Project Value Management (PVM) Dr Jim Young

1. Project Value Management(PVM)Dr Jim Young

2. Jim Young • Lives in Lower Hutt. • Attended Duntroon Military College (Australia) and spent 18 years as officer in NZ Army. • Regional Manager Transpac Ltd (road transport), then went back to university, and qualified as a project manager. • Published papers and books, latest being “Managing Murphy” on project risk management, available from Whitcoulls for mere $45 – good investment eh. • Have managed a variety of projects. • Director of SkillPower Ltd, a project management consultancy. • Hey - check out www.skillpower.co.nz for useful and free information on project management.

3. Purpose of this Presentation To familiarise you with the principles and process of project value management (PVM)

4. Presentation Topics • Origin and definitions • Some examples • Value formula • PVM benefits • Costs and challenges • PVM principles • PVM process • And time permitting – show you the use of some tools This presentation will take about one hour. Presentation slides and a “white paper” on the topic will be available on your university website.

5. Origins of PVM The PVM concept was born with General Electric during World War Two when there were severe shortages of labour, materials and component parts. The company looked for new methods and substituted local materials and components that would perform the same function.

6. Definition of PVM PVM is the formal and systematic study of a project to identify ways to achieve the functions involved and resolve issues at lowest cost without loss of performance. Some equivalent expressions are Value methodology, Value Analysis, Value Engineering and Value Optimisation.

7. PVM Application • Potentially effective for all types of projects, but best results usually obtained with larger and more expensive construction projects. • PVM usually adds greater value if applied early in the project life cycle and preferably prior to project execution. • PVM intervention is in the form of a study undertaken by an expert facilitator including key stakeholders from the target project. • Unfortunately, PVM is often only initiated when project budgets seem insufficient or profit margins are under pressure.

8. Early Intervention The earlier that PVM intervention occurs during the life of the project, the greater is the potential for added value.

9. Some PVM Examples • Russian liquid-fuel rocket manufacturers now practice rough welding. • Japanese vehicle manufacturers standardise processes and components. • Australian supermarket construction introduced JIT practices to eliminate inventory. • NASA space shuttle specifications were relaxed for non-critical functions.

10. PVM Studies Functions • Function concerns what is done and not what does it. There are usually a variety of ways to complete a function. • Function can usually be described with just a verb and a noun. For example: • The function of a pen is to “make marks”. • The function of a spade is to “dig holes”. • PVM recognises that if a function is needed then we should identify and evaluate alternative ways to complete the function better and/or more cheaply without loss of project performance.

11. PVM Value Formula Value-adding options are: • Improve function and maintain cost • Maintain function and reduce cost • Improve function and reduce cost

12. Typical Benefits of PVM • Improves communications and teamwork • Clarifies stakeholders’ needs • Resolves conflicts and misunderstandings • Challenges assumptions • Identifies unnecessary expenditure • Generates alternative ideas • Promotes innovation • Maximises resource use • Saves time, money and materials • Simplifies processes • Eliminates wastage and redundant items

13. Stakeholders Benefit from PVM • Clients achieve best value for their money. • Users’ needs are satisfied. • Designers meet client and user expectations. • Project managers complete the project within prescribed constraints. • Contractors complete work in the most cost-effective manner and future business is assured.

14. PVM Costs To ensure that the benefits of applying PVM are justified, the cost of the following items needs to be considered: • Engaging a facilitator • Participants’ travel and accommodation • Venue hire • Administrative support • Disruption to target project

15. PVM Challenges • Suitable date for workshop • Project delay or disruption • Key stakeholders excluded or unavailable • Real front-end cost versus nominal downstream savings • Threat to designers’ and planners’ reputations • Short-term false economy • Innovations add risk

16. PVM Principles • Suitable facilitator essential • Senior management support • Willing and appropriate participants • Encourage creative problem solving • Focus on more costly functions • Whole-of-life application • Integrate with project life cycle and risk management

17. PVM Seven-Step Process • Prepare for the study • Gather information about subject project • Undertake functional analysis • Generate ideas for project improvement • Evaluate ideas • Make recommendations • Follow-up

