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
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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
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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
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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
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Definitions & Concept of VM

Another relationship by Dell ‘Isola ,
Value = F + Q
C
(F) Function = The specific work that a design/item
must perform.
(Q) Quality = The owner’s or user’s needs, desire’s
and expectation.
(C) Cost
= The life cycle cost of product.
Value = The most effective way to reliably accomplish a
function that will meet the user’s needs, desires
and expectation.
© MMCM
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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
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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)
VA&VE(1942)
Present
Devt.
Mangt.
Tech
Rationalisation
of Enterprise
Development of specialised technologies
I.E  Increase efficiency
Time
QC  Improves quality
© MMCM
VA&VE  Increase value
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Definitions & Concept of VM
Value Management
Value
Planning
Value
Engineering
Value
Analysis
The VM ‘Family’
Source : Ashworth (2000)
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Why use VM ?
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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
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Other Benefits of VM

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





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© 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 man’s job
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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:

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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)
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Saudi Ministry of Finance Mandate (October 2001):
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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:
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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)
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VALUE MANAGEMENT
JOB PLAN
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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 discovery or unexpected
development.
© MMCM
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Function Analysis
Conventional concept
 To find possibilities for cost reduction by analysing
each factor of total cost
BUILT-UP COST
PROFIT
OVERHEAD
LABOUR & EQUIPMENTS
PLANT & MACHINERIES
WASTAGE
MATERIAL COST
© MMCM
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Function Analysis
VM/VE Concept
 To focus on functions and thereby achieve
revolutionary cost reduction
Profit
PRICE
Unnecessary Functions
Secondary Function incorporated
Functions in the design stage
Functions expected by
Customer
Potential cost reduction
Review methods of
achieving functions
Basic Functions
© MMCM
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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
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Function Analysis
TYPE OF FUNCTIONS (Cont’d)
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
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Function Analysis
TYPE OF FUNCTIONS (Cont’d)
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
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Function Analysis
TYPE OF FUNCTIONS (Cont’d)
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
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Space Function Analysis
Component
Admin. Block
Function
Verb
Noun
1. LOBBY
RECIEVE
VISITORS
2. STORAGE
AREA
DISPLAY
EXHIBITS /
Kind
Cost
Worth
Value
Area
(m2)
Area
(m2)
Index
Remark
GROUND
FLOOR
3. LABORATORY
4. SERVICE
(M&E)
S
72.0
72
1.0
NO
CHANGE
COLLECTION
B
619.5
619.5
1.0
NO
CHANGE
TEST
EXHIBITS
B
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
TOTAL
Space Function for Administration Block (Ground Floor)
Note: B = Basic, RS = Required Secondary
© MMCM
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Space Function Analysis
Component
Admin. Block
Function
Kind
Cost
Worth
Value
Area
(m2)
Area
(m2)
Index
Remark
Verb
Noun
1. OFFICE
PROVIDE
WORKING
AREA
B
369.0
157.0
2.4
2. LOBBY
FACILITATE
ENQUIRIES
S
72.0
36.0
2.0
REDUCE BY
50%
3. STORE
STORE
EXHIBITS
B
859.0
859.0
1.0
NO
CHANGE
4. SERVICE
HOUSE
SERVICES
RS
414.0
355.2
1.25
14%
FIRST FLOOR
REDUCE BY
57%
REDUCTION
TOTAL
1,714.0
1,407.2
Space Function for Administration Block (First Floor)
Note: B = Basic, RS = Required Secondary
© MMCM
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FAST DIAGRAM
FAST Diagram are prepared which:

1.
2.
3.
4.
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© 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.
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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
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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
RESURFACE
TAXIWAY
ELIMINATE
F.O.D
PREVENT
INGESTION
FAST DIAGRAM OF TAXIWAY RESURFACING
© MMCM
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ENSURE
PEDASTRIAN
SAFETY
HOW?
CONFORM TO
FLOW RATE
OF WATER
PREVENT
FLOODING
PROTECT
ROAD
DISCHARGE
WATER
WHY?
SUPPORT
DRAIN
CHANNEL
WATER
COLLECT
WATER
CONSTRUCT
DRAINAGE
PROTECT
EMBANKMENT
FAST DIAGRAM OF DRAINAGE CONSTRUCTION
© MMCM
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RESULTS
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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
Project:
Projek Jalanraya Simpang Pulai – Lojing - Gua
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
A
34
22
15
Group
B
22
16
9
Group
C
20
7
1
Group
D
20
18
7
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
1
73
64
5
Group
2
12
10
2
Group
3
42
25
2
Group
4
11
10
2
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.
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© MMCM
THANK YOU
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