Definition

The Australian and New Zealand Standard AZ/NZS 4183:1994 defines value management as
follows:Value Management is a structured, and analytical process which seeks to achieve value for
money by providing all the necessary functions at the lowest total cost consistent with the required
levels of quality and performance.

Objectives
Value management is a tool that has application at all stages of the strategic asset management
cycle, from the identification of service requirements through to the implementation of resource and
asset plans. It may also be used in operational and maintenance planning.

It provides the manager with a tool that can:

ensure that a project is cost-effective
resolve a complex problem
identify a number of options and assist in the selection of a preferred one

identify the means by which a service may be provided

review a brief
identify the means by which a project may be delivered
identify ways of providing functions at a lower total cost (life cycle cost)

identify additional functions which improve the outcome of the project

separate needs from wants and establish priorities

improve the standard of performance or quality of the project outcomes

generate commitment to outcomes through structured participation of stakeholders.

Benefits and risks

Benefits
A Value Management Study generally affects everyone associated with the project, in one way or
another. The client is generally most concerned to achieve value for money from the investment.
Users are concerned that the project meets their needs as effectively as possible. Designers are
keen to meet the expectations of both the client and users as well as to comply with relevant
standards and performance criteria. Project directors and project managers seek to ensure that the

1
project is managed within time, quality and budgetary constraints, and contractors want to provide
services that afford them an adequate profit.

Value management assists in identifying and meeting the needs of all these groups, enhancing, in
the process, an understanding of the project as well as the communication processes. In a well-
managed study, all parties can achieve significant benefit from both the process and the outcomes.

Beneficial outcomes may include:

clarification of stakeholder needs; separation of needs from wants; a refined definition of user
requirements; and functional clarification and definition of the project objectives, leading to an
improved client brief

rationalisation of outcomes
value improvement and cost savings through reduced project development time

identification of alternative designs, alternative solutions and alternate locations

identification of alternative construction methods, or modifications to the construction timeline

enhanced client involvement with the project development

team-building, leading to improved communication between stakeholders

wider ownership of project outcomes, and a commitment to implementation

identification of risk.

The impact of a Value Management Study on a project is usually quite significant. Nevertheless, if the
study does no more than confirm the project’s status and direction, then the stakeholders can be
assured that the confirmation is based upon a defensible analysis of function, cost and worth, and an
exploration of possible alternatives.

Risks

They include:
improper application of the methodology by an unskilled facilitator

inadequate representation of stakeholders in the workshop group

inadequate information, leading to incorrect assumptions

inadequate allocation of time, leading to sub-optimal outcomes
inadequate support by senior management
late initiation of a study within the project life cycle, limiting the impact.

The risks of not conducting a study may include:

outcomes that represent poor value for money
inappropriate strategies for providing service needs
poor definition of service needs

2
 an asset operation that cannot support service delivery
ineffective communication among stakeholders
deficient project briefs
lack of project ownership by end users and managers.

The value management process

The value management methodology comprises a five-stage ‘job plan’. All five stages are addressed
in sequence. Functions to be performed are analysed to ensure that they can be provided at the
lowest total cost while achieving acceptable levels of performance and quality.

A Value Management Study can be initiated by a number of different people, after having determined
that there is a need for such analysis. The choice of a facilitator is crucial to the success of the study.

Commissioning a Value Management Study

The study can usefully be conducted at all stages of the project life cycle.

Who can initiate a study?

the client (who may be concerned with finding the best solution, developing a clear brief,
minimising risk etc.)
the program director (who may be interested in a better brief, involvement of stakeholders in
the planning process, time savings etc.)

The design consultant (who may be seeking stakeholder input in the design process, to explore
alternative solutions etc.)
The development manager (who may be concerned with the identification of optimal solutions
for delivery etc.)

3
 The asset manager (who may seek innovative strategies for managing the asset portfolio).

Determining the need for a study

The decision to initiate a Value Management Study will take into account:

the perceived potential for a value improved outcome

the stage in the project development life cycle
the need to have broad representation and involvement
the benefits that a workshop involving key stakeholders will return

the access and availability of key stakeholders

the cost of the study.

The decision is generally agreed in consultation with management.

In broad terms, the following factors underpin the decision to conduct a

study:
potential for savings
the need to overcome interfacing problems
the need to overcome a difficult problem
the need to provide rigorous review or audit
complexity of the project
the innovative nature of the project
the need to accelerate the project
the need to develop or improve a brief
statutory requirements
a large number of stakeholder interfaces
the need to improve value for money
the need to develop/review the design.

