Cost Value Engineering – Group Assignment

Title: Case Study Report for project

implementing Value Management in the Construction Industry .

Group Members

1. Chian Chee Yong2. Hong Kok Hang3. Wong Yee Yung4. Fu Yih Shyang5. Tan Rou Jin 6. Tie Tung Lik7. Vincent Kah Wee Sen8. Lim Chze Wei

1.0 Introduction

• Value Management was first introduced in 1986 by Prof. Roy Barton to the QS Department of UTM in Malaysia.

• The implementation of value management in construction industry is less practiced by the private sector compared to government projects which mostly using the value management application as a structured approach.

• The key justification is construction field in Malaysia is lack of knowledge and experience in value management

What is Value Management?

Value Management is a rigorous systematic effort to

increase the value and optimize the cost of project,

facilities and systems.

According to Dell I’sola, the relationship between Value,

Function, Quality and Cost can be defined as follow:

Evolution of Value Management

1940s Value Analysis

1960s Value Engineering

1980s Value Management

Benefits of Value Management 1. Solves immediate and high priority problem2. Established least cost goals3. Encourage communications among the team4. Reduce time5. Reduce commercial risks6. Spread cost consciousness 7. Develop hidden abilities and talents8. Identifying & eliminating unnecessary cost9. It encourage staff development & promote system thinking10. Optimising resources by saving time , money & energy11. It is a risk management12. Updating standards, criteria and objective13. Increase value and improve quality of building.14. Enhance competitiveness in the industry.15. Better focus on clients and project’s objective.16. Offer a second look at key design decision17. Encourage creativity and innovation of new ideas18. Simplify and improve methods and procedures or schedules in

construction to reduce time for completion19. It can achieve balance between economic, social, environmental

outcomes and needs.

Space Management

• The space management is to increase overall usage and effectiveness of existing space.

• It is also reduce the need for additional space, fast response to users request and achieving harmony among the space provided.

• The major elements that used to described space included type of space, quantity of space, facilities provided, finishes and security level.

• Space is considered as critical resources that an organization has to provide and manage. In clause 4.0, ISO 9001:2000, it is clearly stated that requirement for compliance to quality management system standards. The main purpose for space in an organization is to provide working space, security, allow circulation and received visitors or clients. The well planned and managed space can provide the cost effectiveness of the operation and optimize usage of resources in the organization.

• There are alternatives in providing space for organization which are:– Buying new building.– Building new building.– Renting space.– Extending existing building.– Refurbishing and upgrading the existing space.– Rearranging the layout space usage.– Sharing existing space.

Space Management Objectives

Objective Explanation

Functionality To ensure organisation functionality is suitable with optimisation of building space.

ConsistencyTo ensure space management is carried out consistently and systematically in achieving organization objectives.

Efficiency To ensure space being used efficiently, in good control and bring maximum profits to the organization.

FlexibilityEven though space management required control over space usage, the element of flexibility is not ignored such as when there is expansion of staff or staff reduction.

Cost

The effective space management which have considered planning, execution and monitoring elements will result in overlal cost reduction and maintenance cost decrease.

2.0 Case Study

• Value Management methodology was adopted in finding alternatives and selection of the suitable solutions to address new space requirement in School of Chemical Engineering, USM.

• Attentions were given to consider the wide range of influencing factors and parameters and defining critically and accurately the real needs of the school.

• The value management workshops have helped the school members to discuss and analyse the issues comprehensively as a team enabling them to achieve consensus quickly.

• Among the challenging but critical stages of the workshop were:-

Space Function Analysis that provided clear definition and purpose of space required linked to objectives of the school and work process. Actual floor area requirements were obtained based on actual work areas required.

Creativity session to generate ideas on all possible ways and strategies to provide space and even considered means to improve work processes and management structure.

Using the Evaluation Matrix to define and rank criteria to evaluate the alternative solutions proposed by the workshop members. This gave very clear justifications on the selection of the final solution and helped tremendously in achieving consensus.

Value Management studies were commissioned to achieve the following objectives:

To provide adequate space and facilities to enable the enhancement and development of Chemical Engineering to achieve international recognition.

To accommodate the large number of studentsTo save costTo propose new alternative/ ideas

Executive Summary• A Value Management workshop was conducted for the

laboratories of School of Chemical Engineering in Universiti Sains Malaysia (USM) which is located at Nibong Tebal which is about 50 km from USM Main Campus in Penang Island.  

• The School of Chemical Engineering is one of the leading institution in the country offering both undergraduate and graduate programmes in chemical engineering.

• Their student population are currently totalled to about 352 undergraduates and more than 50 postgraduates.

