CEL 766 SYSTEMS DESIGN & VALUE ENGINEERING

Value Engineering : Merely, a Methodology or a Philosophy - Valuation through Some Case Studies

Presented By;Amrita Mitra 2010CEC3863

Vikalp Awasthi 2010CEC3853

Arneet Singh Sarna 2010CEC3837

Overview

What is Value Engineering?

How Do we Apply VE?

When is it used?

Value Engineering Six Steps Plan?

VE Case Studies

What is VALUE???

Hummer.. $50,000+

$50000 + Tata Nano $2000

•Use Value

•Cost Value

•Exchange Value

•Esteem Value

•Goodwill

•“Feel good” Value

Both Nano and Jaguar are owned by TATA

What is Creativity???

“Every man with new ideas is a crank until those ideas actually work” - Mark Twain

Creativity is the art of

bringing something new into existence.

It has the art of making, inventing, or producing something new and different.

VE combines concepts of VALUE with CREATIVITY

Originally called Value Analysis by its inventor, Larry

Miles, an engineer in GE's purchasing operation in 1947,

VA/VE uses a value equation that says value is equal to

function divided by cost. If, for example, the buyer wants

to get more item value, he/she needs to either increase the

item's functionality at the same time he/she is containing

cost; or he/she needs to reduce cost while holding or

improving its functionality. Either way, the result is more

value for the customer.

VALUE ENGINEERING - A FORGOTTEN TECHNIQUE??

Value Engineering (VE) is an intensive, Interdisciplinary problem solving activity that focuses on improving the value of the functions that are required to accomplish the goal, or objective of any product, process, service, or organization.

VALUE METHODOLOGY “The systematic application of recognized techniques which identify the functions of the product or service, establish the worth of those functions, and provide the necessary functions to meet the required performance at the lowest overall cost.”

WHAT IS VALUE ENGINEERING???

Concept of Value

FUNCTION

VALUE =

COST

V.E. Objective is to make F/C~ =1.00

Best Value is not about cost cutting, it is about improving the understanding of the business/project needs and improving utility value for the end user.

•Value Engineering is used to determine the best design alternatives for Projects.

•Value Engineering is used to reduce cost on existing Projects.

•Value Engineering is used to improve quality, increase reliability and availability, and customer satisfaction.

•Value Engineering is also used to improve organizational performance. •Value Engineering is used to improve schedule •Value Engineering is used to reduce risk •Value Engineering is a powerful tool used to identify problems and develop recommended solutions.

9

WHEN VALUE ENGINEERING IS USED??

Potential Saving from VE

Re-Test Feasibility

Drawings Released Design Changes

Net Savings from VE Cost

Total Cost of VE Implementation

VE Implementation beyond this point results in a net loss.

Construction Construction Design Concept Dwgs Release

TIME 10

Ideal- Enhanced Value at Reduced Cost

Enhanced Value

Enhanced Value

How do we Improve Value of a function?

Function performance Cost of function?

Resulting Value Needed performance

Enhanced Value

Value Engineering uses a combination of creative and analytical techniques to identify alternative ways to achieve objectives.

The use of Function Analysis differentiates Value Engineering from other problem solving approaches.

Function Analysis Systems Technique

F A S T

HOW IS VALUE ENGINEERING APPLIED???

Value Study Diagram

SIX STEPS VE PLAN

Information Phase: Fact Finding

•What do you need to know about the problem that you don’t know now? •What facts are known?•What are the requirements of the system?•Are these facts, opinions, assumptions, or prejudices?

•Where or how can information be obtained?

FUNCTIONAL PHASEFunctions - Describe what something does

Functions - Use active verb and measurable noun

FAST (Function Analysis System Technique) - A logic diagram to describe how a system works.

Examples : Secondary Functions 1 Plan Finishing Material 2 Magnify Living Room Area 3 Reduce Wall Thickness 4 Design Exposure 5 Minimize Defect 6 Design Finishing

Key Function :

Satisfy Tenant

Creative Phase

The Creative Workshop

•Record creative ideas on a flip chart

•Begin with high cost functions

•Structured & facilitated brainstorming

•Number ideas for cross-referencing

•List every idea no matter how unconventional

•No ridicule or judgment

•Enjoy!!

Functions →Ideas

Mind is like a parachute: It works best when open!

Evaluation Phase• Developing & ranking ideas against performance criteria

•Pass / fail test

• Eliminating ideas that don’t have champions

•Feasible / realistic / lack of champions

• Voting on ideas through ‘Gut Feel Criteria’

GFI (Gut Feel Index) -Discuss pro/con and vote. GFI is team average. -Combine ideas; add new ideas. -Record all assumptions when voting.

WASTE• Make it tangible • Make it VISIBLE• Seek / Identify opportunities to eliminate/modify Small / large ideas, build on others ideas..

