Value World Volume 32 Number 3 Fall 2009 Published by SAVE International Contents: 2 Editor’s Comments M. A. Berawi, Ph.D. 4 A White Paper on Value Engineering Donald E. Parker, PE, CCE, CVS, FSAVE 10 Implementation of Value Engineering in the Infrastructure Services of Indonesia’s Public Works Department Yusuf Latief, Ph.D. & Ir. Vincentius Untoro K. 15 Earning Value to Save Projects Adedeji Badiru, Ph.D., PE, PMP 23 The Application of VE in Business Decision Making Evaluation of Technology Selection Zhang Tie-Shan & Huang Hue 30 Patent Design Using FAST Peter Hanik, PE Inside this issue: Enhancing “Value Added” in Project/ Product Designs and Processes
Transcript
Value WorldVolume 32 Number 3 Fall 2009
Published by SAVE International
Contents:2 Editor’s Comments
M. A. Berawi, Ph.D.
4 A White Paper on Value Engineering Donald E. Parker, PE, CCE, CVS, FSAVE
10 Implementation of Value Engineering in the Infrastructure Services of Indonesia’s Public Works DepartmentYusuf Latief, Ph.D. & Ir. Vincentius Untoro K.
15 Earning Value to Save ProjectsAdedeji Badiru, Ph.D., PE, PMP
23 The Application of VE in Business Decision Making Evaluation of Technology SelectionZhang Tie-Shan & Huang Hue
30 Patent Design Using FASTPeter Hanik, PE
Inside this issue:
Enhancing “Value Added” in Project/Product Designs and Processes
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The first two papers examine the situation on meth-ods and activities for providing best practice of value engineering/value management program and various challenges that has been confronted by a growing value engineering society. The first paper, written by Donald E. Parker, PE, CCE, CVS, FSAVE, presents “A Lesson Learned” and best practice in establishing and directing the GSA (General Service Administration) PBS (Public Buildings Service) value management program and also maintaining the program in a government environment. The second paper, written by Dr Latief and Untoro, PE, portrays the main obstacle factors influencing the pre-paredness in implementing value engineering for infra-structures development in the environment of Ministry of Public Works.
The third paper, written by Professor Badiru, empha-sizes on the combination of analytical and management approaches to improve communication, cooperation, and coordination (Triple C) across a project life cycle for the purpose of enhancing earned value performance of the project. He argues that the Triple C model of project management can be used to mitigate such operational problems and ensure that measurable and sustainable value is achieved at each stage of a project.
The fourth paper, written by Zhang Tie-shan and Huang Wei, discusses how Value Engineering affects the enterprises’ technology selection and evaluation. By using evaluation index system in technology selection and cal-culation of functional index to create technology scheme, combined with cost analysis of the technology selected, the value index of technology selection programs are then can be determined. There are several issues that need to be taken into account when applying VE in technology selection decision-making, including the importance of technological search, evaluation process, impact of tech-nology acquisition mode, and flexible evaluation index system.
A broad definition of value added is to economically add value to a product that will be more preferred in the marketplace. In other words, adding value is the process of changing or transforming a product from its original state to a more valuable state. Thus, adding value is in-tended to evaluate why, what, where, how, and who can innovate and efficiently executed the design and perform the process to produce the desired project/product for the interest of stakeholders. As a consequence, value add-ed measures the amount of revenue earned by a company and it is of particular importance since it reflects the abil-ity of the company to provide the clients/customers with what they desire and what they prepare to pay for.
The essence of value added lies in creating more value in projects, products, and/or services. It is of crucial im-portance to improve performances, quality, system reli-ability, on-time delivery of a project/product, as well as to reduce the unnecessary cost. Superior performances of the project/product can be achieved by maximizing benefits and minimizing obstacles through providing ef-fective and innovative processes to improve productivity, selecting the right technology to be implemented, and for some products or processes, patent and industrial design are important variable to protect the rights of inventors and designers. In this context, therefore, the current edi-tion of Value World discusses on how Value Engineering may be applied to enhance value added in project/prod-uct designs and processes.
Adding Value in Project/Product Designs and Processes
This issue of Value World presents five selected pa-pers from the 2009 Annual SAVE Conference, Beijing’s 2nd International Conference on Value Engineering and Value Management, and the journals submitted with the objectives to stimulate a discussion and to explore vari-ous ways employed in optimizing the use of value engi-neering in order to add value to a project/product.
Enhancing “Value Added”in Project/Product Designs and Processes
EDITORIAL
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The last paper, written by Peter Hanik, PE, describes how value engineering, through the application of FAST diagrams, can be used to analyze and expand inventions and develop a broad set of patent claims. He argues that the complete patent model is an exhaustive description of the invention in diagrammatic form. It is constructed from the foundation model which provides a systematic method to construct a first independent claim of the pat-ent. By systematically removing non-essential functions from the base patent model, which constructed from the specific and pure function model and application of TRIZ principles, the minimum functionality required to deliver the primary function of the invention is finally revealed.
I hope this edition of Value World conveys some new insights in the way we conduct our value methodol-ogy studies, and again, I hope it can achieve its aim to explore, develop, and elucidate the knowledge of value methodology as well as serving as a platform for the ex-change of ideas, knowledge, and expertise of researchers and practitioners in value methodology. Therefore, your valuable contribution and feedback are very important for the success of our journal as it will guide the journal’s future development.
With warmest regards from editorial desk,
Dr. M.A. BerawiFaculty of EngineeringUniversity of Indonesia
Jakarta 16424 Indonesia
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V A L U EWORLDVolume 32, Number 3, Fall 20094
A White Paper on Value EngineeringDonald E. Parker, PE, CCE, CVS, FSAVE
Abstract
This paper is about his experience in establishing and di-recting the GSA (General Service Administration), PBS (Pub-lic Buildings Service) value management program and one of the major challenges he experienced in maintaining the pro-gram in a government environment. The paper answers the following questions: Why support VE above all other pro-grams competing for resources? Why should it get special at-tention and treatment in an organization?
The author answers these questions from a government perspective where profit and increased sales are not necessarily the objective of the organization.
Prolog
I was privileged to start the first formal value management (VM) program in the General Service Administration (GSA) Public Buildings Service (PBS) in 1970, and operate it until about 1980, when I was reassigned to the Cost Management Division. During that period I experienced musical chair top management.
My original mentor was Arthur Sampson, an honorary SAVE vice president who came to the agency, knew the ben-efits of VE, and wanted a program. He wanted to stress it as a value management program for management emphasis be-cause the place was full of engineers. He left to become act-ing administrator after about two years and from then on I reported to about six different commissioners and acting com-missioners of PBS. Some of these had been to my VM execu-tive seminars, but some had not.
In 1977, a new commissioner who knew nothing about VE or VM challenged me. He wanted to know why he should support the program when there were so many other compet-ing programs in government to save money. He asked, “What makes your program so special?” I asked him for a week to respond and ended up preparing the following white paper.
Basic Duty
I told him that a major part of the responsibilities of the commissioner, PBS, is to “protect and conserve” the federal resources entrusted by the people for use in their benefit. The question then follows: How much effort and resources is one willing to allocate to this function and under what mechanism(s) does one wish to manage this activity?
Current Mechanisms
The mechanisms available to managers to conserve and protect resources are many and varied. But basically, they can be put into two groups: static and dynamic.
The static mechanisms are devices built into the process of doing business as guidelines, regulations and laws. They should happen all the time and, of course, they do cost hid-den resources to achieve their benefit. Some examples of static mechanisms intended to conserve and protect resources are:
requirements for competition in procurementthe Economy Actprospectus limitationspersonnel ceilingsbudget limitations.
These mechanisms exist to assist management in prevent-ing the big blunder. It is an approach whose costs and benefits of having are rarely calculated. However, recognizing they ex-ist and that they are important, they are not the subjects of this paper.
It is the dynamic mechanisms for protecting and conserv-ing resources that is the subject at hand. In GSA some of these dynamic mechanisms are programs, techniques and concepts such as:
productivitywork simplificationmanagement improvementenergy conservationvalue managementcost reductionpaper work managementlife-cycle costmanagement by objectivesmanagement surveysemployee suggestionspresidential initiativeszero based budgeting.
All compete for the resources of management. They are dynamic because their emphasis and utilization fluctuates with seasons of government and power. They are dynamic because the level of their use by managers is limited by their under-standing, experience, training, use, and preconceived notions concerning these mechanisms. They are dynamic because the level of their use by employees is limited by these same issues
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in addition to their perception of management’s interest in them.
Operation Perceptions of Dynamic Mechanisms
Before discussing in more detail the selection of dynamic mechanisms for use in the PBS, one must address the percep-tions PBS operating managers seem to have when it comes to allocating resources (e.g., ceiling, dollars, man hours) to these types of functions. Fairly, they wonder about operational pri-orities, how their job will be made easier, who will get the credit, and what the credit is. Direct benefit to them is not apparent to them.
In the business world, the function of effort to protect and conserve resources is clear. It contributes to profit. And managers can rationalize that what is good for the company, is good for them. In government, the function and purpose of the expected effort is more subtle. It is to improve the uti-lization of resources. Yet, the system is so designed to create apprehension regarding impact on resources and performance instead of motivation to perform:
Ac�on Fear
Improve produc�vity Ceiling will ul�mately be reduced
Save moneyUnobligated funds indicates poor performance
Encourage sugges�ons Workload will increase
Encourage studiesDilutes ability to perform opera�onal responsibili�es
Generate LCC ideasDemands for limited money will increase
Iden�fy problems Reflec�on on job performance
A most interesting statement taken from the joint GSA-FEA-OMB Energy Conservation Site Visit Report (Conserva-tion-Paper Number 38, dated April, 1976) reads:
It is almost axiomatic that any effort or program is helped by top management interest. Human nature is such that most employee time and effort is directed toward those as-pects of the job that are closely reviewed and about which management is concerned.
With regard to energy conservation, the above report found that there was an attitude that the mission of the activ-ity was the total and top priority and that conservation was only a secondary function.
Most managers do not perceive a direct “sense of duty” to assist in protecting and conserving resources. This happens because the effort required to protect and conserve resources is not treated as a task assignment equal in importance to other
mission or operational priorities. And the focus of executive management is generally not on these issues.
Supporting this conclusion is the “Wilcock Survey” of the Society of American Value Engineers (SAVE), dated July, 1976. Mr. James W. Wilcock, chairman and chief executive of the Joy Manufacturing Company, in response to his request to assess the effectiveness of communications’ between value en-gineers and their executive management, initiated the survey.
