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SBE Innovations Ltd.’s Value Engineering

Executive summary

The public-private partnership espoused by SBE innovations seeks to develop a civic center in the suburban to stimulate development and to enhance the local community. It will have both public and commercial facilities to provide different services to the community.

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The project has a great opportunity for benefitting from a value management exercise if applied this early in the project. Some of the benefits envisaged include a better understanding of the project objectives by all project stakeholders, protection of the project’s high-value functions, reduction in functions of low value, project cost reduction, and improved project coordination occasioned by information generated by the value management study.

The value management study will focus on the tasks the project should accomplish, the spaces for performing those tasks, the elements of the project, and the project’s components. The membership of the value management study team will include a team of six to twelve participants drawn from the project management team represented by SBE innovations, representatives of the residents association, and client representatives from the two partners.

A value management expert, in the presence of an expert from the construction industry, will facilitate the team’s discussions. The proposed agenda items for the value management study include information, function analysis, creativity, development, and presentation, the whole exercise should take five working days. There are many tools and techniques available for value engineering. They include stakeholders’ analysis, SWOT analysis, Functional Analysis Systems technique (FAST), risk analysis, value analysis, and brainstorming. Other tools and techniques include the Pareto analysis, criteria weighting technique, and cost-benefit analysis.

The best time to undertake a follow-up value engineering exercise is after the project has gone into the one-third completion stage. Its role is to determine cost savings possible from the technical areas of the project. The follow-up study includes much of the original team and the project contractors. The issues involved in the follow-up value engineering exercise include the use of alternative materials, methods, and processes for the completion of the project. Energy use is also a key input to examine during this follow-up process.

Background

SBE innovations, a public-private partnership, desire to develop a civic center, which has some commercial sections managed by the private partner. The proposed facility will include sections meant for use by the public and other areas designated for commercial use. The public partner is the local authority. Its objective is to develop a facility that will stimulate development and enhance the local community. It would like to achieve this by the inclusion of a library, post office, and a medical center in the mixed-use facility. The center will also have space for the provision of social services. The private partner’s main objective is to get a good return on their investment.

They hope to achieve this by providing facilities to host a shopping center, a sports center, a food center, and a bank. The proposed location for the facility is the suburban where there are significantly fewer construction regulations. This means that the design team has a greater space for creativity in the facility design. Through value engineering and value management, the project will benefit from better value offerings for the stakeholders.

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Benefits of Early Application of Value Management

The goal of value management is to find out ways of implementing a project in order to increase the value resulting from the function as cost-effectively as possible, or to retain value and cut costs at the same time. Morledge, Smith, and Kashiwagi (2006, p.151), state that value management, “is increasingly being requested by experienced construction clients as a way of achieving the best value for their money”. This project will experience certain benefits if it employs value management at this stage of the project.

Improved understanding of the project objectives

By undertaking a value management study and thereafter engaging in a value management process, all project stakeholders will have the opportunity to appreciate the significance of all the project objectives as set by the different stakeholders. According to Kelly, Morledge, and Wilkinson (2002, p.77) “the exploration of a clients value system will allow the appraisal of decisions at a number of key levels”.

Protection of high-value functions

A VM study will make possible the protection of high-value functions within the project by identifying their contribution towards the overall value the project offers to the stakeholders. The identification of the related functions provides an opportunity for the VM team to find ways of enhancing them to increase their value offering. It is the main strategy in increasing the value of a project.

Reduction of non-core project components

The opportunity to reduce and eliminate non-core value functions in the project will present itself during the VM study. There is the option of complete deletion of these components or their reduction insignificance is they add no substantial value. This is one of the key ways of attaining cost savings. The earlier this happens, the easier it is to implement the proposed measures to take advantage of the opportunities.

Cost reduction

Through value management, cost reduction opportunities will come into full view. SBE innovations will be able to cut on costs associated with insignificant functions, and provision of the same functions using alternative means thereby providing a more favorable cost outlay. Value management provides a cost reduction of up to twenty-five percent of costs.

