Value management techniques for building design and construction

[edit] Introduction

There are a number of techniques which are commonly used in the conduct of value management (VM) studies. Some of these techniques are:

1. Function analysis.
2. Function analysis system technique (FAST).
3. Cost/worth.
4. SMART methodology (Simple Multi-Attribute Rating Technique).
5. Value drivers.
6. Value benchmarking (or value profiling).
7. Options selection.
8. Weighting techniques.
9. Creative techniques.
10. Evaluation techniques.
11. Scenarios technique.
12. Target costing.
13. Function performance specification (FPS).

[edit] Function analysis

Function analysis is a method for analysing the functions of the constituent parts of a project.

There are many approaches to function analysis, some very structured (such as the function system analysis technique) and others less formal (such as value trees or mind maps).

One of the key principles of the VM process is that it focuses on achieving successful outcomes rather than on the process of getting there. Functional analysis provides a very powerful tool to identify intended outcomes. In developing a functional model, the team is forced to make a very clear definition of the project by considering key questions such as:

• What are we trying to achieve?
• What must we get right if we are trying to achieve it?
• What considerations do we need to bear in mind while designing it?
• How do various design solutions contribute towards achieving the desired outcome?

The method relies on developing a function cost matrix in which the costs of performing each of the identified functions can be determined by allocating elemental costs across the functions.

One of the techniques used to describe each function is by using an active verb, a measurable noun and a qualifying phrase or adjective. The table below lists some of the commonly used active verbs, adjectives and nouns for describing functions.

Table: Active verbs, qualifiers and measurable nouns to describe functions (Adapted from Kelly, J. Male, S. and D. Graham (2004))

[edit] Functional analysis systems technique (FAST)

This technique relies on logically linking functions and allows people from different technical backgrounds to use a common language to describe and link the functions of complex systems to build a FAST diagram. In order to produce the FAST diagram, the team will have to interact and communicate with one another effectively to arrive at a logical diagram that they can all understand and agree with.

A simple FAST diagram for part of an office building is illustrated below (Adapted from Kelly, J. Male, S. and D. Graham (2004)).

The how/why logic provides the key to developing a logic-linked function diagram. Randomly generated functions (as used in function analysis) can be logically linked through the use of questions “how” and “why”. The level of abstraction, gradually diminishes from left to right. This also reflects “dependencies”, where a function of lesser abstraction is dependent upon higher-level abstraction functions.

Thus, changing the higher order functions will effectively change the outcome. While looking for innovations or improvement ideas, it is therefore necessary to address functions of higher-level abstractions.

In addition to the “how” and “why”, other key words that are used for producing FAST diagrams include “when” (to identify things that occur simultaneously with an identified function), “and” (to indicate when two dependent functions happen simultaneously) and “or” (eventually either one dependent function will happen or another, depending upon circumstances).

[edit] Cost/worth

A key principle of VM is to analyse each of the functions and to assess what it actually costs to perform the function, using a functional cost matrix. For comparison, the team assesses the lowest cost at which the function can be performed, referred to as the function’s “worth”. A comparison of the two diagrams gives an indication of the “cost/worth” of the function being examined.

The functions whose cost significantly exceeds their worth may warrant further study to explore whether they can be performed in a different way at less cost. However, this approach must be understood with the caveat that it is absolutely critical that all functions performed by each component must be taken into account. For example, the basic function of granite paving may be to support pedestrians.

This function can also be performed by using concrete paving slabs at a much lower cost. However, there are other functions that the granite paving will have contributed to, not least of which is the aesthetics of the area. Similarly, granite performs an additional function “resisting wear” considerably better than its concrete equivalent.

It is vital, therefore, that in considering the basic function of a component, other functions to which it contributes are taken into account to assess its true “worth”.

[edit] SMART methodology (Simple Multi-Attribute Rating Technique)

The SMART (Simple Multi-Attribute Rating Technique) methodology, introduced in the mid 1990’s generated two evolutionary concepts from FAST methodology. The first of these was the value tree. Instead of expressing the essential components necessary to fulfil the project objectives by means of two three word functions, this methodology uses the concept of a value tree to link functions. The second innovation was to create an importance hierarchy for the functions.

The value tree is similar to the FAST diagram in that it normally begins on the left hand side with a statement of project objectives. The answer to the question “how” is expressed in simple value-adding attributes required to deliver the project objective. Each of these is broken down into the attributes that add value to that branch, thus building a tree of decreasing abstraction from left to right.

The figure below illustrates an example of a value tree for a school.