In his keynote address to the SAVE National Convention (Baltimore, 1975) Wilcock commented that executives, for the most part, do not support value engineering programs to the degree of commitment necessary for success. The survey found (1) that executive managers are (as a group) not inter-ested in cost improvement, and (2) value engineers have been less than effective in creating a program to interest executive management in cost improvements. A partial summary of sta-tistics from the survey follows:
GOAL ESTABLISHMENTEstablished by Executive head ..................................... 11.9%Established by program or line manager ...................... 14.6%Not clearly defined ...................................................... 23.2%
GOAL PERFORMANCEResponsibility of line groups ......................................... 4.9%No directed goals ......................................................... 27.7%
Misconceptions and oversimplification regarding many dynamic mechanisms prevail with adverse effect on their ef-fective utilization. Here are a few of the more common mis-conceptions:
improved productivity is achieved only by working harder or fasterwork simplification results only by cutting out steps in the process
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management improvement benefits cannot be calculatedenergy conservation is an artificial problemvalue management only works on problemscost reduction always means giving something uppaperwork management is concerned only with reducing the amount of paperworkachieving LCC savings always requires higher first costsMBO requires commitments without resources manage-ment surveys result only in reportsemployee suggestions increase workload and stir up prob-lems already known to management without the resources to cope with them.
These misconceptions can all be corrected through edu-cation and application. First however, and regardless of the mechanism used to conserve and protect resources, it is im-portant that the effort desired be a closely reviewed job re-sponsibility. A good way to achieve this is to accept the task as an operational responsibility, commit resources to it, and manage those resources to ensure effective results.
Competing Programs
The common argument when one specific mechanism is pushed and promoted is that it is just another program be-ing demanded when the organization is already burdened with many other worthwhile programs.
The dictionary defines a program as an “official edict or decree” and a “prearranged plan or course of proceedings.” To carry this one step further, the dictionary defines an official act as a formal, written act. And a prearranged plan is an arrange-ment of means or steps for the attainment of some objective which, when operational, has personnel assigned to accom-plishing the tasks and an operating budget.
The PBS planning staff also relates the definition of pro-gram to include the elements of a defined effort, authorized, funded, identified outputs, and a unique collection of resourc-es, policies and technologies to achieve a major responsibility inherent in the PBS mission.
An analysis shows, that of the above list of dynamic mech-anisms, PBS has four “programs” with measurable workload —energy conservation, value management, employee sugges-tions and management surveys. These fully meet all of the ele-ments of the definition of a program.
The other dynamic mechanisms do not, at this time, in-volve as high a level of activity in PBS as do the above four programs.
Picking a Program
From the above list of dynamic mechanisms to conserve and protect resources, if I had to pick just one as a program,
I would pick value management. VM is a planned effort di-rected at analyzing the functional requirements of:
systems, services, procedures, paperwork,regulations, requirements, design, equipment,supplies, facilities, and hardware
to achieve essential functions at the lowest total cost, con-sistent with required quality, perform-ance, reliability, appear-ance, safety and operation.
The reasons for this choice are several:
It has universal application in all of the other dynamic mechanism areas. The objective of VM is to improve val-ue. Improving value can be achieved by:
improving productivitysimplifying workimproving managementconserving energyreducing costreducing paperworkimproving LCCachieving objectives economicallyauditing for problems and performance.
VM has the advantage of advocating or concentrating on no new techniques other than the relationship of cost and worth to function. It teaches and supports the utilization of the following existing techniques in application to the proper problem:
VM has a system of identification, study, approval, imple-mentation and follow-up that can be taught and used by employees at all levels.
VM can improve worth and success rate of all GSA stud-ies because of its applicability. Not only does the VM pro-gram provide a system (VM job plan) to ensure approved
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ment, and private sector firms are beginning to follow our leadership.
Our contract value incentive clause has received wide praise from the General Accounting Office and many other sources for its simplicity, clarity and fairness.
The PBS processing time and approval percentage for contractor value change proposals is excellent:
FY 1972 37.7 days 82%FY 1973 28.6 days 68%FY 1974 43.9 days 81%FY 1975 62.2 days 66%FY 1976 39.0 days 72%
During the past five years we have trained more than 750 PBS employees in the techniques of VM through work-shops. We have a good potential of resources to draw upon in conducting VM studies.
Next, areas for improvement:Internal participation has never been adequate consider-ing the number of regions below $100,000 in savings:
Number of Regions by Amount Saved
>500K 200-500K 100-200K <100K 0
FY 1972 2 1 4 3
FY 1973 1 5 4
FY 1974 2 3 1 2 2
FY 1975 1 2 1 3 3
FY 1976 5 1 1 1 2
The balance of participation between divisions needs improvement. Our judgment is that 95% of the savings achieved originated in the (PC) division, 5% from {PB). And, the majority of all savings since 1974 from (PC) are related to contractual services provided by our A-E’s and CM’s. Hence, many of our employees feel that VM applies only to design work and since new construction workload is down there is little opportunity for VM.
Contract incentive clause participation has fallen off and is unbalanced:
Number of Regions by Number of VCPs Received
Total >1 5 - 10 1 - 5 0
FY 1972 44 1 0 4 5
FY 1973 130 3 4 2 1
FY 1974 48 2 2 5 1
FY 1975 41 2 0 6 2
FY 1976 36 0 4 3 3
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VM studies arrive at a definitive conclusion of imple-mentation, VM also improves the quality of the study. It provides the added dimension of studying function and relating cost of function to the worth of functions. Studies that end in paper reports fail because they do not satisfy management. They define the problem wrong, study the wrong issue, arrive at unworkable solutions, fail to have all the information, fail to be creative, lack empathy for implementation, or fail to quantify benefits. VM studies specifically address each of these issues as part of the VM job plan. It might be noted that a VM study could be done to determine the function cost and worth of all of the dynamic mechanisms previously identified, if desired.
And last, PBS has already expended a lot of resources to have a VM program where it has not done so in any other area. Let’s build upon its strengths and correct its weak-nesses.
Past PBS VM Performance
In the past five years, PBS has saved $30 million dollars. Regardless of this, there is much room for improvement in program performance in terms of the untapped potential of the program, the uneven distribution of program effort be-tween the offices and divisions, and the fluctuating attitude of line management towards the program. Our analysis takes each in turn:
First, the good:Our return-on-investment (ROI) for what PBS has achieved has been acceptable:
We devised an accepted way to classify savings into “hard” and “impact” categories. Recurring impact savings are life cycle savings. Our savings record to date is:
Hard Impact Total
FY 1972 $1,408 $287 $1,695
FY 1973 $1,197 $633 $1,830
FY 1974 $2,164 $7,877 $10,041
FY 1975 $2,924 $317 $3,241
FY 1976 $12,385 $758 $13,143
PBS is the first and only agency to have a comprehensive VM program in the design phase of facilities under A-E contract. Other federal agencies, state and local govern-
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The surge of participation in FY 1973 was caused by the purchase contract program. In FY 1972, one contrac-tor on one project in Region 5 produced 31 of the 44 proposals. In FY 1973, a second contractor in Region 10 produced 35 of the 130 proposals.
The argument is given that, because of our design VM program with A-E’s, our VPCP otential should expect to fall off. This is the same as inferring we have perfect de-signs, economically ideal construction, and the most tech-nologically advanced components. None of these is true when designing under the constraints of criteria, sched-ule, first cost, and competitive procurement. Our judg-ment, based upon the large number and dollar volume of contracts we have and experience in DOD construction, is that our participation is only 10% of what it should be. We need more effort in aggressively marketing the clause with the spirit of making it work.
A GSA audit (21-4002-PCC dated December 17, 1974) of -the value program in Central Office and Regions 2, 3, 6, 7, and 10 confirmed the above and found in addition:
A need for an effective and progressive regional pro-gram by VM Board membersA need for higher priority assigned to the VM pro-gram by top regional officialsA need for more management direction in the moti-vation of PBS employeesA need for a greater effort to identify and publicize the benefits and rewards available to employees for approved VM proposals, and in conjunction with this, clarification as to when VM is job related
Statistics from this report read as follows (based on 85 emp1oyee interviews):
22% submitted VM suggestionsNo suggestions made outside of the VM training workshops were approved62% stated that supervisors had not encouraged VM ideas and some directly discouraged participation50% indicated that regional management does not give full support to the program
A substantial effort is still required in these areas.
The same GSA audit recommended that the PBS Com-missioner take the necessary action to ensure that:
Specific regional VM objectives be establishedVM objectives, accomplishments, and resources are incorporated in regional PBS performance reportingThe regions use all methods for identifying VM stud-ies, including the systematic (or forced methods) as prescribed by the VM Handbook (PBS P 8000.1, par. 5-8).
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Current Executive Management Policy
Line ManagementFor six years it has been our policy that the conduct and
operation of the VM program be delegated to regional com-missioners and assistant commissioners (see par. 11, PBS 8050.lB). The extent of participation has been totally voluntary for internal application. The use of contract provisions has been the only exception to this. However, the level of marketing and aggressive use of contract participation has been volun-tary. Some of the responsibilities assigned to these PBS senior executives with our comments are:
Responsibility Comment
Maintain an effec�ve VM program
VM boards are not effec�ve.
Achieve program objec�ves
Central Office has assigned no goals to regions. We have let regions volunteer to date.
Conduct periodic management reviews of VM program
None have been conducted by line management. Internal audit conducted the one review men�oned above.
Budget and allocate resources to VM
No budget items for internal studies have been submi�ed for any FY budget.
Ini�ate awards to recognize VM achievement
Only regions 3 and 4 have ever ini�ated awards.
Operational ManagementThe policy for program operation is through regional VM
Boards. GSA Order, PBS 8050.1B, sets forth the duties and intended responsibilities of regional VM Boards. A few of the more important functions of VM Boards for VM activities provided for by that order are:
The intent of the order is to provide for the-direct involve-ment of line management in the management and conduct of regional VM activity. The VM board is not intended to “plan studies” or “conduct studies,” but rather to “make deci-sions.” In addition to these general functions, Chapter 5 of GSA VM Handbook, PBS P 8000.1, provides a detailed set of VM Board responsibilities regarding their conduct in manag-ing internal value studies.
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The internal GSA 1974 audit portrayed the boards as inef-fective. The VM boards either do not have the authority neces-sary to do the job desired or have not accepted their authority. In some cases, members of VM boards do not appear to be true representatives of their divisions; in that they are not em-powered to commit resources or approve and direct changes on behalf of their divisions.
During the six years of program operation there has not evolved a policy concerning approved levels of effort for in-ternal VM study activity expected of regional offices. It was originally thought that any value study that showed a poten-tial 10 to 1 ROI would provide appropriate levels of effort. However, when potential studies failed to be actively sought out or voluntarily submitted, the level of effort dropped to zero. The method of case-by-case approval of VM studies from line management has been tried and has not worked.
