Value Management - Tutorial - VM Practice: Enhancing value or cost cutting
- 1. 01 02 03 04 05 06 07 VALUE ENGINEERING & MANAGEMENT CHAPTER 3 Value Management Practice - Enhancing Value or Cost Cutting 0331773 Nicholas Wong Chin Kai 0331859 Orlando Wong Kueng Khung 0329126 Pavithra Ramakrishnarao 0331366 Tan Kai Bin 0330764 Wan Yee Len 0326478 Wong Yong Le 0331857 Yong Kang Seng
- 2. VALUE ENGINEERING & MANAGEMENT CHAPTER 3 Value Management Practice - Enhancing Value or Cost Cutting 01 Difference between the conventional approach and the VM approach in the planning and design development of a proposed project. 02 03 04 05 06 07 CONVENTIONAL APPROACH Complete methodology for ongoing projects in a sequential cycle: initiations, planning, executing, monitoring, controlling and closing Silos All of the parties tend to work in “Silos” during the planning and design development of a proposed project Silos is a mentality of reluctance to share information with employees of different divisions in the same company and that will prevent the flow of information, focus and control outward. However, silos are necessary in companies to allow expertise in different areas. Parties involved Client Project Manager Architect Quantity Surveyor Engineers Owner
- 3. VALUE ENGINEERING & MANAGEMENT CHAPTER 3 Value Management Practice - Enhancing Value or Cost Cutting 01 Difference between the conventional approach and the VM approach in the planning and design development of a proposed project. 02 03 04 05 06 07 VM APPROACH VM are technique concerned with defining, maximizing and achieving “value for money”. VM are not only necessary in construction projects to achieve better value from the resources, but also to deliver ancillary benefits such as better communication, improved teamwork, better alignment of supply chain and a better understanding of project objectives. Difference between value management and other processes is that value management focuses on the expected outcome of a project. Parties involved: Client Project Manager Architect Quantity Surveyor Engineers Owner *could be the same as conventional but all of them will work together under VM approach
- 4. 01 02 Characteristics of VM as identified by Kelly & Male. 03 04 05 06 07 Systems oriented that uses a formal job plan to identify & remove unnecessary costs Multi-discipline team approach team of experienced designers, estimators & value Management Consultants (VM Facilitator) Life cycle oriented that examines the total costs of owning & operating a facility A proven management technique Function oriented that relates function required to value received
- 5. 01 0202 03 MISCONCEPTIONS of Value Management 04 05 06 07 View VM as cost cutting tool Due to lack of understanding of the subject Value Management is not: ● A conflict oriented design review ● A cost cutting exercise ● A standardisation exercise Purpose of VM: To achieve better value by eliminating the unnecessary costs without compromising the needed performance Why? Miss the important features of VM 1. The application of creativity and systems approach to validate a certain proposal 2. Elimination of unnecessary costs which do not contribute to the value of the projects, products, systems and services
- 6. 01 02 03 04 V M C P05 06 07 Value Management Change Proposal Purpose To incentivise the contractor to propose contract modifications which reduce cost without reducing product or process performance with the introduction of a VM/VE clause in the contract
- 7. 01 02 03 04 05 REQUIREMENTS for a VMCP06 07 A proposal must, at a minimum require: Change to a contract Specifications Plans Other contract requirements … without compromising performance, reliability, maintenance, or safety Reduced construction cost Higher quality product Improved safety Shorter contract time
- 8. 02 04 05 06 07 01 02 03 04 05 06 Benefits to the Contracting parties from submitting/adopting VMCP under the FIDIC form of contract. 07 FIDIC form Clause 13.2 Accelerate completion Reduce cost of Employer of executing, maintaining or operating the works Improve the efficiency or the value to the Employer of the completed works FIDIC Forms of Contract allow contractor increase expected profit by sharing the net saving. If a proposal prepare by contractor and approved by the project manager, FIDIC Form of contract allow contractor to get half (50%) of the final saving if this change result in a reduction in the contract value of this part.
- 9. 01 02 03 04 05 06 07 Incentive to the Contractor for VMCP calculated under the FIDIC form of contract The Value Management Incentive Clause (VMIC) is the incentive clause that provided in Malaysia for procurement contracts, such as PWD 203A/203, PAM, FIDIC Form of Contract, whereby the Contractor is allowed to offer alternative proposals to the government components through a VMCP. Steps to calculate Contractor submit written proposal to Project Manager and proposal prepared at the cost of Contractor which include in Subclause 13.3 Variation Procedure. The Project Manager will approve the submitted proposal after decide. The proposal approved by Project Manager, include the changes of design Permanent Work if both party agreed: Project Manager under Subclause 3.5 decides either to pay Contractor the (- 50%) fee difference in: a) Contractor changed the design b) Subclause 4.1 (a) and (d) applies c) Contractor value decreases a) Reduction in contract value b) Reduction in value to the Employer of the varied works 1 2 3 4
Editor's Notes
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