When should value management be used?

Stage	Needs addressed	Methods used	Outputs
VM0 Strategy + inception	Business needs + objectives Triggers for considering a project Benefits sought Strategic fit Objectives available to fulfil need Strategic risks Business environment	Strategic planning Value proposition Value profile Whole life cost analysis Surveys	Vision, mission + objectives Basis of business case Success criteria Performance indicators Implementation strategy
VM1 Briefing		Briefing study Develop value profile Risk + issue Identification Stakeholder analysis Relationship development Gap analysis	Prioritised value drivers (design) Procurement strategy Output specification Statement of requirements Project strategy Stakeholder map Basis for managing risk
VM2 Concept design	Concept selection + development Feasibility Efficiency of the building Project organisation Team alignment Preliminary cost + programme	Function analysis Attribute weighting Option selection Option improvement	Preferred concept option Basis for decision making Design brief Initial project execution plan
VM3 Scheme design	Design proposals Whole life cost Specification Programme Operational issues Buildability	Value engineering Risk management Proposal monitor + track	Optimised designs Refined project execution Plan
VM4 Detailed design + construction	Standardisation Productivity Interface coordination	Value engineering Design + cost reviews	Refine specifications Basis of tender Documentation Roles + responsibilities
VM5 Handover	Project performance	Project review Post occupation review	Lessons learned Record of effectiveness of VM
VM6 Use	Building performance Efficiency of activities in building	Surveys Value analysis Repeat of VM0-1	Proposals for improvement

Table 1: Route map for the application of value management interventions in construction projects.

© Reproduced with permission from the Institute of Value Management.

Early value management

True value cannot be created through the most cost-effective delivery of the wrong output. Value management must start by understanding the clients requirements.

At the initial stages of a project, value management provides an exceptionally powerful tool to explore a project’s objectives and aspirations from the client’s perspective.

To achieve maximum benefit, value management should be carried out from the concept stages of a project, not simply introduced later to bring a project back within budget. The process of value management is very different to conventional cost reduction.

Value management/engineering interventions should be delivered at pre-defined project stages or in response to project challenges as they arise during design and/or construction. Interventions can, therefore, be scheduled at all stages of the project life cycle. 

The value benefit curve decreases over the project life cycle. The greatest opportunity to maximise value is, therefore, secured from decisions made during the initial stages of a project.

The greatest opportunity to influence cost is at inception as decisions that have the greatest impact on cost and value are taken during these early stages. Examples of such decisions may include:

• which site to acquire;
• whether an existing building can be adapted and refurbished; or
• whether a new build generates better value for money.

Consequently value management should commence at the earliest possible opportunity to maximise benefits to the project.

There are different ways of delivering a client’s requirements offering further potential to add value to a project. The building services element offers examples of innovation that can have a significant impact on the overall project outcome such as ground water heating and cooling. Innovations such as these need to be adopted at the earliest possible stage of a project. When introduced as part of a value engineering exercise at a later stage, it is difficult to introduce such radical changes. That said, opportunities to add value still exist, such as the use of manufacturers’ standard components rather than bespoke products.

Macro or strategic value management is less tangible. Bigger decisions can be made at this juncture, but often the savings generated cannot be measured. Rather than generate savings, it may be that the team have avoided committing the resource in the first place. Cost avoidance, often unmeasurable, is a key product of value management.

Later value management

Value management later in the project life cycle is value engineering.

Value management or value engineering at this stage of the project should focus on what is required, the validation of those objectives and agreement on the best design solution. Value management or value engineering has a key role to play in design development.

The focus of design stage value management or value engineering is to maximise value through the optimum relationship between function and cost. Although at this stage, function can be explored further in both the ‘work’ and ‘sell’ functions.

Work functions tend to be hidden, save for the Lloyds of London Building where building services were used as a feature. Work functions are critical to project success, for example, when building services are called on to perform in extreme conditions.

Sell functions are the visible functions evident to the client and purchasers/tenants such as the façade, floor and wall finishes, joinery, kitchens and bathrooms and often more prominent in the declared project objectives.

These elements justify a significant proportion of the total project cost and, therefore, form important targets for the value engineering effort.

Value engineering can be applied to any project, however, the more complex and higher the cost provides the most opportunity to challenge and generate opportunities given the scope of such projects, although it is good practice to run the rule over all projects. Furthermore, value engineering will be invaluable where parts of a programme or portfolio of projects are being considered, as improvements can be incorporated into future developments. They can also be tested in practice resulting in continuous improvement.

In practice, maximum benefit is secured by applying the tools and techniques of value management and value engineering throughout the project life cycle and is an on-going process that should be used to continually review all aspects of the project against stakeholder requirements. The opportunities generated may then be realised at key interventions to assist with the smooth progress of the project throughout the design stages avoiding disruption and abortive work.

When problems occur later in the life of the project, value engineering is an effective process for developing a rapid and robust, consensus solution.

It’s usually very difficult and costly, if not impossible to make changes late in the project, but value engineering interventions can be used to recover cost divergence.

Micro or tactical value management and/or value engineering benefits from established design and cost assumptions. This makes changes and savings easier to capture with the benefit of additional design information.

Additional objectives of design stage value management or engineering include:

• present a positive business case and change the viability of a project that would not otherwise proceed;
• rework the scheme to align with a reduced capital budget;
• recover a forecast cost or programme overrun;
• resolve a technical concern;
• resolve a performance issue;
• reduce implementation risk;
• challenge, optimise and validate design prior at key hold points; and
  
• assist with the orientation of a new team member(s).