UNDERSTANDING AND

SOLVING ROOT CAUSE OF THE

PROBLEM THROUGH VALUE
MANAGEMENT / VALUE
ENGINEERING
By:
Assoc. Prof. Sr. Dr. Mohd. Mazlan Bin Haji Che Mat
President
Institute of Value Management Malaysia (IVMM)
December 2008
1

DEFINITIONS &
CONCEPT OF VALUE
MANAGEMENT

Definitions & Concept

of VM
Miles clarified Value Analysis as a
philosophy implemented by the
use of
a specific set of technique
a body of knowledge and
a group of learned skills
MMCM

Definitions & Concept of

VM
It is an organized creative approach
which has for its purpose the efficient
identification of unnecessary cost,
i.e. cost which provides neither
quality, nor use, nor life, nor
appearance, nor customer features.

MMCM

Definitions & Concept

of VM
Che Mat MM (2004) - Value Management
as a rigorous, systematic and
innovative methodology with multi
disciplinary approach to achieve
better value and cost optimization for
projects, products, facilities, systems
and services without sacrificing the
required performance levels.

MMCM

Definitions & Concept

of VM

Another relationship by Dell Isola ,

Value = F + Q
C

(F) Function = The specific work that a design/item

perform.

must

(Q) Quality = The owners or users needs, desires

expectation.

and

(C) Cost

= The life cycle cost of product.

Value =
The most effective way to reliably accomplish a
function that will meet the users needs, desires
and
expectation.

MMCM

Definitions & Concept

of VM

As such Value can be increased by

the following approaches :
F+Q

Value =
C
Cost
reduction
approach

MMCM

Function Compound
increase approach
approach

Expand
growth
approach

Definitions & Concept of

VM

Management of Technology
A Technology that enables work to be performed
efficiently and is applicable to all industries and job areas
I.E(1911) QC(1920)
Present

VA&VE(1942)

Devt.
Man
gt.
Tech

Rationalisa
tion of
Enterprise
Development of specialised
technologies
I.E Increase efficiency

Time

QC Improves quality
MMCM

VA&VE Increase value

Definitions & Concept of

VM
Value Management
Value
Planning

Value
Engineering

Value
Analysis

The VM Family
Source : Ashworth (2000)

Why use VM ?

VM promotes systems thinking

VM establishes customer needs
Value management change proposal
(incentive clause)
It encourages Staff development
It promotes Partnering
Is a Vehicle for Change
VM identifies unnecessary costs,
which then can be removed.

MMCM

10

Other Benefits of VM

MMCM

Solves immediate and high priority problems

Establishes least cost goals
Identifies and defines stakeholders aims and objectives
Optimize the unit/component cost
Produces unique solutions
Increases the marketing potentials
Improves communication
Improves quality
Reduces time
Reduces commercial risks
Helps
to
increase
the
co-operation
between
departments
Encourages fresh thinking
Spreads cost-consciousness
Develops hidden abilities
Helps to provide better appreciation of the other mans
job
11

Misconception About
VM

There is a view held by some that Value

Management is simply just another cost cutting
tool, however it misses an important feature of
Value Management which is creativity and
systems approach to validate a certain proposal .

The fundamental contribution by the Value

Management exercise is to eliminate the
unnecessary cost which does not contribute to
the Value of the services, products, systems and
that includes the construction projects.

MMCM

12

Value Studies are

mandatory in:

All US federal projects > $ 2 M

All Japan projects > $ 2 M
All Saudi Government projects > $ 5 M
All RC of J&Y projects > $ 5 M
All Saudi Aramco projects > $ 10 M
Also in UK, Germany, France,
Australia, Korea, India, etc.

