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SBE Innovations Ltd.’s Value Management Project

Executive summary

The Public-Private Partnership represented by SBE Innovations has the two-fold objective of ensuring a fair return on investment and enhancing community life. The benefits of applying Value Management early in the Project include a better grasp of the project objectives by the stakeholders, preservation of high-value functions, reduction in overall project costs, and better team spirit. The four key areas proposed for study are the tasks, the spaces, the elements, and the components of the project.

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The proposed membership Value Engineering study team under the leadership of a Value management expert includes representatives from the business case team, the client project manager, client representatives, and a construction expert. Six agenda items are proposed. They are information, function analysis, creativity, evaluation, development, and presentation. Several techniques and tools for use in the process include brainstorming, stakeholder analysis, SWOT, FAST, Criteria Weighing Technique among others. The best timing for value engineering is at about the 30% mark on the project life cycle. Members participating in Value Engineering include the whole team in the Value Management study team with the inclusion of project contractors.

Introduction

SBE Innovations is a public-private partnership (PPP) formed between a public sector local authority and a private developer for the development of a mixed-use facility for recreational and commercial use. The partners have sought a Value Management report to determine the need, scope, and benefits of conducting a Value Management workshop before the project gets underway. Each of the partners has different objectives for the project.

The private sector partner hopes to get a good return on their investment since they are providing the bulk of the financing for the project. They will achieve this by renting out space for business, and by collecting parking fees from users who will visit the center. The local authority seeks to stimulate development and to enhance the local community by providing an avenue for social events, business, and recreation. It will achieve this by the inclusion of a social hall, a gym, a health club, an indoor sports club, and a business center. The proposed location for the facility is in the suburban, which has no significant regulatory restrictions on planning. This factor allows for a wide degree of freedom in the design and construction of the proposed facility.

Benefits of Early Application Value Management

Kelly, Morledge, and Wilkinson (2002, p.34) define Value Management as, “a team based activity that is concerned with making explicit the package of whole-life benefits a client is seeking from a project or projects at the appropriate cost”. EP Consult (2005) identifies the general function of Value Management as, “managing and optimizing a project solution”. There will be a number of benefits to the project from the early application of Value Management.

A better grasp of project objectives by all stakeholders

Value Management will enhance understanding of the project objectives by all stakeholders. The process involves detailed discussions of all the functions that the project will perform, and in the process, each stakeholder has the opportunity to present their key interests in the project. The project objectives form the basis of these interests.

Identification and protection of core functions

The Value Management process will identify the core functions of the project enabling their protection and entrenchment in the project. After the determination of the value to be derived from the project functions, the project management team will implement measures to ensure that associated functions get due attention.

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Elimination of inconsequential functions

In the process of Value Management, there will be opportunities to identify inconsequential functions to which the project stakeholders attach little or no value. This will enable the project development team to commit resources to higher-value functions.

Reduction in project costs

A tangible benefit of Value Management will cost reduction. This is not the primary purpose for the exercise but a key outcome. Dhillon (2002, p.193) reports that “the application of value engineering has helped reduce project costs by approximately 15% to 25%”. A related benefit from a VM study is, “a probable return on investment of 10 times the cost of the study” (Capital Projects, 2010).

Better team spirit

An overall benefit of Value Management is that there will be better team spirit since everyone will understand the key value elements in the project. They will be clear about the expectations of each stakeholder, and they will feel included since their views will form part of the value chain of the project.

Proposed Areas of Focus for VM study

The consultants propose four areas for a Value Management study for the venture. These are the tasks the project should accomplish, the spaces for the performance of these tasks, the elements of the project, and the project components. In the scenario under discussion, the study on tasks will answer the question of whether a building is the best possible solution to address the needs identified by SBE Innovations.

If there is an agreement that this is the best route, the study team shall scrutinize the spaces designed for the performance of the tasks. It will include looking at the value derivatives in the recreational areas and business center, location by location. The third area relating to the elements of the project for Value Management Study are those parts of the project that perform a function but do not form part of a process. An example of this project is the perimeter wall, which will have a security function on its own. It is not part of a process in the delivery of the services under the project’s main objectives. Finally, a discussion of the project’s components shall follow. This will aim at looking in detail at those parts subjected to a process before arriving at the site.

Membership to the Value Management Team

Several considerations inform the choice of the Value Management study team. The proposed membership will include the business case team, client project manager, and client representatives. The preferred number for a Value Management study team is placed at anywhere between six to twelve members. A smaller number will lead to quick exhaustion of input while a larger one will choke the discussions. Some of the participants may not be able to participate meaningfully. In particular, the following persons ought to be included in the Value Management team for this project.

Representatives from the business case team

The two partners in the project need to send representatives from their project inception teams to the Value Management team. These representatives hold the ‘vision’ for the project since they developed the business case.

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Client project manager

This is the team directly involved in the operations of SBE Innovations. Their role will be to provide the project details to the study team. The designers of the proposed facility should only present their work and nothing more. Caldwell (2006) advises that “those who present information should not take part in the VM workshop”.