• However they only have an office, two lecture rooms, six tutorial rooms, a computer lab and eleven laboratories in the same building.

• There are several issues being faced by them which need proper improvement. The following are the issues being proposed:

Inadequate space to accommodate the increasing activities and the amount of equipment as well as materials used in the laboratories.

Improper and not enough facilities and provision for safety and security session.

Research works is not able to be expanded.Negative image and impression given by the

industrial clients during the visiting of those laboratories.

• After a preliminary discussion with the heads of laboratories together with a one day visit and inspection to the eleven laboratories, a one and a half day intensive Value Management workshop was done which involve the relevant staffs working in the laboratories.

Based on the preliminary discussion with the school’s management, two alternatives were proposed to manage the issues and meet the requirements as follows:

Provide new building to house the laboratories.

Renovate and upgrade existing laboratories by providing improved and added facilities and building services. Significant changes would have to be done to the layout of equipment and circulation system within the laboratories and might require additional spaces to be provided as annexes to existing building. Management system and scheduling of activities would also require changes.

• After the Evaluation Matrix had made, the final decision is to provide new building to house the laboratories. Hence, in order to achieve the objectives stated previously, Space Function Analysis is used.

Linear Process of Space Planning Management with improved application of Value Management Methodology (Source :

Che Mat MM & Zulkarnian, 2006)

There are 5 phases of value management job plan to be taken in Universiti Sains Malaysia

(USM)

Identification of actual space requirements through collection of comprehensive data and

information

Brainstorming session to identify alternative solutions through creativity

Evaluation of alternatives by teamwork and consensus

Final selection of recommended solutions according to the ranking of alternatives

The End

1. Evaluation MatrixPriority Setting Matrix

Weighted Scoring Matrix

Space Function AnalysisComponent

FunctionKind Cost Area

(m2)Worth Area

(m2)Value Index Remarks

Verb NounGround Floor

Lobby Receive Visitor S 20.00 20.00 1.00 NO CHANGEProcess Control Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONChemistry Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONEnvironmental and Separation Process Research Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONReaction Engineering Research Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONService (M&E) House Service RS 100.00 100.00 1.00 NO CHANGE SUB-TOTAL 840.00 640.00

Level 1 Analytical Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONEnvironmental Control Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONPetroleum and Gas Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONBioprocess Engineering Research Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONService (M&E) House Service RS 100.00 100.00 1.00 NO CHANGE SUB-TOTAL 820.00 620.00

Level 2 Thermodynamics Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONBiochemical Laboratory Test Student B 180.00 130.00 1.38 28% REDUCTIONService (M&E) House Service RS 100.00 100.00 1.00 NO CHANGE SUB-TOTAL 460.00 360.00 TOTAL 2,120.00 1,620.00

• The workshop successfully worked out an approximate 28% savings to the original proposal and request of space made by the school’s management.

• The school was also able to decide on the location of the new building within their existing complex area with ease.

3.0 Sketches before and after design showing proposed changes

4.0 Reasons Supporting the Selection of Alternative

The final decision is to build a new building to house the laboratories instead of renovate the existing building. The followings are the reasons to support the decision made:

1. Student enrolment in universities is on the rise

2. Reduce health and safety issues3. Growing IT needs4. Meet regulatory compliance5. Compete with other universities

5.0 Cost Analysis Item Description

AreaBefore After

m2 m2 Ground Floor 1 Lobby 20.00 20.002 Process Control Laboratory 180.00 130.003 Chemistry Laboratory 180.00 130.00

4Environmental and Separation Process Research Laboratory

180.00 130.005 Reaction Engineering Research Laboratory 180.00 130.006 Service (M&E) 100.00 100.007 Toilet 35 35 Level 1 8 Analytical Laboratory 180.00 130.009 Environmental Control Laboratory 180.00 130.00

10 Petroleum and Gas Laboratory 180.00 130.0011 Bioprocess Engineering Research Laboratory 180.00 130.0012 Service (M&E) 100.00 100.0013 Toilet 35 35 Level 2

14 Thermodynamics Laboratory 180.00 130.0015 Biochemical Laboratory 180.00 130.0016 Service (M&E) 100.00 100.0017 Toilet 35 35

Item DescriptionCost (RM)

Before After Before Afterper m2 per m2 Total Cost Total Cost

Ground Floor 1 Lobby 1,200.00 1,200.00 24,000.00 24,000.002 Process Control Laboratory 1,500.00 1,500.00 270,000.00 195,000.003 Chemistry Laboratory 1,500.00 1,500.00 270,000.00 195,000.00