Source: Al-Yousefi (2008)

13

Saudi Ministry of Finance Mandate

(October 2001):

Emphasis on Function, LCC and ROI

Perform VE during early design stages
Train employees on VE
Include VE clauses in the Design contracts
Apply VE as follows:

Typical repeated projects that is > SR 5 M

Projects that are > SR 20 M (about $ 5 M)
O & M contracts that are > SR 5 M

Source: Al-Yousefi (2008)

14

VALUE MANAGEMENT
JOB PLAN

15

Five Steps of the VM

Job Plan
PRE-STUDY
INFORMATION
SPECULATION
JUDGEMENT
DEVELOPMENT
RECOMMENDATION &
REPORTING

POST
STUDY

The five steps of the Job Plan are shown diagrammatically in

figure above. The significant of the arrows is that, whilst a
cascade system is used, with each phase following on from
and using the output of the preceding phase, there is
frequently reversion to a previous phase, as a result of some
16
discovery or unexpected development.
MMCM

Function Analysis

BUILT-UP COST

Conventional concept
To find possibilities for cost reduction by
analysing each factor of total cost
PROFIT
OVERHEAD
LABOUR & EQUIPMENTS
PLANT & MACHINERIES
WASTAGE
MATERIAL COST

MMCM

17

Function Analysis
VM/VE Concept
To focus on functions and thereby achieve
revolutionary cost reduction

PRICE

Profit

MMCM

Second
ary
Functio
ns

Unnecessary
Functions
Function

incorporated in
the design stage
Functions
expected by
Customer
Basic
Functions

Potential cost
reduction
Review methods
of achieving
functions

18

Function Analysis
TYPE OF FUNCTIONS
Basic Function:
The purpose or performance feature which
must be attained if an item is to work or
perform. It is a "must" type of objective in
that it is the feature of the item which is its
primary reason for existence from the users
point of view.

MMCM

19

Function Analysis
TYPE OF FUNCTIONS (Contd)
Required Secondary Function:
Dell Isola developed other function which
he called required secondary function. It
is the function that must be achieved to
meet codes, standards, or mandatory
other requirements.

MMCM

20

Function Analysis
TYPE OF FUNCTIONS (Contd)
A Supporting Function:
Any characteristic of an item which is not
essential to the user for the desired
application of the item and does not
contribute directly to the accomplishment of
a basic function.

MMCM

21

Function Analysis
TYPE OF FUNCTIONS (Contd)
An Unnecessary Function:
An element or a characteristic which is
not necessary for the item to work or sell.
Unnecessary functions are usually the
result of honest wrong beliefs and
assumptions, or the perpetuation of
obsolete requirements.

MMCM

22

Space Function Analysis

Component
Admin. Block

Function

Kin
d

Cost

Worth

Value

Area
(m2)

Area
(m2)

Index

Remark

Verb

Noun

1. LOBBY

RECIEV
E

VISITORS

72.0

72

1.0

NO
CHANGE

2. STORAGE
AREA

DISPLA
Y

EXHIBITS
/

619.5

619.5

1.0

NO
CHANGE

TEST

EXHIBITS

238.5

238.5

1.0

NO
CHANGE

HOUSE

SERVICES

RS

444.5

444.5

1.0

NO
CHANGE

1,374.
5

1,374.
5

GROUND
FLOOR

3.
LABORATORY
4. SERVICE
(M&E)
TOTAL

Floor)
MMCM

COLLECTIO
N

Space Function for Administration Block (Ground

23

Space Function Analysis

Component
Admin.
Block
FIRST
FLOOR
1. OFFICE

Function
Verb

PROVID
E

Kin
d

Noun

WORKING
AREA

Cost

Worth

Value

Area
(m2)

Area
(m2)

Index

369.0

157.0

2.4

Remark

REDUCE
BY 57%

2. LOBBY

FACILITAT
E

ENQUIRIE
S

72.0

36.0

2.0

REDUCE
BY 50%

3. STORE

STORE

EXHIBITS

859.0

859.0

1.0

NO
CHANGE

4. SERVICE

HOUSE

SERVICES

RS

414.0

355.2

1.25

14%

1,714.
0

1,407.
2

TOTAL

Floor)
MMCM

REDUCTIO
N

Space Function for Administration Block (First

24

FAST DIAGRAM

FAST Diagram are prepared which:

1.
2.
3.
4.

MMCM

Shows the specific relationship of all functions

with respect to each other,
Tests the validity of the functions under study,
Helps identify missing functions, and
Broadens the knowledge of all team members
with respect to the project

At first glance, FAST appears to be similar

to a PERT Chart. However, the basic
difference between FAST diagramming and
other techniques is that the FAST is
function-oriented and not time-oriented.
25

HOW?

MAINTAIN
SAFE
LANDING &
TAKE OFF

MEET
STANDARD

ENABLE
LANDING &
TAKE OFF

PROVIDE
EMERGENCY
ACCESS
(ROAD)

WHY?

