Familiarity Of Value Management In Practice

Published Date: 02 Nov 2017

Majority of respondents agreed that they have undergone VM in several projects. Some participants were engaged in a formal VM workshop for projects, but not all the respondents. Majority of the respondents stated that they have practiced VM incorporated with other cost cutting methods for several projects, but not much got the chance to carry out a separate VM process.

Majority of the participants said that they have adequate knowledge in the concept of VM. They further stated that they are familiar with all the stages – pre workshop, workshop, post workshop activities, and management tools used for VM workshops.

Respondents didn’t agree that VM, Value Engineering (VE), Value Analysis (VA) and Value Planning (VP) are similar terminologies and designates one activity. They agreed that VM is the overall name given to all these activities, but VA, VE and VP are different from each other and they are carried out in a project at different times.

However, one respondent disagreed with this argument and mentioned that VM is more a managerial process. It concerns more in strategic management rather than the technical aspects. But VE, it is more concerned with technical issues. VE is more like a cost cutting method. But VM is more concerned with increasing the value for a project.

Almost all the respondents agreed that in Sri Lankan construction Industry VM is still a novel concept. But the term "Value Engineering" got its wider recognition among the industry. Participants mentioned that main reason for that is the inclusion of Value Engineering in the FIDIC (1999) conditions of contract. They further stated in most circumstances, they value engineered the designs. They agreed that concern for value is less in those circumstances. It was more like a cost cutting method.

In Sri Lankan construction industry, VM is now getting popular, but now its usage is limited to some extent. For some large complex projects a complete VM study had been done in the past. After completion also some VM studies had been done to increase energy efficiency in World Trade Centre. So the VM is now getting the recognition among the industry, but still the awareness is needed among the industry.

4.3.2 Concept of Value Management

All the respondents are familiar with the concept of VM. As a definition, most of respondents concluded VM as systematic management approach to increase the value of the output while eliminating unnecessary cost. Value depends on the function of a project. One respondent argued that not only the construction cost but also the whole life cost to be considered in a value management study. Simply as one respondent stated VM is to identify the best option which gives the best value for money in accordance with set criteria.

Some respondents argued that among the construction industry professionals there is a false concept regarding the VM as a cost cutting technique. They strongly objected this consideration and stated that VM is more than a cost cutting method since it takes strong consideration regarding value.

One respondent strongly recommended that while doing the VM study, not only the function, cost and life cycle cost should be taken in to consideration but also the environmental aspect. Nowadays environmentally sound projects are important since the consideration of global warming crisis is getting significant.

All the respondents admire that the early involvement of VM study is the best thing rather than conducting it later in the design stages or after design is completed. Because the cost of change is lower in the early design stages and it is higher in the later design stages. Also the tendency of later VM studies to be more technical, whilst early VM studies give strong consideration to value and strategic managerial approaches. There is common demeanour in the industry to go for VM after a problem is aroused or estimation exceeded the budget. This should be avoided and the VM studies should be initiated early in the design stages to avoid the unnecessary change costs.

All the respondents accepted that common form conducting VM study is a forty hour workshop with a skilled facilitator. But some of the participants stated that there are other effective methods also. All the respondents agreed that brain storming is the suitable technique to raise the ideas among the workshop participants. One participant strongly recommended that project stakeholders participation in the workshop. Otherwise increasing value considering functions cannot be optimised. Also the education of client and the workshop participants are the main influencing fact in the success of a VM study stated by the respondents.

Majority of the respondents preferred a separate workshop for conducting VM study rather than in-house auditing or any other form in Sri Lankan construction industry. They suggested the workshops to be facilitated with skilled facilitator and brain storming sessions in an entertaining environment.

Some participants suggested in house auditing for a VM study. They reasoned it as the ability to monitor the whole design process. Rather than spending more money in separate workshops, they suggested in-house editing as an economic and effective way of achieving the goals of a VM study.

4.3.3 Clients Interest in Value Management

Clients’ demand to perform the VM is the major driving force that determines the survival of the VM practice in the construction industry. Their financial and time assistance to the consultants to perform VM and their participation in VM will be resulted in successful achievement of project objectives. Respondents’ view in clients’ demand for RM, their awareness of RM and its benefits are analysed in this section.