Timing

The Value Management Study has application at all stages of the project life cycle namely:

at the strategic planning stage

at the concept development and evaluation stage
during the development of the design brief
at the design review stage
during the project’s implementation
at the operational review stage.

4
The greatest potential saving is possible at the earliest stage in the project life cycle i.e. when needs
are being identified, and there has been a minimum commitment of funds. It is common on large
projects, however, to hold a series of studies, one at each of the project stages mentioned above.

The study objectives and the mix of stakeholders are determined by the stage at which the study is
conducted.

If proposing to conduct value management studies, it is important that they be planned well ahead so
that they have maximum benefit.

Costs

The decision to commission a Value Management Study should be based on ‘best practice’
management criteria and not on cost alone. However, the costs involved in conducting a study must
be recognised.

They include the costs of:

engaging a consultant facilitator (or team)
each participant’s attendance
venue hire
administrative support.

While value management studies regularly return savings far in excess of the cost of conducting
them, the cost must nevertheless be substantiated and the need for the study validated.

Initiation criteria

The following study initiation criteria are developed in some detail to assist agencies to provide the
necessary justification for commissioning a study.

Potential for savings

Value management studies may be initiated for projects where there is a potential for savings.
Savings options may include developing alternative, more cost-effective ways of achieving functions,
taking into account the total life cycle costing.

Interfacing problems

Where interfacing problems exist, value management may be used to find temporary or permanent
solutions. Examples include the need to develop a high degree of understanding between
departments jointly involved in a project, or the need to find a bridging solution to a new or existing
problem.

Problem situations

5
Projects may involve problem situations that are best resolved using a facilitated group process.
Such problems may be common, recurring and difficult to resolve without stakeholder involvement.

Audit requirements

Value management studies can be used to audit capital works procurement programs. They can also
be used to achieve continual improvement of standard products, or to check a project rigorously.
Value management is used in this way to ensure that value for money is being achieved through the
clients capital works program.

Complex projects

Projects which contain complex issues may require that decisions be made using input from key
stakeholders. The complexity of a project increases with the number of disciplines involved in the
design or with the number of stakeholders. There may, for example, be competing interests, or a
need to establish priorities among a number of contentious items. Value management provides a
methodology for addressing such complexities, and for providing a range of potential options.

High-cost projects

The cash value of a project alone may be sufficient grounds for initiating a value management study.
It is important, however, that all parties agree to the need for the study. Any attempt to insist that
studies be conducted simply on the basis of cost of a project is likely to encourage resistance to the
process and, as a direct result, less than optimum outcomes.

Innovative projects

Value management studies may be held for projects which involve new ideas or new ways of doing
things in order to develop and compare options.

State projects

Where, for example, the general public has a significant level of interest in a project, or where issues
such as cultural value are involved, value management can be used to address the often complex
issues in a formal manner, and to validate the project.

Project acceleration

Value management studies can be used to accelerate projects. By bringing together a range of
people involved in the project delivery process, a high level of consensus can be reached in a short
time. For example, a study conducted at the project briefing stage can reduce the time taken for the
project as a result of the stakeholders’ involvement and the understanding of the project gained
during the study. Therefore, value management can shorten the critical path of the project delivery
process.

Project brief development

A Value Management Study may be initiated to develop the project brief. When conducted at an early
stage in a project life cycle, there is maximum opportunity for value improvement. An added
advantage is that the client, end user, designer and other key stakeholders are all present,
participating in a facilitated problem-solving exercise, sharing knowledge and understanding.

The Value Management Study

6
The Value Management Study is, a three-stage process. Each of the stages – the pre-workshop
stage, the workshop stage and the post-workshop stage – has specific objectives, and each is
important in its own right. Figure 1 shows the relationship between these three stages.

As soon as a decision is made to conduct a study, a skilled value management facilitator (or
facilitation team) is engaged, who assists in managing the process through each of the three stages.

While the role of the facilitator is to guide the study through its three stages, it is useful for the
managers and participants also to have some understanding of the value management process.

Figure 1 — Stages in a Value Management Study

The pre-workshop stage

During this stage, the facilitator and the sponsor of the study confer to identify all relevant information
and the key stakeholders, and to organise the workshop.

Key activities are:

establish the study timetable
establish workshop objectives
finalise the study team, including technical specialists
identify, and gain the commitment of, stakeholders
nominate, invite and brief participants
arrange a venue
brief presenters/sponsors for the information phase of the workshop

circulate background material.

