Basics of Value Engineering

Value engineering (VE) study shall be an organized effort directed at analyzing the functions of systems, equipment, facilities, and supplies for the purpose of achieving the required function at the lowest overall or life cycle cost.

 will result in reduced overall costs without degradation of the essential characteristics of the system by applying value engineering principles and techniques, thus, resulting to higher productivity and efficiency

 VE METHODOLOGY
THE FUNCTIONAL APPROACH THE VE JOB PLAN HUMAN RELATIONS CREATIVITY

THE FUNCTIONAL APPROACH

A user/owner purchases an item or service because it will provide certain functions at a cost he is willing to pay. Anything less than the necessary functional capability is unacceptable; anything more is unnecessary and wasteful.

 To achieve optimum value, functions must be carefully defined so that their associated costs may be determined and properly assigned The VE approach requires the development of valid and complete answers for the following six questions:
What is it? What does it do? What it is worth?

 What does it cost? What else would work? What does that cost?

1. Evaluation of Function. - When it has been decided that a VE study will be conducted on an item or system, the initial effort must be directed toward determining the users actual needs.

 The users needs are those explicit performance qualities, traits, or characteristics that justify the existence of an item, that is, the characteristics that must be possessed if the system or item is to be useful or efficient. Many times there is a temptation to look at an item and say that the function it performs is the required function. But this is not always true. By defining the function, one learns precisely which characteristics of the design are really required.

2. Determining Function.
In VE, function is normally expressed using two words a verb and its noun object: The verb answer the question, What does it do? The verb define the items required action ( it may generate, control, pump, emit, protect, transmit . . . . ). The noun answers the question, What does it do it to? The noun tells what is acted upon, (electricity, temperature, liquids, light, surfaces, sound . . . ).

 The system of defining a function in two words, a verb and a noun, is known as twoword abridgement. This abridgement represents a skeletal presentation with retention of relative completeness 3. Identifying Function. A function should be identified so as not to limit the ways in which it could be perform. For example, consider a buildings management operation of fastening a simple nameplate on a piece of equipment

 Identification of function should concern itself with how something is used, not just what it is. For example, the function of an electric wire could be conduct current, fasten part, or transfer force depending on application. Identifying function in broadest possible terms provides the greatest potential for value improvement because it gives greater freedom in creativity developing alternatives

4. Classifying Functions. Functions of items or systems may be divided into two types, basic and secondary.
Basic Function defines a performance feature that must be attainted It reflects the primary reason for an item or system A basic function answers the question, What does/must it do?

- Secondary function defines performance

features of a system or item other than those that must be accomplished. - A secondary function answers the question, What else does it do? For example, -the basic function of exterior paint is protect surface. -The secondary function is improve appearance.

 Secondary functions often result from the design configuration chosen to satisfy a basic function For example, a valve on a radiator restricts flow and is necessary only because a hot water heating design was chosen. Then, the presence of a secondary function is incidental to the method chosen to achieve a basic function

5. Functional relationships. The relative position that a system or item occupies in the scheme of the total assembly is called its level of indenture.

Figure 1.1 Typical System Model

Level of Indenture
1

Component

Functions

Fire alarm system

2 3

Person Pull boxes Bells Panels Conduit and wire

Classification B = Basic S = Secondary Make noise B Detect Fire B Protect Building S Detect Fire B Pull lever S Break circuit S Make noise B Provide power S Transmit power S

Figure 1.2 Example of Functional Relationship

6. Evaluation of worth. The second step in functional analysis is to establish the Peso value of worth for each function. -It is a highly creative endeavor because worth is relative to subjective rather than absolute or objective measure. -Skill, knowledge and judgment play a major role in determining the quantitative aspect of worth in terms of Pesos.

7. Determining worth. The above guidelines for evaluating worth must be applied against the following rules for determining worth for a specific VE analysis
-The worth of all secondary function is zero for VE purposes. -A Peso figure for the value of worth must be established for each basic function. -Worth is associated with necessary function or functions and not with the present design of the item.

