Value Management & Engineering. Origins of VM & VE Used by General Electric in the USA during World...
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Transcript of Value Management & Engineering. Origins of VM & VE Used by General Electric in the USA during World...
Value Management & Value Management & EngineeringEngineering
Origins of VM & VEOrigins of VM & VE
Used by General Electric in the USA during World War II
Shortage of materials led to substitutes being used to achieve the same function
Many of these substitutions resulted in improved products - as well as better Value for Money
This led to a formal process for evaluating design options
GE called it “Value Engineering” The process was gradually refined to incorporate
“Value Management”
The Value Management The Value Management ProcessProcess
Define Project Objectives
Define Options
Evaluate Options
Maximise Value for Money
What is Value for Money?What is Value for Money?
Benefits of Value ManagementBenefits of Value Management
Optimisation of cost, with early elimination of non-viable projects
Clarified project objectives Greater confidence in the need for the project Common understanding of the project
requirements
Value Management Phase 1 Value Management Phase 1 (VM 1)(VM 1)
Undertake an early review of Project Objectives Link this with Risk Assessment study Involve Senior Management and Stakeholders Gain consensus for agreed hierarchy of
objectives Score objectives so that relative importance can
be determined
Objectives HierarchyObjectives Hierarchy
Key Objective
Prime Objective
or Reason
Sub-Objective
Example of Objectives Example of Objectives HierarchyHierarchy
Travel to Office
Arrive in time
No breakdowns
Comfort
Departure time
Convenience
Safety
Reliability
Importance WeightingImportance WeightingWeight Score Weight Score Importance
20 0.67 Arrive in time 0.25
15 0.38 Reliability
10 0.33 No breakdowns 0.12
30
10 0.25 Safety 0.25
10 0.50 Comfort 0.19
15 0.38 Convenience
40 10 0.50 Departure time 0.19
20 1.00
Travel toOffice
Value Management Phase 2 Value Management Phase 2 (VM 2)(VM 2)
Separate activity during Feasibility & Definition Stage
Consider all available Options Achieve best Value for Money by evaluating
options against the importance weightings agreed for the hierarchy of objectives
Link with Risk Analysis and Scenario Analysis to choose the optimum project configuration
Evaluating the OptionsEvaluating the Options
Each option assessed to see how well it satisfies each of the objectives (score each out of 100)
These Raw Scores are then weighted according to the Importance Weighting given to each objective
The Weighted Scores are added up to give a Total Score for each option
The Total Score for each option is then divided by the Life Cycle Cost to give a Value score
Best Value for Money is obtained by choosing the option with the highest Value score
EvaluationEvaluation
Objectives: A: Arrive in time C: Safety E: Departure timeB: No breakdowns D: Comfort
VALUE MANAGEMENT ASSESSMENT
OBJECTIVE A B C D E Score Cost Value
OPTIONImportance
weighting.25 .12 .25 .19 .19 1.00
1 Raw score 90 70 90 70 60
RAIL Weighted score 22.5 8.4 22.5 13.3 11.4 78.1 48 1.63
2 Raw score 70 90 80 100 80
CAR Weighted score 17.5 10.8 20 19 15.2 82.5 55 1.50
3 Motor Raw score 80 80 60 40 90
Bike Weighted score 20 9.6 15 7.6 17.1 69.3 45 1.54
The Value Engineering ProcessThe Value Engineering Process
Define FunctionalRequirements
ConsiderDesign Options
Evaluate Options
Maximise Value for Money
Objectives of Value Objectives of Value EngineeringEngineering
Remove the cost of unnecessary functionality
Reduced or eliminated late technical/design modifications
Reduced or eliminated abortive technical/design costs
Functional Analysis System Functional Analysis System Technique - FAST DiagramTechnique - FAST Diagram
VM / VE Critical Success VM / VE Critical Success FactorsFactors
Senior Management Full Support Accountability - so that results are not
undermined Good Facilitation Commitment to the process - belief Right Timing - early enough to be effective, not
just a last minute cost cutting exercise
Potential SavingPotential Saving
£
Duration of project design
InitialInvestigation
FeasibilityStage
PurchasingCommitment
Net saving potential
Cost reduction potential
Cost to implement changes