Unnecessary & secondary functions are like waste that may be eliminated by creativity

Development Phase

Objectives:

• Review Customer’s values and objectives

• Expand Ideas

• Develop the chosen ideas into written recommendations that include:

Sketches

Calculations

Cost Analysis

Advantages and Disadvantages

Risks (cost and time) if possible

ACTION PLAN

• “What needs to be done?”

• Plan ahead for anticipated Road Blocks.

• “Who should be assigned the action?” Assign a Team Member• Assign a completion date for the action.

• “When should the task be completed?” Plan regular team status meetings. • Anticipate 4-6 weeks to complete the actions.

Reporting/Presentation Phase

• Give oral presentation. • Support it with written executive brief. • Be clear, concise, and positive. • Anticipate roadblocks.• Use good human relations. • Inspire Confidence.

Follow –up Activity

• Recognize the participants.

• Publicize the results.

• Audit the performance of the implemented actions.

• Close out the project.

Critical Success Factors for VE

METHODOLOGY

VE job plan must be followed systematically

Attitude of Participants

Right attitude, appropriate stakeholders, awareness of process

Executive support

VE workshops, sponsorship, implementation of results

Management of Process

Clear objectives, timelines, follow-up actions, review and feedback

Professional Workshop Facilitation

Probing with right questions, using appropriate tools, managing

the process, maintaining momentum of team, etc. etc.

Case Studies

In order to present our views further and to bring out the importance of a VALUE ENGINEERING exercise in construction projects, we have taken up a case study. The following case study was published by OGC (Office of Government Commerce), Ministry of Commerce, U.K along with a series of other value engineering case studies in order to promote it’s use all across the United Kingdom for Construction Projects.

Case Studies by OGC

Case Study No.2

Among all the projects that were subjected to VM by OGC the second project namely, THE OPEN UNIVERSITY PROJECT was the one where maximum transformation was observed. Hence, we shall discuss the same during the course of our presentation.

The OPEN UNIVERSITY Project

•Project Objective of the VM team: Getting more for less and Increasing User SatisfactionThe End Result:•VM supported team learning at the OPEN UNIVESITY LIBRARY PROJECT resulted in benefit to cost ratio of more than 10:1.•Cost savings of £1.3m were achieved at aVM study cost of £120,000 – a benefit-to-costratio of more than 10:1.

The OPEN UNIVERSITY ProjectThe Open University’s objectives were:

A new library building which: did not exceed the capped capital budget would be ready for occupation by the stated

moving-in date met user requirements.

The total and focused involvement of the wider client body, in particular users of the building and those responsible for its upkeep.

A project team that would: identify and enhance value develop a common understanding of user needs define common objectives.

Major issues

The proposed library site was constrained by existing buildings, car parking and natural features- including a large tree and a pond that was home to a colony of great crested newts.

The failure to gain approval for previous proposals had engendered doubts that a properly-functioning building could be delivered within budget, on time and also satisfy the aspirations of user groups, such as the management, library staff, library users and researchers.

Successful Initiatives: CORE GROUPA core group was established which:

comprised a representative from each partnering organisation

met monthly to maintain an overview of the process and to support decision-making

who would be the arbitrator in the event of a major issue worked together in a structured programme of VM

workshops and other full-team workshops aimed to add value by increasing client and user

satisfaction aimed to reduce costs, waste and time spent on re-

working and resolving confusions. The team also focused on achieving satisfaction,

enjoyment and pride in an exemplary building, adding value for all.

Successful Initiatives: Trust

The increase in positive experiences, created by the successful series of VM workshops, significantly raised the level of trust within the team.

When team morale weakened it was apparent in the team satisfaction KPIs. Consequently, the June workshop was limited to the morning, followed by a Thames cruise in the afternoon. In the context of a £17m project, this cost was minimal but it turned the morale and team-working around, as evidenced by the KPIs ( Key Performance Indicators)

Successful Initiatives: KNOWLEDGE SHARING

One of the principles of VM is that added value is driven by the sharing of explicit and tacit knowledge throughout the project.

During review workshops, all team members benefited from communicating their views on project and team successes and opportunities.

Successful Initiatives: MITIGATING RISK

The University had previously endeavoured to procure the new library by traditional means.

This did not yield proposals that could be delivered within time and budget constraints and to the satisfaction of the end-users.

The VM programme was implemented to help reduce uncertainties.

Successful Initiatives: REDUCING BUDGET UNCERTAINITY As the project developed, it became clear

that there was a potential mismatch between resources and expectations.

Workshops, during the design, development and procurement stages, provided more opportunities for both costs savings and enhancements to meet user needs.

The outcome of the workshops was a reduction in construction costs of 20% whilst retaining essential client and end-user functionality.