Clients’ Engagement in VM

According to the respondents clients’ interest in VM is highly noted among the industry. Clients actually wanted to complete the project within the lowest possible cost with required criteria. When it comes to function, most of the clients are expecting the consultants to increase the value of their project. But one respondent stated that the clients demand the cost cutting services, but they do not care much about the value of the project.

However, all of the respondents agreed that demand for a separate VM process is less in the Sri Lankan construction industry. A formal separate VM study had been done for few projects in the Sri Lankan construction industry. The consultants generally demand for less cost alternatives. Normally, the clients think that the separate VM study is a time consuming process which incur additional cost. They stress the consultants to do it within the design process as an auditing process.

Respect to the clients’ acceptance of a separate VM process, the respondents pointed out that even though the clients strongly require the consultants to increase the value to their projects, they are reluctant to go for a separate workshop or process which is costly. They believe that VM can be incorporated to the design process and think the separate process is unnecessary. They generally expect the consultants to do VM incorporated with other services. This is because of the unawareness of the benefits that can be obtained by the separate VM and the unwillingness to pay for additional service.

Some respondents stated that the clients ask for a separate VM process when there is a critical situation. When the estimation of the project has exceeded the budget or to find an alternative with lowest cost possible, then the clients demand to go for VM. But in these circumstances the value cannot be optimised through the VM and the resistance to change is high thus the cost of change is high. Clients should be warned by the consultants about this risk.

Majority of the respondents agreed that definitely the educated and technically qualified clients are asking for VM, not all the clients require VM specifically since they expect it from consultants. Even though the technically qualified and educated clients are asking for VM, they are unwilling to go for separate workshop for VM. Most of the educated and technically qualified clients prefer the in house auditing for VM. This is because of the additional burden to them by time and financially. In house auditing for VM may be appropriate for some projects but not for all.

The study implies that most clients have interest in increasing the value of the project, but some have interest solely on obtaining the lowest possible cost within the set criteria. Even though clients have interest their demand for separate VM study is less. They expect it as a normal part of a design team’s responsibility. It is because their unawareness of benefits of separate VM and the additional financial and time resources incurred in the separate VM study.

Clients’ Awareness in VM

According to the respondents, most of the clients are well aware of the concept of VM, but their awareness in the procedures, methodologies, benefits and savings that can be obtained from the VM study is less. The foreign, educated and technically qualified clients are well aware of VM study.

Some respondents mentioned that clients’ awareness is higher in the Value Engineering rather than Value management. They further explained that it is because it is VE which gained more popularity rather than VM earlier. Also VE was a successful cost cutting method in USA and UK.

Although the clients are aware of the concept of VM, in most circumstances their awareness is limited to referring VM as a cost cutting tool. They are not much aware of the differences between VM and other cost cutting managerial tools. Most of the clients think VM is for "fire fighting". That means after the budget exceeded or problem aroused the clients wanted VM. Majority of the respondents strongly objected this practice is not correct. The earlier the VM involves the higher the benefits can be obtained.

According to the respondents, even though the current status of awareness about VM is not satisfactory, the situation is improving in the Sri Lankan construction industry. The VM study that had been done for some large project gained the reputation among the industry. The recognition of VM and its benefits is increasing in the industry. As the study implies, the awareness amongst the clients in the VM concept is high. But most of the clients think of it as a cost cutting method and more technically related to VE. Most of the clients tend to include VM in the later design stages, but earlier inclusion is beneficiary. Now the increasing awareness will help VM to gain the recognition that it deserves in the Sri Lankan construction industry.

4.2.4 Presence state of Risk Management Application

VM application is bit practically ahead in the Sri Lankan construction industry rather than other innovative managerial tools. VM is gaining the recognition in the industry because of the benefits obtained by past projects. But rather than strategically approached, it is considered as a cost cutting exercise in the industry.

Application of VM in the Sri Lankan construction industry is analysed in this section in respond to the interviewees’ opinion in the current status of VM application, the key professionals’ involvement in the VM diligence and their adequate knowledge in the formal VM techniques and methodologies, and the benefits that can be obtained from the formal separate VM procedure in Sri Lankan construction Industry.

Current status of VM in Sri Lankan construction industry is analysed through the respondents’ view on the present stage of VM and their considerations for that status. Involvement of professionals in VM is analysed through the respondents’ opinion on the adequate knowledge of professionals in the separate VM formal procedure in Sri Lankan construction industry. Benefits of separate VM procedure are analysed under direct and indirect benefits that can be obtained by the VM in Sri Lankan construction industry.

