Present Status Of Rm Application

Published Date: 02 Nov 2017

CHAPTER 04

4.1 Introduction

By analysing the collected data, the aim and objectives established to carry out the study were achieved in this chapter. To achieve the aim and each and every objective the data were dissevered and analysed. Foremost, the interviewees’ experience and view in respect of the RM and VM practices were presented to establish the validity of the study.

To achieve the objective of analysing the current RM and VM practices in the Sri Lankan construction industry, the data collected were dissevered and analysed application of the VM and RM practices in the Sri Lankan construction industry and to achieve the objective of examining the potential to integrate the RM and VM and its practicability in the Sri Lankan construction industry, the data collected were analysed under areas of links between RM and VM and the potential and practicability of an integrated approach.

Finally, the objective of outcomes of integrated approach were divided and analysed through the possible outcomes and restrictions that are expected to be imposed by the industry. The findings established to achieve the aims and objectives are concluded in the next chapter.

4.2 Application of RM

For a developing country like Sri Lanka where large infrastructure facilities are to be initiated, need of innovative management approaches and effective management techniques for construction industry is acknowledged by the key professionals.

The respondents perceptive of RM and application of RM in the Sri Lankan construction industry are analysed in this section. Application of RM is analysed in this section in the several areas; current status of RM application, the key professionals’ involvement in the RM diligence and their adequate knowledge in the formal RM techniques and methodologies, and the benefits that can be obtained from the formal RM procedure in Sri Lankan construction Industry.

4.2.1 Present Status of RM Application

Almost all of the respondents agreed that the formal RM procedure for a project is very rare in the Sri Lankan construction Industry. However, risks in projects are managed by using experience in their own way, but not in a formal organized way. Majority of the respondents said that they used their intuition to analyse the effect of the risks in most circumstances. Further they stated that the risk analysing techniques are used in some critical circumstances, but that was also limited to some extent. They further stated that RM is being done in the industry, but a RM workshop or a separate formal RM procedure is rarely practiced.

The need of a separate formal RM procedure for large and complex projects is acknowledged by all of the respondents. However, majority of the respondents criticised the use of separate formal RM procedure for small scale projects. They explained that for small projects, RM can be done along with other consultation services and a separate process is not essential.

Several reasons have been elaborated by respondents to the lack of formal RM process application in Sri Lankan construction Industry. Those reasons can be categorized as following,

Clients’ awareness and Marketability of RM

Professionals’ involvement

Separate culture of RM

Additional burden

Regulations regarding RM

All the respondents agreed that clients’ awareness is the biggest restriction in practicing formal RM procedure in Sri Lankan construction industry. Generally clients considered RM as an additional burden for them. It requires additional time, multi disciplinary professional involvement and additional cost for conducting separate RM process. That resulted in clients’ avoidance in practicing RM. Most of the clients are actually unaware of the benefits that can be obtained by the RM practice. According to interviewees, unawareness of clients regarding RM resulted in the absence of clients’ demand for separate RM process. The main driving force for this problem is the unawareness of clients and professionals engagement in formal RM.

That constrains the consultants to market RM practice in the industry, especially to the new clients. However this problem is common to all consultancies. So the unawareness of clients is the main driving force for the lack of formal RM application in Sri Lankan construction industry.

Professionals’ involvement in the formal RM is another problem criticised by the interviewees. In Sri Lankan construction industry, according to respondents, the knowledge of most of the professionals in formal RM methodologies, techniques and procedures is not adequate to implement. This resulted in reduced professional involvement and engagement in formal RM.

Also as required by some other management services, the RM requires a different culture amongst the consultancy organization. That will result in adopted RM in the organization and require additional experts in the field to effectively carry out the RM process in projects. Since this scope is relatively difficult to the consultancy organizations, it will result in the reluctance of the consultancy organizations in the application of formal RM.

Generally, formal RM is considered as an additional burden to the clients and consultants because of the time constrain and financial burden. This will result in avoidance of separate RM process and incorporation of RM into other services. Despite of the savings and benefits that can be obtained by formal RM, this consideration is illustrious in the industry.