RESIST
SKIDDING
DISCHARGE
WATER

PROVIDE
RIDING
QUALITY

PROTECT BASE
(FOUNDATION)

RESURFACE
RUNWAY

PROVIDE
STRENGTH
ELIMINATE
F.O.D (Foreign
Object Debris)

PREVENT
INGESTION

FAST DIAGRAM OF RUNWAY RESURFACING

MMCM

26

HOW?

MAINTAIN
SAFE MOVES

WHY?

MEET
STANDARD

REDUCE
OCCUPANCY
(RUNWAY)

PREVENT
ACCIDENT
ALLOW
EFFICIENT
USE
(RUNWAY)

ACCOMMODATE
MOVEMENT

PROVIDE
ROUTE

PROVIDE
RIDING
QUALITY

PROTECT BASE
(FOUNDATION)

CONNECT
RUNWAY

DISCHARGE
WATER

PROVIDE
STRENGTH

CONNECT
APRON
PROVIDE
HOLDING
ENHANCE
SAFETY

FAST DIAGRAM OF TAXIWAY RESURFACING

MMCM

RESURFACE
TAXIWAY

ELIMINATE
F.O.D

PREVENT
INGESTION

27

HOW?

PREVENT
FLOODING

PROTECT
ROAD

ENSURE
PEDASTRIAN
SAFETY

CONFORM TO
FLOW RATE
OF WATER

DISCHARGE
WATER

SUPPORT
DRAIN
CHANNEL
WATER

COLLECT
WATER

CONSTRUCT
DRAINAGE

PROTECT
EMBANKMENT

FAST DIAGRAM OF DRAINAGE CONSTRUCTION

MMCM

WHY?

28

RESULTS
29

Project:

Education Faculty for UTM

Achieved
Effective Planning of Space to Layout to customer
requirements

(Initial Design cost RM35M, after VM RM7M)

MMCM

Project:

Library for USM, Penang

Achieved
Effective Planning of Space to suit Site Provided to customer
requirements

(Initial Design cost RM24.9M,after VM RM11.9M)

MMCM

Project:

Darul Ridzuan Islamic College, Perak

Achieved
Effective Planning of Layout and Design to customer requirements

(Initial Design cost RM120M after VM RM57M)

MMCM

Projek Jalanraya Simpang Pulai Lojing - Gua

Project: Musang - Kuala Berang (Pakej 8)

Outcome
Identified many areas in the existing solutions where
value improvements can be made without loss of
functions

These improvements would lead to cost savings

in the order of RM18 m from the initial cost
of RM 92 m.

MMCM

Project:

Pakej 3/1A : Jalan Simpang Pulai Lojing Gua Musang Kuala Berang
No. Of
Ideas

Ideas for
Evaluated

Ideas for
Action

Group

34

22

15

Group

22

16

Group

20

Group

20

18

96

63

32

100%

79%

23%

TOTAL
Percentage

Results

More effective design (Safety, Environmental & Maintenance requirement)

(Cost Reduction ~ 3.8%) from estimate cost of RM112.8 M

MMCM

Project:

Klinik Kesihatan Jenis 3

No. Of Ideas

Ideas for
Evaluated

Ideas for Action

Group

73

64

Group

12

10

Group

42

25

Group

11

10

138

109

11

100%

79%

8%

TOTAL
Percentage

Results

More Effective Design (fulfilled User requirements)

(Cost Reduction ~ 5.1%) from original cost of RM6.8 M

MMCM

Project:

High End Apartment Project

ORIGINAL

TARGET

AFTER VM
STUDY

Gross Development
Value (GDV)

RM 45.1m

RM 45.1m

RM 47.8m

Gross Development
Cost (GDC)

RM 42.9m

RM 37.0m

RM 38.5m

Gross Profit (GP)

RM 2.2m

RM 8.1m

RM 9.3m

4.81%

17.9%

18.9%

% GP/GDV

MMCM

Conclusion
The application of this technique has
proved to be very successful in various
human endeavors. The systematic
process
that
it
offers
promote
creativity
&
innovation
towards
achieving customers satisfaction and
in many cases producing results that
are beyond expectations.

37

MMCM

THANK YOU

38