Finally, VM boards are all run on a collateral duty basis and consist largely of one branch manager from each regional division. VM board chairmen have asked for a full time assis-tant to handle the day-to-day VM work in the region. Region-al commissioners have stated that if Central Office were seri-ous about the program, they would provide ceiling to support a position to manage the operation of regional VM activity. Paragraph 10 of PBS 8050.1B authorizes regions to provide a position and sets forth the duties. However, it does so without authorizing additional ceiling and makes it a regional option. Region 2 did have a full-time position for about two years un-til the incumbent died this spring. They have not taken action to fill it again.
Region 3 has two full time positions. However, one of these is the VM board chairman and he has no line manage-ment authority. He works as staff to the regional commission-er. The other works for buildings management. Region 3 has two VM boards, a carryover from when the region was split.
Employee participationOn December 9, 1971, PBS 8030.1 was issued. It provid-
ed for employees to submit VM ideas in parallel with the sug-gestion program. In recent years the VM staff has attempted to provide more specific guidance to employees and regions regarding this issue.
On April 16, 1976, we received approval from the admin-istrator to experiment with improving the suggestion program through the IDEA Program concept. This wi11 be imple-mented in early 1977.
Recommendations
All of our recommendations to improve the VM program are provided for in the proposed “Guidance for FY 1977 VM Activity” and its covering letter for the commissioner’s signa-ture.
Epilogue
The white paper seemed effective because the guidance I prepared was signed by the commissioner and was sent to the field. It worked for about a year until a new commissioner came in and the guard changed again. I was fortunate during my term to have been able to hire three outstanding value specialists:
Arnold (Bud) Brogan – from IndustryGlenn Woodward – a ConsultantDale Daucher – from NAVFAC
In 1974, Bud Brogan went to GSA’s Federal Supply Ser-vice and started a VM program there. Dale Daucher took over the PBS program in 1980, when I was reassigned to the Cost Management Division. I retired in 1984, and the program continued until Dale left for private industry two years later.
The moral of this story: A value program needs a champion to set goals, assign tasks, demand results, and report benefits to management in order to survive. When it becomes everyone’s job, then no-one does it because no-one is accountable!
About the Author
Mr. Parker is a graduate of Northwestern University with a B.S. in civil engineering, a registered engineer, a life Certified Value Specialist, Certified Cost Engineer, and SAVE Fellow. He is a recipient of the Lawrence D. Miles Award and serves as president of the Miles Value Foundation.
He was previously employed for 28 years with the Federal Govern-ment—U.S. Navy and GSA design and construction work. He served as staff value engineer for the Navy’s Chesapeake Division, Naval Facilities Engineering Command and led the Command to receive the only VE award ever given by the President of the United States, Lyndon B. Johnson, in 1967. He was then pro-moted to start and direct GSA’s first value management program.
He has been engaged for the past 22 years in consulting work and private sector commercial property development work including financing, acquisition, and property management.
He is author of the texts, VE Theory, and Determining Building Worth. He is the creator of the CD ROM Technology Templates sold in the SAVE bookstore.
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Implementation of Value Engineering in the Infrastructure Services of Indonesia’s Public Works Department
Yusuf Latief, Ph.D. & Ir. Vincentius Untoro K.
Abstract
Value engineering (VE), as one of the alternatives for im-proving the efficiency and effectiveness of a budget plan, is a creative approach where it will be linked to the goal to opti-mize cost and/or performance of a system/facility. VE studies are done by analyzing the function of the object in order to identify any unnecessary cost, so that the cost may be reduced while still considering the important functions.
Any constraints occurred in the implementation of VE in the Public Works Department in Indonesia must be consid-ered and dealt with proper regulation, implementing social-ization and training for VE certification, and improving the skills and competence of personnel in each working unit. VE is implemented by considering any inefficient cost. By imple-menting VE, it is expected that there will be cost reduction around 11% - 15%.
Keywords
value engineering, inefficiency, function analysis
Introduction
BackgroundBased on the role and contribution of infrastructure ser-
vice at national level, issues and strategic environment de-velopment, including the target, the infrastructure of public work are demanded to provide a suitable level of service which can guarantee a good implementation of socioeconomic ac-tivities. Hence, the Public Works Department of Indonesia established the 2005-2009 vision as follows: “Guaranteeing a good and proper service for the infrastructure of public work in order to provide a productive and sustainable life.”
From year to year, the Public Works Department was grouped into the top five institutions receiving the largest national budget and spending. In 2008, it was ranked as the third position after the National Education Department and Defense Department. However, based on the inspection re-sults, there were various deviations occurred in the budget spending that led to inefficiencies.
As one of the methods for improving the budget’s efficien-cy and effectiveness, the method of value engineering (VE)
can be used. Generally, VE is defined as a creative and orga-nized approach for optimizing cost and/or facilities or system performance.
Problem Description This research is based on several findings from Public
Works Department inspection. The findings are: lack of obe-dience, incomplete and inaccurate analysis leading to ineffi-ciency, and ineffectiveness of budget spending in the infra-structure service of public work divisions.
In order to implement VE in the infrastructure service of public works divisions, there is a question needs to be an-swered: “What factors influencing the preparedness of the in-frastructure service of public works divisions in implementing value engineering?”
ObjectivesThe objective of this research is to identify main factors
influencing the preparedness of the infrastructure service in Public Works Department in implementing value engineer-ing.
By identifying these factors, the inspection division of Public Works Department can evaluate them during their in-spection reviews and may provide better solutions for mini-mizing any inefficiency. It is also expected that this research can be a proper feedback for the decision maker in the Public Works Department in implementing projects.
Literature Reviews
Value engineering (VE) is a function of analysis approach which aims for reducing the production or project cost. The amount of cost needed in the planning and execution phase and the process to save time in those phases must be analyzed simultaneously. Problems which usually occurred is cost re-duction by eliminating substantial elements, which may lead to improper deliverables.
VE method was developed during the World War II, when there was a resource crisis that led to changes in the development of methods, materials and traditional designs. In the beginning of World War II, General Electric Company from USA (pioneered by L.D. Miles) implemented the VE concept for providing cost-efficient war equipments. After-
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wards, VE method was developed quite rapidly in various sec-tors. In 1985, the association for VE practitioners was estab-lished, called as Society of American Value Engineers (SAVE), which now has members from more than 35 countries. In Indonesia, due to the increase of VE implementation, the as-sociation for VE was also established in 2006 for improving professionalism in optimizing budgets for infrastructure and industrial projects.
A VE program is an effort to provide a significant change by finding any unnecessary cost and eliminating them. SAVE International implied that VE is more com-prehensive than just analyzing cost:
VE is system oriented (reviewing the process in a systematic approach);multidiscipline team approach (analyzed by experienced experts);life cycle oriented (considering the to-tal cost based on the project’s life cycle, including total cost for operating and maintaining the facility/product);using a proven management technique; and function oriented (correlating the function needed and the value that will be received).
Thus VE is not intended to correct the designs or calculations made by the planner. It is also not a cheapening process; VE is not meant to cut cost by eliminating important elements. VE is also not considered as part of the design review phase, but it is a part of a cost and function analysis during the design phase.
The unnecessary cost needed to be de-termined during the VE process are the costs which occur due to limited time in the de-signing phase (there is not enough time to provide a more cost efficient design alterna-tives); limited information; lack of ideas; im-proper decision; mistakes in developing the concept; limited freedom in the designing phase; politics (considering different needs or importance); and reluctant or hesitant in receiving feedbacks (Rochmanhadi,1992).
Based on the Public Works Ministry Regulation No. 06/PRT/M/2008 on Con-struction Implementation and Monitoring in the Public Works Department, any indica-tion of inefficiencies in the design/planning, working methods, construction methods, or
construction material and equipment selection can be re-viewed and analyzed by VE method.
Research Process
Research MethodThis research was implemented by conducting surveys to
related respondents and experts. The data was collected by de-veloping questionnaires and structured interviews. The data was analyzed by statistical analysis and description analysis.
Table 1. Factors that Influence VE implementa�on
Variables Descrip�on Mean Index
1 Personnels’ level of educa�on 3,43
2 Personnels’ level of experience 4,77
3 Personnel’s’ level of competence in cost es�ma�on 4,41
4 Level of knowledge in market/standard prices 4,61
5 Level of competence in developing working methods 4,44
6Personnel composi�on (architecture, civil, mechanical, electrical, and environment)
3,02
7 The number of personnel with VE cer�fica�on 1,11
8The comprehension level of VE technique and management
3,22
9 Program op�miza�on using VE 4,33
10 Project scale/type using VE 3,95
11 Project area using VE 4,49
12 Project cost/value which use VE 5,07
13 Construc�on drawings 4,10
14 Building func�on analysis and its elements 4,25
15 Material specifica�on informa�on 5,31
16 Informa�on about project problems 4,60
17 Design alterna�ves based on technical views 4,71
18 Design alterna�ves based on cost 4,63
19 High cost items 4,33
20 Efficient construc�on method 5,13
21 Efficient construc�on innova�on 5,21
22 Alterna�ve selec�on 5,23
23 Alterna�ve priori�es 5,30
24 VE reports and recommenda�on 5,18
25 Coopera�on with related par�es 5,16
26 Coopera�on and interac�on with the internal VE team 5,16
27 Logis�c support 4,51
28 The importance of regula�on in VE implementa�on 4,55
29 VE implementa�on regula�on 2,69
30 Incen�ves for contractors applying VE 3,70
31 Incen�ves for design consultants applying VE 3,83
V A L U EWORLDVolume 32, Number 3, Fall 200912
Research ResultsThe research variables were identified from various ref-
erences and it recognized 31 variables influencing the pre-paredness of VE implementation. The questionnaires were distributed to 99 respondents. The data was analyzed using frequency distribution method. The results of analysis can be seen in Table 1 (see page 11), which illustrate the 31 variables/factors influencing VE implementation together with its mean index.
Based on the mean (average) index from the frequency distribution analysis, there are 5 (five) main factors that in-fluence the preparedness of VE implementation in the Public Works Department. Those factors are shown in Table 2.
Table 2. Five Main Factors Influencing VE Implementa�on
Variable No. Factor Descrip�on
Mean Index
7Cer�fica�on/training
The number of personnel having VE cer�fica�on
1,11
29 Regula�onVE implementa�on regula�on
2,69
6 Composi�on
Personnel composi�on (architecture, civil, mechanical, electrical, and environment)
3,02
8 ComprehensionThe comprehension level of VE technique and management
3,22
1 Educa�onPersonnel’s’ level of educa�on (minimum Bachelor degree)
3,43
Moreover, based on the question in the questionnaire, there were also findings on the average percentage of efficiency that may occurred by implementing VE in a physical infra-structure projects. Most of the respondents responded that there might be cost efficiency between 11% and 15% from the total contract value.