The second aspect of the SMART method requires the client to rank the value adding attributes in order of their importance in achieving project objectives.

Under the SMART value tree the weighting for each of the values is expressed as a decimal of less than 1, such that for any level of abstraction for any single attribute, the total weighting adds to 1.

By attributing costs to the value tree it is possible to assess the cost of undertaking a function relative to its importance in the overall project, and to consider different approaches to undertaking the same function for fewer resources

[edit] Value drivers

Many of the functions in construction projects are not physical in nature. Since these abstract functions are essential to adequately describe a project, the concept of "value driver", instead of primary function, is often used. Value drivers are those things which contribute to the value of the building and are readily understood.

Table: Generic value drivers for construction projects (adapted from Dallas, M F (2006) Value & Risk Management, CIOB, Blackwell Publishing)

Development of generic value drivers offers an advance on the generation of random value drivers for each and every project. While random value drivers may be just as effective for the purposes of VM, the resulting function analysis would be unique to the particular project and the circumstances in which they were developed.

Use of generic value drivers creates the advantage of comparability, where projects with similar objectives can be benchmarked against one another.

[edit] Value benchmarking (or value profiling)

Utilising the value driver tool, it is possible to describe the client’s value priorities, which form the project’s value benchmark or value profile. This, in turn, creates a way of identifying those parts of the project which provide most potential for adding value and shaping the project.

Value benchmarking should take place at the beginning of a VM study. Using the weighted value drivers, the client team (excluding client consultants and advisers, but including the end users) produces the value profile. The VM team, in conjunction with the client team, creates an acceptable range for each value driver using objective matrices (for example, using a scale of 1 to 10, where 1 is unacceptable and 10 is ideal).

The VM team, with the client team, may also identify targets within each range for the VM objective to achieve. These targets will help to benchmark the exercise and the project, by clearly contrasting current performance values against the target (benchmark) values.

Table: Value benchmarking (or value profiling) (adapted from Dallas, M F (2006) Value & Risk Management, CIOB, Blackwell Publishing). Items in bold have the highest priority and greatest value deficit and hence require immediate focus.

[edit] Options selection

A weighted value driver model provides an objective way of making decisions. By using an options evaluation matrix, it is possible to assess the relative benefits of each option using the weighted value drivers as evaluation criteria. The best option will be the one that satisfies the value drivers the most.

A value score for each option is obtained by multiplying the weighting of each value driver by the degree to which the options satisfy it. It is recommended that a scale of 1 to 4 is used, where 1 is poor and 4 is excellent. It is better to use a 4 point score than a more common 5 point scale, as there is a tendency for groups to pick the midpoint number 3 on the 5 point scale, whereas on a 4 point scale the group is forced to select above or below the mean by choosing 3 or 2.

Adding all the value scores across all functions for each option gives a total value score for that option. The option with the highest score is that which best satisfies the requirements in the project objectives.

[edit] Value for money

Value for Money (VfM) is a further sophistication of this technique, used for option selection. VfM is calculated by dividing the value score by the total cost of the option. This helps to differentiate between two options, each of which has a high value score, but where one costs significantly more than the other. See Value for more information.

NB It is recommended that a sensitivity analysis be performed as well, since small changes in the weighting of each option against the value drivers will have an impact on the end result. Even when scientific methods are used to assess weightings or assessing how well each option satisfies a particular function, there remains an aspect of subjectivity.

A sensitivity analysis varies both the importance weightings and satisfaction assessments to ensure that the process is robust.

[edit] Weighting techniques

There are a number of different weighting techniques with varying degrees of complexity which are commonly used in VM studies. These include:

• Dots.
• Distribution of points.
• Paired comparisons.

'Dots' is perhaps the most simplistic technique and the least scientific, but can be the quickest way to assess the relative importance of a number of items. Here, the VM team simply allocates dots to their preferred choices. There should be some guidance as to how many favourites can be selected. The number should not be more than one third of the items under consideration. The item with the most dots is ranked most important and so on.

A more statistically sound way to assign weightings is to ask the team to allocate a fixed number of points between the items (distribution of points). Each person can put as many points as they wish against any one item, but must use all their points and no more. The points against each item are added up and divided by the total number of contributors to give an average score for each item. Then these scores are normalised to arrive at a percentage weighting for each.

However, the outcome of this technique can be biased if the VM team does not have representatives from the whole project team. Furthermore, sometimes there may be a significant divergence in individual weightings across the team. In this situation, the average will not be representative of all the members’ views. Convergence tools such as the Delphi technique or similar can be utilised in these situations.