Successful Initiatives: Cost-effectiveness of VM process The overall cost of conducting the

VM programme, including the salaries of those who attended and the professional facilitation fees, was about £120,000. The realised cost savings were £1.3m, representing a payback of over 10:1.

Successful Initiatives: Early involvement of all parties Bringing the full team together early

on enabled the client to take advantage of the knowledge of all professionals, including key specialist contractors.

Each workshop featured a team exercise to reinforce a learning point or introduce a process. These 15- minute activities also helped to breakdown barriers.

Successful Initiatives: Continuous Improvement The information and knowledge generated

from the workshops has been used to improve subsequent schemes for the Open University.

All the data leading up to the team’s decisions was listed in detail within the workshop reports.

This formed an audit trail of objective decision-making and also provided an information base to guide users, specifiers, designers and constructors involved in future Open University projects.

Lessons learned

The success of the VM workshop programme has led the client to adopt the same approach on subsequent projects.

The process allowed the client to feel part of the project and also involved the end-users, enabling both client and user needs to be met in a resourceful and value-adding manner.

Lessons learned

The workshops helped the team to push the boundaries of cost, time and quality. Normally, one would expect a gain in one of these criteria at the expense of the other two, but in this project the team achieved better than-expected performance in all three criteria.

SUMMARY OF CHANGES

Before:The procurement route was

traditional. After:The revised procurement route

involved partnering with regular VM reviews.

As observed, just bringing about one small change can do wonders for a Construction Project.

Achievements and Benefits

Involvement of department heads and end-users.

Benefit: Library usage is double the pre-project estimate.

Excellent value for money. Benefit: Savings of £1.3m were

achieved for a cost of £120,000 (the VM studies) – a payback of over £1.1m.

Achievements and Benefits

Users’ needs were identified before value adding proposals were generated.

Benefit: The team evaluated the potential for value enhancement before spending time on the detailed development of proposals, which might have resulted in little improvement.

Achievements and Benefits

All members were encouraged to attend meetings regardless of their position within the team.

Benefit: Fuller briefings with input from end-users.

Good team spirit. Benefit: Team members could raise

controversial topics without fear.

Achievements and Benefits

Joint solutions to problems encouraged.

Benefit: Reduced delays and costs associated with time consuming referrals to senior management.

Development of trust within the team. Benefit: Reduced correspondence.

BENEFITS OF VM EXERCISE:

increasing collaboration as the project progressed

clients’ and end users’ expectations met in full

costs reduced by 20% to remain within capped budget

effective VM reduced uncertainty of unproven procurement route to acceptable levels.

Typical Case Study (The Technical Aspect):

A typical scenario for the suitability of crushed aggregate in construction has been selected as our case study.

Crushed fine aggregates have been regularly used to make quality concrete for decades in India and abroad.

Demand for crushed fine aggregates for making concrete is increasing because natural sand cannot meet the rising demand of construction sector.

Advantages of Crushed Aggregate over Natural Sand: Because of its limited supply the cost of

natural sand has sky rocketed and its consistent supply cannot be guaranteed.

Natural sand in many parts of the country is not graded properly and has excessive silt on other hand crushed sand does not contain silt/ organic impurities and can be produced to meet desired gradation and fineness as per requirement.

Comparison with Natural Sand:

Property Natural Sand Crushed fineAggregate

Shape Spherical Particles Cubical

Gradation Cannot be controlled Can be controlled

Particles passing 75micron

Presence of SiltShould be Less than 3%

Presence of DustLess than 15%

Specific Gravity 2.6 to 2.8 2.7 to 2.9

Water Absorption 2 to 3 % 3 to 4%

Ability to holdsurface moisture

Up to 7% Up to 10%

Comparison in concrete when compared with well graded silt free natural sand:

Crushed sand gives comparable /better strength when compared with natural sand

It gives lower workability It gives lower workability retention It gives lower cohesion

However, commonly available natural sand is rarely well graded and silt free.

Long Term Effects (Durability)Durability depends on permeability of concrete & long term stability of cement matrix from alkali aggregate reaction, chlorides present in cement, aggregates and admixture. There is no evidence that concrete made from crushed fine aggregates is less durable than that with natural fine aggregates.