Improved overall project coordination

With the clarity of issues that a VM study will achieve, the project coordination will improve vastly. This is partly because a VM study uses many of the tools used for strategic planning and management. The information generated will provide all sections of the project with valuable insight into the best operational disposition for attaining the best results for the project.

Value Management Study Areas

The study areas for the VM study are classifiable as tasks, spaces, elements, and project components. This approach ensures that the team applies a systematic process as it goes through the VM exercise.

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Tasks

Tasks refer to the specific things that each unit in the project should accomplish. The exploration of tasks starts with the whole project at the macro level and dissolves down to individual units. The main focus while looking at tasks is to establish whether the model proposed for the accomplishment of the task is the most effective way of doing it and whether it can be done better at a lesser cost using alternative ways.

Spaces

This involves looking at each of the spaces assigned for the performance of the various tasks. This establishes their suitability and their value offering while examining the ways of improving on them. This will involve examining the banking halls, the library, and the other facilities specifically as spaces, to determine their suitability.

Elements

The elements of the project refer to units, which on their own perform a complete function with or without the rest of the project. This includes parts such as the security lighting, which will provide lighting for the facility regardless of whether the rest of the project components perform their functions.

Components

Components are interdependent for the performance of their functions. Their analysis involves a detailed look at how the different items making up the project interrelate. Acting on a project component in isolation may end up in an undesired result downstream. It is therefore important to identify all components that bear such influence on others.

The Value Management Study Team

Special considerations inform the choice of the VM study team. SBE innovations have two main partners, the local authority, and the private developer. These two parties, in addition to the end-users of the proposed facility represented by the residents association, form the three classes of stakeholders for a VM study for the project. An ideal VM team has between six to twelve members. Within this range, all members get to participate meaningfully without being crowded out on one hand or becoming overstretched on the other.

Project management/SBE innovations

The role of the project management team in the VM study will include informing the team of the project progress. The information required includes design considerations, constraints factored, and design limitations. Beyond this, the project manager has no useful role in the VM study because they are intimately involved in the project details and could become a barrier to the creative development of ideas. They have a bigger propensity to defend the status quo, which is exactly what the VM study team seeks to disturb in order to improve the value offering from the project.

Residents’ representatives

As the eventual users of the facility to be developed, the residents form a key unit in the VM study team. They have no stakes in the project as far as the commercial and political aspects of it are concerned. They present a valuable source of information on the probable user experience.

Client representatives

Despite joint representation by SBE innovations, it is vital to have representatives from the local authority and private developers’ business development teams. The two teams were responsible for the ideation of the project hence their participation will ensure the protection of the interests of the two partners.

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In addition to these stakeholders, the consultants recommend that a VM expert lead the discussions. This will increase the study costs but will serve to improve the results from the exercise. The expert will prepare the final report for implementation, which will ensure that the professional communication of the study’s recommendations. Stevens (2002, p.445) warns that “Value engineering often suffers (sometimes irrecoverably) from poor facilitation”.

Also, the team will find it beneficial to include at least one construction expert who can provide technical advice on the suggestions forwarded during the evaluation stage of the discussions. The expert will save the team’s time by helping in identifying options that are not technically feasible. The expert will also provide invaluable advice to the team during the development of recommendations since he is familiar with industry practices.

VM Study Agenda

The entire VM study will take four days. Agenda items for discussion within these four days are as follows.

Day 1: Information

The project development team will take time to inform the VM study team of all the project’s practical details, as a foundation for discussions. The team will ask clarifying questions to understand fully the reasons for decisions taken with respect to each aspect of the project. It is important for the VM expert to ensure the project development team does not present its opinions, but the position of the project.

Day 2: Function Analysis and Creativity

The team will classify all project functions as basic or secondary, in order to have a framework for prioritizing which aspects to focus on during the study. They will then embark and on a creative phase where they will develop alternatives to these functions using a creative thinking technique preferred by the VM expert.

Day 3 and 4: Evaluation and Development

On the third day, the team will embark on evaluating the proposals developed to weed out unfeasible ones. It will proceed to arrive at preferred options for VM for the project. They will then develop them further into full-blown proposals including cost and labor requirements for implementation. Birnberg (2008, p.188) states, “implemented VE team recommendations are a primary measure of VE success”.