Since there are no regulations by government as a mandatory or requirement for separate RM studies in public projects or private projects, it is not necessitated to implement formal RM.

The interviewees’ suggestions to overcome the lack of formal RM usage and to help this discipline to achieve the recognition it deserves in the industry as follows,

Mandatory regulations by government

Awareness programs

Training and seminars for professionals

Internalisation in university courses

Standardization by relevant institutes

Benefits of RM

The benefits that can be obtained by an effective RM procedure can be categorized as hard benefits which are the direct benefits and soft benefits which are the indirect benefits. Respondents’ view regarding the benefits by RM in Sri Lankan construction industry is listed in the table 4.1.

Table 01 - Benefits of RM

Direct Benefits

Indirect Benefits

Controlled accidents

Better decision making

Increased quality

Improved understanding about the project

Better planning and controlling the schedule

Heightening awareness of the possible outcome

Successful risk allocation

Increased value

Identification of relative importance of each risk

Increase team spirit

Improved project management

Education of inexperienced members

Accurate contingency allocation

Improved communication

Lower project cost

constructability

Non avoidance of a risk

4.3 Application of VM

The respondents perceptive of VM and the application of VM in the Sri Lankan construction industry are analysed in this section. 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. Benefits of separate VM procedure are analysed under direct and indirect benefits that can be obtained by the VM in Sri Lankan construction industry.

4.3.1 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 renowned 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

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 (Hydro Power Plant, Highways). 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

Design Department's 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. 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.

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. 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.

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

4.3.2 Benefits of VM

Respondents view regarding the benefits that can be obtained by the Sri Lankan construction industry is listed in the table 4.2 as direct and indirect benefits.

Table 42- Benefits of VM

Direct Benefits

Indirect Benefits

Enhanced quality

Better decision making

Reduced cost

Better communication among stakeholders

Increased value

Improved team work

Lowest life cycle cost

constructability

Considerable amount of saving

Increase team spirit

Improved project management

Education of inexperienced members

Successful achievement of project objectives

Improved communication

Avoidance of risk impact

4.4 Integration of RM and VM

According to the literature, the RM and VM are mentioned as compatible and complementary. In RM if a risk is managed, it is possible to enhance the value. In VM if options are considered there may be risks associated with each proposal. Thus the literature review gives strong consideration to integrate RM and VM since the links between them are strong.

In this section, feasibility of integrating RM and VM is analysed through two sub sections. The feasibility is identified through the respondents’ opinions on the awareness of links between the RM and VM and the respondents’ consideration on the potential for the integrated approach of RM and VM in the Sri Lankan construction industry.

The consciousness of the links between the RM and VM is analysed through the respondents’ consideration the complementarily of RM and VM, similarities of RM and VM and the awareness of clients about the links between RM and VM.

The potential to integrate the RM and VM in Sri Lankan construction industry is analysed through the respondents’ view on the duplication of effort by using separate workshops for RM and VM, using same team for both workshops, possibility of an integrated approach and the pros and cons by the integrated approach.

4.4.1Consciousness of Links between RM and VM

Some participants disagreed that the VM and RM are complementary processes. They objected the consideration of RM and VM in one boundary. They agreed the processes are interrelated but are not complementary. They further argued that both the processes have to be done in different boundaries. Objectives of RM are differed from objectives of VM.

One respondent further argued RM as a cost management tool. The objective of RM is to reduce the impact of a risk. But in VM the main consideration has to be given to the function of the project thus increasing value. He further stated that interrelated considerations should be given to each process but they are not complementary.

A different view was given by a respondent, considering RM as a part of VM. He further argued that VM is the dominant process that overrides the RM with having strong links with the clients’ objectives.

Majority participants agreed that the VM and RM are complementary processes and argued that VM ensure the project objectives are achieved successfully simultaneously RM ensure that the project objectives are not affected by potential risks.

Further they argued VM cannot be successful without the consideration of risks. To implement RM the consideration of value and function is needed. So both the processes cannot be accomplished without other process thus the processes are complementary.

