VALUE MANAGEMENT

This section discusses value management (VM) in infrastructure projects and reviews the techniques and appropriate stages to implement and intro- duce VM.*

VM has long been regarded as an effective means to eliminate unneces- sary capital and life cycle costs (it might be noted that perhaps life cycle cost analysis, discussed previously, might be deemed to fall under a VM umbrella); however, although many are familiar with the theory, its use in industry is sporadic.

The discussion here and in Section 3.6.1 documents the potential benefits to be achieved by using value management techniques and the attitudes of industry professionals towards the feasibility or need of establishing a some- what more obligatory value management procedure for all (civil engineer- ing) developments. Generally, findings suggest that although the Western Australian industry is well aware of both the concept of value management and the accrued benefits of addressing the life cycle of a project, there is resistance to any legislative requirement for VM to become part of the con- tractual documentation that is used to bring the design solution to fruition.

Value management grew from a post–World War II need to address the significant shortages of available resources, skilled labour and raw materi- als, where the need to substitute one material specification with another similarly fit-for-purpose alternative material specification was found to often result in benefits of overall project cost savings or time savings in the pro- duction process.

The term value management is somewhat interchangeable with labels that include value analysis and value engineering, and although Australian engineering currently displays a localised preference for the more North American branding of value engineering, the term value management (VM), with the establishment of the Institute of Value Management Australia in 1977, might be suggested to remain relevant.

Although VM implementation costs approximately 1% of a project’s value (as a result of a practitioner’s time to review a range of design solu- tion specification alternatives in totality), current moves by civil engineer- ing towards staged/fast track/design-bid-build/turnkey delivery methods, means that there is practically no time to allow any real review of the range of potential design solution options. Particularly for Western Australian min- ing clients and their representatives who seek quick installation of civil engineering components, to the exclusion of infrastructure cost-in-use variables, as a means to simply get them up and running, to allow mine resource extraction and transportation (and resultant profit generation of that resource) to commence as soon as possible. Albeit that perhaps this *Input from Carlo Cammarano,40–58 _{received with thanks.}

historical attitude is changing, however, with senior (client) personal and design consultants recognising that most support structures and facilities put in place two or three decades ago to facilitate mining operations have now reached and overrun their expected life cycle, and require essential expansion refurbishment and retrofitting.

3.6.1 Value management techniques and tools

Value management techniques to address infrastructure design solution considerations of alternative like-for-like material specifications, might be suggested to include

VAluemAnAgementApproAches

• Brainstorming via open, noncritical discussion of alternative design solutions.

• Review of alternative materials’ ‘strengths, weaknesses, opportu- nities and threats’ (SWOT) to help identify all factors that might apply fit-for-purpose options.

• Function analysis system technique (FAST) assessment of the inter play between (sub)components towards determining what elements are principally required to do and what functions are superfluous.

• Risk analysis provides a structured approach to identify potential risks associated with project elements and attribute costs (financial and time) to mitigate (through technical installation processes or supply chain issues of) such risk.

• Cost–benefit analysis (B/C) comparing tangible as well as intan- gible benefits and costs for a particular project’s overall value, not only in terms of ultimate project go-ahead but also perhaps more relevantly assessment of the (need for the) contributory compo- nents or subcomponent alternative specification inputs.

• In the hugely profitable mining industry, infrastructure invest- ment is usually worthwhile, thus this method is relevant when considering alternative overall solutions for the same projects. • Stakeholder analysis technique, where a range of key (client and

the like) stakeholders with influence or authority over a project are identified to assist in focussing scope.

• Although perhaps it might be somewhat glibly stated that such a stakeholder analysis is largely a client’s briefing procedure, this more structured, defined approach might well identify, and allow consultation with, any individuals who may otherwise have slipped through the client briefing ‘net’.

• Substitute, combine, adapt, modify, put to another use, eliminate, reverse (SCAMPER) similarly provides a structure under which alternative design solutions might be assessed for their respective fit-for-purpose attributes.

• All party consultations with the full range of contractors and subcontractors.

• Life cycle cost analysis (LCCA), as discussed previously, is part of a VM process that allows consideration of element-by-element alternative design specifications over the facilities’ useable life, from design through construction and installation through opera- tion and maintenance until decommissioning; all in terms of a con- sideration of the time–value of money (discount rate) where one dollar today is worth less in the future.

• Life cycle assessment (LCA), incorporated into a VM procedure applied to the design process at the early stages, allows an analysis of alternative materials (and alternative installations) in terms of their environmental effect related to option-by-option comparisons of pollution-in versus pollution-out.

Towards the assessment of the importance of value management and the techniques above, a pilot study targeted 10 experienced professional civil engineers working in and around Western Australia and found that nine of the interviewees had an in-house structured management policy, which included appropriate value management procedures largely concerned with the review of principal fit-for-use component specification alternatives.

• It was suggested by the respondents that early contractor/subcontrac- tor involvement is an important variable because construction knowl- edge can be successfully integrated into the design procedure to create an effective solution in terms of constructability.

• Many suggest a combination of techniques in the development phases of the value management study, stating that stakeholder concerns should be explicitly considered along with the potential risks of each alternative.

