methodology Practitioner å…±VMPå…², granted by SAVE Internationalå…´ is not a necessary
imperative for a VM facilitator, it is a good indication that the
facilitator has gained a firm range of knowledge and skills in VM
In order to guarantee that the VM study follows a logical and
structured job plan, the facilitator should have a good ability to
control the whole VM program. Function analysis in this cluster
grouping indicates that appropriate tools should be used in VM
studies with the direction of the facilitator. Interaction among
team members reflects the competence of the facilitator in encouraging communication and building team spirit. For an unbiased
view, ICE å…±1996å…² and the Australian/New Zealand VM Standard
å…±Joint Technical Committee 1994å…² recommend that an independent facilitator å…±not an in-house staff member of the client organizationå…² be appointed for this specific purpose.
Cluster 4: Relevant Departments’ Impact
This comprises cooperation from the relevant departments and
plans for implementation. Both CSFs concern the related departments’ impact on VM studies. Obviously, VM studies need active
cooperation from the related departments, especially the original
design team, in data collecting, project understanding, and proposal implementation. However, in most cases, VM studies involve an audit process å…±Palmer et al. 1997å…². There is a danger of
the relevant departments regarding VM as a criticism of their
original solution. A failure in communication could result in a
defensive or even a roadblock response. Besides introducing the
essence of VM to the relevant departments, a certain amount of
diplomacy is required to enhance communication for gaining support for VM studies.
A deliberate plan has a significant influence on the successful
implementation of VM proposals. Many departments will be involved in the implementation of decisions resulting from VM
studies. For a clear understanding of the merit of VM output and
for increasing the possibility of success implementation, it is recommended that the generated proposals be not only reported to
the client, but also clearly presented to the representatives of the
relevant departments. The duties of the related departments in
carrying out VM proposals should be clarified in the action plan.
This study identifies and ranks the CSFs of VM studies according
to their importance, which is measured in accordance to the views
of experts with experience in VM studies. The findings of the
study are generally in line with the conclusions of the previous
relevant research. Two factors, ‘‘clear objective of the study’’ and
‘‘professional experience and knowledge of the participants,’’ not
stressed by previous research, are revealed as having a significant
impact on the outcomes of VM studies. The former reflects the
fact that VM has been developed to address a variety of objectives, not only to produce cost savings. The latter suggests that
there is a trend for the increasing complexity of projects under
VM studies to place higher demands on the participants.
By using the factor analysis technique, the 15 identified CSFs
considered in this study were grouped into four clusters, with the
most important being VM team requirements, followed by client’s
influence, facilitator competence, and relevant departments’ impact. The results reveal that the VM team, client, facilitator, and
other related departments who are directly or indirectly involved
in studies all have a significant influence on the success of VM
studies. This also means that the success of VM studies requires a
combined effort from all parties involved.
It is worth paying more attention to the requirements of the
VM team. The results of the factor analysis indicate that the CSFs
related to the VM team have the most significant influence on the
output of VM studies å…±accounting for 37.68% of variance in the
factor analysiså…². Adequate preparation of the team members is a
prerequisite for conducting a fruitful VM study. In assembling a
VM team, careful consideration should be given to the professional experience level, VM study experience, and personalities
of the VM team members, and to whether the team is sufficiently
The work described in this paper was substantially supported by a
grant from the Research Grants Council of the Hong Kong Special Administrative Region, China å…±Project No. PolyU 5008/98Eå…².
Bartholomew, D. J., and Knott, M. å…±1999å…². Latent variable models and
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Barton, R. T. 共2000兲. ‘‘Soft value management methodology for use in
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projects.’’ Int. J. Proj. Manage., 15共1兲, 55– 63.
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Dell’Isola, A. J. 共1982兲. Value engineering in the construction industry,
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Dell’Isola, A. J. 共1997兲. Value engineering practical application: for design, construction, maintenance, and operations, R. S. Means, Kingston, Mass.
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Green, S. D. 共1994兲. ‘‘Beyond value engineering: smart value management for building projects.’’ Int. J. Proj. Manage., 12共1兲, 49–56.
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7 Value management
Copyright © 2014. Taylor and Francis. All rights reserved.
7.1 Introduction
The value process originated during World War II within the General Electric Company (GEC) in
the USA. GEC were faced with an increase in demand but had a shortage of key materials. Larry
Miles of GEC, instead of asking, ‘How can we find alternative materials?’, asked, ‘What function
does this component perform and how else can we perform that function?’ This innovative
approach led the company to use substituted materials for many of its products. They found,
surprisingly, that the cost of the product was often reduced, but the product improved; care
and attention to function provided better value for money.
A spin-off of this approach was the elimination of cost, which did not contribute to
performance – this was known as value analysis. Over the next 10 years this was further developed
by GEC and became known as value engineering (VE). Value management (VM) developed from
VE and is now a requirement on many public and private projects in the USA and Australia.
