Creating value in engineering

63 Pages·1996·5.858 MB·English

by  Institution Of Civil Engineers

Creating value in engineering
ICE design and practice guides
One of the major aims of the Institution of Civil Engineers is to provide its
members with opportunities for continuing professional development. One
method by which the Institution is achieving this is the production of design
and practice guides on topics relevant to the professional activities of its mem­
bers. The purpose of the guides is to provide an introduction to the main
principles and important aspects of the particular subject, and to offer guid­
ance as to appropriate sources of more detailed information.
The Institution has targeted as its principal audience practising civil engineers
who are not expert in or familiar with the subject matter. This group includes
recently graduated engineers who are undergoing their professional training
and more experienced engineers whose work experience has not previously led
them into the subject area in any detail. Those professionals who are more
familiar with the subject may also find the guides of value as a handy overview
or summary of the principal issues.
Where appropriate, the guides will feature checklists to be used as an
aide-
on major aspects of the subject and will provide, through references
memoire
and bibliographies, guidance on authoritative, relevant and up-to-date pub­
lished documents to which reference should be made for reliable and more
detailed guidance.
ICE desgi n and practice guide
Creating value in
engineering
^1 Thomas Telford
Published by Thomas Telford Publishing, Thomas Telford Services Ltd,
1 Heron Quay, London E14 4JD
First published 1996
Distributors for Thomas Telford books are
USA: American Society of Civil Engineers, Publications Sales Department,
345 East 47th Street, New York, NY 10017-2398
Japan: Maruzen Co. Ltd, Book Department, 3-10 Nihonbashi 2-chome,
Chuo-ku, Tokyo 103
Australia: DA Books and Journals, 648 Whitehorse Road, Mitcham 3132,
Victoria
A catalogue record for this book is available from the British Library
Classification
Availability: Unrestricted
Content: Recommendations based on current practice
Status: Refereed
User: Practising civil engineers and designers
ISBN : 978-0-7277-2050-4
© Institution of Civil Engineers, 1996
All rights, including translation reserved. Except for fair copying, no part of
this publication may be reproduced, stored in a retrieval system or transmitted
in any form or by any means, electronic, mechanical, photocopying or
otherwise, without the prior written permission of the Books Publisher,
Publishing Division, Thomas Telford Services Ltd, Thomas Telford House,
1 Heron Quay, London E14 4JD.
This book is published on the understanding that the authors are solely respon­
sible for the statements made and opinions expressed in it and that its publica­
tion does not necessarily imply that such statements and/or opinions are or
reflect the views or opinions of the publishers. Every effort has been made to
ensure that the statements made and the opinions expressed in this publication
provide a safe and accurate guide; however, no liability or responsibility of any
kind can be accepted in this respect by the publishers or the authors.
Preface
Value for money is a prerequisite in all commercial transactions. Project
owners are demanding that those responsible for design and implementation
provide them with value. The government's private finance initiative (PFI)
targets value and the 1994 report Constructing the Team* aims to create the
collaborative team environment to deliver such value.
Completed projects are as successful as their perceived value. Acceptable risk,
reasonable cost, timely and safe completion to a specified quality are normal
requirements. If the end result lacks function, costs too much, is too risky, late
or otherwise fails to satisfy, then potential value has been wasted and the team
will have failed to meet the expectations. Capital projects are increasingly
subject to global economic pressures, so it is ever more important that teams
look beyond their project in developing solutions.
Value management provides a practical and workable set of systematic and
logical procedures and techniques developed to enhance value. It thus assists
project teams to orchestrate their activities to deliver full value for the owner's
investment while meeting his or her expectations (such as performance,
aesthetics and environmental acceptability).
The benefit to the owner can be an overall saving typically between 5 and 25%
of project cost. Benefits to the designer include a collaborative agreement,
a more satisfying professional service and fees to be earned from the value
work. To the constructor, benefits include a non-confrontational contractual
and working environment and the possibility of gaining substantially from
sharing the saving arising from value improvement. Viewed in the context of
over £40 billion aggregate annual turnover of the UK construction industry,
the opportunities for savings are enormous.
On many projects world-wide, this process has delivered improved value. In
the UK examples in civil engineering and building include: Limehouse Link,
Cardiff Bay Barrage, Jubilee Line, Broadgate, Heathrow Terminal Five and the
PFI prisons. More and more public and private sector clients demand its
application as a matter of course and these owners include London
Underground Limited, the Lord Chancellor's Department and British Airports
Authority PLC.
Industry cannot afford to ignore the power of value management.
Acknowledgements
Membership of the Working Party
Professor Albert Hamilton Centre for Project Management, University
of Limerick
Mr David Howard Management-NewStyle
Mr Alan Osbourne (Chairman) Tarmac Construction
Mr Robert Osbourne Tarmac Construction
Mr Charles Penny Balfour Beatty
Mr Alan Powderham Mott MacDonald
The assistance of Adele Stach-Kevitz, Nigel Standing and Branko Bajatovic is
also gratefully acknowledged.
Contents
1 Introducing value management 1
About this guide 1