A further technique is 'paired comparison', where direct comparisons are made between each of the attributes. In this technique, each item is judged against the others. Scales of assessing by how much one attribute is better than another vary. A 3-point scale (1 being low and 3 being high) is most commonly used.

The score for each attribute is calculated by adding up the total number of times it appears in the matrix, with each entry being multiplied by the scale factor if applicable. The weighting is then calculated by normalising the scores on a percentage basis.

[edit] Creative techniques

One of the fundamental concepts underpinning VM is to encourage innovative solutions. Functional analysis can be used to generate and foster innovation and creativity.

Ideas can be generated simply by asking questions such as “how can the component be made better, efficient and cheaper”, particularly in terms of value drivers. This is based on the fundamental assumption that there will always be more than one way to solve a problem.

Creative techniques such as brainstorming (McFadzean, E. S. (1997), “Improving Group Productivity with Group Support Systems and Creative Problem Solving Techniques”, Creativity and Innovation Management, Vol. 6, No. 4, pp. 218-225.) can be used to generate and foster ideas.

It is also necessary to develop processes to evaluate the ideas generated, by creating common evaluation criteria so that ideas can be ranked and suitable implementation proposals developed.

It may also be necessary to undertake scenario appraisals to risk assess the selected ideas.

[edit] Target costing

VM techniques can be used to establish not only what functionality the client wants, but also how much the client is willing to pay for it.

Construction, being a fiercely competitive market, operates in an environment where, broadly, the price is dictated by the customer. Historically, the industry operates on the following commercial basis:

Cost + profit = price

Designers will produce a design based on the client’s requirements; quantity surveyors price the design based on market testing and experience (which contain unstated risk allowances). All too often the client is not willing to pay the price and through competition, where the suppliers cut their margins, alternative (often inferior) specifications are adopted and scope (functionality) is reduced to arrive at the price that the client is willing to pay.

The application of VM techniques from the outset of the project will establish the functionality required by the client and the necessary margins to sustain a profitable business for all the suppliers involved:

Price – profit = cost

If the resulting cost is lower than the estimate, the functional cost model will identify the areas of discrepancy. The client will then be in a position to work with the designers and suppliers to align cost with their required functionality without creating adversarial or confrontational circumstances.

[edit] Functional performance specification (FPS)

A specification is a document that describes a designer’s or a user’s intentions to a provider of the item being specified. Specifications can be broadly categorised as:

[edit] Absolute specifications

Here the specifier describes exactly what is required in detail and the scope for innovation or alternative options is non-existent.

[edit] Performance specifications

Performance specifications describe the output required from a component or subsystem, but do not indicate or dictate the means of delivering that output. For example, the specification may require the internal environment in a room to be 21 ±2 ºC throughout the year, with an occupancy of up to 50 people.

There are a variety of air conditioning and heating systems that could achieve this and the choice is left to the provider. This type of specification provides scope for innovation and genuine competitive bidding.

[edit] Function performance specifications (FPS)

Function performance specifications (FPS) take this one step further. The specifier defines user requirements by what the item must do rather than what it must be. In the previous example, the specification might read 'the room shall facilitate comfortable gatherings for the users at all times', where the function of the room is to enable meetings to take place. The definition of "comfortable" is flexible and could be negotiated with the users.

Similarly, the number of people attending can also vary. This gives the provider ultimate flexibility and the ability to devise a very innovative and competitive solution.

The FPS comprises a thorough functional description of the system or subsystem being specified as it relates to the user (a user-related function - URF). To each function it attaches measurable attributes (known as Compliance Criteria - CC). Each CC is assigned a target level which can be quantitative or qualitative. Each target level is provided with a degree of flexibility by defining tolerance bands.

The requires a function analysis of user’s needs, identification of measurable CCs, and agreement of the target levels and acceptable degrees of freedom. Having completed the FPS it is possible to explore trade-offs between the CC for different functions. This enables identification of the most competitive offering that complies with the specification.

--CIOB

[edit] Find out more

[edit] Related articles on Designing Buildings

• Benchmarking.
• Best value.
• Evolutionary design process model EDPM.
• Market value.
• Overcoming difficulties in value management.
• Specification.
• Value added.
• Value engineering.
• Value management.
• Value planning.

[edit] External references

• Dallas, M F (2006) Value & Risk Management, CIOB, Blackwell Publishing.
• Kelly, J; Male, S and D Graham (2004) Value Management of Construction Projects, Blackwell Science
• Value Management in Construction, CIRIA SP129, 2006 A Client's Guide, John N. Connaughton, S.D. Green