APPLICATION OF VALUE MANAGEMENT IN CONSTRUCTION

The concept of value management (VM) is becoming more relevant to Sri Lankan construction industry. Value Management provides structured, documentable consideration of project stakeholders to ensure that projects are required, framed to satisfy values and sufficiently supported by all stakeholders to ensure successful completion (Austin and Thomson 2001). This is supported by the definition of Albert and Betty (1996) that VM is a structured, systematic, flexible, team oriented approach for assessing the relationship between function, cost and worth. The aim of this paper is to illustrate the development and increasing relevance of VM in the Sri Lankan construction industry in the last decade and to describe the VM systems which have developed within the industry. An outline also is given of the objectives of VM and the methods developed for the application of VM. The paper concludes with the identification of benefits of the process and justifying its relevance with brief case studies which had been carried out to demonstrate the success of the process.


Introduction 1.1 Background
Construction industry is important to the Sri Lankan economy.It has contributed 6-7 % of the GOP (Gross Domestic Product) over the past decade (Central Bank Report, 2002).It is estimated that construction industry is responsible for about 50% of the total GDFCF (Gross Domestic Fixed Capital Formation) (National Account of SL, 2002).It is also seen that construction generates other benefits including income, employment, tax revenue etc.Construction provides employment to about 4-5% average of those employed in the national ecoonomy (Sri Lanka labour Force survey, 2002).Therefore it is evident that construction industry makes a significant contribution to the economy of the country both in terms of production output and the provision of empolyment.As a result an efficiency of the construction industry is a crucial factor for the development of investment portfolio in new resource and manufacturing projects.A lower level of value generated from construction degrades the international competitiveness of the industry, discourages the level of investment in construction and presents an additional cost to projects.In current economic context it is necessary to identify initiatives that will eliminate the extra cost of construction (hidden-costs that do not contribute to value) for the future visibility of the industry itself and of the overall economy.To eliminate the extra cost element caused by this aspect of inefficacy, a cost reduction system must target to improving the quality of the decisions made throughout the life cycle of construction projects.In order to deal with these problems, it is important to focus on the value of the project throughout the project life cycle.This is possible through value management as indicated by the definition of Institute of Civil Engineers (1996): "VM addresses the value process during concept, definition, implementation and operation phases of a project.
It encompasses a set of systematic and logical procedures and techniques to enhance project value through the life of the facility".VM is used by electronics, general engineering, aerospace, automotive, construction and many other industries, and increasingly by service sectors (Winch 2000).There is evidence of VM techniques that have also been successfully applied to all types of construction from buildings to offshore oil and gas platforms, and for all types of clients from private industry to governmental organizations worldwide.
The first section of this paper provides the broader view of the Value Management based on the literature review and the second section deals with the VM techniques applied to Sri Lankan construction industry based on survey research carried out, by the writers.

Aims
This research aims at identifying and measuring the project and/ or design performance that can be achieved through the application of value management to construction projects.

Objectives
Implementing value management techniques, to improve the project performance is the primary objective of this research: This is derived through the following series of secondary objectives.

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Exploring the current state of application of value management in Sri Lankan construction industry.

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Identifying the importance and benefits of application of value management techniques.• Analyzing the benefits of value management by application of it at different levels of the construction process.That is value planning, value engineering and value analysis (These terms will be explained later).

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Finding out whether the performance can be improved through application of value management.

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Measure project performance in terms of time, cost and quality targets of the project.

Methodology
The research methodology adopted can be summarized as follows:

Scope of Study
Most researchers as well as literature hold the view that significant benefits can be achieved through the application of value management at the early stages of a project.This is supported by the fact that cost, time and quality significant decisions are taken at the early stages of a project.This research will be limited to the building projects but applied through out the cycle of initial stages, design and construction and completion or post completion.The idea of a project value chain is a useful concept for viewing:

How is best value achieved or improved
• A network of projects as a series of strategically linked activities that must add value in order for the delivery process to meet the initial strategic requirement of the client.

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Strategically linked activities within a single project delivery process.
This necessitates best value being considered from multiple or single project perspectives.

The objectives of Value Management
The • Information phase The initial segment of the study is devoted to developing a comprehensive understanding of the project and proposals.All relevant information pertaining to the project is gathered from all parties.
• Objectives phase Using the data provided in the information stage as a platform, detailed analysis of the project is undertaken.The VM process focuses on the analysis of objectives, which the project must satisfy.
• Functional analysis Phase Functional analysis forces a broader and more comprehensive understanding of the project by Stimulating intense discussion and by compelling the team to view aspects they might not normally have considered.Functional Analysis System Techniques (FAST) diagram is used as the technique for the evaluation of functions.

• Creativity phase
Concentrating on the objectives/functions identified during the previous phase, appropriate techniques are employed to assist the group to generate alternative ideas of achieving the required outcomes.In this segment of the study the emphasis is on creating a large quantity of ideas with discussion and assessment held over to the next stage of the process.The creativity phase (brainstorming phase) is probably the most important phase of a VM exercise but it should be emphasized that all phases should be properly dealt with.