Findings and DiscussionReferring to the results of the frequency distribution anal-
ysis for factors influencing VE implementation, there were several factors with low mean index; i.e., below 3,50. It is con-sidered that these factors with low mean (average) index were the main problems influencing the Public Works Department preparedness in implementing VE.
From those findings, it is validated five main factors by expert’s judgments. The five main factors were ranked and val-ued by corresponding experts using questionnaire instrument. The criteria of expert herein are those with minimum educa-tion of Bachelor Degree (in engineering), 20 years of experi-
ence in the Public Works Department and civil engineering projects, such as water resources, roads and highways, build-ings, and project supervision.
Based on the expert validation process, which analyzed using the scoring system, the main factors influencing VE implementation was (1) regulation, (2) certification/training, (3) comprehension, (4) education, and (5) composition. This can be seen in Table 3.
Table 3. Validated Dominant Factors Influencing VE Implementa�on (validated by experts)
Rank Factor Descrip�onMean index
1 Regula�onVE implementa�on regula�on
4,6
2Cer�fica�on/training
The number of personnel having VE cer�fica�on
3,8
3 ComprehensionThe comprehension level of VE technique and management
3,0
4 Educa�onPersonnel’s’ level of educa�on (minimum Bachelor degree)
2,4
5 Composi�on
Personnel composi�on (architecture, civil, mechanical, electrical, and environment)
1,2
Regulation plays an important role in determining the preparedness of Public Works Department in implementing VE. In general, VE implementation in Indonesia was first established in 1986; however, the concept was not socialized thoroughly. There was not any single government regulation determining and regulating the VE implementation, therefore, there were constraints in applying the method with no distinct guidelines. In 2007, there was a regulation from the Minis-try of Public Works for Public Building Construction Manual (No.45/PRT/M/2007) regulating VE implementation. Still, the directive was only for public buildings, and not suitable for other construction projects. So far, there was no clear and concise parameter or guideline on VE implementation in construction and infrastructure projects. Although the Public Works Department had encourage the VE implementation in their projects, but there was still no detailed regulation on this issue. The regulators should consider creating and establishing VE implementation based on law like other countries. The United States, for example, had implemented VE legally based on their Public Law 104-106 sub section 36, which stated that each government department is obliged to implement and ex-ecute cost efficiency process based on value engineering. The practice of value engineering as a professional service in the
Volume 32, Number 3, Fall 2009 13V A L U EWORLD
USA has enjoyed a comfortable niche in federally funded or partially Federally funded projects of greater than $25 mil-lion dollars costs and federal procurement regulation that all significant U.S. DOD projects, including U.S. Corps of Engi-neers, EPA, and the Departments of the Army, Navy, and Air Force, as well as a host of minor federal agency projects must have their proposed project plans reviewed in a formal value engineering study (Fanning, 2005). Furthermore, FIDIC had also affirmed that VE can be applied in construction works, in which the contractors can propose the process to the techni-cal directors in order to (i) accelerate the working duration, (ii) reduce construction, operation, and maintenance cost, (iii) improve cost efficiency, or (iv) increase profitability.
Regarding certification and training related to VE, the number of people having VE certification was still small. There were only 30 people having VE certification as Associate of Value Specialist (AVS) in Indonesia. Nonetheless, Indonesian value engineers had shown some effort in improving their af-filiation and professionalism by creating an association called Indonesia Value Engineering Expert Association (IVEEA) in 2006. This association has been collaborating with Society of American Value Engineers (SAVE) International and since then they have facilitated various training and local VE certi-fication. This effort must be managed thoroughly in order to publicize VE through training, certification, seminars, work-shops, and other means of promotion.
The comprehension or understanding level of VE tech-nique and management is still low due to the lack of VE publication. Therefore, the Public Works Department should facilitate the national VE association (IVEEA) in providing various training/certification or workshops for their employ-ees. A workshop will explore ways of making the VE process more efficient, with the objective of making recommendations in support of workshops with time constraints (Hunter and Kelly, 2007).
VE analysis is a multi-discipline team approach, which means that the team will consist of members with various aca-demic background and disciplines related to their works (Raj, 2002). The limited number of personnel who had minimum education background (minimum Bachelor degree) was related to the working unit’s composition based on their knowledge background (architecture, civil, mechanical, electrical, and en-vironment). This constraint can be resolved by collaborating with other party outside their working unit, such as external consultants with VE expertise.
Conclusion and Recommendation
The value engineering (VE) implementation in the Public Works Department, as one of the alternatives in improving cost efficiency and effectiveness, is still experiencing problems
and constraints. The main factors (which became problems) that influence the implementation of VE are lack of VE guide-lines and regulation, limited personnel with VE certification, minimum knowledge of VE technique and management, and last but not least, the limited number of personnel and work-ing unit composition having sufficient education level and knowledge background.
VE process should be implemented in work/project pack-age which indicated any cost inefficiency (Davis, 2004). Those indications may be derived from various inspections, such as from public inspection, superior level inspection, or function-al inspection.
Based on the conclusion, it is recommended that the Pub-lic Works Department should:
Create and determine detailed guidelines and regulation about VE implementation for all projects in its division, such as water resources, roads and highways, buildings, and others.
Develop promotion and socialization about VE to related users, followed by conducting trainings and certification by collaborating with related associations.
Increase the number of qualified personnel with proper composition for each working unit in order to provide a suitable team for applying VE analysis in their works. If needed, the VE process can also be applied by working with external team having VE expertise.
VE implementation should be applied to project/work package which indicates cost inefficiency.
References
Davis, Kristin E.L., 2004, Finding Value in the Value Engi-neering Process, Journal of Cost Engineering, Vol 46 / no.12 December, USA.
Dell’Isola, Alphonse J., 1982, Value Engineering in the Con-struction Industry, Van Nostrand Reinhold Company, New York.
Fanning,Daniel, 2005, Value Engineering Study Services in a Design Build World, Fanning & Company, USA
FIDIC, 1999, Conditions of Contract for Construction, for Building and Engineering Works Designed by the Em-ployer, FIDIC, Switzerland.
Hunter,Kirsty and Kelly,John, 2007, Efficiency in VM/VE Studies and the Pressure for Shorter Workshops, Value World Journal, SAVE International, USA
Miles, Lawrence D., 1972, Techniques of Value Analysis and Engineering, McGraw-Hill, Inc., New York.
Raj,Hussain Mustansir, 2002, VE is not a “Group Cost Cut-
V A L U EWORLDVolume 32, Number 3, Fall 200914
ting”, AACE International Transactions, USA
Rochmanhadi, 1992, Teknik Penilaian Disain (Value Engi-neering), Yayasan Gema Aproteknika, Semarang.
About the Authors
Dr. Yusuf Latief is a faculty member of the University of Indone-sia’s Civil Engineering Department.
Ir. Vincentius Untoro K. has a degree in construction manage-ment and serves as an internal auditor at the Department of Pub-lic Works.
Join SAVE International nowand avail yourself of the opportunities to
ADD VALUE TO YOUR CAREER.
SAVE Opens Yahoo Group & Facebook PageU� lizing venues familiar to most Internet users, SAVE Interna� onal has jumped on the social networking bandwagon with a new Yahoo discussion group and a new Facebook web page.
The discussion group was created on Yahoo.com through its “Yahoo Groups” u� lity. The purpose of the group is to facilitate discussion on topics related to the value methodology and its prac� ce. The URL for the group is h� p://fi nance.groups.yahoo.com/group/save_interna� onal/. To subscribe, you must be registered with Yahoo. Registra� on is free and simple to accomplish. The group is moderated. You may link to Yahoo from a “bu� on” on the SAVE home page (www.value-eng.org).
SAVE’s new Facebook page expands its Internet presence aff ords members and others interested in value engineering yet another venue for social and professional networking. SAVE will also use the forum to announce upcoming events and due dates important to the membership. Become a fan of SAVE’s Facebook page. The Facebook bu� on on the society’s home page will take you right there!
SAVE welcomes other sugges� ons from members to improve services and increase awareness of value engineering, the society, and the membership. Send sugges� ons to [email protected].
Volume 32, Number 3, Fall 2009 15V A L U EWORLD
Earning Value to Save ProjectsAdedeji B. Badiru, Ph.D., PE, PMP
Abstract
This paper presents a combination of analytical and man-agement approaches to improve communication, cooperation, and coordination across a project life cycle for the purpose of enhancing earned-value performance of the project. Proj-ect failures most often result from poor cost-schedule-quality criteria. In order to save projects, acceptable levels of value must be realized from the project iteratively over its life cycle. Project value can be measured in terms of physical product output, provision of service, or achievement of some desired result. When value cannot be ascertained, it is usually due to deficiencies in the communication, cooperation, and coordi-nation processes. The paper discusses how the Triple C model of project management can be used to mitigate such opera-tional problems and ensure that measurable and sustainable value is achieved at each stage of a project.
Introduction
What is value? Value is in the perception of the project stakeholder. Every year, thousands of high-profile projects are terminated prematurely due to value-deficient performance problems. How can these projects be saved? Often times, we focus our efforts on issues that are not the root causes of proj-ect value problems. The obvious value metrics are in terms of cost, schedule, and quality. The premise of this paper is that there are other subtle factors that impinge directly on the value performance of projects. These factors are centered on human communication, cooperation, and coordination aspects of projects.
This paper presents a combination of analytical and man-agement approaches to improve communication, cooperation, and coordination across a project life cycle for the purpose of enhancing earned-value performance of the project. Proj-ect failures most often result from poor cost-schedule-quality criteria. In order to save projects, acceptable levels of value must be realized from the project iteratively over its life cycle. Project value can be measured in terms of physical product output, provision of service, or achievement of some desired result. When value cannot be ascertained, it is usually due to deficiencies in the communication, cooperation, and coordi-nation processes. The paper discusses how the Triple C model of project management can be used to mitigate such opera-tional problems and ensure that measurable and sustainable
value is achieved at each stage of a project.
Value-Centric Assessment of Projects
Figure 1 shows a typical (normal) profile of the progres-sion of any process. In the case of project value assessment, val-ue increases over time until it gets to a maximum point, then it starts to degenerate if proactive steps are not taken to preserve it. The best case scenario is to do timephased value mapping so that maximum value point coincides with the project life cycle, which is shown in Figure 2. If the project value is man-aged effectively, it will level off instead of dropping off. The dashed line in Figure 1 illustrates this target scenario.
Foundation of Earned Value Analysis
Cost, Schedule, and Quality constitute the foundation for earned value analysis (EVA). If deficiencies exist in any of these three, the overall project value would suffer. Thus, any
TimeVal
ue M
agni
tude
Value Decline Path
Value Leveled Path
Figure 1. Profile of Project Value over Time
Figure 2. Typical Project Life Cycle
V A L U EWORLDVolume 32, Number 3, Fall 200916
strategies aimed at preserving the integrity of cost, schedule, and quality of a project will help to preserve project value and, thus, result in “saving” the project from potential premature termination.