All the respondents agreed that there are similarities between RM and VM. They mentioned the similarities in conducting the processes, objectives of the processes and the soft benefits of the processes. The similarities mentioned by the respondents are categorized as following,

Creativity

Workshops

Brain storming sessions

Involvement of multi disciplinary team

Improved project management

Maximising the project success

Consideration of alternatives

Better communication

Facilitation in generating ideas

All the respondents agreed that the clients’ awareness regarding the similarities between RM and VM is very less. The educated and technically qualified clients also do not have much awareness regarding the similarities and links between the RM and VM.

4.4.2 Potential for Integration of RM and VM

None of the respondent agreed there is a total duplication of effort by conducting separate workshops for VM and RM. Majority of the respondents agreed there is a duplication of effort of conducting separate workshops of RM and VM up to some extent. Not all the efforts are duplicated. But the extent of the duplication of effort they argued that is acceptable and necessary.

One respondent stated that the duplication of effort is originated by the failure of the proper management. He further argued though the RM is a part of VM, RM comes first in the project. Then the VM will come. So there cannot be a duplication of effort unless there is failure of proper management.

Another argument is there can be constant recycling of ideas arouse from each workshop. That will lead to the duplication of efforts in the workshops. To avoid this, there must be interactions between the RM and VM workshops.

All of the respondents rejected the consideration of using same team for VM and RM workshops. All of them have agreed that there should be a flow of information from one workshop to another. But each workshop needs the experts in the relevant field. Using same team will result in confused objectives of the workshops thus the successful completion of workshops will be doubtful.

One respondent suggested that rather than using the same whole team for both workshops, the part of a team can be used as same in the RM and VM workshops. This will maximise the successful completion of each workshops. Also the tendency of effort duplication can be eliminated by this interaction. Since the RM and VM workshops serve different purposes and have strong links between them there must be interaction between both workshops rather than using same team for them.

Also it is stated that VM needs a positive approach and RM needs a negative approach. The mindset of participants required in each approach is different. So it argued that using same team for RM and VM workshops is not appropriate.

All the respondents agreed that there is a potential to integrate VM and RM. Especially in the early stages of design. They argued the integration helps to eliminate the tendency of effort duplication and increase effectiveness and credibility of the processes. Rather than considering each process’s objectives, considering the whole project objectives, the processes need to be integrated. Thus the integration leads to a complete picture of the project and effective decision making.

Also there were arguments that the processes are disparate and require different mindset and serve different purposes so the whole integration is not necessary. Since in VM consideration of risk is already offered there is no need for a complete integrated approach and consideration of risks is enough.

Also there is an argument that the integration of RM and VM may reduce the achievement of objectives of each process. The concern is that it leads to less clarity of purpose, confused thinking and subsequently less effective results.

However, majority of the respondents agreed that there must be integration of RM and VM. They argued the advantages of the integration outweigh the negative aspects and disadvantages. The most important features for integrating VM and RM are that both are systematic processes, involving a multi-disciplinary team in creative workshops. They both use a brainstorming technique as means for decision making process. Therefore combining the two processes within a single study is practical and logical as both share the same resources.

The advantages and disadvantages by integrating RM and VM expressed by the respondents are listed in the table 4.3.

Table 43 - Pros & Cons of Integrated Approach

Advantages

Disadvantages

Best option can be selected in VM in terms of risks, value can be increased in RM

Confused thinking

Elimination of duplication of effort

Lack of standard framework

Reduced cost of workshops

Limit the use of experts in both processes

Time savings

Tendency to reduce overall project performance

Initial savings through the implementation of early in the project

Contradiction between participants

Better management of uncertainty

Less clarity of purposes

Successful achievement of project objectives

Dominance of one process

Improved project management

4.4.3 Pertinence of Integrated Approach

The applicability of the integrated approach is the dominant part of this study. Theoretically the integration is possible and has greater advantages that outweigh its disadvantages. The problem is whether the integration is practicable or not. There is a need to identify that the positive outcomes by the integration is practicable to Sri Lankan construction industry or not.

The applicability of the integrated approach of RM and VM and the practicability of achieving the positive outcome by integration is analysed in this section through the respondents’ opinion on the existence of integrated approach, the reasons for their consideration of integration as beneficial or detrimental in the industry and the practicability of the possible positive outcomes.