It was only in the late 1980s that VM began to be used in the UK. The author (Potts) first
came across the use of VM on the £50 million International Convention Centre in Birmingham;
this 4-year project was completed in 1991. Two years into the construction period an American
VM consultant was engaged to execute value engineering exercises; however, by this time it
was too late to effect any meaningful changes. In reality, there are various triggers for a VM
exercise, which are usually workshop based, e.g. new legislation, new opportunities for a
commercial product, solution of a social problem or simply overspend on the budget.
In the UK, the public sector has been slow to take up VM but, with the introduction of Best
Value and Prime Contracting, there has been an uptake in interest. However, the ultimate
challenge is to integrate risk management and value management into a single framework that
evolves throughout the life of the project.
7.2 What is value management?
Value management is the wider term used in the UK to describe the overall structured teambased approach to a construction project. It addresses the value process during the concept,
definition, implementation and operation phases of a project. It encompasses a set of systematic
and logical procedures and techniques to enhance project value throughout the life of the facility.
Value management embraces the whole value process and includes value planning, value
engineering and value reviewing.
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104 Value management
The basic steps are as follows:
to determine the functional requirements of the project or any of its constituent parts;
to identify the alternatives; and
to examine the cost and value of each alternative to enable the best value selection.
(See Figure 7.1.)
Confusion has arisen in the definitions of value, depending on geographic location.
VM/VE, value planning and value auditing are often interchangeable. The following definitions
are proffered:
Value: value is the level of importance that is placed upon a function, item or solution.
Value management (VM): VM is a systematic and creative procedure operating on the relevant
aspects of the value process through the life of the project or facility.
Function: a mode of action or activity by which a thing fulfils its purpose. Understanding the
concept of function is important as this can provide the catalyst to introducing innovative
solutions. For example, consider the function of an internal wall, it can: separate space,
secure space, maintain privacy, support heating systems, support fittings and fixtures,
transfer load, reduce noise, etc. If we merely required to separate floor space we could use
a row of potted plants or different floor material.
Figure 7.2 shows the introduction of the parties into the project cycle under the traditional
procurement route. This highlights the importance of involving all the key parties early in the
Copyright © 2014. Taylor and Francis. All rights reserved.
Value planning
Value engineering
Client’s briefing
Weighted value criteria
Preferred scheme
Value reviewing
Conformation of project
Information gathering
Function analysis
VE proposals and final report
Implementation/follow up
Figure 7.1 The value management process (ICE, 1996)
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Monitoring the
value process
Correction of defects
Feedback into
subsequent areas
of work
Value management 105
Cost to
Cost reduction potential
Operation Phase
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Figure 7.2 Stakeholders’ impact on project cost (ICE, 1996)
process under a partnering agreement or better still a long-term alliance. Studies at the early
stages of a project are much more effective and of shorter duration than those conducted later
on. This is because the opportunities for making changes reduce as the project progresses and
the cost of making such changes increases. Indeed, once the concept has been frozen, about
80 per cent of the total cost has been committed – even though no design exists.
All client bodies operate a capital approval process that calls for certain criteria to be met
before passing from one stage to the next – known as approval gateways. Each approval gateway
presents a natural opportunity to conduct a value management study to verify that the scheme,
as it has evolved so far, represents optimum value to the client. It is unusual to conduct a formal
study at all of these gateways – usually two, or at most three, are sufficient.
The first stage in any project is to establish that a project is the most appropriate way in
which to deliver the benefits which are sought. Is it likely to be viable? Do the conditions exist
to enable the project to stand a chance of success? Is it affordable? Answering these sorts of
questions is the main purpose of Gateway 0 in the OGC’s Gateway Review Process. Value
management can make a significant contribution at this stage. Table 7.1 identifies the key
questions which should be asked at each stage of the VM study throughout the project cycle.
7.3 Value planning (VP)
VP is applied during the concept phase of a project. VP is used during the development of the
brief to ensure that value is planned into the whole project from its inception. Several outline
designs will be assessed to select a preferred option that best meets the functional and other
At this stage the value criteria are identified and concept proposals are put forward to satisfy
the client’s needs and wants. The needs are those items which are fundamentally necessary for
the operation of the project, while the wants are items which the client would like to have, but
are not essential. Best value is provided by delivering a solution which delivers all the needs and
as many of the wants as possible, within the permitted budget.
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106 Value management
Table 7.1 Typical questions to be asked at each stage of the VM study on a new urban highway project
Stage in project
Questions to be asked
What is the problem?
Road congestion, lack of decent
Is this the right project to deliver
the benefits?
Does this meet our business criteria?
Part of Government / local transport plan
Which is the best option?
Does this solution satisfy our need?
Route B
Yes, least demolition of existing housing
Does the solution fulfil all requirements?
Is it good value for money?
Can it be built?
Best compromise solution
As good as possible
Are the components cost effective?
Detailed VE exercise required on road
surface, bridge and tunnel construction
Did we achieve the expected benefits?
Improved transport links now helping to
regenerate city
Develop-design-build partnering approach;
always expect the unexpected!
Are there lessons to be learnt for our
next project?
Source: Adapted based on Dallas (1998)
In order to achieve maximum benefit from the effort applied by the individuals, it is common
practice to apply the principle of the Pareto rule (80 per cent of the value lies in 20 per cent of
the items).