Client representatives

This refers to the eventual users of the project. The residents association forms a natural clients’ representative body. They will provide invaluable insight into what constitutes value for them as end-users.

In addition to the parties proposed above, we recommend the inclusion of a professional Value Management consultant and an expert in the construction. A professional Value Management consultant greatly improves the quality of the discussions and ensures that the recommendations developed are implementable. The construction expert is invaluable during weeding out of non-feasible ideas since he will provide technical insight as to whether the idea in question is technically achievable.

Value Management Study Agenda

The proposed agenda for the Value Management study includes the following six issues

Information

This session’s purpose is to inform the Value Management study team of all critical project information relating to design and financial constraints, choices, and alternatives considered, and the criteria for selection of final design.

Function analysis

This process involved the identification and classification of the functions in the project as either basic or secondary

Creativity

The team then goes on to explore creatively different methods available for fulfilling the value requirements of the project identified through functional analysis.

Evaluation

After developing different ideas on alternatives, an evaluation process gets underway to weed out non-useful ideas.

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Development

The ideas that survive the evaluation phase move on to the development phase where they are developed into fully implementable solutions.

Presentation

The Value Management consultant prepares a report for presentation to the project development team for implementation.

Tabulated Agenda for Value Management Workshop
Day 1 Information
Day 2 Function analysis
Creativity
Day 3 Evaluation
Development
Day 4 Presentation

Value Management Tools and Techniques

There are a number of tools and techniques available for the Value Management study. Chitale and Gupta (2007, p.255) refer to them as, ‘a collection of various techniques from many fields”. The proposed tools for the SBE Innovations Value Management workshop are as follows.

  1. Brainstorming technique will be used for the uninhibited generation of ideas
  2. Through a Stakeholder Analysis, the Value Management study team shall identify all people the project affects and determine the degree of participation they should have in the project development to ensure the meeting of project objectives.
  3. A project SWOT analysis shall help in determining the priority areas for the project. It will expose the Strengths, Weaknesses, opportunities, and threats to the project.
  4. The function Analysis System Technique (FAST) shall apply to the identification of critical functions of the project. It works by asking the how and why questions.
  5. The application of the Criteria Weighting technique will provide a useful means for determining priority issues from a random list.
  6. Risk analysis techniques will provide a basis for evaluating the project’s critical functions.
  7. A cost-benefit analysis shall assist in determining the actual benefits accruing from the project as compared to the costs incurred.
  8. By using Value Analysis, the Value Management study team shall document the actual value the project shall offer to different stakeholders.
  9. The Value Management study team shall apply Pareto Analysis to assist in prioritizing suggestions raised for discussions; it involves determining which twenty percent of the issues carry eighty percent of the weight.

Value Engineering

Best follow-up timing for Value Engineering

Value engineering, as compared to Value Management, concentrates more on the technical aspects of a project. Kelly et al (2002, p.34), say that it “is concerned with making explicit the package of whole life benefits that a client is seeking from the technical delivery of a project”. The best time therefore for value engineering is after the initial Value Management workshop but after the commencement of the project development. This is typically at about the 30% mark on the project cycle. At this time, there will be a clear definition of the technical aspects of the project to allow for productive value engineering.

Members of the Value Engineering Study team

The members proposed for the Value engineering team include the project contractors since they are involved intimately in the project and hence they are poised to provide information about the project progress and delivery. In addition, there is still a need to include the entire team involved in the inaugural Value Management study. They represent the project history and can ensure the process has continuity.

Elements for value engineering in the Project

This follows up process will handle emerging issues to the project. It will seek to identify new opportunities for cost savings and Value Management initially omitted, or that were unclear at the time of the Value Management study. Benefits that the project may annex because of newer working methods and availability of alternative materials will find space for consideration under Value Engineering. Project elements that will benefit from Value Engineering include construction methods and materials, labor, and maintenance. Value Engineering will aim at coming up with Value Engineering Change Proposals (VECP) which shall reduce overall project costs while maintaining or enhancing value.

Finally, there will be a need to wrap up the project by some form of evaluation to determine whether the project objectives were met. Venkataraman and Pinto (2008, p.14) state, “good project management also requires an evaluation stage in which we analyze what went right and what went wrong”. Typically, the Value Management process spans the entire duration of the project, hence evaluation is the last step in it, where the identification of project lessons for posterity takes place.

Reference list

Caldwell, J., 2006. Technology review: Value engineering. Web.

Capital Projects and Service Planning, 2010. Value Management Development. Web.

Chitale, A. K., 2007. Product design and manufacture. 4th ed. New Delhi: PHI Learning Pvt.

Dhillon, B. S., 2002. Engineering and technology management. Massachusetts: Artech House.

EP Consult, 2005. Value engineering. Web.

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

Venkataraman, R., & Pinto, K.J., 2008. Cost and value management in projects. New Jersey: John Wiley and Sons.

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