-There must be no discrimination between a function that is definitely required and the consequences of failure to achieve that function. 8. Evaluation of cost. The consideration of cost is the third step in functional analysis.
Evaluation of cost serves several purposes: 1. Identifying high cost elements is useful in determining the priority of individual VE studies to be undertaken.

2. Cost visibility is given to functional performance where normally such costs are buried in unit or system estimates. 3. The validity of the claimed savings at the conclusion of a VE project depends upon the accuracy of the cost figures for the present design and the realism of cost estimates of the proposed design.

9. Determining cost. The cost of the present design of a system, item or operation should be determined in as great detail as possible.
- In conducting functional analysis the following rules will always govern: 1. Where an item serves but one function, the cost of the item is equal to the cost of the function.

2. Where an item serves more than one

function, the cost of the item should be prorated to each function. For example, the cost of acoustical tile with a flame spread rating of 25 or less might be Php 100.00 per square foot.

An appropriate breakdown of this cost on a functional basis might be:

ITEM Acoustic tile

FUNCTION Absorb sound B Cover ceiling S Protect ceiling S

COST/SF Php 70.00 10.00 20.00

10. Evaluation of value. This is the fourth step in the functional analysis process. The term value is used in many different ways, and has several meanings.

-The value of a given item may differ according to whether it is viewed from the standpoint of the seller, the buyer, or the user.

-Different concepts of value may exist between individual users, depending on the time, place, situation, or availability of substitute items. -Four general categories of Value 1. Cost value, 2. Use value, 3. Esteem value, and 4. Exchange value.

-Value is relative to both cost and price but use value, which is the value normally considered by most users/owners, may not be relative to either. -A VE goal is the maximization of end item value through the control of use value, cost value, and the elimination of costs associated with any other value not related to performance of basic function.

11. Determining value. Value can be quantitatively expressed through the use of a value index which is the relationship between cost and worth. -Remembering that cost and worth are related to functions rather than items, the index serves to:

-Assist in determining whether to proceed with the study. -The study should proceed only when the value index is greater than one, exists. -Locate areas where the cost/worth ratio is greater. Generally these areas will have the greatest VE potential and is useful in selecting projects for VE study.

THE VE JOB PLAN

 The VE Job Plan consists of those tasks or functions necessary to properly perform a VE study. Use of the Job Plan provides: A vehicle to carry the study from inception to conclusion.
A convenient basis for maintaining a written record of the effort as it progresses. Assurance that consideration has been given to facts that may have been neglected in the creation of the original design.

 A logical separation of the study into units that can be planned, scheduled, budgeted and assessed

PHASES OF THE VE PLAN

1. Orientation phase.

This phase relates to the initiation of ideas for projects and their evaluation, selection, planning and authorization rather than the steps for conducting a specific project.

2. INFORMATION PHASE. -Objectives: a. to obtain through understanding of the system, operation or item under study by a rigorous review of all the pertinent factual data, and b. to define the value problem by means of functional description accompanied by an estimate of the worth of accomplishing each basic function.

Procedure: a. Good human relations. b. Collecting information. c. Determine functions. d. Evaluate functions.

3. Speculation Phase -Objective. The objective of this phase is to generate, by creative techniques, numerous alternative means for accomplishing the basic functions identified. - Procedure. Consideration of alternate solutions should not formally begin until the problem is thoroughly understood.

- Free use of imagination is encourage so that all possible solutions are considered. -partial list of questions that can be used to stimulate and trigger ideas. a. ELIMINATE-COMBINE -Can it be eliminated entirely? -Can part of it be eliminated? -Can two parts be combined into one? -Is there duplication? -Can the number of different lengths, colors, types be reduced?

 STANDARDIZE SIMPLIFY

-Could a standard part be used? -Would a modified standard part work? -Does the standard to cost? -Does anything prevent it from being standardized? -Is it too complex? -Can connections be simplified?

 CHALLENGE IDENTIFY -Does it do more than is required? -Does it cost more than it is worth? -Is someone else buying it at lower cost? -What is special about it? -Is it justified? -Can tolerances be relaxed?