Copyright © 2014. Taylor and Francis. All rights reserved.
7.4 Metropolis United’s new football stadium
Second division Metropolis United are keen to move from their cramped town centre stadium
to a greenfield site on the edge of town. The directors of the club realize that they require a
30,000 all-seater stadium if they are to compete in the top division.
The client’s project manager suggests that a value management exercise would enable the
directors and the council officers, representing the local council who are partly funding the project,
to identify the priorities for the club. Unfortunately there is little involvement of other key
stakeholders – the fans, the manager and the players! The mechanism for incorporating best
value into the project design is through the use of VP workshops. The first step of the workshop
is to gather information concerning the project – generally through a briefing with the client.
In the first stage of VP, at the concept stage, a value hierarchy (see Figure 7.3) is developed.
It aims to establish a shared perception of the design objectives and attributes.
In the second stage of VP a value tree is drawn up (see Figure 7.4) based on a simplified
hierarchy. Although capital cost will be one of the attributes used to evaluate design options,
it is preferable to omit it from the value hierarchy and deal with it separately at the end of the
The logic of the diagram emanates from the how–why approach. In essence, by providing
all the criteria on the right-hand side of the diagram, one will have provided all primary
requirements on the left-hand side of the diagram. These criteria can then be weighted according
to their degree of importance to the client.
In the second VP stage, the project solutions would have been proposed which met these
criteria; usually this exercise takes the form of a brainstorming session where creative thinking
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Value management 107
Safe facilities for
Covered seating for 30,000 with floodlights
Car park for 5,000
Bars/food outlets/toilets
Video screens/TV areas
Facilities for
directors/VIP guests
Quality bars/restaurant/lounge
Quality boardroom
Provision of private boxes
Car parking
Facilities for
Changing facilities
Gymnasium/indoor pitch
Car parking
Facilities for
Shop outlet
Ticket office
Administration offices
Provision for future
Attractive design
Copyright © 2014. Taylor and Francis. All rights reserved.
Figure 7.3 Value hierarchy at concept stage for new football stadium (Developed based on CIRIA, 1996)
and synergy between experienced participants leads to effective solutions to meet the value
After some considerable deliberation, the client representatives compile a weighted value
tree (with the highest attribute scoring 50 and the lowest scoring 10). Naturally the directors of
the club, who are providing their own financial support to keep the club in existence, consider
that the facilities for directors and visiting VIPs are paramount; these attributes are therefore
scored with a high 40 or 50. Attractive design is considered low priority for these self-made
businessmen and is marked at 20.
The sum of the initial scores is 540. Each of the weightings of the six secondary objectives
is then calculated. Thus safe facilities for spectators equates to 130 (40+30+30+30), which, divided
by the total score of 540, equals a weighting of 0.24 or 24 per cent of the total.
In the next stage the possible design solutions submitted by the design and build contractors
would be evaluated and ranked. The allocation of importance weightings to the value hierarchy
forms the basis for the next stage of the second workshop, which is deciding which of the available
designs provide the best value. Evaluation involves assessing each option against each of the
identified attributes, and this is best done in the form of a decision matrix (see Figure 7.5). Finally,
the team would make recommendations to the client.
Design option B shows the highest score with 54.0, with the highest score for facilities for
directors but the lowest score for safe facilities for spectators. Design C shows a marginally lower
overall score than B but with improved spectator facilities and a lower score for the directors’
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108 Value management
Safe facilities for
Facilities for
directors/VIP guests
Facilities for
Facilities for
Covered seating for 30,000
with floodlights
Car park for 5,000
Bars/food outlets/toilets
Video screens/TV areas
Quality bars/restaurant/lounge
Quality boardroom
Provision of private boxes
Car parking
Changing facilities
Gymnasium/indoor pitch
Car parking
Shop outlet
Ticket office
Administration offices
for each
Provision for future
Attractive design
Copyright © 2014. Taylor and Francis. All rights reserved.
Figure 7.4 Simplified value tree at feasibility stage with importance weightings (Developed based on
CIRIA, 1996)
Weight of importance
Weighted score for
Weighted score for
Facilities Facilities
for future
players administrators expansion
Weighted score for
Figure 7.5 Decision matrix – shows the process of comparing the total scores of the various design
options (Developed based on CIRIA, 1996)
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Value management 109
This exercise is typical of the possible dilemmas facing clients and their advisors. This is not
a science, more an art. It is extremely difficult to score each of the sub-objectives, and choosing
between one contractor’s design and another again becomes subjective. In the event design
option B is chosen!
7.5 Value engineering (VE)
VE is applied during the definition stage and, as required, in the implementation phases of a
project. VE investigates and analyses in order to identify the required function and then compares
and selects from the various options to produce the owner’s best value requirements.
During the VE phase any unnecessary cost is eliminated from the proposed design.
This is usually undertaken in the VE workshop, where a separate review team from that which
developed the outline design reviews the work to date. Since this review is generally undertaken
at approximately the 30 per cent stage, there is still a good opportunity to adjust the design
before it proceeds to the definitive and detailed design stage.