Value-Based Cost Estimates
Using an adaptation of the PERT formula, we can com-bine optimistic and pessimistic cost estimates to convey the concept of earning and preserving project value. If O = opti-mistic cost estimate, M = most likely cost estimate, and P = pessimistic cost estimate, the estimated cost can be stated as follows:
and the cost variance can be estimated as follows:
The importance of the above formulae is to recognize that “fluff activities” increase cost variance, thereby impeding potential advantages of lean six-sigma initiatives, which ulti-mately affect project value in adverse ways.
Three-legged Stool of Value
In spite of the increased levels of technology infusion into project execution, human capital remains at the forefront of earning value for projects. Figure 4 (below left) illustrates the concept of a three-legged stool for the sources of project value. Project value is primarily within the purview people associ-ated with the project, and thus must be managed with that appreciation.
Value Monitoring
As a project progresses, value can be monitored and evalu-ated on the basis of cost, schedule, and quality to identify ar-eas of unacceptable performance. Figure 5 shows a strategy of phase-based assessment of a project. The idea is to justify the value of each phase as the project progresses so that surprises are not revealed at a sudden end of the project. Figure 6 shows a plot of value versus time for projected value and actual value. The plot permits a quick identification of the points at which value benefits occur and where value deficits exist in a proj-ect.
Plots similar to Figures 5 and 6 may be used to evaluate cost, schedule, and quality performance of a project in the context of overall value. On the analytical side, a computa-tional approach similar to the project profit ratio presented by Badiru (2009) may be used to evaluate the overall value performance of a project over a specified planning horizon. Presented [following] is a formula for value performance index (VPI), whose calculation is based on the bounded segments in Figure 6 (next page):
termination.
���������Quality �
CostSchedule�
Value Assessment State Space
Figure 3. Value Trade-offs for Cost, Schedule, and Quality
� � 46
O M PE C � ��
� �2
6P OV C �� �� � �� �
�
Sources of
Project Value
�
People
Resources
�
Process
Assets
�
Technology
Tools
Figure 4. Focus on People, Process, and Technology as mutual Sources of Value
Phase III
Phase II
Phase I
Time
Part 1Part 2
Part 3
Figure 5. Assessment of Value-Based Project Phases
Volume 32, Number 3, Fall 2009 17V A L U EWORLD
The VPI measure may be used to evaluate the relative performances of several project alternatives or to evaluate the value feasibility and acceptability of an individual alternative.
Value Balance Technique
One other approach to monitoring project value perfor-mance is the value balance technique (VBT), which is based on the conventional project balance technique. The technique helps in assessing the value state of a project at a desired point in time in the life cycle of the project. It calculates the net value (in cash flow terms) of a project up to a given point in time. The project value balance is calculated as follows:where
VBT(i)t = project balance at time t at an interest rate of i% per period
PW income (i)k = present worth of net income from the project up to time k
P = initial cost of the project
St = salvage value at time t.
The project balance at time t gives the net loss or net profit associated with the project up to that time.
Project Value Model
A technique that is related to the project value balance technique is the project value model (PVM), which is an ad-aptation of the manufacturing system value (MSV) model presented by Troxler and Blank (1989). The model provides a
heuristic decision aid for comparing project alternatives. Value is represented as a deterministic vector function that indicates the value of tangible and intangible attributes that characterize the project. It is represented as:where V = value,A = (A1,...,An) = vector of quantitative mea-
sures or attributes, and p = number of attributes that charac-terize the project. Examples of project attributes are quality, throughput, capability, productivity, and cost performance. Attributes are considered to be a combined function of fac-tors, x1, expressed aswhere {xi}= set of m factors associated with attribute Ak (k
=1,2,..., p) and fi = contribution function of factor xi to at-tribute Ak . Examples of factors are market share, reliability, flexibility, user acceptance, capacity utilization, safety, and design functionality. Factors are themselves considered to be composed of indicators, vi , expressed as
where {vj}=set of n indicators associated with factor xi(i =1,2,...,m) and zj = scaling function for each indicator variable vj. Examples of indicators are debt ratio, project responsive-ness, lead time, learning curve, and scrap volume. By combin-ing the above definitions, a composite measure of the value of a project is given by
where m and n may assume different values for each attribute. A weighting measure to indicate the decision maker’s pref-erences may be included in the model by using an attribute weighting factor, wi , as shown below:
where
In addition to the quantifiable factors, attributes, and in-dicators that impinge upon overall project value, the human-
Area of value benefitVPI = Area of value benefit + area of value deficit
.
Figure 6. Evalua�on of Actual and Projected Value
value balance is calculated as follows:
� � � � � �t
incomek=1
1 PWttt kVBT i S P i i� � � ��
� �1 2, , , pV f A A A� �
� � � �1 21
, , ,k
k
m
k m i ii
A x x x f x�
���
� � � �1 21
, , ,n
i n i ij
x v v v z v�
���
definitions, a composite measure of the value of a project is given by
These are addressed in the remaining sections of this pa-per. First, we examine the various causes of value problems in a project from a value-earning perspective.
Causes of Schedule Problems
Delay of critical activitiesUnreliable time estimatesTechnical problemsInappropriate precedence structureChange of due datesManagement change orders
Schedule Control Actions
Use activity crashingRevise milestonesUpdate time estimatesChange the scope of workCombine related activitiesEliminate unnecessary activities (i.e., operate lean)
Inadequate budgetInflationary impacts on procurementPoor cost reportingIncrease in scope of workHigh overhead cost
High labor cost
Cost Control Actions
Reduce labor costsModify work processAdjust work breakdown structureImprove coordination of project functionsImprove cost estimation proceduresOutsource work selectively and strategically
Elements of Value Control
Value control, in the context of project management, re-fers to the process of regulating or
rectifying value attributes to bring them within acceptable levels. Because of the volatility and dynamism often encoun-tered in complex projects, it is imperative to embrace the fol-lowing project value control practices:
Recognize humans as drivers of valueInfluence the factors that create changes to the cost base-lineEnsure requested changes are agreed uponManage the actual changes when and as they occurMonitor cost performance to detect and understand vari-ances from the cost baselinePrevent incorrect, inappropriate, or unapproved changesUse earned value technique (EVT) to track and rectify cost performanceDocument and disseminate approved changes early
Contemporary Earned Value Technique
The conventional earned value technique (EVT) is used primarily for cost control purposes, which is the most obvious element of value. However, both schedule and quality aspects of a project can be expressed in cost terms for EVT applica-tion. The technique involves developing important diagnostic values for each schedule activity, work package, or control ele-ment as shown in Figure 7 (next page, top left).
The definitions of the variables that appear in Figure 6 are summarized below:
Planned Value (PV): This is the budgeted cost for the work scheduled to be completed on an activity up to a given point in time.
Earned Value (EV): This is the budgeted amount for the work actually completed on the schedule activity during a given time period.
Actual Cost (AC): This is the total cost incurred in accom-plishing work on the schedule activity during a given time
Volume 32, Number 3, Fall 2009 19V A L U EWORLD
period. AC must correspond in definition, scale, units, and coverage to whatever was budgeted for PV and EV. For exam-ple, direct hours only, direct costs only, or all costs including indirect costs. The PV, EV, and AC values are used jointly to provide value performance measures of whether or not work is being accomplished as planned at any given point in time. The common measures of project assessment are cost variance (CV) and schedule variance (SV).
Cost Variance (CV): This equals earned value minus actual cost. The cost variance at the end of the project will be the difference between the budget at completion (BAC) and the actual amount expended.
CV = EV – AC
Schedule Variance (SV): This equals earned value minus planned value. Schedule variance will eventually become zero when the project is completed because all of the planned val-ues will have been earned.
SV = EV - PV
Cost Performance Index (CPI): This is an efficiency indicator relating earned value to actual cost. It is the most commonly used cost-efficiency indicator. CPI value less than 1.0 indicates a cost overrun of the estimates. CPI value greater than 1.0 indicates a cost advantage of the estimates.
CPI =EVAC
Cumulative CPI (CPIC): This is a measure that is widely used to forecast project costs at completion. It equals the sum of the periodic earned values (Cum. EV) divided by the sum of the individual actual costs (Cum. AC).
CPIc =EVc
ACc
Schedule Performance Index (SPI): This is a measure that is used to predict the completion date of a project. It is used in conjunction with CPI to forecast project completion esti-mates.
SPI =EVPV
Estimate to complete (ETC) based on new estimate: Estimate to complete equals the revised estimate for the work remaining as determined by the performing organization. This is an inde-pendent non-calculated estimate to complete for all the work remaining. It considers the performance or production of the resources to date. The calculation of ETC uses two alternate formulae based on earned value data.
ETC based on atypical variances: This calculation approach is used when current variances are seen as atypical and the expec-tations of the project team are that similar variances will not occur in the future.
ETC = BAC-EVc,
where BAC = Budget at completion.
ETC based on typical variances: This calculation approach is used when current variances are seen as typical of what to expect in the future.
ETC =BAC-EVc
CPIc
Estimate at completion (EAC): This is a forecast of the most likely total value based on project performance. EAC is the projected or anticipated total final value for a schedule activity when the defined work of the project is completed. One EAC forecasting technique is based upon the performing organi-zation providing an estimate at completion. Two other tech-niques are based on earned value data. The three calculation techniques are presented below. Each of the three approaches can be effective for any given project because it can provide valuable information and signal if the EAC forecasts are not within acceptable limits.
EAC using a new estimate: This approach calculates the actual costs to date plus a new ETC that is provided by the perform-ing organization. This is most often used when past perfor-mance shows that the original estimating assumptions were fundamentally flawed or that they are no longer relevant due to a change in project operating conditions.
Figure 7. Graphical Plot of Earned Value Performance Analysis
V A L U EWORLDVolume 32, Number 3, Fall 200920
cesses of communication, cooperation, and coordination. The integrated impact of these is illustrated in Figure 8.
Communicating Value
The Triple C model requires communication to be the first and foremost function in the project endeavor. Communica-tion highlights what must be done, why, when, where, how, and by who. It addresses explicit questions such as:
When will the project be accomplished?
Which tools are available for the project?
What training is needed for the project execution?
What resources are available for the project?
Who and who will be part of the project team?
Triple C can mitigate disparity between idea and practice because it explicitly solicits information about the critical as-pects of a project.
SMART Communication
The key to getting everyone on board with a project and contributing value is to ensure that task objectives are clear and comply with the principle of SMART as outlined below:
Specific: Task objective must be specific.
