The job plan for value engineering.
Value engineering key to cutting costs
Over the years, value engineering is getting more widely applied in projects across the globe as it leads to reduction in cost and produces creative and initiative results, writes Dr Basil A Latif projects manager of Shanfari Group of Companies of Oman.
01 December 2004
Right from the day that Lawrence Miles, an engineer from General Electric (GE), found a way of overcoming the acute shortage of quality materials through the use of alternatives, the concept of value-engineering has come a long way.
During World War II, GE was required to increase the production capacity of turbo chargers for B24 bombers from 50 to 1000 chargers per week. The company’s designer sought the services of Miles, to procure materials that would meet the new production requirements.
But, since the war created a shortage in required materials Miles went about finding suitable substitutes that not only performed better but also cost less.
This was the first practical application of the concept of value engineering and the credit for the concept has been rightfully been attributed to Miles.
Over the years, the principle of value engineering has been applied to projects across the globe and has allowed industries and individuals alike to benefit from it.
Simply put, the value engineering involves searching for alternatives that have the same function and performance, comparing the cost of usage of these alternatives over their service life, and finally selecting the one that costs the least. It takes into consideration the function of the product and the service performed rather than mere identity. It is different from the approach of optimum design, which searches for a design of dimensions and specifications that lead to lowest cost (initial plus operation only) for the same basic design.
Value engineering is getting more widely applied, as it results in creative and initiative results. It is usually applied during and after the design stage of projects and systems. Before construction. It can be applied during the stages of construction, operation, maintenance and rehabilitation.
Value engineering is applied according to a set approach called the job plan, which consists, usually, of eight phases.
Selection
This forms the first phase of value engineering, during which the project or system on which the study has to be carried out, is selected. The selection can be made by the owner, the management, the designer or the value-engineering expert of the project.
The focus will be on high-cost or complicated components that have to be used for the project. This is followed by the selection of a value-engineering team who will conduct the next five phases, and also conclude and present proposals at the end of the study. This team, which consists of usually five experts – not directly involved in the project and drawn from different engineering and costing disciplines – is led by an experienced member.
Investigation & information
During the second phase, the value-engineering team gets acquainted with the project under study – its elements, design, function and required performance, cost and relative values of each as per the original design.
This is followed by a thorough definition and analysis of the functions of each element and the highlighting of the basic and secondary functions. The team then plots a Function Analysis System Technique (FAST) diagram of the project, which will help in validating the proposed decisions and discussing overall goals.
Usually a cost model is prepared, which is an expression of the distribution of costs. It is a tool that assembles and breaks down total project costs into more functional units for quick analysis. The model offers an estimated and target cost for each element. The target cost is extracted from the conducted functional analysis and the difference between the two costs would give an indication of the achievable savings for the cost elements.
The objective of this phase is to get comprehensive knowledge of the system, its elements, role and function of each, in particular those with high contribution to the total cost. This phase usually takes about half the time required to conduct and complete value-engineering study.
Speculation & creation
The third phase involves a brainstorming on the functions of the elements selected during the investigation phase with the objective of arriving upon alternatives for each element. Members of the team come up with suggestions that can offer the necessary functions at a lower initial and/or lifecycle cost and each idea is written down.
Analysis & evaluation
This phase involves the study, analysis and evaluation of the ideas and alternatives, which have come up in the speculation and creation phase. Here, the value-engineering team studies thoroughly the ideas and suggestions, evaluates the alternatives, compares them and ranks them in order to select the best ones.
Development
In this phase, preferred alternatives are expanded into workable solutions; each undergoes comprehensive analysis, preceded by collecting the required information, designing the new concepts, working out the estimated cost of the concept and the original design.
The cost of each includes initial, operating, maintenance and rehabilitation costs and any other cost to be borne up during the service live of the project or system taking into accounts the salvage value too, that is calculation of life cycle costing of the system.
The value-engineering team concludes the best alternative for each element on the basis of its cost and also on it having the same function and performance as the original.
Presentation & reporting
During the last phase of value-engineering study, the results and conclusions achieved by the team are documented. A presentation is given to those directly concerned with the project, which will highlight the reduction in cost and seek to prove that the selected alternatives perform the same function as the original. Presentation of facts that support the suggestions is necessary to have the approval and satisfaction of those concerned.
Implementation
During the seventh phase, which is the implementation and application phase, the alternatives selected according to the value-engineering study are implemented. The team makes sure that the alternatives have been correctly executed and are functioning.
Audit
At the end of the job plan, the team inspects the implemented alternatives to make sure that the desired results are gained and documented. This is called the audit phase, which is the eighth and last phase.
Some organisations, especially from the government sector, request engineering and contracting companies to conduct value-engineering study on the contracted jobs. This trend has not been limited to the industrial nations alone and even organisations and establishments in the Arab world have been implementing the approach of value engineering because of the benefits it has to offer.
For more than eight years the General Directorate of Military Works in Saudi Arabia has been saving from $30 million to $75 million a year as a result of implementing the suggestions and recommendations concluded by value-engineering teams*.
As an example of the benefits of value-engineering study, one of the companies in Saudi Arabia saved $10 million in 1994, which represented 15 per cent of the construction cost of a commercial centre. This was in addition to an annual saving of $350,000, also achieved through the application of value engineering prior to construction*. Some of the engineering companies in the UAE have also been using the value-engineering approach as a means to achieve reduction in cost of projects and the trend is fast catching up in the region.
(*) AJ DellIsola, Value Engineering, RS Means (1997).