Day 5: Presentation

The VM team’s representatives will present the solutions arrived at by the team to the project sponsor for adoption.

Agenda
Day 1 Information
Day 2 Function Analysis
Creativity
Day 3 Evaluation
Day 4 Development
Day 5 Presentation

Tools and Techniques for Value Management

There is a wide range of tools and techniques available for Value Management. The VM team will have different tools and techniques at their disposal based on the agenda item under discussion. During the information phase, the following tools and techniques are useful

  1. Stakeholders analysis: This Involves identifying the parties affected by the project’s development and the extent of the effects. The purpose is to ensure all parties who can influence the project’s development are involved in its development.
  2. SWOT analysis: This tool provides a means of evaluating the strengths and the weaknesses inherent in the project, and the opportunities and threats to it.

As the team proceeds to function analysis and creativity stages, the tools available for them are as follows.

  1. Function Analysis System Technique (FAST): This technique makes it possible for the VM study team to analyze the functions of the projects by asking ‘how’ and ‘why’ questions.
  2. Risk Analysis Technique: This technique enables the VM study team to determine the levels of risk in each part of the project to understand what areas to enhance or avoid.
  3. Value Analysis Technique: Through this technique, the VM study team will determine the value they project will present to each stakeholder.
  4. Brainstorming: As the most common technique used for creativity, brainstorming provides the uninhibited conditions ideal for idea generation.

As the VM study team proceeds to evaluate and development of the ideas generated in the previous stages, the most useful tools for them will include the following.

  1. Pareto Analysis: This analysis exposes the most critical 20% of the functions responsible for 80% of the value the project offers. This will make it easier to prioritize which ideas should proceed to full development.
  2. Criteria Weighting Technique: This technique will assist the team to find a basis for determining the significant options in terms of their impact on the project. It alternates with the Pareto analysis and applies where it is more difficult to determine which of the options fits into the 20% bracket.
  3. Cost-Benefit Analysis: This evaluative tool brings to light the advantages and disadvantages of a particular proposed solution.

Value Engineering

Follow-up Value Engineering Timing

In comparison to Value Management, Value Engineering focuses on technical issues. It is more concerned with the entire project cycle benefits of the project. “Value engineering typically involves engaging a separate engineering group to examine a project plan” (Wastewater Collection Systems Management, 2009, p.146). Its application to this project will best happen after the project has commenced and progressed up to about a third completion. Kelly and Male (1993, p.64) state, “the most common target point of 35% provides an optimum locus for a study”. By then, many technical aspects of the project are much clearer and technical benefits that the project may still benefit from are easier to identify. These aspects present themselves as opportunities for improving construction methods, materials, and fixtures.

VE study team

For value engineering, the original team involved in value management is a natural inclusion. Having participated in the VM study, the VM study team will bring history to the Value engineering process, saving time, and enhancing the benefits derived from the value engineering process. In addition, project construction contractors should be included. This is because they will be involved in the details of the construction and will have many practical suggestions for the value engineering exercise.

Project’s VE elements

Value engineering makes it possible the taking advantage of the project of newer construction methods. These methods include those that were unknown to the VM study team. It also provides the opportunity for employing alternative materials and fixtures. The value engineering process will provide the basis for the development of value engineering change proposals. One other area value engineering can improve is the application of energy. Energy costs are an important input in large construction projects such as the one envisaged by SBE innovations. Cost savings may be possible by using low energy systems and processes.

Reference list

Birnberg, G., 2008. Project management for designers and facilities managers. Florida: J.Ross publishing.

Kelly, J., Morledge, R., & Wilkinson, S., 2002. Best value in construction. Oxford: Wiley-Blackwell.

Kelly, J., Stevens, M., 1993. Value management in design and construction: the economic management of projects. New York: Taylor Francis.

Morledege, R., Smith, A., & Kashiwagi D. T., 2006. Building procurement. Oxford: Wiley-Blackwell.

Stevens, M., 2002. Project management pathways. Buckinghamshire: APM Publishing Limited.

Water Environment Federation, 2009. Water collection systems management. USA: McGraw Hill professional.

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