The basic premise of VE is that a certain amount of unnecessary cost is inherent in every
design. It is usually only possible to eliminate this by identifying another option, which provides
the same function at less cost.
Specific causes of unnecessary cost include the following:
cost of unnecessary attributes (attributes which provide no useful function);
cost of unnecessary specification (due to needlessly expensive materials/components);
unnecessary cost of poor buildability (failure to consider construction implications during
unnecessary life-cycle cost (failure to consider future operational costs);
unnecessary opportunity cost (the cost of losing potential revenue).
Copyright © 2014. Taylor and Francis. All rights reserved.
The VE workshop follows the broad principles of the VP workshop. The information phase
usually involves a debriefing from the original design team to the VE team, who then consider,
in the functional analysis, the function of each part of the proposed works. In the speculation
phase, they have a brainstorming session and consider alternative methods of providing the same
Panel 7.1 Value engineering techniques
The different ways of delivering a client’s requirements offer further potential for adding
value to a project. With engineering services, examples of innovation that can have a
significant effect on the overall project outcome include the use of ground water cooling
or gas-fired air handling units.
Innovative solutions such as this need to be adopted at the earliest possible stage of
a project. When the value engineering approach is applied at a later stage, it is difficult
to introduce radical changes. However, opportunities to add value still exist, such as the
use of manufacturer’s standard components rather than bespoke products.
Source: Davis Langdon website; for a description of small-scale renewable energy systems
see Building, 28 October 2005, pp. 54–57
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110 Value management
There follows an evaluation phase in which the proposed alternative solutions to providing
the function are analysed to determine the viability of each one. Where a suitably viable
alternative is possible at a significantly reduced cost, it is included in the proposal phase.
Ideally every design decision should be subject to VE, but 80 per cent of cost is often contained
in 20 per cent of the design decisions. On building projects, services in particular account for
a very large percentage of the overall cost (28–40 per cent). This element can be further broken
down into mechanical services (17–28 per cent), electrical services (6–13 per cent) and lifts
(0–3 per cent). On road projects the three highest cost elements are typically earthworks (28–31
per cent), structures (18–32 per cent) and sub-base and surfacing (21–28 per cent) (CIRIA,
7.6 Value reviewing (VR)
VR is applied at planned stages to check and record the effectiveness of the value process and
its management.
The Value Manager usually has a responsibility to review the value process throughout the
project to ensure that the value identified in the VP and VE are actually provided within
the executed works.
When to apply value management
Timing is of the essence. Figure7.2 illustrates the substantial scope to reduce cost, and hence
improve value, in the project definition and early design phases. This scope diminishes to a point
when the cost of change exceeds the saving.
Any construction project should only be commissioned following a careful analysis of need.
Failure to carry out this analysis will cause problems at subsequent design and construction stages.
Many projects suffer from poor definition through lack of time and thought at the earliest
stages. This is likely to result in cost and time overruns, claims, user dissatisfaction or excessive
operating costs. Value management can help to avoid these problems.
Copyright © 2014. Taylor and Francis. All rights reserved.
Panel 7.2 40-hour workshop
In the USA the classic VE exercise is a 40-hour workshop attended by the value manager
and an independent design team. The findings are reported to the client and project
manager for further action/implementation.
While an independent design team has the advantages of providing a fresh and critical
approach and an independent review, in the UK the disadvantages are generally believed
to outweigh them. These include:
conflict with the existing design team;
loss of time while the external team becomes familiar with the project;
the additional cost of a second design team; and
delay and disruption to the design process during the review.
Also, the external team may feel obliged to identify cost savings to justify their fee.
Source CIRIA, 1996
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Value management 111
VP and VE are mainly applied in the concept and definition phases and generally end
when the design is complete and construction started. However VE can be applied at the
construction stage to address problems or opportunities which may arise. At a later stage a
tendering constructor may be expected to bring other value-improvement ideas and techniques
for consideration by the owner.
Finally the project may run into practical, cost or time difficulties during construction, and
here again solutions may be developed using VM.
7.7 Case studies
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Case study 1: Value management session, Midlands Hospital
The VM session was the first session of its kind involving the wider project team, which included
the ProCure 21 supply chain members and a number of clinicians from various affected
The purpose of the session was to review, reflect on and understand some of the key project
issues, as well as determining spatial adjacencies and linkages required with the rest of the
hospital. The session was led by an eminent VM practitioner.
The first tool used in the session, the client’s value system, was used to obtain ordinal
measurement in the form of ranking for the client’s values. The client’s value system, based on
a matrix approach, demonstrated that the three most important aspects to the client group were:
flexibility, comfort and community accessibility. The client’s value system concentrates on ‘inside
the building’, i.e. the focus is how the building functions, rather than its external appearance.
The service development group reviewed typical patient flows through the new facility. This
detailed analysis helped to achieve a consensus on requirements and a degree of ownership of
the final solution.