• Evaluation phase
It is during this phase that detailed assessment of possible alternatives identified during the creativity phase takes place.Ideas are examined from a range of perspectives including capital cost, recurrent/ maintenance costs, impact on service delivery, aesthetics, functionality and overall performance.Ideas to be recommended for implementation or for further investigation are identified with responsibility for such investigation allocated to the VM participants.

• Development phase
• The ideas/alternatives identified in the evaluation phase are technically developed and analyzed during the development phase by the participants and/or members of the professional team.

• Reporting and recommendation phase
In this phase of the VM study the participants agree on the outcomes and recommendations flowing from the study and identify action necessary to keep the project on track and to meet key milestones.Each recommendation is to be tested against the objectives determined earlier.

Functional Analysis System Techniques (FAST) FAST diagrams are considered as one of the most successful in breaking existing paradigms of analysis of functions of a product or process. The technique promotes a historic view of projects with a view to understanding the customer's perspective of the finished product. It is a technique which uses a function diagram to illustrate the relationships and inter-relationships of
all functions within a specific project or product or process.

Generation and development of alternatives ideas to enhance value
There are tools and techniques to use when it is difficult to make a decision.One may, for instance, set up a "value tree" or draw up a "decision making matrix".The techniques categorized under this title consist of techniques that first weigh evaluation criteria according to their relative importance and then score alternatives on the basis of the weighted criteria to determine those that are optimal.

Life cycle costing & whole life costing
Life cycle costing is a tool to be used during the development phase of a VM study.Whole life costing assesses the cost of an asset over its lifetime.This takes into consideration initial capital costs, finance costs, operational costs, maintenance costs and replacement or disposal costs at the end of its life.In calculating whole life costs all future costs and benefits are brought back to a present day value through the use of discounting techniques.

The approaches for Value Management
The success of VM lies in its methodical approach.However the focus of VM is not on cost but function and optimum value for money.It is an ongoing process and should be used to review continuously all aspects of the project against customer needs.There are many customer benefits in using the whole project team and involving end users, as appropriate and if possible.These include the advantages of better teamwork throughout the project and users taking a stake in the end result.There are a number of pre-requisites to ensure a smooth running of the approaches such as, willing participation, management support, an appropriate study team and experienced facilitator.

The charette
This approach is undertaken at the end of the compilation of the brief, after the appointment of the design team but before design commences.Client representatives and the design team meet under the chairmanship of the value manager for one or two days.The value manager acting as chairman is termed the value management team coordinator (VMTC).

The 40 hour workshop
The 40 hour, five day workshop is the most widely accepted formal approach to value management and is seen as being quick and economical.It comprises the formation of a second design team to review the design at 35% of design or sketch design stage.

The Value Management Audit
This follows the same procedure as either a charette or the 40 hour workshop.Its objective is to give a corporate or public client a clear indication of the worth of a scheme or development inspired by a subsidiary.The parent organization may then appoint a value manager to carry out a charette in consultation with personnel from the subsidiary company and their design team.Alternatively, the parent company may appoint a value management team to carry out a full feasibility study after the proposed scheme has been developed to sketch design stage.

Guide to Research Tree
The previous sections examined briefly the VM process as applied in industry.This section and forthcoming sections will now focus mainly the research carried out by the authors.The research methodology, which was applied for this research, can be illustrated as follows (Figure 5): Identify VM concepts b.
Identify application of each concept c.

Pilot Sur\ey
Case Studies Through the literature review it is expected to identify the basic concepts, applications and problems associated with areas of VM process.

Pilot Survey
To obtain industry-wide perspective of Value Management a survey will be carried out among the large-scale construction organizations operating in the Colombo metropolitan area.This is justified by the fact that these are the organizations that have the capability of investing on VM.The survey will cover different stakeholders such as clients, contractors and consultants of the construction industry.Semistructured interviews will be carried out to collect the information on VM practices.This will enable the researchers to develop statistics as to the past status of VM application in Sri Lanka.

Case Studies
A systematic selection of case studies to achieve the objectives of research was adopted.Accordingly a total of six case studies were selected so as to correspond with the different VM stages of VP, VE and VA.For the purposes of comparison and evaluation all the projects were carefully selected to fall within the same procurement method and within the Colombo metropolitan area.
The objective of the case studies is to illustrate the potential benefits of application of VM to project performance in terms of improvement in Cost, Time and Quality.It is hypothesized that the enthusiasm of the.clients as well as the consultants will be aroused only by showing the benefits of VM in a practical manner.Except the project on value engineering stage (on-going project) all the other case studies are planned to be carried out with the use of in-house resources.A real VM workshop will be conducted by the researchers in order to get the actual inputs from the team.

Conclude findings investigation
Analyse the findings of investigations and introduce a procedure for application of Value Management to the construction industry.