The workshop stage

7
During this stage, a skilled facilitator who is well versed in the methodology of value management
guides the stakeholder group through the five phases of the Value Management Job Plan. The five
phases of the plan are described below.

The information phase

This phase of the workshop is concerned with sharing, disseminating

and clarifying information relating to the project. Components include:

identifying the problem situation

identifying the project ‘givens’
identifying the project functions
identifying assumptions
the project overview
key issues and concerns
clarifying project objectives.

The facilitator assists the participants to work as a group and to become effective in identifying and
addressing the issues in a structured way.

The analysis phase

During this phase, the functions of the project are analysed. Key questions asked are:

What does the project do?

What must the project do?
What does the function cost (life cycle cost)?
What is the value of the function?

This phase enables functions to be identified that appear to be disproportionately expensive.

The creativity phase

During this phase, the facilitator encourages the group to explore alternative approaches. The intent
is to suspend judgement so as to generate a number of creative ideas within a non-critical
framework. Group synergy is utilised to create more numerous and more creative options than is
possible with the members working individually.

During the creativity phase, the following questions are addressed:

How else may the required function be performed?

What else will perform the required function?
What will the alternatives cost?
Is the function necessary?
Can we eliminate, change, combine, relocate, add, simplify?

Creative ideas are generated and recorded.

8
The judgement phase

During this phase, participants are asked to judge the ideas developed to this point and select those
that may lead to improved outcomes.

The development phase

Those ideas judged during the previous phase to be potential solutions are further developed during
this phase.

In some cases, the work of this phase will extend beyond the Value Management Workshop and may
involve, for example, the development of detailed drawings and cost estimates.

The final task in the Value Management Workshop stage is to consolidate the outcomes of the
workshop session. Depending on the length of the workshop and the stage of the project at which it
is conducted, these outcomes may take several forms.

These are briefly detailed following:

Action Plan
This would identify the findings and provide a timeline for ongoing development, evaluation and
decision-making. Follow-up meetings for those involved in implementing items in the Action
Plan are recommended to ensure that all value improvement opportunities are fully developed.

Workshop findings and recommendations

With longer studies, where time is available to evaluate options more thoroughly, firm
recommendations may be developed. They may be presented to sponsors or management as
an Implementation Plan. They may also be delivered as a formal presentation.

Formal presentation
Where possible, these recommendations should be formally presented to management and
other stakeholders so that issues can be resolved before a final report is prepared. The
process of preparing a formal presentation assists in clarifying issues and in consolidating
commitment to, and ownership of, the recommendations.

The post-workshop stage

During this stage, the Action Plan is implemented, a report on the workshop is prepared and
circulated and an evaluation is conducted.

The agency generally takes over the responsibility for ensuring that the action plan is implemented,
and for incorporating the recommendations into the project’s development. It should develop
procedures to audit the implementation of recommendations once projects proceed.

The report provides a clear and comprehensive record of events that led to the development of
recommendations. It is sometimes necessary to refer back to events during the workshop for
clarification or justification.

Finally, a form of evaluation is recommended to ensure that the value management process achieved
its objectives in a cost-effective manner.

Why use value management?

9
What sets value management apart from other problem-solving methodologies is that it is concerned
both with the identification and analysis of information and the transformation of perceptions. On the
one hand, it deals systematically with all that is known about the project, including underlying
assumptions, givens and viewpoints, while on the other it seeks to use the creative process to
identify solutions (some of which may be radically different). It is not uncommon for individuals to
reverse their position on issues completely as a direct result of their involvement in the Value
Management Workshop.

Enhanced communication and networking are direct benefits of the workshop process. These, in
turn, have a significant impact throughout the project. Figure 2 illustrates how the interaction of
knowledge and experience of workshop participants overlap.

Figure 2 — Workshop interactions: overlap of experience and knowledge

As a management tool, value management has a lot to offer.

It can solve problems creatively and economically by:

challenging assumptions
identifying unnecessary expenditure
generating alternative ideas
promoting innovation
maximising resource utilisation
saving time, money and energy

10
 simplifying methods and procedures
eliminating redundant items.

It can achieve better value and improved return on investment through:

project life cycle cost savings

time savings
consideration of options
reduced wastage
risks being forecast
expenditure being concentrated on adding value
staging and phasing.

It can be used to:

improve communications
resolve conflicts
set objectives
establish priorities
expedite decisions
validate proposals
create more options
build project teams
generate commitment.

It is important to note that value management is not:

cost planning
cost engineering
project management
quality assurance
a ‘cure-all’
a ‘witch-hunt’
design-by-committee.