Measurable: Task objective must be measurable.
Aligned: Task objective must be achievable and aligned with overall project goal.
Realistic: Task objective must be realistic and relevant to the organization.
Timed: Task objective must have a time basis.
If a task has the above intrinsic characteristics, then the function of communicating the task will more likely lead to
EAC = ACc +ETC
EAC using remaining budget: In this approach, EAC is calculated as cumulative actual cost plus the budget that is required to complete the remaining work; where the remain-ing work is the budget at completion minus the earned value. This approach is most often used when current variances are seen as atypical and the project management team expecta-tions are that similar variances will not occur in the future.
EAC = ACc + (BAC – EV),
where (BAC – EV) = remaining project work = remaining PV.
EAC using cumulative CPI: In this approach, EAC is calcu-lated as actual costs to date plus the budget that is required to complete the remaining project work, modified by a perfor-mance factor. The performance factor of choice is usually the cumulative CPI. This approach is most often used when current variances are seen as typical of what to expect in the future.
EAC = ACc +(BAC-EV)
CPIc
Other important definitions and computational relationships are summarized below:
Earned Budgeted cost of work actually per-formed
Planned Budgeted cost of work scheduled
Actual Cost of actual work performed
Ending CV = Budget at completion – Actual amount spent at the end
= BAC – EAC = VAC (Variance at Comple-tion)
EAC = ETC + AC = (BAC – EV) + AC = AC + (BAC – EV)
ETC = EAC – AC = BAC - EV
Application of Triple C Model to Value Creation
Badiru (2008) presents the Triple C model as an effective tool for achieving communication, cooperation, and coordi-nation in complex project environment. The Triple C model states that project value can be enhanced by executing the project within the following integrated and hierarchical pro-
Figure 7: Triple C for Planning, Scheduling, and Control
Project Value Enhancement
�Communication Cooperation Coordination
Figure 8. Triple C for Planning, Scheduling, and Control
Volume 32, Number 3, Fall 2009 21V A L U EWORLD
personnel cooperation.
Complexity of Multi-Person Communication
Communication complexity increases with an increase in the number of communication channels. It is one thing to wish to communicate freely, but it is another thing to contend with the increased complexity when more people are involved. The statistical formula of combination can be used to estimate the complexity of communication as a function of the number of communication channels or number of participants. The combination formula is used to calculate the number of pos-sible combinations of r objects from a set of n objects. This is written as:
In the case of communication, for illustration purposes, we assume communication is between two members of a team at a time. That is, combination of 2 from n team members. That is, number of possible combinations of 2 members out of a team of n people. Thus, the formula for communication complexity reduces to the expression below, after some of the computation factors cancel out:
In a similar vein, Badiru (2008) introduced a formula for cooperation complexity based on the statistical concept of permutation. Permutation is the number of possible arrange-ments of k objects taken from a set of n objects. The permuta-tion formula is written as:
Thus, for the number of possible permutations of 2 mem-bers out of a team of n members is estimated as:
Permutation formula is used for cooperation because co-operation is bi-directional. Full cooperation requires that if A cooperates with B, then B must cooperate with A. But, A cooperating with B does not necessarily imply B cooperating with A. In notational form, that is:
A → B does not necessarily imply B → A.
Figure 9 shows the relative plots of communication com-plexity and cooperation complexity as function of project team size, n.
Cooperation for Value
The cooperation of project personnel must be explicitly elicited. Merely voicing consent for a project is not enough as-surance of full cooperation. The participants and beneficiaries of the project must be convinced of the merits and value of the project. Some of the factors that influence cooperation in a project environment include personnel requirements, resource requirements, budget limitations, past experiences, conflict-ing priorities, and lack of uniform organizational support. A structured approach to seeking cooperation should clarify the following:
Cooperative efforts requiredPrecedents for future projectsImplication of lack of cooperationCriticality of cooperation to project successOrganizational impact of cooperationTime frame involved in the projectRewards of good cooperation
Coordination for Value
After the communication and cooperation functions have successfully been initiated, the efforts of the project personnel must be coordinated. Coordination facilitates harmonious or-ganization of project efforts. The construction of a responsibil-ity chart can be very helpful at this stage. A responsibility chart is a matrix consisting of columns of individuals or functional departments and rows of required actions. Cells within the matrix are filled with relationship codes that indicate who is responsible for what. The matrix helps avoid neglecting crucial
!![ ]!n rnC
r n r�
�
2( 1)2n
n nC ��
!( )!n knP
n k�
�
2 ( 1)n P n n� �
Communication�
Cooperation�
f(n)�=�n(n�1)/2�
f(n)�=�n(n�1)�
Complexity�
Figure 9. Plots of Communica�on and Coopera�on
V A L U EWORLDVolume 32, Number 3, Fall 200922
communication requirements and obligations, thus facilitat-ing coordination.
Conclusion
Cooperation is a basic virtue of human interaction. More projects fail due to a lack of cooperation and commitment than any other project factors. To secure and retain the coop-eration of project participants, we must elicit a positive fi rst reaction to the project. Th e most positive aspects of a project should be the fi rst items of project communication. For proj-ect management, there are diff erent types of cooperation that should be understood and pursued explicitly. In order to earn and sustain value to save projects from premature termination, the human aspects must be considered. Th e Triple C model of project management makes human consideration possible and eff ective.
References
1. Badiru, Adedeji B., STEP Project Management: Guide for Science, Technology, and Engineering Projects, Taylor & Francis CRD Press, 2009.
2. Badiru, Adedeji B., Triple C Model of Project Management: Communication, Cooperation, and Coordination, Taylor & Francis CRC Press, 2008.
3. Troxler, J. W. and L. Blank (1989), “A Comprehensive Methodology for Manufacturing System Evaluation and Comparison,” Journal of Manufacturing Systems, Vol 8, No. 3; pp. 176-183.
About the Author
Adedeji Badiru is Professor and Head of Systems & Engi-neering Management at the Air Force Institute of Technology. He was previously professor and head of Industrial & Infor-mation Engineering at the University of Tennessee, and for-merly professor of industrial engineering at the University of Oklahoma. He is a registered professional engineer (PE), cer-tifi ed Project Management Professional (PMP), Fellow of the Institute of Industrial Engineers, and Fellow of the Nigerian Academy of Engineering. He has B.S. and M.S. in industrial engineering and M.S. in mathematics from Tennessee Tech-nological University, and Ph.D. in industrial engineering from the University of Central Florida.
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Volume 32, Number 3, Fall 2009 23V A L U EWORLD
The Application of VE in Business Decision-making Evaluation of Technology Selection
Zhang Tie-shan & Huang Wei
Abstract
In this paper, the existing evaluation methods of technol-ogy selection was reviewed , characteristics and combination ways of value engineering (VE) and enterprise technology se-lection were discussed, then the function-cost analysis method was applied into the enterprises’ technology decision evalua-tion . Based on the function evaluation of technology selec-tion, the author discussed the building of the evaluation index system in enterprise technology selection and the calculation of the functional index to technology scheme, combined with the cost analysis of technology selection, the value index of technology selection programs can be calculated in order to evaluate the technology programs and help with decision mak-ing in enterprise technology selection. At the end of the paper some recommendations to the application of VE in decision-making evaluation of technology selection were outlined.
The acquisition for technical resources has become one of the key issues in enterprise technology strategy formulation.
The National Bureau of Statistics data shows that since 1995, investment in technology acquisition of the large and medium-sized industrial enterprises registered in China pres-ents a trend of wavy growth. As shown in fig.1,in 2007 China’s large and medium-sized enterprises’ investment connected to technology acquisition was up to 68.9 billion yuan, with enterprises’ investment connected to technology acquisition was up to 68.9 billion yuan, with 45.2 billion directly on the introduction of foreign technology spending, 10.7 billion on technology assimilation, 13.0 billion on purchase of domestic technology. (Figure 1, above right.)
Meanwhile, China’s research and experimental develop-ment (R&D) expenditure was 371.02 billion yuan in 2007, with expenditures of various types of enterprises 268.19 bil-lion yuan. In 2008, research and experimental development (R&D) expenditure reached 457 billion yuan high[2].In 2008 China’s technology market recognized and registered a total of
226,343 technology contracts, the trading amount of which was 266.5 billion yuan, 0.89% of 2008GDP[3]. These figures fully demonstrate that many businesses has given more weight to technology acquisition and considered it an important proj-ect in strategic development.
With the acceleration of technology upgrading and chang-ing of technical environment, making appropriate decisions in technology selection becomes an unavoidable issue on tech-nology strategy level.
Evaluation Methods of Technology Selection
With the increasing emphasis on technology selection, scholars at home and abroad enterprises have carried out exten-sive researches on enterprises’ technology selection, especially on the evaluation method of technology decision-making.
Foreign scholars have created a number of methods of economic evaluation in technology selection, such as the Ana-lytic Hierarchy Process (Kleindorfer, 1990), mixed integer programming model (Singh and Shushil, 1990), the physi-cal system theory (Singh, 1990) and so on. The research of technology selection evaluation method in China began in the late 90’s of last century. From the theoretical perspective, scholars in China discussed the economies of scale and the appended bonus degressive rule (Jing Wei, 2003), produc-tion conditions and market conditions (Chan Ying, 2003),
Figure 1[1]. 1995-2007 investment of China’s large and medium-sized enterprises in technology acquisi�on (Unit: hundred million ¥)
V A L U EWORLDVolume 32, Number 3, Fall 200924
Resources Gift Theory(li Honglin and Yang, 2004) and other influencing factors of decision making in technology selection as well as some key issues in decision making ;As for specific methods, Chinese scholars applied the Game Theory (Yang Zhongzhi,1997),the mathematic Fuzzy Theory (Xiu Guoyi, 1998; Li Gaozhyeng,etc 2004),the Grey theory (Yu Xiaoling, 2000 ), the weighted method (Zhang Jiong,2003;Yu Jingtao and Wu Chunyou, 2003)to technology selection evaluation .
Looking at literatures on technology selection and evalua-tion at home and abroad, it is not difficult to find that there still remains some shortages in the existing researches in China: in the field of technology decision-making evaluation methods we have made some progress , however, the studies were gener-ally conducted from the qualitative perspective to analyze the influencing factors and evaluation indexes of technology selec-tion , lack of synthesis methods combining qualitative and quantitative ways from a corporational strategic perspective.
VE and Business Decision-making Evaluation of Technology Selection
Since the foundation of VE theory, function-cost analysis has been widely applied in the product and process develop-ment activities, life cycle cost (LCC) has also been put into exertion in all aspects of the business value chain.
Now the research trend of VE is to integrate with other management methods, such as the integrated application be-tween VE and decision-making methods. The target of this paper is to combine VE with business technology selection theory, and apply the principles of value engineering into busi-ness decision-making analysis of technology selection.