Thus Crushed Fine aggregate can be used for all types of concrete including: High Performance concrete Self Compacting Concrete Pumpable Concrete Roller Compacted Concrete Precast concrete products Brick Work and plaster Mortars Flooring Water proofing

Trouble Shooting practical problems encountered while using crushed fine aggregate:Problems

Reason Remedy

Concrete does not give adequate workability

The particle shape is not spherical but cuboidal or flaky

Controlling shape and gradation

Usually has higher % of fines

Use of plasticizers

Use of flyash

Concrete tends to set quickly

Higher water absorption removes free water

Wetting of fine aggregates in case it is bone dry

Lower particle size results in faster absorption

Use of retarding plasticizers

Greater surface area results in faster evaporation

Use of flyash

Protecting the green concrete from drying

Problems

Reason Remedy

Concrete tends to segregate

Flaky shape Controlling the shape and gradation of particles

Lack of adequate fines Preventing segregation during transportation by spraying water

Segregation of Particles while transportation and Unloading

Use of Flyash

Inadequate mixing Blending with natural sand

Use of fibres to increase cohesion

Using better mixers

Concrete gives lower strength

Flaky particles or higher fines increase water demand

Controlling the quality of incoming material by visual inspection and regular sieve analysis

Higher water demand translates in to higher water cement ratio

Controlling the water cement ratio by using plasticizers

Segregation of concrete results in non - uniform distribution of cement paste

Take steps to control segregation

Problems

Reason Remedy

Concrete has Honeycombs

Lower workability and lower slump retention

Use of plasticizers, retarders and flyash

Inadequate vibration Complete compaction and finishing as early as possible

Segregation of particles during transportation and unloading

Use well graded crushed sand with adequate fines

Lack of fines Ensure cohesion of concrete

Segregation of concrete

Concrete surface shows irregular shaped voids

Concrete with excessive fines and flaky particles is prone to bleeding

Ensure crushed sand is well graded and particle shape is not flaky

Bleeding is phenomena when water comes to vertical faces and top surface through capillaries

Ensure that it is not stone dust

Bleeding water gets trapped between concrete and form work to form water pockets

Non absorbent form surfaces like Plastic coated ply are more prone for trapping water pockets

This water evaporates and shows irregular shaped pockets on surface

Regular tamping of concrete member with mallets will bring bleed water to the top surface

Economics of Crushed fine aggregates

Natural Sand – 2000 to 2500 Rs per 100 cft Rs. 0.4/- to 0.6/- per Kg

Crushed Sand –1500 to 2000 Rs per 100 cftRs. 0.3/- to 0.5/- per Kg

Net difference: Rs. 0.1/- per Kg

Economics in concrete:

1 m3 of M20 concrete requires approximately 800 to 1000 Kg of fine aggregates

Cost difference of using crushed fine aggregates: Rs. 80/- to 100/- per m3 Incremental cost of using admixture: Rs. 50/- to Rs 100/- per m3

Economics in Mortars:

100 kg of 1:5 mortar requires:i. 17 Kg of cement Cost: Rs. 50/- (@Rs. 3/- per Kg)ii. 84 Kg of Natural SandCost: Rs 42/- (@Rs. 0.5/- per Kg) Total Cost: Rs. 92/- Replace natural sand by crushed

sand @Rs. 0.4/- per Kg Saving per 100 kg of Mortar: Rs

8.5/-

Additional cost of admixture: Rs. 4/-(Dosage 0.5% by weight of cement @ Rs. 40/- per Kg) Additional cost of fibres: Rs. 5/- to Rs.

10/-(125 gm per 50Kg @ Rs. 20/- to Rs. 40/- per pouch) Saving by flyash replacement (@Rs1.5

per kg:• 25% replacement - Rs. 5/-• 50% replacement - Rs. 10/-

Net cost saving per 100Kg of mortar

• Crushed sand (saving) - Rs. 8.5/- • Admixture (additional) - Rs. 4/- • Fibres (additional) - Rs. 5/- • Flyash 50% (saving ) - Rs. 10/- Net saving: Rs. 10/- per 100cft

Economics in Overall Building• Building requires 100 to 150 Kg

of fine aggregate per sq. feet• Building requires 75 to 100 Kg

of mortar Net saving: Rs. 6/- to Rs. 8/- per

sq. feet

(Note: Above calculations are based on price levels in Pune Region)

Precautions to be taken: Ensure that well graded and well

shaped crushed sand is obtained at site

Ensure that a mixture of stone dust and grit at the cost of crushed sand is not being procured at site

Ensure that crushed sand is received in wet condition and does not segregate while unloading

Conclusions to the case study:

Natural sources of fine aggregates cannot meet the demand of the industry

Natural sources of fine aggregate cannot meet the quality requirements of the industry

Crushed fine aggregate can be used for all applications in construction

Crushed fine aggregate can deliver a good product and will save costs

References

Value Engineering Methodology In Construction by Fadi Elayache, Dubai 2010

Value of Project Management – a Case Study PASI OJALA.

Value management in Construction (Case Studies) Published by OGC, Sep 2007.

Crushed sand, a reality for construction Industry, HCC value engg division, Published Dec,2009

The Synergy between Value Engineering and Sustainable Construction Abdulaziz S. Al-Yousefi, CVS-Life, FSAVE

VE Research Group of SANNO Management Institute (1999) New Essentials of VE (in Japanese). Publication Department of SANNO Management Institute, Tokyo.

Thank You