The project team then used a brainstorming session, using ‘post-it’ notes on a working wall,
to identify strategic needs and wants and technical needs and wants. The strategic functions
identified the strategic mission for the project and the main functions that it requires to deliver
for the client. The strategic wants were considered as non-essential or ‘nice to have’. The technical
needs and wants are the functions that form the brief for the project. The ProCure 21 team
agreed to incorporate the technical needs into the project brief, as well as any strategic issues
that were to be dealt with, by looking for a technical solution.
The VM exercise took the project team a step further in validating a conceptual model for
the new facility. Once this was finalized the ProCure 21 supply team members could draw up
the Project Execution Plan.
Case study 2 – Office building (reported in HM Treasury, 1996)
The sketch design for the outside walls of an office building indicated the use of precast concrete
cladding panels. An analysis of the design showed a total of 450 separate panels of different
After a workshop review, which included a cladding manufacturer, the total number of panels
was reduced to 280 with only 21 different types to cover the same area. Although an increased
cost arose due to the need for a larger crane to hoist the panels, the net saving for the reduced
number of moulds and perimeter waterproofing represented 10 per cent of the total cost of
cladding. The cladding element of the project amounted to 25 per cent of the project’s cost
and, as a result of the workshop review, the overall saving equated to 2.5 per cent of the project’s
capital cost.
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112 Value management
Case study 3 – Office building (reported in HM Treasury, 1996)
The detailed design of a bolt-on cladding system indicated an internal wall lining of insulation
and painted plasterboard. Following a brainstorming session, the cladding manufacturer was
asked to provide a price for incorporating the insulation and providing a metal finished panel
on the inner face of the building. The plasterboard and its finish would be omitted.
The net effect was to increase the cost of the project by £125,000. However, omitting the
plasterboard and paint meant fewer ‘wet’ trades on the project, saved three weeks on the overall
construction period and increased the net lettable floor area by 2 per cent. The value of the
finished building was increased in the order of £2 million for an additional outlay of £125,000.
Case study 4 – Hotel leisure facility (reported in McGeorge et al., 1997)
In a hotel development the architect had included the main hotel swimming pool and a children’s
paddling pool. The design team had assumed that the function of the children’s pool was to
allow the children to swim separately from the adults, thereby providing a more suitable facility
for each.
In fact, the function of the pool was to keep much younger children safe whilst others swam,
and there was no real objection to competent child swimmers using the same pool as the adults.
As a result of correctly defining the function, the VM team were able to generate ideas for
alternatives providing a safe environment for the children. The small pool was replaced with a
spray at a tenth of the cost. When constructed, the spray proved to be a huge success.
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Case study 5 – Speculative office block, London (reported in the CIRIA Special
Publication 129)
A developer proposed to construct a speculative office building in London with a net lettable
area of 4,500 square metres and at a cost of £5 million. Initial studies indicated that providing
the necessary space within the site and cost constraints would be challenging.
The developer decided to use VE and employed a facilitator to work with the design team
to find the most effective solution. The facilitator convened a workshop during which it became
clear that the relationship between net lettable area and the size of the service cores was crucially
important to the viability of the design. Although the designers had already evaluated this, the
combined efforts of all the parties working together creatively in a facilitated workshop
environment identified a number of improvements to the outline design proposals. Potential
improvements were also identified in the proposed wall-cladding system, and these were subject
to more detailed study outside the workshop.
As a result of the workshop, the building cost 2 per cent (£110,000) more than the original
budget. However, the increase in benefits of some £3.4 million more than paid for this.
Case study 6 – Dudley Southern Bypass (reported in Modernising
Construction, NAO, 2001)
In 1998 Kvaerner won the project in competition, with an exceptionally low bid of £14.3 million;
the contract was based on the ICE 5th with a Partnering Agreement. After a joint evaluation of
the risks, the Dudley Metropolitan Borough Council (MBC) felt able to negotiate a target price
which would still be below the second lowest bidder, and a target cost of £16.7 million was
agreed. Dudley MBC agreed with Kvaerner that it would split 50/50 any ‘pain’ or ‘gain’ over or
under that target price and Kvaerner would be paid an agreed maximum management fee of
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Value management 113
£900,000. The project was completed five months ahead of schedule within the target cost and
the budget agreed with the DETR.
Value engineering did identify savings. For instance, the original specification required
the removal of 50,000 cubic metres of waste, to be replaced with quarry material. Much of the
material was contaminated, but by working together and involving the Environment Agency in
developing solutions, they were able to reuse most of the material within the project. By the
end of the project, they had only taken 1,500 cubic metres to the tip, which prevented 25,000
lorry movements around Dudley.
Case study 7 – The Scottish Parliament building (reported in ‘The Holyrood
Inquiry’, 2004)
Construction work began in July 1999. In September 1999 a value engineering exercise was
implemented in order to reduce the construction cost by £25 million. The exercise identified
several hundred recommendations, the vast majority of which could be dealt with by the project
team. Some of the recommendations required a high-level decision from the Scottish Parliament
Corporate Body (SPCB). Table 7.2 gives an indication of the issues considered by the SPCB.
Lord Fraser reports that the exercise failed miserably in achieving its stated goal of achieving
the £25 million required. The workshop never identified achievable savings of the magnitude
required. Likewise, when the client realized that these decisions would have a significant impact
on the quality of the building they did not face up to the reality of the situation. Lord Fraser
comments that ‘To some extent the Value Engineering exercise could be interpreted as a knee
jerk reaction to a budgetary crisis.’