• These issues are further considered by a cost–benefit analysis to compare qualitative and quantitative factors that affect the cost and benefit.

• Time factors play a part, and therefore a number of the techniques were not considered as feasible within a VM approach, most notably LCCA and LCA.

Table 3.4 highlights the most common techniques considered applica- ble to a value management study of civil engineering projects in Western Australia.

The timing of value management implementation is worthy of note; although (unsurprisingly) all 10 of the design and construction companies interviewed indicated that they used (or would wish to use) value manage- ment at the conceptual design phase, 5 of the 10 noted that value man- agement can be used during feasibility and detailed design; it has been suggested that the greatest possible savings can be achieved during the planning and definition phases, which will ensure that appropriate invest- ment decisions are made. Four of the 10 respondents mentioned that they incorporate value management in the post construction and maintenance phase, commenting that it is still possible for cost reductions/effective construction methods through VM/NE applications by subcontractors (Table 3.5).

Several interviewees commented that company policy or design procedures do not allow sufficient time to implement VM, particularly in the traditional ‘design-bid-build’ contracts where there is added pressure to fast-track the con- struction phase. Indeed, given the need for civil engineering consultants and contractors to realise their respective infrastructure projects early, enabling early mine operation resource production, this is unlikely to change. Time limitations were found to be at the top of the list of issues identified as affecting (negatively) VM uptake (Table 3.6).

Table 3.4 Value management techniques utilisation VM technique Application in projects (%)

Risk analysis 80

B/C analysis 8

Stakeholder analysis 70

Brainstorming 70

Issues generation and analysis 50

Value analysis 20

SWOT analysis 20

FAST analysis 30

SCAMPER 0

Table 3.5 Timing and stage of value management implementation VM stage Application in projects (%)

Conceptual design 100

Feasibility 50

Detailed design 50

Postconstruction/maintenance 40

Although factors such as time limitations and ambiguous design solu- tions were found (Table 3.5) to detract from VM uptake, if value man- agement techniques are adopted as part of a materials specification/ installation review, then benefits are argued to accrue, including perceived improved project value for the client, cost savings and improved coopera- tion. Indeed, some respondents feel that the benefits would be greater if all participants were briefed about value management procedures so that they are conscious of the importance of their individual participation. Table 3.7 places perceived benefit in order of (mean) importance.

Respondents subsequently identified scenarios in which having the time to conduct, at least some form of, VM allowed opportunities to reflect on planned specification choices for civil engineering projects. By way of example, three retaining walls at three locations were identified in vari- ous city projects. The retaining walls were constructed using the T-Block wall system. These walls are manufactured from precast concrete sections with baled rubber tyres placed in between. Before the decision was made to use the T-Block walls, the manufacturer was contacted to provide the

Table 3.7 Mean (importance) score of benefits of value management VM benefits Mean (importance) score

Improved project value for client 2.9

Improved effectiveness 2.7

Cost savings improved profit 2.6

Improved relationship/coordination 2.5 Documentation of issues/opportunities 2.5

Improved reputation 2.1

Reduced claims or disputes 1.8

Table 3.6 Mean (importance) score of issues affecting

VM uptake

VM issues Mean (importance) score

Time limitations 2.6

Lack of understanding 2.5

Ambiguous specification 2.3

Faulty ambiguous drawings 2.1

Lack of commitment 2.1 Lack of support 1.9 Unforeseen constraints 1.9 Budget limitations 1.7 Confrontational relationships 1.6 Nonstandard drawings 1.5

comparative cost of construction for similar walls and provide data towards a value management assessment. The alternative materials considered were T-Block wall options of concrete or limestone.

A capital cost reduction potential was highlighted (Table 3.8). This was presented as the initial step in an overall value management exercise that sought to factor in life cycle cost analysis, supply chain variables, trades- man expertise and client/(user) aesthetic considerations, as well as work breakdown structure activity scheduling for the wider aspects of the proj- ect. Respondents suggested that the initial impetus for value management resulted in a significant cost saving accumulation due to a compounding of factors related to the repetitive nature of the projects’ multiple retaining walls.

Generally speaking, although the cost to provide and maintain (civil engi- neering) facilities is but a drop in the (profitability) ocean for the huge West Australian resources industry, suggestions that companies can’t afford to not use VM rings as true for mining infrastructure as it does for more traditional building design projects because value management has the potential to pro- vide increased worth and effectiveness at all stages of a project’s life cycle.

Certainly, the quality of the final decision is influenced by the level of information provided initially, compounded by the pressures to fast-track design projects to on-site construction. It might be suggested that the types of projects in which value management has the most potential for high returns on investment include projects that are complex and unique, or alternatively, are repetitive in nature. The benefit of value management across all types of civil projects depends in large part on the commitment and initiative of each individual member making up a design (and value management) team.

The discussion above on value management is somewhat complemented by Section 3.7, which reviews the critical path items and opportunities for buf- fers to accommodate delay. Section 3.7 discusses critical chain scheduling. 3.7 CRITICAL CHAIN PROJECT