Benchmarking
The term benchmarking has been adopted when the comparator is regarded as the best available.
Benchmarking compares a snapshot of performance at a particular point in time.This indicates the current performance and the inherent potential for future performance.
In the above case studies the original time, cost and quality targets are taken as benchmarks.
• Time: The project duration established originally is taken as the benchmark for comparison.That is to identify time saving that can be achieved by the application of VM or to complete the project within the specified time period even after application of VM.
• Cost: The budgeted cost is compared with the analyzed figure achieved through the application of VM. • Quality: Quality is a subjective measure.Therefore it is proposed to use the VM process as a quality assurance process that will ensure achieving required quality targets.Further, the method of procurement can affect quality of projects.Hence case studies having the same procurement methods were selected.

Current Status of Value Management in Sri Lanka
As discussed above, an enormous contribution to the economy of Sri Lanka can be achieved through the construction industry.When comparing with other countries, in Sri Lanka the application of VM in construction organizations is relatively new.At present a very few instances of application of VM can be found in the industry.Eg: A VM study was done to the project of World Trade Centre (Colombo) throughout the project After occupation also there were some studies carried out for energy saving, increased productivity in business, etc. by some consultants related to the same project.
According to research carried out by SAVE, application of VM ensures a minimum of 30% cost saving in projects (www.value-eng.org).However there are no such statistics available for the Sri Lankan industry.Further research by the authors hope to develop case studies primarily in terms of value analysis related to construction projects in Sri Lanka.

Reasons for the absence of Value Management
The initial studies and investigations indicate that there is very little evidence on application of VM in the construction industry of Sri Lanka.There are various reasons for the absence of Value Management in the Sri Lankan construction industry.A main factor could be the greater fragmentation of the industry.
Over the centuries as buildings have become larger and more complex with shorter programmes, a plethora of specialist professions have grown up, each as an individual profit centre arid each with its own private agenda for a project.Following are some factors that can be highlighted as potential factors to this situation: • A key fact is that professionals do not share a common design environment.Furthermore, they have been educated separately in their isolated disciplines and accustomed to working independently.• According to the traditional contract that the contractor is not introduced to a project until it has been fully designed, when it is too late to bring construction expertise to the design process.

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Under this regime, the architect, traditionally the consultant team leader, often takes an insufficiently detailed brief.• The Architect then interprets the client's brief according to his own design parameters, still without the benefits of early structural or services engineering input and most certainly without construction input, which will only be introduced much later.• The design professionals do not therefore act as a cohesive team throughout a project.They may well progress the design along a specific path only to discover that the budget has been exceeded or the scheme is not buildable and the project either needs drastic or a complete redesign.Implement some regulation for application of VM for some projects (make it mandatory for public sector investment projects).

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Introduce any regulatory body to observe and regulate the application of VM. • Follow up and get the knowledge from other developing countries as to how they are successful in application of VM.Above is not a comprehensive list of action but a possible action list.The researchers intend to elaborate on these aspects towards the completion of the project.

Conclusion
Value Management is a structured, systematic, flexible, team oriented approach for assessing the relationship between function, cost and worth (Albert and Betty, 1996).The philosophy of Value Management is based on the premise that a certain amount of unnecessary cost is inevitable in building design due to the inherent complexity of the process and that significant cost savings can therefore be achieved by the identification and subsequent elimination of unnecessary cost.
VM has worked successfully in the US, UK, Australia and many other developed countries, either under the name of value engineering, value analysis or value planning.The absence of proper cost control techniques such as cost planning in the construction industry of Sri Lanka further exacerbates the need for Value Management in Sri Lanka.However it is still a relatively new concept in Sri Lanka.Thus the main theme of this paper was to introduce the application of Value Management to the Sri Lankan construction industry and to highlight potential benefits of it.

Figure 2 :
Figure 2: Value Criteria -managing time, cost, quality, risk and Project functionality Therefore, value is the most cost effective way to reliably accomplish a function that will meet the user's need, desires and expectations.It was said by researchers that value methodologies may be applied at any point during the project development.But best results or best value is obtained through early application.Ideally the value process is used as early as the needs identification stage and is used for facilitating strategic partnering workshops including the development of dispute avoidance procedures (Philip 2002).In order to achieve best options of value or opportunities, it is important to consider the strategic phase of project and project value chain (Male and Kelly 1992).Small or large, the client has a strategic plan for the project.The size.complexity.clientrequirements are some of the parameters for the strategic phase..A project may also be influenced by its relationship to the asset base of the client.How best value could be achieved in project development is shown in figure3.

Figure 3 :
Figure 3: Value context of project An organization comprises a series of internal and external strategically important activities that when combined provide it with an advantage over competitors (Porter 1985).This is termed as "Value Chain".Male & Kelly (1992) put forward the concept of the project as a value chain within a value management frame work, for understanding client organization's requirements at the strategic and tactical stages of a project.The project value chain concept was extended further by Standing (1999) to look at a project holistically, including the impact of procurement systems.(Figure 4) The below shown value chain comprises three distinct major value systems: Client, Multi and User.These reflect major value transition points in any projects (Kelly, Morlrdge and Wilkinson 2002).

Figure 4 :
Figure 4: Typical value system and value chain

Figure
Figure 5: Method of Study

5. 2 Following
How to improve the knowledge of VM in Sri Lanka context