Copyright © 2014. Taylor and Francis. All rights reserved.
Case study 8 – Refit project for Pizza Hut (Constructing Excellence website)
In 1997 Pizza Hut was anticipating a programme of 25 refit projects (Pizza Delivery Units). At
an estimated/budget value of £145,000 each, this amounted to a programme value of over
£3.5 million. In order to review the projects before going on site, a series of three half-day value
management workshops was convened comprising client representatives (area manager and
property manager) and the consultants (designer, quantity surveyor and services engineer). An
experienced value management facilitator from outside the project team facilitated the
The three workshops followed a traditional format of information exchange, functional
analysis, brainstorming of alternative solutions, evaluation of alternatives, acceptance and
Table 7.2 Examples of VM savings considered on the Scottish Parliament building
Potential saving
Decision of the SPCB
Actual saving
Reduce car parking provision
from 129 to 50
Reduce to 65 spaces
Rationalize bar/lounge/
In excess of £1,000,000
Maintain existing
Delete wash handbasins in
MSP rooms
Agreed to be deleted
Reduce standard of media
accommodation fit out
Ankrah, N. P. K. (2014). Construction Cost Management. : Taylor and Francis. Retrieved from http://www.ebrary.com
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114 Value management
implementation. This resulted from nine hours of workshop and a similar amount of work outside
the workshops.
Through members of the team a total of £14,000 per project was saved, equivalent to
£350,000 capital cost on the whole programme. In some areas standards were actually raised
and longer-term maintenance was reduced. A shorter contract period was also established and
shorter delivery times for certain long-lead items.
The total cost of the value management exercise was estimated at less than £10,000, giving
a return of 35:1 on the investment.
Simister and Green (1997), through 17 value management case studies, identify the
practitioner’s role and the purpose of the VM exercise. They further identify the reasons why
the VM exercise worked well in ten of the cases but not so well in seven cases. Reasons for
success included: clear leadership from the client; involvement of client decision-makers;
willingness of client/designers/management to re-evaluate previously fixed design; clear articulation of client’s requirements; and proactive workshop participants. Reasons why the VM exercise
did not work so well included: client not able to set clear objectives; too many problems to be
solved; reluctance to consider change as design work already complete; and changed objectives
during the VM workshop.
The erstwhile Office of Government Commerce (2007) also produced an excellent VM review
covering seven case studies on the following projects:
Copyright © 2014. Taylor and Francis. All rights reserved.
Hexable Dance, Kent – describes how the project moved from being unaffordable to reality
through the effective application of VM techniques.
Open University – describes how the Estates Department delivered a £17 million library using
the principles of partnering and VM. Cost savings were achieved at a VM study cost of
Kintry Housing Partnership, Edinburgh – illustrates how VM was used during one phase
of a major housing project to improve the partnering performance, which resulted in a
7 per cent saving of £500,000.
Council house improvement (Scotland) – VM methods reinforced partnering performance
on this £144 million project to reduce defects by 10 per cent and costs by £1.75 million.
NHS Teaching Hospital, Stoke-on-Trent – on project A the VM study helped build a common
understanding of the project brief and the team achieved savings of about £4 million on
the £13 million project. On project B the VM workshop achieved annual savings of £4.5
million on the PFI £52 million annual Unitary Payment.
Withington Community Hospital, Manchester – describes how the VM methodology
facilitated the successful delivery of a project using an innovative approach.
Antler’s Bridge, California – VM was used to save £7 million and improved performance by
17 per cent. (It is noted that the US Federal Highway Administration requires VM studies
for all projects exceeding $25 million. Furthermore, the California Department of
Transportation requires the assessment of non-monetary benefits on all VM studies.)
7.8 Conclusions
The above case studies demonstrate that real benefits and cost savings can be secured by
implementing a value management approach. Case study 1 identified how the VM approach
enabled an NHS client to determine special adjacencies and linkages and identify the client’s
value system as a basis for validating a conceptual model for a new hospital facility.
Case studies 2 and 3 showed how significant savings could be achieved by redesigning an
alternative size and type of cladding. In case study 4 Dr Angela Palmer brilliantly illustrated the
Ankrah, N. P. K. (2014). Construction Cost Management. : Taylor and Francis. Retrieved from http://www.ebrary.com
Created from newschoolarch-ebooks on 2017-02-06 09:46:19.
Value management 115
classical benefit of the VM approach by giving an example in which the project team questioned
the fundamental purpose of a children’s paddling pool.
Case study 5, the speculative office block, illustrated how the VM exercise showed that a
little extra expenditure would result in a significantly greater net lettable area. Case study 6
demonstrated the benefit of value engineering within a partnering approach on the Dudley
Southern Bypass, which resulted in a considerable saving in the removal of excavation waste.
Case study 7 demonstrated the difficulty of achieving real savings through value engineering
on the hugely controversial Scottish Parliament building.
