Value Analysis in UK Construction Industry

1. King Fahd University of Petroleum & Minerals LIFE CYCLE COSTING Appling The UK Manufacturing Industries Experience of Value Analysis Into Construction D r ARE-512 Presented by MUBARAK ALQAHTANI I.D.# 969260 SAADI ASSAF January 12, 2008

2. Abstract Value Analysis is concerned with the identification of best value. Too often its associated techniques are applied to new situations without consideration of its underlying philosophy. There has been a fall off in the formal application of Value Analysis within UK Manufacturing Industries. The principles are however still claimed to be accepted. Value Opportunities exist within the UK Construction Industry but Value Analysis is not practiced. Can the experience of the UK Manufacturing Industries' informal commitment to Value Analysis be applied to the UK Construction Industry in order to gain acceptance of the Value Ethos. Keywords Value Analysis, Quantity Surveying, Procurement Procedures .

3. Outline • Introduction • The Development of Value Analysis • Opportunities for Value Analysis in Construction • Experience in UK Manufacturing Industries • Applying the Experience of the UK Manufacturing Industries to the Construction Industry • Current Reflections of Value Analysis in the UK Construction Industry • Conclusion

4. Introduction • "Value Analysis is an organized effort to obtain optimum value in a product, system or service by providing the necessary function at the lowest cost".

5. "Value Analysis is an organized effort to obtain optimum value in a product, system or service by providing the necessary function at the lowest cost". • Value analysis * is an example of an identifiable subject area. It however comprises previously established techniques, discipline& and ideas. Value Analysis derives its uniqueness from the way in which the component elements are combined. Similarly the established subject of Value Analysis assumes further 'newness' when it is applied in a discipline other than the one for which it was originally developed.

6. Introduction • "Value may be defined as the relationship between function and cost. In all cases value is greatest when the cost of obtaining a required function or service, at a particular time and place with the essential qualities, is at a minimum. "

7. Total cost

8. TheDevelopment of Value Analysis • L D Miles(l) is recognized as the 'Father of Value Analysis'. • He originally conceived the idea some 50 years ago when, while working as a design engineer with General Electric, he was surprised by the apparent lack of consideration given to cost. The advent of World War 11 put great pressures on resources.

9. Value Analysis is concerned with the search for best value To achieve this it must be more than just a cost control technique as cost can not be reduced at the expense of performance. • Value Analysis may use many varied techniques, some of which are more traditionally associated with cost control, e.g. Life Cycle Costing and Cost in Use Analysis, but the object is to establish best value not just lowest cost.This means that, unlike pure cost reduction, the levels of qualify and performance are 'not allowed to deteriorate. • This means that, unlike pure cost reduction, the levels of qualify and performance are 'not allowed to deteriorate.

10. Opportunities for Value Analysis in Construction • The objective of Value Analysis is to identify and eliminate unnecessary cost. Such value opportunities are not restricted to anyone part of the life cycle of a building. Value Analysis does however attempt to focus attention on those areas where there is potential for the greatest return on the effort exerted. Value Analysis would be most profitably applied where the net savings potential is greatest, as illustrated in Figure 2.

12. A popular stage for applying Value Analysis is during design which is an identifiable action which offers large net saving potential. Traditionally a design would be developed to In developing a design through the application or Value Analysis (possibly more properly termed Value: Engineering at this stage) • Value Analysis recognizes. Aesthetic Value as one of the needs to be addressed when balancing the design equation and by developing a Value Index (the ratio of the cost of the proposed design to the lowest cost alternative) a more objective evaluation can be made.

13. A second area popularly chosen for the application of Value Anal sis is the construction stage. As is evident from • The net savings potential is substantially reduced by this stage. Contractors can conduct Value Analysis exercises on their ownoperations to increase efficiency. Part of these benefits will be passed on to the building

14. Experience in UK Manufacturing Industries • Value Analysis was imported into the UK as a well developed set of procedures. These procedures had been developed in the US and were taken on board by UK managers, tantalized by the apparent potential for savings or because they were directed by a multi-national parent company or even to demonstrate their openness/acceptance for change.

