Principles of value management

Value management can be a low-cost, high-benefit exercise. The benefits of a value management review are often perceived in terms of improved quality and reduced cost.

Value management can be applied incrementally, generally delivering:

• value improvements in excess of 20% including savings of between 10% and 25%; and
• tangible returns on investment between 20 and 40 times the resource commitment.

The decision to build, convert, extend and/or refurbish involves a substantial investment of time, effort and money.

The primary benefits of value management include:

• A clear definition of what the owners and end users mean by value, thus providing a shared understanding of value and precise basis for making decisions throughout the project.
• A tool for optimising the balance between differing stakeholder needs and expectations.
• A basis for creating a clear project brief that reflects the project sponsors’ priorities and expectations, expressed on the basis of value and function. This improves communication between all the stakeholders, so that each can understand and respect the other’s constraints, expectations and requirements.
• A basis for ensuring that the project is the most effective way of delivering business benefits and satisfying business needs.
• A functional basis for embellishing and refining the business case for the project by addressing both the monetary and non-monetary benefits.
• A functional basis for design development and management, through improved communications, mutual learning and enhanced collaborative working, leading to better technical solutions with enhanced performance and quality, often through innovative solutions.
• A functional mechanism to measure value, taking into account monetary and non-monetary benefits and thus demonstrating value for money.

The application of value management and value engineering is considered a best practice process in construction projects because of the demonstrable results it delivers.

Benefits of value management and value engineering include:

• Improved financial position and value for money: the process is effective in identifying opportunities for direct financial improvement through separating needs from wants and increased level of innovation.
• Improved communication and teamwork: workshops provide an ideal forum for bringing stakeholders together to establish project requirements at the outset and provide a structured process to improve understanding through clearer objectives resulting in better decisions and allowing the team to participate and take ownership of solutions.
• Improved risk management: early intervention highlights project risk and improves certainty of outcome.
• Improved project management: value management and value engineering smooths the project decision and implementation process and is an ideal vehicle for highlighting challenges and generating solutions.
• Improves design and construction programmes.

Benefits are derived from the functions a building performs rather than the building. This means that where a project includes features that do not relate to the client’s stated objective, no benefit is derived from the additional cost and overall value falls. Similarly, a project that is built cost effectively but does not meet the client’s objectives does not provide good value, despite being built within budget.

It is important to acknowledge and highlight the potential risk to value management interventions:

• if the value engineering intervention is undertaken too late in the project life cycle it will not be effective;
• inadequate information will result from incorrect assumptions;
• a high level of engagement is required of stakeholders; and
• sufficient time must be made available to complete the process.