The Pizza Hut case study demonstrated how VM, when used by an enlightened client, resulted
in cost savings, improved standards and shorter delivery times on 25 refit projects.
Finally, the seven case studies reviewed by the OGC demonstrated the benefits that VM has
brought to central and local government projects, including improvement in leadership and
decision-making, effective team working, pre- and post-construction performance improvement,
innovation and defect reduction.
7.9 Questions
Question 1
Consider the function of an internal wall in an office complex.
Question 2
Give specific examples of potential unnecessary costs identified in Items 1–5 in Section 7.5 Value
Question 3
Copyright © 2014. Taylor and Francis. All rights reserved.
The University of Metropolis is planning a new state-of-the-art teaching facility for the School
of the Built Environment. As the client’s chosen project manager, write a 500-word report to
your client, explaining the key concepts and benefits of including a value management approach
and state what will be required from the client and when.
7.10 References/further reading
Connaughton, J.N. and Green, D.G. (1996) Value Management in Construction: A client’s guide, CIRIA Special
Report 129, CIRIA.
Dallas, M.E. (1992) ‘Value management – Its relevance to managing construction projects’, Architectural
Management (ed. P.Nicholson), Spon, pp. 235–246.
Dallas, M. (1998) ‘The use of value management in capital investment projects’, Session Guide Television
Education Network Video: Quantity surveying focus, March.
Dallas, M. (2006) Value and Risk Management: A guide to best practice, Blackwell Publishing, Oxford.
Dell’ Isola, A.J. (1982) Value Engineering in the Construction Industry, 3rd edition, Van Nostrand Reinhold.
Fraser, L (2004) The Holyrood Inquiry, Scottish Parliamentary Corporate Body.
Green, S.D. (1992) A SMART Methodology for Value Management, Occasional paper No. 53, CIOB.
Green, S.D. and Popper, P.A. (1990) Value Engineering: The search for unnecessary cost, Occasional paper
No. 39, CIOB.
HM Treasury (1996) CUP Guidance Note No 54: Value management, HM Treasury.
ICE (1996) Creating Value in Engineering – Design and practice guide, Thomas Telford.
Kelly, J. and Male, S. (1993) Value Management in Design and Construction: The economic management
of projects, E & FN Spon.
Ankrah, N. P. K. (2014). Construction Cost Management. : Taylor and Francis. Retrieved from http://www.ebrary.com
Created from newschoolarch-ebooks on 2017-02-06 09:46:19.
116 Value management
Kelly, J., Male, S. and Drummond, G. (2004) Value Management of Construction Projects, Blackwell.
McGeorge, D., Palmer, A. and London, K. (2002) Construction Management New Directions, 2nd edition,
Blackwell Science.
NAO (2001) Modernising Construction, Report by The Comptroller and Auditor General, National Audit Office
HC 87 Session 2000–2001.
Office of Government Commerce (2007) Value Management in Construction: Case studies: http://webarchive.
Construction.pdf – cited 20 October 2012.
Simister, S.J. and Green, S.D. (1997) ‘Recurring themes in value management’, Engineering, Construction
and Architectural Management, Vol. 4, No. 2, pp. 113–125.
Copyright © 2014. Taylor and Francis. All rights reserved.
www.constructingexcellence.org.uk – Value Management fact sheet – cited 12 December 2006.
www.davislangdon.com – Value engineering cost model – accessed August 2005.
Ankrah, N. P. K. (2014). Construction Cost Management. : Taylor and Francis. Retrieved from http://www.ebrary.com
Created from newschoolarch-ebooks on 2017-02-06 09:46:19.
Writing Assignment
In this week’s Learning Resources, you encountered three accounts of the VE process.
While they agreed in most respects, there is some variation. For example, Potts (2013) notes
that some VE processes in the UK are different than in the United States regarding who
participates in the VE process and why. According to Liu and Shen (2003) communication,
cooperation, and feedback with the original design team in a VE study can vary and impact
the adoption of the recommendations.
Imagine you are again working with Yerbin, Wren, & Ewell (YWE), a fictional construction
You are working on the project team to design and build an office building that will serve as a
regional headquarters for an international client. While settling the terms of the contract, the
client and YWE agree to value engineer the project as a whole at key gateways during the
design phase. However, both parties are at an impasse as to how this VE will occur. The client
prefers to bring in a third-party VE team to provide them and your project team
with recommendations. The client feels that an impartial team would be better prepared to
make recommendations as they have no vested interest in the outcomes of the project. Your
team would only be available to respond to any queries from the VE team, but would not be
part of the workshop that produces the final report with recommended changes.
YWE would prefer to follow its standard VE process. The internal Value Manager would lead
your project team in a VE workshop that includes other members of YWE who are not on the
project. YWE feels the client’s method to be too confrontational and that your team would not
have a vested interest in implementing any of the recommendations as you were not a party to
their creation. Furthermore, an outside team would waste valuable time becoming familiar
with the project and would disrupt the internal review mechanisms YWE has already
implemented. YWE has asked you, as a member of the project team, what you feel would be
the best course of action.