For value management to be successful, the following factors are

important:
explicit executive support
the selection and attitudes of participants
the methodology
the workshop facilitation
the management of the process.

11
The Strategic Value Management Study
Strategic planners and strategic asset managers will find the Strategic Value Management Study
particularly relevant. As the title suggests, this study is conducted at the earliest possible stage, as
soon as a perceived need is recognised. It involves a broad range of stakeholders, usually
representing a high level in the client organisation, and includes representation from users, regulating
bodies, planners, and asset managers. The group is generally large (up to 30 participants) and the
workshop is often of two days’ duration.

The characteristics of the strategic study include:

a systems approach, concentrating on service delivery
a focus on function
the creative development of delivery options
an assessment of total asset cost (which includes life cycle costing)

prioritisation of service delivery options

the use of advanced facilitation methods.

Concept and design value management studies

Value management studies conducted at concept and design stages of a project have a different mix
of stakeholder involvement, and may be conducted over longer periods (i.e. from three to five days’
duration). Each type of study is important to the overall success of the project. In all cases, the
standard job plan is followed.

Selecting a facilitator

The choice of facilitator is fundamental to the success of a study. The decision to engage an in-house
facilitator, a consultant facilitator or a facilitation team will be made taking into account the nature of
the study, the complexity of the task and the size of the stakeholder group. It is important that the
facilitator be objective and therefore have no other involvement with the project.

Agencies are encouraged to require that facilitators conduct value management studies in
accordance with the Australian and New Zealand Standard AS/NZS 4183:1994. They should seek
references from the facilitator’s previous clients.

Factors to be considered in selecting a facilitator include the person’s:

experience as a value management facilitator

experience with similar projects

12
 willingness to comply with AS/NZS 4183:1994
qualifications. (They should be equivalent to the ‘practitioner grade’ of the Institute of Value
Management, Australia.)

Performance Measurement
The two key aspects of a study which require attention in any form of performance assessment are
the process and the outcomes.

Process
The value management process can be assessed on the basis of how effectively the facilitator
managed the process (as specified in the job plan), facilitated the group and liaised with the agency
throughout the entire study.

Outcomes

Outcomes can be assessed by making the following observations.

The study objectives were met.
Workshop participants gained a better understanding of the project.

Participants gained a better understanding of the views of others.

Networking and communication amongst participants were enhanced.

There was an improvement in value.

Where appropriate, there were savings in cost.

Other measures which may be used to assess outcomes include:

enhanced definition of the problem situation
improved client brief
reduced project development timeline
reduced project construction time.

Reference Material
All Queensland Government Legislation
Australia/New Zealand Risk Management Standard
Building Division
Department Of Public Works
Glossary of Terms
Institute of Value Management, Australia
Queensland Government’s State Purchasing Policy
Queensland Treasury

Case Study

13
A proposal for a new prison was the subject of a Strategic Value Management Study, which was
conducted very early in the project life cycle. It preceded any concept design, with only very
preliminary estimates of site cost available. The study was initiated with the aim of identifying
potential savings.

At the outset, it was made clear that the choice of site was predetermined, despite undulations, steep
slope and poor sight lines. This was challenged a number of times, initially with no success. As
members of the group began to match the functions required of the prison facility with the functions
of the building, it became obvious to all that the site was entirely unsuited to the purpose.

During the function analysis process, the proposed medium security prison was considered in the
context of the broader prison system of which it was a part. It became a relatively simple matter to
change the usage pattern of some alternative sites, and the principal outcome of the study was the
recommendation to relocate the prison. Because the decision-makers were represented at the
workshop, the approval to develop the prison on the alternative site was forthcoming almost
immediately.

The result was a far superior prison with better sight lines on the perimeters, less expensive
foundations and improved security procedures. The need to relocate existing buildings on the original
site was obviated and cost savings were of the order of millions of dollars. There were a number of
other useful innovations which led to value improvement as a direct result of the Value Management
Study.

The workshop was conducted over two days, and the study overall, including the pre- and post-
workshop stages, required approximately six weeks.

The project development time was significantly reduced as a result of an improved understanding
and more effective communication between the stakeholders.

The study was conducted at the concept development stage which provided maximum opportunity
for savings.

The stakeholders included representatives from Corrective Services, prison staff, the designers, the
project managers and the Department of Finance.

The study was facilitated by a team comprising a facilitator, a co-facilitator, a value analyst and an
independent technical specialist.

The cost of conducting the study including venue hire, facilitation team fees and the two-day
contribution by each participant was a very small percentage of the value improvement.

14