Project Value
Managementby Dr Jim Young
Purpose of this Presentation
To familiarise you with the principles and process of project
value management (PVM)
Presentation Topics• Origin and definitions• Some examples• Value formula• PVM benefits• Costs and challenges• PVM principles• PVM process• And time permitting – show you the use of some tools
This presentation will take about one hour. For those who choose to sleep, the presentation slides and a “white paper” on the topic are available on your university website.
Origins of PVM The PVM concept was born with
General Electric during World War Two when there were severe shortages of labour, materials and component parts.
The company looked for new methods and locally substituted materials and components that would perform the same function.
Definition of PVM PVM is the formal and systematic
study of a project to identify ways to achieve the functions involved at the lowest cost without loss of performance.
Some equivalent expressions are Value Management, Value methodology, Value Analysis, Value Engineering and Value Optimisation.
PVM Application• Potentially effective for all types of projects,
but best results usually obtained with larger and more expensive construction projects.
• PVM usually adds greater value if applied early in the project life cycle and preferably prior to project execution.
• PVM intervention is in the form of a study undertaken by an expert facilitator and involves key stakeholders from the target project.
• Unfortunately, PVM is often only initiated when project budgets seem insufficient or profit margins are under pressure.
Some PVM Examples• Russian liquid-fuel rockets allow for
rough welding.• Japanese vehicle manufacturers
standardised processes and components.
• Australian supermarket construction introduced JIT practices to eliminate inventory.
• NASA space shuttle specifications were relaxed for non-critical functions.
Extreme Example
(JOKE)
But Without Loss of Quality
oops
PVM Studies Functions• Function concerns what is done and not what
does it. There are usually a variety of ways to complete a function.
• Function can usually be described with just a verb and a noun. For example:
• The function of a pen is to “make marks”.• The function of a spade is to “dig holes”.
• PVM recognises that if a function is needed then we should systematically identify and evaluate alternative ways to complete the function better and/or more cheaply without loss of project performance (functionality).
PVM Value Formula
Value-adding options are:
• Improve function and maintain cost
• Maintain function and reduce cost• Improve function and reduce cost
Value = Function / Cost
Typical Benefits of PVM• Improves communications and teamwork• Clarifies stakeholders’ needs• Resolves conflicts and misunderstandings• Challenges assumptions• Identifies unnecessary expenditure• Generates alternative ideas • Promotes innovation• Maximises resource use• Saves time, money and materials• Simplifies processes• Eliminates wastage and redundant items
Stakeholders Benefit from PVM
Properly applied PVM means:
• Clients achieve best value for their money.• Users’ needs are satisfied.• Designers meet client and user expectations. • Project managers complete the project within
prescribed constraints.• Contractors complete work in the most cost-
effective manner and future business is assured.
PVM Costs To ensure that the benefits of applying PVM
are justified, the cost of the following items needs to be considered:
• Engaging a facilitator• Participants’ travel and
accommodation• Venue hire• Administrative support• Disruption to target project
PVM Challenges• Suitable date for workshop• Project delay or disruption• Key stakeholders excluded or
unavailable• Real front-end cost versus
nominal downstream savings• Threat to designers’ and planners’
reputations• Short-term false economy • Innovations add risk
PVM Principles• Suitable facilitator essential• Senior management support• Willing and appropriate
participants• Focus on more costly functions• Whole-of-life application• Integrate with project life cycle
and risk management
PVM Seven-Step Process 1. Prepare for study2. Gather information about subject
project3. Undertake functional analysis4. Generate ideas for project
improvement5. Evaluate ideas6. Make recommendations7. Follow-up
Step One – Prepare for Study
• Select subject project• Prepare terms of reference• Appoint facilitator• Decide study team composition –
includes key stakeholders• Confirm study methodology and
timetable• Identify logistic needs• Book venue
Step Two – Gather Information
• Facilitator is provided with documentation: project purpose, goal, objectives, assumptions, success criteria,
feasibility study, business case, charter, designs, drawings, specifications, work breakdown structure, estimates, risk and issues logs, project plan, budget and schedule, and progress reports if project already underway.