Origins of value engineering 2
What is value management? 2
Terminology 3
Stakeholders 4
When to apply VM 5
Essentials of VM 6
All designs include unnecessary costs 8
Potential for cost saving 9
2 The team and teamwork 10
The value team 10
Attitudes and influences 11
3 Value planning 13
Model sequence 13
VP1 14
VP2 20
4 Value engineering 23
VE exercises 23
VE workshop preparation 24
VE workshop agenda 25
5 Value reviewing 29
Purpose of VR 29
Questions for, and outcome, of VR 29
6 Agreements and contracts 31
Support for, and constraints on, the value process 31
Overcoming constraints on the value process 32
Consultant/designer agreements 33
Constructor/subcontractor agreements 33
vii
Contents
7 Procedures and techniques 36
Information gathering 36
Cost analysis 37
Pareto's rule 39
Basic and secondary functions 40
Cost and worth 40
FAST diagramming 42
Creative thinking and brainstorming 43
Life-cycle costing 44
Criteria weighting 46
Analysing and ranking alternatives 48
8 Conclusion 51
Glossary 52
Bibliography 54
viii
I. Introducing value
management
About this guide This Institution of Civil Engineers practice guide has been prepared primarily
for those who are entering, or have recently entered the civil engineering
profession, but it will also be of interest to owners, designers, constructors and
others involved in the built environment.
It is not intended to be prescriptive, but rather to set out some of the key
approaches and techniques which may be used to improve value.
The guide has been structured so that it can be read from cover to cover or as a
point of reference for specific information on some aspect of value management.
The guide is organized as follows:
— Chapter 1—Introducing value management: describes the logical,
systematic nature of the value process and outlines the aspects that are
significant and necessary in achieving the owner's requirements.
— Chapter 2—The team and teamwork: deals with the crucial human aspect.
It introduces the value team, describes the importance of teamwork and
outlines the role of each participant.
— Chapter 3—Value planning: describes the value process during the
conceptual phase; and how value is planned into the project from the
initiation of the project life-cycle.
— Chapter 4—Value engineering: describes the process of value management
during the design and construction phases. Until recently the whole value
process has been known as Value engineering, and most of what is used
today has its lineage in value engineering.
— Chapter 5—Value reviewing: assesses the effectiveness of the value
process.
— Chapter 6—Agreements and contracts: addresses the need for incentives
in agreements and contracts. It describes how to create a collaborative
environment between the owner, designer, constructor and other
contracted parties.
— Chapter 7—Procedures and techniques: describes the methods and tools
at the core of value management for value planning and value engineering.
— Chapter 8—Conclusion: offers brief concluding remarks on key features
of the value process, factors to ensure success and top management
commitment.
I
Creating value in engineering
— Glossary: provides a definition of the terms used in this book.
— Bibliography: lists a wide range of publications providing important
background.
Origins of value The value process originated during World War II within the General Electric
engineering Company in the USA. During this period US industry was running at
maximum capacity to supply the allied war effort. General Electric were faced
with a significant increase in demand but with a shortage of key materials.
This forced the company to use substitute materials for many of its products.
It found that through careful and informed use of substitute materials the cost
of a product was often reduced, but surprisingly the product was also
improved.
How superior value was achieved, when intuition suggested the opposite,
revealed that the overall improvement came about by virtue of the underlying
functional requirements of the product that had to be produced. Care and
attention to function manifested itself at the end of the production line
through improved quality and lower costs—hence providing 'better value for
money1.
This approach resulted in a method which identified the function of a scarce
component or element and then sought its replacement with an alternative
component or element whilst maintaining function. A spin-off from this
basic philosophy, which was then known as Value analysis' was the elimina­
tion of cost which did not contribute to the performance of the required
function.
The value analysis concept was further developed by General Electric and
others over the next ten years and became known as value engineering. Value
engineering gradually became more refined as it started to spread throughout
US manufacturing industry. Value management developed from value
engineering is now a requirement of many public and private construction
projects in the US and increasingly in the UK.
What is value Value management addresses the value process during the concept, definition,
management? implementation and operation phases of a project. It encompasses a set of
systematic and logical procedures and techniques to enhance project value
throughout the life of the facility. Value management embraces the whole value
process and includes value planning, value engineering and value reviewing.
The basic steps followed at several stages in the development of a project are:
(a) to determine the functional requirements of the project or any of its
constituent parts, (project objective, information/criteria and function
analysis) then
(b) to identify alternatives (speculation) and
(c) to examine the cost and value of each alternative to enable the 'best value
selection' (evaluation and recommendation).
Figure 1 is a simplified diagrammatic representation of these steps. Each of the
three main applications of value management, namely value planning, value
engineering and value reviewing can be applied independently or be fully inte­
grated, on a given project.
2