For this week’s Assignment, what do you feel would be the best course of action, the client’s
method, YWE’s method, or would you suggest a third way? Whichever you choose, provide a
rationale that explains your choice. Be sure to use references from the Learning Resources to
support your work.
Be sure to support your work with specific citations from this week’s Learning Resources and
any additional sources as appropriate. Refer to the APA guide to ensure the intext
citations and reference list are correct.
35 Value management
In a constantly changing environment, methods and procedures must be constantly challenged
and updated to meet the needs and aspirations of one or more of the stakeholders of a project.
This need for constant improvement was succinctly expressed by the first Henry Ford when he
said he could not afford to be without the latest improvement of a machine.
Value management and its subset, value engineering, aim to maximize the performance of
an organization from the board room to the shop floor. Value management is mainly concerned
with the strategic question of ‘what’ should or could be done to improve performance, while
value engineering concentrates more on the tactical issues of ‘How’ these changes should
be done.
Value can be defined as a ratio of functionkost, so in its simplest terms, the aim is to increase
the functionality or usefulness of a product while reducing its overall cost. It is the constant
search for reducing costs across all the disciplines and management structures of an organization
without sacrificing quality or performance that makes value management and value engineering
such an essential and rewarding requirement.
The first hurdle to overcome in encouraging a value management culture is inertia. The
inherent conservatism of ‘if it ain’t broke, don’t fix it’ must be replaced with ‘how can a good
thing be made better?’. New materials, better techniques, faster machines, more sophisticated
programs, more effective methods are constantly being developed and in a competitive global
economy, it is the organization which can harness these developments and adapt them to its
own products or services, which will survive.
The search and questioning must therefore start at the top. Once the strategy has been established, the process can be delegated. The implementation, which could cover every department
and may include prototyping, modelling and testing, must then be monitored and checked to
ensure that the exercise has indeed increased the functionkost ratio. This process is called value
The objectives should be one or more of the following: eliminating waste, saving fuel, reducing harmful emissions, reducing costs, speeding production, improving deliveries, improving
performance, improving design, streamlining procedures, cutting overheads, increasing functionality, increasing marketability. All this requires one to ‘think value’ and challenge past
practices, even if they were successful.
In an endeavour to discover what areas of the business should be subjected to value analysis,
brainstorming sessions or regular review meetings can be organized, but while such meetings
are fundamentally unstructured, they require a good facilitator to prevent them straying too far
off the intended route.
Value analysis can be carried out at any stage of the project as can be seen from the simplified
life cycle diagram of Figure 35.1. For the first two phases it is still at the ‘What’ stage and can
be called value planning while during the implementation phase it is now at the ‘How’ stage
and is known as value engineering. The diagram has been drawn to show value management
276 Project Management, Planning a n d Control
& o1 PD,
Value Planning
Sketch Plans
Implementation could include
Design, Development,
(Procurement) & Production
Operation Shut-down
Value Engineering
Working Drawings
Outline Scheme Detail Production Bills of Tender
Inception Feasibility
Proposals Design Design Information Quantitles Action
Value Analysis
during the project phases, i.e. before handover. However, value management can be equally
useful when carried out during the operation and demolition phases in order to reduce the cost
or manufacturing time of a product, or simplify the dismantling operations, specially when, as
with nuclear power stations, the decommissioning phase can be a huge project in its own right.
In addition to brainstorming, a number of techniques have been developed to systemize
or structure the value engineering process of which one of the best known ones is FAST or
function analysis system technique. This technique follows the following defined stages:
Collect and collate all the information available about the product to be studied from all the
relevant departments, clients, customers and suppliers.
Carry out a functional analysis using the ‘Verb and Noun’ technique.
This breaks down the product into its components and the function (verb) of each component is defined. The appropriate noun can then be added to enable a cost value to be
ascertained. This is explained in the following example:
It has been decided to analyse a prefabricated double glazed widow unit.
The functions in terms of verbs and nouns are:
Light, Glass
Draughts, Seals
Heat, Double glazing
Cleaning access, Reversibility
Handles, Locking catches
Each function and component can now be given a cost value and its percentage of the total
cost calculated.
Find alternative solutions. For example it may be possible to reduce the thickness of the glass
but still maintain the heat loss characteristics by increasing the air gap between the panes. It
may also be cheaper to incorporate the lock in the handles instead of as a separate fitting.
Evaluation. The suggested changes are now costed and analysed for a possible saving and
the functionkost ratio compared with the original design.
Acceptance. The proposed changes must now be approved by management in terms of
additional capital expenditure, marketability, sales potential, customer response, etc.
Implementation. This is the production and distribution stage.
Value management 277
7 Audit. This is carried out after the product has been on the market for a predetermined time
and will confirm (or otherwise) that the exercise has indeed given the perceived additional
value or function / cost ratio. If the results were negative, the process may have to be repeated.
Value management is not only meeting the established success criteria or KPIs but improving
them by periodic reviews. Having previously carried out a stakeholder analysis and identifying their needs, it should be possible to meet these requirements even if the costs have
been reduced. Indeed customer satisfaction may well be improved and environmental damage
reduced, resulting in a a win-win situation for all the parties.

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