• Visit project site if work has started• Research information about previous similar
projects• Contact key stakeholders for preliminary
discussions• Identify main issues for the PVM workshop• Prepare and distribute information packs• Brief presenters
Step Three – Undertake Functional Analysis
PVM participants attend a one or two day workshop where:
• Participants introduce themselves.• Facilitator reminds group about purpose and scope of study,
workshop agenda and process, and issues to be resolved and target functions to be analysed.
• Issues and functions are analysed in sub-groups, typically by seeking answers to questions such as:
• What is its function?• Why is it needed?• What value does it add?• What would be the consequence if it was excluded?• What could do the same function more cheaply and/or
better?
Step Four – Generation of Ideas Having clarified the issues and the nature and need
for selected functions, alternative solutions are then sought typically through group brainstorming for improved functionality and cost reduction. Such ideas must not impair project performance. The usual rules for brainstorming apply:
• Quantity not quality• Suspend criticism• Encourage maximum participation• Record all ideas for later
assessment
Step Five – Evaluate Ideas Options are now evaluated in against pre-determined
and weighted attributes such as:
• Technical feasibility, practicality and ease to implement (time, resources and skills)• Legal implications• Consistency with organisation’s core values• Impact on project objectives• Whole-of-life costs• Whole-of-life savings • Risks created – their impact, probability and
mitigation strategies
Evaluation Tools Some tools and techniques that might be used to select best options
to improve the project’s functionality and/or cost and resolve issues are:
• Function analysis system technique (FAST)• SWOT analysis• Cost benefit analysis• Process mapping and analysis• Pareto analysis• Fishbone diagram• Paired-comparisons• Decision tree• Weighted attributes decision matrix
Step Six – Make Recommendations
• A verbal presentation is likely to be followed by a formal written report with prioritised recommendations for the client’s approval.
• The draft report should be circulated for comment to those who participated in the workshop study.
• Agreed changes are then included in the project plan.
Step Seven – Follow Up• Should PVM recommendations be
implemented, their effectiveness should be monitored and measured.
• Lessons learned from the study should help with future PVM interventions.
• The PVM process can be repeated periodically throughout the project.
Process Mapping A process can usually be broken down into tasks that may
be undertaken either concurrently or sequentially.
Process Analysis Typical questions asked in order to improve a process are:
• Is the process needed and do process outputs satisfy these needs?
• Are process performance measures and targets in place and appropriate?
• Are all inputs satisfactory in terms of cost, timeliness, quantity and quality?
• Are there any process delays or bottle necks?• Are all steps needed and do all steps add value?• Is the process documented, understood and adhered to?• Does rework occur?• Is there scrap or waste?• Is cycle time minimised?• Should some steps be combined?• Is better/cheaper technology available?• Do the users possess the necessary knowledge?• Could more steps be completed in parallel?• Are all steps in the correct sequence?
Example Decision Matrix Suppose Victoria University commissions a project to provide students
with free footwear. First the decision-makers identify appropriate criteria or attributes to assess viable/functional footwear options and prioritise these using a paired-comparison’s technique:
Rank Score Attributes 4 3 2 13rd 1 1. Appearance 4 1 22nd 2 2. Maintenance 4 24th 0 3. Durability 41st 3 4. Comfort
Example Decision Matrix Next the prioritised attributes go into a decision matrix. We give each
attribute a weight (from say 1 to 10) that represents its relative importance, and then evaluate each option against each attribute, scoring them, where say excellent is 5, satisfactory is 3, and adequate is 1. In this instance Option B scores highest.
Attributes Weight Option A Option B Option CComfort 10 x 3 = 30 x 4 = 40 x 2 = 20
Maintenance
9 x 5 = 45 x 3 = 27 x 4 = 36
Appearance
6 x 1 = 6 x 4 = 24 x 3 = 18
Durability 3 x 5 = 15 x 3 = 9 x 3 = 9Total Scores 96 100 83Place 2nd !st 3rd
Summary PVM is a powerful strategy that focuses on
delivering better project value. Top five requirements are:
• Management support• Early application• Thorough preparation• Independent facilitator• Maximum involvement of stakeholders
Bring these five essentials together and PVM will payback as a positive intervention.
Unless you have some very easy questions, it’s
THE ENDAnd many thanks and good luck
with your studies!