Characteristics of Value Engineering and Enterprise Technology Selection
There are many common features between value engineer-ing and technology selection, which make it possible to apply value engineering into the business decision-making analysis of technology selection.
First, value engineering and technology selection are both systematic projects. They both have their own specific pro-cesses, but VE aims to analyze the function and cost to pursue higher value, its ideas and methods can be applied to many segments of enterprises’ technology selection.
Second, value engineering and technology selection both share the target of optimization. Value engineering aims to find an optimal or relatively better solution by enhancing the function of the research object and reducing the cost of the object, and the target of technology selection is to choose the best one among many technology programs.
Last but not the least, value engineering and technology
selection both emphasize the spirit of innovation. By studying the function and cost of research object, VE looks for continu-ous innovation to increase the value of the object as a result to achieve better economic and social benefit. And to technology selection, one of its main goals is to raise the comprehensive technology level enterprises and develop technology innova-tion capability of enterprises.
Combination Ways of Value Engineering with Business Decision-making Evaluation of Technology Selection
Value engineering pursues the optimal program through improvement of the function and decrease of the cost to obtain the optimal program. As a matter of fact technology selection can be seen as an objective activity or process, whose func-tion could be analyzed from the corporational perspective, the cost of which can be divided into several parts like technol-ogy exploration, trade, management and human resource cost in order to be well analyzed, then the function-cost analysis method can be used to evaluate the value of technology pro-grams and make better choice.
Application of VE in the Evaluation of Technology Selection Decision-making
The thinking of applying VE to evaluate the technology selection decision-making in this paper, is to use function -cost analysis to evaluate the function of each potential scheme and calculate the corresponding function indexes, then analyze the corresponding cost of each scheme, make the final decision ac-cording to the principle of optimal function at per unit cost
Function Evaluation of Enterprise Technology Selection
First of all, functional analysis systematical technique is applied to analyze technology selection. As shown in fig.2, the highest goal of technology selection for an enterprise is to implement the technology scheme, which is upper func-tion of technology selection. According to “how to do–why to do ”thinking functions on the major logical route are “con-firm scheme”, ” Evaluate scheme”, ” establish criterion” and “Design target” as lower function. In the “confirm scheme”, “Evaluate scheme”, “establish criterion” processes “improve scheme”, “research technology”, “Investigate enterprise” and other auxiliary functions are accomplished.
The establishment of evaluation index of enterprise technology selection
The decision-making evaluation of enterprise technol-ogy selection includes analysis of a variety of factors. On the one hand, enterprises need to estimate the advancement of
Volume 32, Number 3, Fall 2009 25V A L U EWORLD
target technology, the product market demand also deserves fully consideration; on the other hand , congruence of target technology with enterprise strategies and characteristics , risk of technology scheme, as well as consistency of technology with and policy and environment, should all be taken into account.
Considering the above influencing factors in technology selection, combining with the functional analysis of technol-ogy selection, this paper will build the evaluation index system in enterprise technology selection based on four aspects: ad-vancement of target technology, congruence of target technol-ogy with enterprise goal, and consistency of technology with and policy and environment.
Advancement of target technology:The advancement analysis of target technology includes
analysis of internal advancement of technology and estimate of degree to meet the technology product market.
Internal advancement of technology refers to superiority degree of target technology performance compared to other related technologies, which can be measured by advanced ex-tent of target technology among related technologies and im-provement level of existing technology.
The degree of technology product to meet the demands of the market is also an important factor which reflects the advancement of target technology, the measurement indexes of which include improvement level of product performance, capability of product to ex-cavate market, capability to increase product market share.
Congruence of target tech-nology with enterprise goal
The congruence of tar-get technology with enter-prise goal mainly involves the matching degree be-tween target technology and corporational strategy, enterprise economic ben-efit of technology scheme, and capability of technol-ogy scheme to improve the enterprise comprehensive capability.
Technology selection has be connected to the enterprise strate-gies, thus an important function of decision
1)
making evaluation of technology selection is that technol-ogy scheme has to match the technological strategy , mar-keting strategy , management capability, etc. Indexes to measure the matching degree between target technology and technology strategy mainly comprise the associative effects between target technology and existing technol-ogy system, matching degree between target technology and existing equipments foundation, matching degree between target technology and existing technological ca-pability, consistency of target technology with the techno-logical development direction, etc. The matching between target technology and marketing strategy includes com-bination effect between target technology and existing products system, matching degree between target technol-ogy and competitive strategy ,the combination between existing marketing channels and target technology and its product, etc. Some other indexes of matching degree between target technology scheme and other capabilities of enterprise, like the matching between target technol-ogy and enterprise financial capability, matching degree between target technology and enterprise production ca-pability, matching degree between target technology and enterprise management capability, should also be taken into account.
Economic benefit is a commonly-used index in evaluation of technology scheme .In this paper, the financial net pres-ent value, internal rate of return, and dynamic investment
2)
Implement scheme
how why
Designtarget
Evaluate scheme
Confirmscheme
Improvescheme
Establish criterion
Confirmmethod
Optimal value principle
Research technology
Investigateenterprise
Exist several options
Estimate risk
Reviewpolicy
Build team
Figure 2. FAST Analysis of Enterprise Technology Selec�on
V A L U EWORLDVolume 32, Number 3, Fall 200926
payback time are chose to evaluate the economic benefit of the technology schemes from the dynamic point of view.
Technology selection involves comprehensive integration of relevant technologies and corresponding equipments thus forces great impact on enterprise’ comprehensive ability. On the one hand, technology selection enables en-terprises to obtain advanced technology and equipments and accordingly enhance the technological capability and innovation capability; On the other hand, technology selection can lead to operational efficiency by improving employee satisfaction and labor productivity, as well as organization and management efficiency. Thus improve-ments of technological innovation, employee satisfaction, labor productivity are also the goals and functions of tech-
3)
nology selection, which should be considered as evalua-tion indexes of technology selection.
Anti-risk capability of target technologyAnother issue the evaluation of technology scheme need
to address is to reduce risk in order to avoid failure. And the risk mainly derives from the application of technology in the enterprise and the commercialization of technology, so the anti-risk capability of target technology can be measured by three indexes: possibility of technology R&D success, possi-bility of production success of technology, and possibility of commercial success of technology.
Consistency of technology with policy and environmentSocial and environmental benefits analysis should be
Table 1. Enterprise Technology Selec�on Evalua�on Index System Based on Func�onal System
First Grade Indices Second Third Grade Indices Third Grade Indices
Advancement of target technology
Internal advancement of technology
Advanced extent among related technologies
Improvement level of exis�ng technology
Degree of technology product to meet the demands of the market
Improvement level of product performance
Capability of technology product to excavate market
Congruence of target technology with enterprise goal
Matching degree between target technology and corporate strategy
Matching degree between target technology and technological strategy
Matching degree between target technology and marke�ng strategy
Matching degree between target technology and enterprise financial capability
Matching degree between target technology and enterprise produc�on capability
Matching degree between target technology and enterprise management capability
Enterprise economic benefit of technology scheme
Financial net present value
Financial internal rate of return
Dynamic investment payback �me
Capability of technology scheme to improve the enterprise comprehensive capability
Capability to improve enterprise innova�on capability
Capability to improve enterprise labor produc�vity
Capability to improve enterprise employee sa�sfac�on
Capability to improve other performance of enterprise
An�-risk capability of target technology
An�-risk capability of target technology
Possibility of technology R&D success
Possibility of produc�on success of technology
Possibility of commercial success of technology
Consistency of technology with policy and environment
Capability of promo�ng employment
Capability of promo�ng employment
Capability of protec�ng employement
Capability of energy-saving and emission reduc�on
Consistence with other policies and regula�ons
Conssitency with other policies and regula�ons
Volume 32, Number 3, Fall 2009 27V A L U EWORLD
included in the evaluation of technology scheme. Technical scheme need to be consistent with the related economic and legal policy. The social and environmental impact of the tar-get technology, especially in employment promoting as well as energy-saving and emission reduction, should be taken into account.
Calculation of the functional indexes to technology schemesThe confirmation of the weight of evaluation indexes
Analytic Hierarchy Process (AHP) can be applied to the confirmation.
According to the judgment of evaluation team (consti-tutes technical expert, financial officer, production expert, marketing expert and other members related to decision-making), relative importance of the function indexes will be confirmed layer by layer in multiple comparison, then the weight of indexes in each grade can be calculated in judgment matrix formation, by this way we can obtain the weight of the third grade indexes Wi.
Where (1)
Valuation of the function indexes
In the valuation process, the function indexes will be graded by the evaluation team according to the expected performance of the target technology scheme.Assume that there are x technology schemes, now the in-dexes of each technology scheme have to be graded.
First sort the technology schemes by the performance of one specific index .According to the performance of tech-nology scheme on index i, array the technology schemes from best to worst as 1, 2, ..., x, regard the best of which as full score 1. Compared with this best technology scheme on index i, real numbers in [0, 1] will be the performance grades of technology schemes on index i. By this way we will get the values of technology schemes on other index-es.
The calculation of the integrated functional index
The integrated functional index of each technology scheme can be calculated by weighted average method:
Fx = FxiWi (2)
Cost analysis of technology selectionConsidering the correlation of cost and technology selec-
tion, cost of technology selection can generally be divided into direct cost and indirect cost.
Direct cost of technology selection is expenditure directly incurred by technology program, including the cost of tech-nology exploration and investigation, technology R&D cost,
1)
2)
3)
transaction cost of technology and equipments, technology maintenance cost.
Technology R&D cost involves research cost and labor cost in the implementation process of technology scheme, the research cost and labor cost of independent developing tech-nology scheme are also included. Transaction costs of technol-ogy involves expenditure on technology transaction in tech-nology introduction.
Indirect cost refers to the cost needs to be allocated to the operating activities indirectly related to the technical program ,including the cost of technical staff training, marketing and after-sales service cost and cost of other management activi-ties.
The evaluation and improvement of technology schemeAfter the integrated functional index Fx and cost Cx of the
optional technology schemes are confirmed, the formula (3) can be applied to calculate the value index Vx of each technol-ogy scheme, the best of which represents the optimal technol-ogy scheme.
Vx = Fx / Wi (3)
According to the formula, the improvement of technol-ogy scheme can be achieved in following ways:
Cost decreased, function unchanged (F→/C↓=V↑). Un-necessary functions can be removed or replaced to achieve cost reduction on the premise that the technological func-tion remains unchanged. For instance, the acquisition of non-key technologies can choose a more economical way from purchasing, outsourcing, R&D cooperation, and other manners.
