Value Engineering

Value Engineering is the systematic application of recognized techniques by a multi-disciplinary team which identifies the function of a product, process, design or a service, establishes a worth for that function, generates alternatives through the use of creative thinking, and provides the needed functions at the lowest possible life cycle cost without sacrificing project performance, safety, reliability, quality and environmental compliance.

Value Engineering is also referred to as Value Analysis, Value Management or Value Planning. The subject of a VE study, whether it is a product, process, design or service is referred to as the “project”.

Workshop Process

VE uses a systematic process that attempts to answer five fundamental questions:

  1. What is it?
  2. What does it do?
  3. What does it cost?
  4. What else will do the job or what other material or method can be used to provide the same function?
  5. What would that alternative cost?

Pre-Study Session Activities

The pre-study phase starts with establishing the following in consultation with client Department Manager:

  1. Fixing date for the VE study session
  2. Planning the duration of study
  3. Arranging for a Facilitator
  4. Selecting VE team members

VE Facilitator will prepare Terms of Reference (TOR) for the study based on the following documents and distributes to the team members:

  1. Project Specification
  2. Process Design Package
  3. Design Basis Memorandum
  4. Basic Design Package
  5. Pareto Chart for Cost Distribution
  6. Class-2 Cost Estimate +/- 20% (if non-confidential)

Cost data aids the VE team in identifying potential areas for value improvement. It also provides a base line for quickly estimating the cost benefits of VE proposals. Ensuring that a detailed budget estimate or summary level cost Pareto Chart is prepared in advance

Value Study Session Activities

VE study session activities include exploring the project scope, visiting the site (if possible), analysing project functions, brainstorming ideas, screening and developing ideas and finally presentation of short listed ideas to Project Manager or decision maker for acceptance and implementation. The strength of the VE study team lies in its diversity and in its focus on improving project value. Although they have a shared objective, each team member will have slightly different role and responsibility to ensure that these activities are accomplished successfully.

Various Activities under VE study session are described below;

Information Phase

In this phase, project requirements, limitations, plans, specifications, design and construction schedules, and project cost estimates gathered during the pre-study phase are presented, discussed and validated by VE team during the first day of the workshop.

Whenever possible, always include a site visit in VE agenda. Typically, the best time for the site visit is on the first day of the study for Facilitator and VE team members to get first-hand information about the project. Site visit is part of the Information Phase of the study and it serves below listed three important functions in the VE study plan:

  1. It aids in the understanding and visualization of the scope of work.
  2. The site can provide valuable information about neighbouring facilities that might benefit, or adversely impact, the project under study.
  3. A site visit aids the development of a cohesive VE team (team building)

Functional Analysis Phase

Function analysis is the foundation of VE since it separates VE from cost reduction techniques. The function analysis approach is used in VE to arrive at the basic purpose of project components. In this phase, the following activities will be performed:

  1. Identify the function for each system / equipment
  2. Classify the functions as Basic or Secondary
  3. Develop function models
  4. Establish function worth
  5. Compare cost to worth of functions (i.e., establish Value Index = Cost/Worth)
  6. Select functions for study.

Certain key questions are asked during the analysis of functions, namely:

  1. What does it do?
  2. What must it do?
  3. What does the function cost?
  4. What is the function worth?

The Facilitator will develop Function Analysis System Technique (FAST) diagram. In FAST diagram, the following functions will be identified for system under study:

  1. Higher Order Function
  2. Basic Function
  3. Required Secondary Functions
  4. Lower Order Function
  5. Time Functions

Creative Phase (Idea Generation/ Speculation)

The objective of this phase is to develop a large quantity of ideas (alternatives) using brainstorming exercise for performing each function identified in FAST diagram during previous phase. During the creative phase, judgment on the ideas is restricted. The VE team is looking for quantity and association of ideas which will be screened in the next phase of the study. This list will include ideas that can be further evaluated and used in the design. A large number of ideas are listed for further consideration at the conclusion of this phase.

Evaluation Phase

In this Phase, ideas and concepts generated from the Creative Phase are evaluated to select the feasible ideas for further development. Impractical ideas are disregarded and those that represent the greatest cost saving potential are developed further. It is important to establish criteria to evaluate and screen ideas.

Criteria like Life Cycle Cost (LCC), safety, and reliability, better performance or shorter project schedule can be used in screening of ideas. List all ideas after screening in descending order of importance for the development phase.

Development Phase (Idea Development)

The objective of this phase is to further develop the shortlisted ideas into workable solutions. The development consists of detailed technical analysis, cost analysis and schedule information to support feasibility of the ideas.

The VE team further screens the VE recommendations/proposals completed during the development phase before presenting the results. Feasible ideas will be considered for recommendations and each proposed idea shall be documented separately.

Issue Preliminary VE Workshop Report & Presentation

The Facilitator formally presents the recommendations from the preliminary VE Report to the Project Manager, who will determine (in consultation with Owner/ E&PM Management, as necessary), which of the VE Proposals are to be executed/implemented.

Before the final VE report can be issued (part of post study activity), confirmation of the acceptance status of each recommendation/proposal will be determined. If the preliminary report includes proposals that could have a significant impact to the project scope or schedule, or proposals for which a unanimous agreement among the key team members could not be reached, the VE Facilitator will present them directly to Project Manager for a final decision.

VE Study Duration

The traditional VE study workshop lasts approximately five (5) days. A typical five (5) days VE session agenda is as follows:

  • Day 1: Information Phase & Site Visit
  • Day 2: Function Analysis & Creative/Brainstorming Phases
  • Day 3 & 4: Evaluation & Development Phases
  • Day 5: Presentation & Wrap-up

Large complex studies may be organized differently as they will need more time. The effectiveness of the VE study can be severely affected if sufficient time is not allocated to each of the VE phases.

Post Study Session Activities

Post session activities include preparation of the final report which lists the accepted proposals/recommendations that have been agreed for implementation, implementing accepted proposals and monitoring the overall implementation process. The Facilitator will issue the final report to the Project Manager. Copies of this report will be made available to the Facility Owner (Affiliate) and client Department Manager for their record and reference.

It is important to note that the decision to implement a particular proposal need not wait until the post session activities are completed. The Project Manager is empowered to act immediately on VE proposals generated at any time during the study. This is particularly advantageous when the project is on a fast track schedule and the VE proposal requires some redesign effort.