Value Engineering
Value Engineering is a collection of techniques designed to examine all the cost components of a product, service or system in order to determine whether any cost item can be reduced or eliminated without detracting from its functional & quality elements. And the elimination of non-adding investment.
Value Engineering measures value by providing best functional performance for the least cost:
Terminology & Concepts
Value
“Value as used in Value Engineering can be defined as: The lowest cost to reliably provide the required functions or service at the desired time & place & with the essential quality.”
VALUE = FUNCTION
COST
The lower the cost for optimum function, the better the value.
Function
Function is the basic purpose of an object or process. This is the cornerstone of Value Engineering. Understanding the functional requirements will allow for the best cost effective solution.
Product
Product, in VE terms, is anything (an item, system or a process) which is produced as a result of someone’s labour or mental effort.
Cost
Cost is the sum of all factors involved in a process or the production of an item. Cost should not be confused with price.
Application Tools:
- FAST Diagram (Functional Analysis System Technique)
- Function / Cost Analysis
Applications
Value Engineering is utilised in major projects. It is also a main feature of the Value Improvement Practices (VIP’s) requirements.
Value Analysis
Value Analysis utilises the same approach as Value Engineering but the focus will be on existing products and systems. (refer to Value Engineering)
Application Tools:
- FAST Diagram (Functional Analysis System Technique)
- Function / Cost Analysis
- Redundancy Analysis
Applications
Value Analysis is utilised in Product Cost Reduction and Optimising Layouts / Processes, applied in product design, operational and production environment.
Value Management
Value Management is a rigorous examination what functional requirements are needed to meet business objectives of a product, service or system at the least cost without detracting from its functional & quality elements. and the elimination of non-adding investment.
Terminology & Concepts
Value
“Value as used in Value Management can be defined as: The lowest cost to reliably provide the required functions or service at the desired time & place & with the essential quality.”
VALUE = FUNCTION
COST
The principles are very much the same as it is applied to Value Engineering but utilised mostly for strategic outcomes.
Typical Value Management questions that would apply:
Process Question VM Phase
What is it? INFORMATION
What does it do? FUNCTION
What else will do it? CREATION
How will that work? EVALUATION
How best can that be accomplished? INVESTIGATION
What is required to change? RECOMMENDATION
How is change implemented? IMPLEMENTATION
How effective was the change? AUDIT
Application Tools:
- FAST Diagram (Functional Analysis System Technique) if applicable
- Issues and Results to Achieve Matrix
- Objective Matrix
- Functional Analysis (Numerical Evaluation)
- Recommendations
Applications
Value Management is applicable for many of the Value Improvement Practices (VIP’s). Constructability Review; Optimise Energy etc.
Another widely used application is for Strategic Management:
- Alignment Workshops
- Strategic Directions Workshop
- Turn-Around Strategy Workshop
- Reduce Procurement Cost
- Optimise Maintenance Cost
- Improve Logistics Cost
Project Risk Management
Project Risk Management is the activity of identifying, assessing and prioritising risks (defined as the effect of uncertainty on achieving objectives, whether positive or negative) followed by coordinated and economical application of resources to minimise, monitor, and control the probability and/or impact of respective events or to maximise the realisation of opportunities.
The methodology described allows for the application of Project Risk Assessments for small and large project including Enterprise / Strategic Risk Management.
Assumptions
Baseline assumptions are listed to obtain a common understanding of the project complexity and current scenarios.
Risk Categories
Depending on the specific project a selection of risk areas are selected.
Risk Matrix
The risk matrix we utilise may vary from client to client.
Risk Ranking
The ranking of risk is based on a score of Probability that the risk may occur, from rare to almost certain.
On the Severity / Consequences we need to assess the risk based on the impact it may have on schedule, cost, quality & technical integrity, safety & health, environment, legal & regulatory & the reputation / social / community to the project.
Risk Log Components:
- Risk Area
- Reference Number
- Risk Described
- Risk Cause
- Describe Impact
- Inherent Risk
- Existing Risk Controls
- Existing Risk Controls Effectiveness
- Residual Risk
- Mitigation – Preventive Actions
- Mitigation – Contingent Actions
- Mitigated Risk
- Cost
- Employer Approval
- Monitoring Mechanism & / or Comments
- When
- Who
Depending on requirements this list changes.
Project Hazard Identification
The objective is the identification of any hazards, relating to the process (safety, operability, maintainability and constructability) of the finished product that may be inadequately addressed in the current design and propose solutions to eliminate, substitute or engineer them out.
Assumptions
Baseline assumptions are listed to obtain a common understanding of the project complexity and current scenarios.
Nodes and Categories
Depending on the specific project a selection of “nodes” (areas of investigation) are selected. Each of the nodes is then analysed for potential hazards against the following categories:
- Safety
- Operability
- Maintainability
- Constructability
HAZOP Log Components:
- Listing of Hazards / Issues
- Hazards / Issues Cause
- Hazards / Issues Impact
- Severity (Low / Medium / High)
- Comments
- Proposed Solution
- Date to Complete
- Responsible Person