4Environmental and Separation Process Research Laboratory 1,500.00 1,500.00 270,000.00 195,000.00

5 Reaction Engineering Research Laboratory 1,500.00 1,500.00 270,000.00 195,000.006 Service (M&E) 100.00 1,500.00 10,000.00 150,000.007 Toilet 1,000.00 1,000.00 35,000.00 35,000.00 Level 1 8 Analytical Laboratory 1,500.00 1,500.00 270,000.00 195,000.009 Environmental Control Laboratory 1,500.00 1,500.00 270,000.00 195,000.00

10 Petroleum and Gas Laboratory 1,500.00 1,500.00 270,000.00 195,000.0011 Bioprocess Engineering Research Laboratory 1,500.00 1,500.00 270,000.00 195,000.0012 Service (M&E) 100.00 1,500.00 10,000.00 150,000.0013 Toilet 1,000.00 1,000.00 35,000.00 35,000.00 Level 2

14 Thermodynamics Laboratory 1,500.00 1,500.00 270,000.00 195,000.0015 Biochemical Laboratory 1,500.00 1,500.00 270,000.00 195,000.0016 Service (M&E) 100.00 1,500.00 10,000.00 150,000.0017 Toilet 1,000.00 1,000.00 35,000.00 35,000.00

TOTAL 2,859,000.00 2,529,000.00

Hence, the estimated saving cost is RM330,000.00.

6.0 Action Plan

Ground Floor

ElementRecommended

Solution Task Action by TimelineLobby No change Architectural Design Architect

Detailed Design StageProcess Control Laboratory

Reduction in space / Space Optimisation

Structural Design Engineer

Chemistry LaboratoryCost Plan

Consultant Quantity Surveyor

Environmental and Separation Process Research Laboratory Implementation per

recommendation Project Manager Construction Stage

Reaction Engineering Research Laboratory Ensure implementation as

per recommendation

Value Management

Facilitator Implementation Stage

Service (M&E)

No change

Review and audit implementation and

approvalClient /

StakeholderImplementation Stage and

post implementationToilet No change

Level 1

ElementRecommended

Solution Task Action by Timeline

Analytical Laboratory

Reduction in space / Space Optimisation

Architectural Design Architect

Detailed Design StageEnvironmental Control LaboratoryStructural Design Engineer

Petroleum and Gas LaboratoryCost Plan

Consultant Quantity Surveyor

Bioprocess Engineering Research Laboratory Implementation per

recommendation Project Manager Construction Stage

Service (M&E)

No changeEnsure implementation as

per recommendation

Value Management

Facilitator Implementation Stage

Toilet

No change

Review and audit implementation and

approvalClient /

StakeholderImplementation Stage and

post implementation

Level 2

ElementRecommended

Solution Task Action by TimelineThermodynamics Laboratory Reduction in space /

Space OptimisationArchitectural Design Architect

Detailed Design StageBiochemical Laboratory Structural Design Engineer

Service (M&E) No change Cost PlanConsultant

Quantity Surveyor

Toilet No changeImplementation per

recommendation Project Manager Construction Stage

Ensure implementation as

per recommendation

Value Management

Facilitator Implementation Stage

Review and audit implementation and

approvalClient /

StakeholderImplementation Stage and

post implementation

Conclusion

• Value Management has provided an effective way to deliver objectives and fulfil user’s requirements.

• The system based functional analysis of Value Management allows consideration of complex interrelationships.

• Consequently, Value Management has a broad range of applications, with principle opportunity of gains in the early stages of development of programs and projects.

• It is particularly useful in focusing or distilling objectives and priorities, and in generating alternative solutions.

In the project of constructing a new building to house the laboratories of School of Chemical Engineering, USM, it clearly shows that there is an obvious cost reduction by implementing Value Management. There is a total of RM 330,000.00 cost reduction based on the space function analysis. It has shown that Value Management is an effective tool in the planning of space requirement. There are clear and obvious impact and advantages gained in applying the concept of Value Management in the planning of space as follows:

Systematic and comprehensive process Able to provide solutions in a short time compared to

conventional process requiring time to gather information and integrate requirements from various parties.

Cost effective – able to provide large savings through defining real requirements and avoid or minimize wastage or irrelevant elements.

Clear justification on selection of solution which enables efficient process of modification or revision of solution if the need arise.

Recommendation

• The implementation of Value Management should be a standard practice for every project as it is able to provide a better value for money for the client in the project.

• The benefits of implementing Value Management such as increase in the value of the project should be introduced to client to encourage them to practice the implementation of Value Management into the projects.

• The Government should create more local guidelines in order to promote the use of Value Management in the projects.