Present Status of VM Application

All the respondents agreed that the application of VM is not much exercised in the Sri Lankan construction industry. But the awareness of VM amongst the industry is high. Clients’ interest in increasing the value for their projects is eminent but their demand for a separate VM study is less.

VM is practiced among the industry mainly as a cost cutting exercise rather than giving much consideration to value. VM is not only for reducing unnecessary cost, but to increase the value of the project considering the life cycle cost. Although these procedures have similarities, the methodologies, objectives and results are different. A cost reduction exercise does not aim to consider value and involves a sacrifice or a compromise to gain a lower total project cost. In actual practice, in the name of VM, normally VE is practiced in the industry. A separate VM study is practiced rarely in the industry.

However the respondents mentioned that the separate process of VM is getting recognized by the Sri Lankan construction industry rapidly. It is because of the savings and benefits obtained by VM study undergone in some completed large projects. Also the worldwide recognition of VM in construction industry is a driving force to this situation.

The respondents’ reasoning for the lack of application of formal separated VM study and the misconception among the industry about the VM is categorized as following,

No government regulations

Lack of clients’ demand

Deficiency of professionals’ involvement

No institutions for VM

No standard procedures implied by authorities

Considered as additional burden

Absence of adequate knowledge and training

Architects’ resistance in changing the design

Greater fragmentation of the industry

In Sri Lankan construction industry, there are no regulations imposed regarding the VM in public projects or private projects. If the policy makers identify the importance of VM and impose regulations in the construction industry, then there will be a rapid change in the situation. Most of the respondents identified it as main driving force that results in lack of usage of separate VM approach.

As discussed earlier in this section, Lack of clients’ demand in the formal separate VM study drives the professionals to avoid the separate VM workshop and to concentrate more on in house auditing.

Deficiency of professionals’ involvement is discussed later in this section regarding the VM study. Since the clients’ are not willing to pay for a separate VM study, the consultants tend to avoid the application and use alternative methods to accomplish the value target.

Since there are no institutions for Value Managers like Society of American Value Engineers (SAVE) and Institute of Value Managers (IVM) – UK in Sri Lanka, the awareness and recognition among the industry is less regarding VM and it drives the industry into misconceptions about definitions and procedures of VM.

Generally a separate VM study is considered as additional burden by the clients and consultants. For clients, it is financial burden to them and for consultants, it results in time constrain. So both the parties tend to avoid the separate VM study and find alternative tools for VM.

Adequate knowledge and training of participants are required for a successful completion of a VM study. There are no separate professionals called Value Managers. Engineers and Quantity Surveyors take that role. Since VM is a specific study that requires special knowledge and training, absence of adequate knowledge and training in Sri Lankan construction industry drives to the lack of application of separate VM study.

The suggestions by the respondents in respect to the lack of VM application in Sri Lankan construction industry is categorized as following,

Formation of a separate institution

Imposing government regulations

Awareness programs and seminars

Standardization of procedures and definitions

Introducing separate course in universities

Involvement of Professionals in VM

The adequate knowledge and training of the participants and their engagement in a VM study are the key factors that drive the success of the VM study thus the successful achievement of project objectives. According to respondents since there are no separate profession called Value Managers in Sri Lankan construction industry, the quantity surveyors and the engineers take their role to achieve the value target. The evolvement of the professionals into Value Managers is through the practical experience. Nevertheless adequate academic knowledge and training of professionals is required in the Sri Lankan construction industry.

According to the interviewees, among the construction industry professionals them who have adequate knowledge in VM study, its procedures and techniques are considerably low. Also the misconception about VM is a significant problem in the industry. Most of the professionals in the industry consider VM as a cost reduction exercise. They are exercising it as a cost reduction technique.

The reasoning of the respondents regarding the lack of adequate knowledge among the professionals and their misconceptions are categorized as following,

Absence of value culture among the organizations

Absence of standardized procedures and definitions

Lack of training facilities

Less demand by clients

No separate institution

No separate academic body

To overcome these problems respondents’ suggestions are, conducting seminars, workshops and training programs, introduce a separate course for VM in universities, forming a professional body for VM, forming a separate institute for Value Managers, forming a value team in organizations and standardizing the procedures and definitions related to VM.

Benefits of VM

Respondents view regarding the benefits that can be obtained by the Sri Lankan construction industry is listed in the table 4.4 as direct and indirect benefits.