15. In order to gauge current practice regarding the use of Value Analysis in the UK interviews were conducted with 6 firms. These firms represent heavy engineering, micro engineering, aerospace and petro-chemicals. All the organizations had formerly employed specialist Value Analysis staff. All but one however considered that they still had a commitment to the principles of Value Analysis and utilized techniques associated with Value Analysis. In two of the organizations all products are subject to review by an independent group, either during the design stages or at prototype stage. Although neither firm currently had Value Analysis staff they both considered that their staff were sufficiently familiar with the techniques to ensure that the original design work and the review embraced the value principle.

16. Applying the Experience of the UK Manufacturing Industries to the Construction Industry • The early involvement of producers or production departments is seen as a valuable means of reducing production costs. In the Traditional UK procurement procedure the Architect completes the detail design before the Contractor is selected and there is no formal means for the Contractor to contribute to the 'design. The procedure of Management Contracting has been' developed with the intention of securing the independent contribution of a Contractor at the design stage.

17. At the other extreme from the Traditional procedure, Design and Build places the Contractor in full control of the design possibly excluding an independent Architect. Where size or cost precludes the use of Management Contracting and the project requires greater Architectural control than is possible through Design and Build, the Traditionalprocedure could be modified to more fully embrace Performance Specifications. This would reflect Value Analysis in that the functionis defined in the performance specification, alternative solutions are developed by the competing contractors and if contractor selection is based on cost the lowest cost, solution is identified. _

18. Current Reflections of Value Analysis in the UK Construction Industry • The foregoing illustrates how Value Analysis might be applied within the construction industry. • The following are two initiatives which introduce Value Analysis into UK construction:

19. first is a procurement procedure which incorporates features of US procedures. • second is in the Public Works Department of Local Government where Value

20. Analysis is to be directly applied as part of a rat1onalisation programmed. British Property Federation considered that the performance of the construction industry in the UK compared • unfavorably with other countries. In order to overcome the e shortcomings they developed their System for Building Design and Construction (6) This broke considerably with ­traditional UK procedures. Certain aspects can be seen as reflecting Value Analysis procedures.

21. The client is required to take greater responsibility especially at the early stages when a fully considered brief is to be prepared (functional. analysis). The Architect is required to develop the design • to the level which requires Architectural control allowing the Contractor to develop the 'detail' design **(This allows a variety of technical solutions to be developed, by the contractors, for the outstanding features).

22. Conclusion • Value Analysis has not had continuing support within the UK • • manufacturing industries. In formal Value Analysis terms its use has encountered 'roadblocks' which should be overcome.

23. The principles and some techniques however linger on " at a level which is apparently satisfactory to the users and the situations in which they find themselves. Should this be the 'experience' that the construction industry gains from the manufacturing industry?

24. Critics of Value Analysis applied in construction have looked at techniques such as brainstorming, multi-criteria diagramming and numerical weighting of factors and have dismissed them as impractical or inappropriate in the construction industry. If we look beyond the techniques back to the origins of Value Analysis the basic motivation is appropriate to construction, that is to reduce cost through the development of alternative solutions.

25. The problems of the construction industry can be held to be different from other industries. There is a one-off product required to satisfy multiple-criteria which is produced by a unique grouping of personnel. The parties involved may have conflicting interests and the traditional approach fosters such divisions by requiring each party to defend their actions thus resulting in sub-optimization of the total project .

26. Value Analysis is concerned with the evaluation of function, cost and worth which can provide a unifying vehicle, directing effort to the mutual benefit of all parties and the total project. Further study is required to identify how best to apply Value Analysis to the UK construction situation in order to achieve acceptance of the procedures.

27. Thank youAny ?