In the literature, it was found that in UK the integration existed while the theory was not fully developed. The practice is ahead of the theory. According to the respondents in the Sri Lankan construction industry, a formal integration is not in practice. The integrated approach for VM and RM is not in practice.

However, the respondents further stated that, other than the workshops, the integration happens sometimes not with intention to actually integrate the practices. The RM and VM processes. It is not a formal approach, but it exists in the Sri Lankan construction industry.

All the respondents agreed that the integration of RM and VM would be beneficiary in the Sri Lankan construction industry, but need some rigid approach and standardised procedures. Also the participants argued that both practices are rarely used in the construction industry formally. The awareness regarding the RM and VM formal processes are less. Thus the integrated approach would be detrimental to the Sri Lankan construction industry without,

Adequate knowledge

Rigid framework

Participation of qualified professionals

Flexible framework according to project

Effective facilitation

Clients support

Stake holders’ participation

The practicability of obtaining positive outcomes which outweigh negative outcomes depends on the proper management of the integrated approach. According to the respondents in the Sri Lankan construction industry, the practicability of obtaining benefits through the integrated approach is less. It is because they argued the present status of application of both practices in the Sri Lankan construction industry.

Practicability of obtaining positive outcomes is possible in the Sri Lankan construction industry when there is rigid framework flexible with nature of projects is imposed, effective facilitation and clients cooperation is high and the workshop’s participants have adequate knowledge and qualified in required fields.

More over the greater fragmentation of the industry is a significant threat to the practicability of the integrated approach and obtaining positive outcomes in the Sri Lankan construction industry.

4.4.4 Outcomes of Integrated Approach

The possible outcomes of an integrated approach in Sri Lankan construction industry irrespective positive and negative effect are analysed in this section.

According to respondents, the positive outcomes rather than negative outcomes can be obtained by the integrated approach with better coordination, better management, better facilitation, better planning and by the corporation of the client. Otherwise the negative outcomes may outweigh the advantages and becomes greater threat to the successful achievement of the purposes of the RM and VM thus affects the total project performance.

Positive and negative outcomes by the integrated approach in Sri Lankan construction industry mentioned by the respondents are categorized as in the table 4.4.

Table 44 - Outcomes of Integrated Approach

Positive outcomes

Negative outcomes

Cost and time saving

Confusion

Uncertainty management

Reduction of overall project performance

Effective project management

Dominance of one process

Recognition of RM and VM

Contradiction

Economic projects

Conflicts between RM expert and VM experts

Increased value and reduced risk impact

Difficulties in accepting one solution

Generation of innovative management tools

Reduced involvement of one process

4.4.5 Restrictions for Integrated Approach

The restrictions that will be imposed by the Sri Lankan construction industry to the integrated approach of RM and VM is analysed in this section

Generally the construction industry resists the new methodologies and new management tools because of the traditional approach the industry mainly depends on. Also the professionals’ unawareness and unwillingness to innovative approaches resists the incoming processes.

According to the respondents, the restrictions for implementing the integrated approach are the involvement of various parties, fragmentation of the consultants, lack of expertise, clients’ unwillingness, professionals unawareness, usage of traditional procurement systems, lack of researches, initial cost and the stake holders’ traditional way of thinking. These can be the restrictions that would be imposed by the industry in implementing the integrated approach and obtaining the objectives.

4.5 Summary

This chapter expressed the analysis of collected data from the interviewees and findings regarding the aim and objectives. The current VM and RM practices’ status are not satisfactory in the Sri Lankan construction industry. Absence of formal RM and VM procedures were found to be the reason for the lesser recognition of these significant processes in the Sri Lankan construction industry. The reasons identified for this status are the lack of clients’ demand, clients’ awareness and clients’ interest, greater fragmentation of the industry and less involvement of the professionals. The awareness of the links between the RM and VM is less among the industry. It is accepted that there is a potential for an integrated approach of RM and VM in the Sri Lankan construction industry. The practicability of the integrated approach depends on the management. However, it was expressed that the practicability of the integrated approach is less in Sri Lankan construction industry and it would be confronted by some significant restrictions imposed by the Sri Lankan construction industry.