18. Step One – Prepare for Study • Select subject project • Prepare terms of reference • Appoint facilitator • Decide study team composition – includes key stakeholders • Confirm study methodology and timetable • Identify logistic needs • Book venue and invite participants

19. Step Two – Gather Information • Facilitator is briefed and provided with: project purpose, goal, objectives, assumptions, success criteria, feasibility study, business case, charter, designs, drawings, specifications, work breakdown structure, estimates, risk and issues logs, project plan, budget and schedule, and progress reports if project already underway. • Visit project site if work has started • Research information about previous similar projects • Contact key stakeholders for preliminary discussions • Identify main issues for the PVM workshop • Prepare and distribute information packs • Brief presenters

20. Step Three – Undertake Functional Analysis PVM participants attend a one or two day workshop where: • Participants introduce themselves. • Facilitator reminds group about purpose and scope of study, workshop agenda and process, issues to be resolved, and target functions to be analysed. • Issues and functions are analysed in sub-groups, typically by seeking answers to questions such as: • What is its function? • Why is it needed? • What value does it add? • What would be the consequence if it was excluded? • What could do the same function more cheaply and/or better?

21. Step Four – Generation of Ideas Having clarified the issues and need for selected functions, alternative solutions are then sought typically through group brainstorming for issue resolution, improved functionality and cost reduction. Such ideas must not impair project performance. The usual rules for brainstorming apply: • Quantity not quality • Suspend criticism • Encourage maximum participation • Record all ideas for later assessment

22. Step Five – Evaluate Ideas Options are now evaluated in against pre-determined and weighted-attributes such as: • Technical feasibility, practicality and ability to implement (time, resources and skills) • Legal implications and legislative compliance • Consistency with organisation’s core values and sustainability requirements • Impact on project objectives • Whole-of-life costs • Whole-of-life savings • Risks created – their impact, probability and mitigation strategies

23. Evaluation Tools Some tools and techniques that might be used to evaluate and decide best options to improve the project’s functionality and/or cost and resolve issues are: • Function analysis system technique (FAST) • SWOT analysis • Cost benefit analysis • Process mapping • Pareto analysis • Fishbone diagram • Paired-comparisons • Decision tree • Weighted-attributes decision matrix

24. Step Six – Make Recommendations • A draft report might be circulated for comments from those who participated in the workshop. • A verbal presentation is likely to be followed by a formal written report with prioritised recommendations for the client’s approval. • Agreed changes are then included in the project plan.

25. Step Seven – Follow Up • Should PVM recommendations be implemented, their effectiveness should be monitored and measured. • Lessons learned from the study should help with future PVM interventions. • The PVM process could be repeated periodically throughout the project life cycle.

26. Process Mapping A process can usually be broken down into tasks that may be undertaken either concurrently or sequentially.

27. Process Analysis • Is the process needed and do process outputs satisfy these needs? • Are process performance measures and targets in place and appropriate? • Are all inputs and outputs satisfactory in terms of cost, timeliness, quantity and quality? • Are there any process delays or bottle necks? • Are all steps needed and do all steps add value? • Is the process documented, understood and adhered to? • Does rework occur? • Is there scrap or waste? • Is cycle time minimised? • Should some steps be combined? • Is better/cheaper technology available? • Do the users possess appropriate attitude and aptitude? • Could more steps be completed in parallel? • Are all steps in the correct sequence?

28. Example Decision Matrix Suppose Victoria University commissions a project to provide students with free footwear. First the decision-makers identify appropriate criteria or attributes to assess shortlisted suitable footwear options and prioritise these using a paired-comparison’s technique:

29. Example Decision Matrix Next the prioritised attributes go into a decision matrix. We give each attribute a weight (from say 1 to 10) that represents its relative importance, and then evaluate each option against each attribute, scoring them (where say excellent is 5, satisfactory is 3, and adequate is 1). In this instance Option B scores highest.

30. Summary PVM is a powerful strategy that focuses on delivering better project value. • Management support • Suitable venue • Early application • Thorough preparation • Independent facilitator • Maximum involvement of appropriate stakeholders • Creative problem solving encouraged • Persuasive recommendations Bring these essentials together and PVM will payback as a positive intervention.

31. Unless you have some very easy questions, it’s THE END And many thanks and good luck with your studies!