 MAINTAIN OPERATE -Is it accessible? -Are service calls excessive? -Would you like to own it and pay for its maintenance? -Is labor inordinate to the cost of materials? -How often is it actually used? -Does it cause problem? -Have users established procedures to get around it?

 REQUIREMENT COST

-Are any requirements excessive? -Is it proprietary? -Are factors of safety too high? -Are calculations always rounded off on the high side? -Would lighter gauge materials work? -Could a different finish be used?

 Techniques to use.
- Blast, create and refine. Create, really reach for an unusual idea; reach way out for another approach. Refine, strengthen or add to develop an idea to perform basic functions in a new unique manner.

- Functional

comparison. Conduct a creative problem solving session (brainstorming) in which new and unusual contributions of known things or processes are combined and/or rearranged providing different ways of performing basic functions.

- Simple comparison. Conduct a thorough search for other items which are similar in at least one significant characteristic to the study item.

- Scientific search. Conduct a search for other scientific disciplines capable of performing the same basic function.

4. Analysis Phase. - Objectives. The purpose of this phase is to select for further analysis and refinement the most promising alternatives from among those generated during the previous phase.

Several techniques are available by which alternative ideas can be evaluated and judged. These are: a. Comparison technique. b. Advantages versus disadvantages technique. c. Ranking technique.

- Techniques.

d. Checklist technique. e. Probabilities technique. f. Creativity approach.

 Procedure. Evaluation may be accomplished either by the generating group or an independent group. a. Evaluation criteria. The first step is to develop a set of evaluation criteriastandards by which to judge the ideas. b. Screening process. The next step in the procedure is the actual ranking of ideas according to the criteria developed.

-Define alternatives. The remaining alternatives are then ranked according to an estimate of their relative cost reduction potential. - Final selection. After the detailed cost estimates are developed for the remaining alternatives, one or more are selected for further study, refinement, testing, and information gathering. Normally, the alternative with the greatest saving potential will be selected.

5. Development Phase. - Objective. In this phase, selected idea or ideas are fully developed with the intent of making specific recommendation for change to management or owner.

 Procedures. General. Each alternative must be subjected to: (a) careful analysis to insure that the users needs are satisfied; (b) a determination of technical adequacy; (c) the development of estimates of costs, implementation expenses, and schedules, including schedules and costs of all necessary tests; and (d) consideration of changeover requirement and impact.

 Develop convincing facts. As in the Information Phase, the use of good human relations is considerable importance to the success of the Development Phase. Develop specific alternates. Those alternates that stand up under close technical scrutiny should be followed through to the development of specific designs and recommendations.

 Develop implementation plans. Anticipate problems relating to implementation and propose specific solutions to each. Testing. Tests required to demonstrate technical feasibility are part of the VE process and should be performed before the alternative is recommended for implementation.

 Select first choice. Finally, one alternative should be selected for implementation, as the best value (best cost reduction) alternative, and one or more other alternatives selected for presentation in the event the first choice is rejected by the approval authority.

6. Presentation Phase.

- Objective. This phase involves the actual preparation and presentation of the best alternatives to persons having the authority to approve the VE proposals.

This phase of the VE job Plan includes the following steps:

- Preparing and Presenting the VE proposals. - Presenting a plan of action that will insure implementation of the selected alternatives. - Obtaining a decision of positive approval.

- Form. Presentation of a VE proposal should always be made in written form. - Format. During the course of a VE project, two major documents should be produced: a report summarizing the results of the effort and a project book that contains all the detailed back-up information.

- Content. Management, responsible for review and approval, must base its judgment on the documentation submitted with a proposal.

 Minimum Requirement of VE study written report Contents page. Executive summary. Brief summary of VE recommendations Site plan, floor plan and elevations on letter size paper.

Summary sheet of cost estimate of 50% design submittal. VE cost model of project. VE worth model

 Each VE recommendation will be described before and after VE and will be accompanied with a detailed cost estimate of savings, life cycle cost analysis, and sketches as necessary. Complete VE job plan of all work will be submitted as a glossary for reference. Review comments on preliminary submittal.