Cost unchanged, function increased (F↑/C→=V↑). On the premise of unchanged cost, the enterprises seek to improve the function of technology, like optimizing the allocation of resources and improving organizational ef-ficiency, the improvement of labor productivity will lead to increase of the overall value.
Cost slightly increased, function greatly increased (F↑↑/C↑=V↑). Enterprises look for great enhancement of function at the price of appropriate cost increase. For instance, developing environment-friendly technologies will enable companies get preferential policy from the government and meet the growing needs for healthy products and even build up better brand image.
Function slightly decreased, cost largely decreased (F↓/C↓↓=V↑). Appropriate elimination on function may greatly decrease the cost. For instance, by excluding some of the performance technology research and development, manufacturing inputs may be significantly reduced.
Cost decreased, function increased (F↑/C↓=V↑↑). Dur-
1)
2)
3)
4)
5)
∑i
Wi = 1
V A L U EWORLDVolume 32, Number 3, Fall 200928
ing the decision-making evaluation of technology selec-tion, by technical survey companies may find a new type of technology, which will save the cost of production ma-terials and achieve improvement on product quality, then consider changing the original technology scheme will be reasonable.
Recommendations to the Application of VE in Decision-making Evaluation of Technology Selection
There are several issues need to be paid attention to when put VE into practice in technology selection decision-mak-ing.
Attach Importance to Technological SearchIn the technical decision-making process the search and
investigation of related technologies must be emphasized, as small expenditure on the search probably will enable enter-prise to find a new technology of greater value, which will save a lot of investment in the R&D process and reduce risk, and this is in line with VE idea on improving the technical program.
Improve the evaluation processThe evaluation team should constitute experts from the
market, financial, technology, production and other related functional departments .After the completion of preliminary evaluation , the implementation of technology scheme should also be under supervision in order to make necessary adjust-ment and actualize dynamic decision-making.
Consider the Impact of Technology Acquisition Mode
Technology schemes involve the selection of technology acquisition modes, using different acquisition modes will re-sult in different performance on the function and cost. The en-terprises have to make clear whether to purchase external tech-nology or obtain it by independent R&D, or both of them, which part is to purchase external technology and which part should be done through independent R&D. The enterprises are supposed to analyze and improve the technology scheme considering the overall value of the enterprise.
Build Flexible Evaluation Index System As technical characteristics, market characteristics, busi-
ness conditions vary in different industries, the index weights of the influencing factors in technology selection should also be adjusted accordingly. For instance, the advancement of technology will be affected by upgrading speed of technology, which should be reflected on the evaluation indexes. Market
demand and profitability tends to be the crucial factors for small and medium enterprises, while large enterprises will pay more attention on the matching between target technology and corporational strategies.
[2] National Bureau of Statistics of China, Ministry of science and technology of China, Ministry of finance People’s Re-public of China, The statistical communique of the Peo-ple’s Republic of China on the 2007 national expenditures on science and technology, 2009.
[3] China technology market management&promotion cen-ter, Briefing of the national technology market statistics, 2009.
[4] P.R.Kleindorfer, Integrating manufacturing strategy and technology choice [J]. European journal of operational research, 1990, 02, 56-68
[5] N.Singh, M.Rajoria, Modeling and analysis of the marble industry of Rajasthan-part1: Technology selection and goal setting [J]. International journal of system science, 1990, 141-155.
[6] N.Singh, Physical Technology selection models for multi-Production systems: joint application of system theory and mathematical Programming. European journal of op-erational research, 1990, 248-261.
[7] Jing Wei, The effects of technological alternatives of enter-prises in the economic society (Chinese language), Tech-nology & economy in areas of communications, 2003, 01, 60-61.
[8] Chen Ying, The two economic effects of innovation and the choice of new technology faced a firm (Chinese lan-guage), Nankai economic studies, 2003, 03, 41-44.
[9] Li Honglin, Yang Di ,Factor gift and the technical selec-tion of the enterprise in China(Chinese language), Com-parative economic and social systems, 2004,02,72-77.
[10]Yang Zhongzhi, Zhang Shiying, Li Guangquan, Study on evaluation and decision-making method of technology choice(Chinese language),China soft science,1997,01,121-124.
[11]Xiu Guoyi, Study on methods of enterprise technology evaluation, Journal of Harbin university of science and technology (Chinese language), 1998, 02, 59-62.
[12]Li Gaozheng, Yang Jun, Li Ying , Yu Juan ,Compos-ite risk assessment model for technology upgrading projects(Chinese language), Science& Technology prog-
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ress and policy , 2004,05,29-31.
[13]Yu Xiaoling ,Wei Wei, Yang Zhongzhi,Study on the eval-uation and selection method of R&D projects(Chinese language), Journal of industrial engineering and engineer-ing management , 2000,01,31-34.
[14]Zhang Jiong ,Ye Yuanxu, Zhang Shensheng, Evaluation of technical choice in innovation projects and its evaluation index system(Chinese language) ,Reform of Economic System , 2003,02,45-48.
[15]Yu Jingtao, Wu Chunyou ,Th e evaluation framework of technology choice of enterprises with a symmetric information(Chinese language), Th e journal of quantita-tive & technical economics, 2003,03,87-92.
About the Authors
Zhang Tie-Shan and Huang Wei are faculty members of the School of Economics and Management, North China University of Technology in Beijing, P.R. China.
Th is project was supported by Funding Project for Academic Hu-man Resources Development in Institutions of Higher Learning under the jurisdiction of Beijing Municipality (20077040) and Special Project for Discipline & Graduate Education (9063).
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V A L U EWORLDVolume 32, Number 3, Fall 200930
Patent Design Using FASTPeter Hanik, PE
Abstract
Patents have become increasingly important in business today because patents protect the innovations upon which fu-ture revenues depend. Engineers develop innovations in tech-nical language. Patent attorneys write patent claims in legal language. There is a gap between the language and knowledge of the attorney and engineer. Failure to effectively bridge this gap often leads to weak, overly narrow patents. This paper will show how to use FAST diagrams to structure patent claims and to bridge the communication gap between the patent at-torney and the engineer. The result is stronger and broader patent claims.
Introduction
If necessity is the mother of invention, then the patent at-torney or agent (patent attorney for simplicity) may well be the father. So where does the inventor fit into this scheme. There is more than a little anecdotal evidence of inventors handing the patent attorney a simple sketch or an idea on the back of a napkin and letting him or her fully develop the patent application. At the other end of the spectrum is the inventor who files a patent application, usually a provisional applica-tion, in a paragraph or two without a clear understanding of the nuances in patent law and practice. There is danger in either practice, and it may well explain why patent litigation is the most lucrative and fastest growing area for major lawsuits in the United States.
The danger in the first approach is that when an inventor is working on a problem, he or she usually stops when an appar-ent solution is found. At that point the patent attorney must research the relevant literature and issued patents or published applications to create a background and detailed description for the patent application. This places all of the burden on the knowledge and skill of the patent attorney to fully explain and expand the invention as well as prepare proper claims with the patent office rules. In some situations this may work well where the patent attorney has the appropriate technical back-ground, such as a Ph.D. in genetics, provided he or she stays current in that field and is experienced in both patent pros-ecution and litigation. Even then the process is relatively slow, time consuming, expensive, and the potential for a less than satisfactory result.
The problem with the second approach is that even with
an inventor who has experience with the patent process, he or she may not be able to prepare an application that dem-onstrates the invention as useful, novel, and not obvious. Al-though most ideas can meet the requirement for usefulness, many run into trouble because other descriptions in the litera-ture or other patents are so similar that the idea is deemed not to be novel. Along this same line, it may be determined that this prior art anticipated the current invention, and it would be obvious to one skilled in the art. Lack of understanding may cause the application to languish in the patent office for many years.
It is axiomatic that the patent application should be writ-ten as broadly as possible to allow for the greatest claims cover-age for the invention without conflicting with prior art. This requires dancing on the balance beam by both the inventor and the patent attorney. If the inventor writes an application to address a specific problem, he or she may receive narrow claims having limited or no commercial value. In fact, the in-ventor may not be able to use the invention at all if another patent exists with more general claims. On the other hand, the application may be written so generally as to be vague and unable to support the claims, or prior art may preclude the issuance of a patent.
There are also many words that can trap an inventor into narrow claims when drafting an application. These may be difficult or impossible to overcome when a patent attorney begins to develop a nonprovisional utility application or a Pat-ent Cooperation (PCT) application. As can be imagined, use of the words “only”, “must”, “cannot”, “will not”, or “requires” will severely limit the breadth of the claims. The use of pat-ent jargon, such as “teaches” or “best mode” gleaned from is-sued patents should be avoided as these have specific meaning within the courts and patent office. In the academic world, where many provisional applications are prepared, there is a tendency to write the application as if it is an academic pa-per. The danger in this approach is that the application will almost always be very narrow and may include future plans of the research that can bring into question whether the idea has reached the level of an invention.
In addition to the differing approaches to the patent pro-cess, the inventor (or his/her employer) must determine that the invention is economically valuable and that use of the in-vention by others can be easily detected. Then the inventor may seek patent protection. The patent attorney wants to write the patent claims as broadly as possible as they have greater com-
Volume 32, Number 3, Fall 2009 31V A L U EWORLD
mercial value because the generality of the language in a broad patent claim covers a lot of turf. Narrow or specifi c patent claims are usually easier to write and to read, but they limit the protection to only the specifi cs of the claim. Th e information provided to the patent attorney about the invention is usu-ally very specifi c to the precise invention. Working with the patent attorney, the scope of the invention will be expanded as much as possible. Broadening the claims of the patent is both a technical and a legal activity. Patent attorneys understand the legal aspects of broadening the claims while Inventors are often not as comfortable broad-ening the technical aspects of the claims. As a result, inventors often improperly rely too much on the technical background of the patent attorney to broaden the technical scope of the invention.
Th e best solution for this problem results when the inven-tor can eff ectively communicate all of the information the pat-ent attorney requires to write broad and eff ective claims. Th is article will provide a structured method for expanding the in-formation to the patent attorney in the form of “pre-claims”. To explain how to construct broad and eff ective pre-claims, I will use a hypothetical invention, a method for making a ham sandwich, as an example1.
An Illustrative Example
Imagine that no one has invented the ham sandwich and you have just come up with the idea in your kitchen. You clearly understand how to make the sandwich and can write down step by step instructions. Your family enjoys your ham sandwiches so much, you believe you can sell the invention to restaurants and food companies. You decide to apply for pat-ent coverage to protect your invention.
Modeling the Invention
Th e process fl ow diagram in Figure 1 below describes our invention. First, we retrieve two slices of bread from the pan-try and get the ham and mayonnaise from the refrigerator. We are now ready to put the ham on one slice of bread and put mayonnaise on the second slice of bread. Final assembly of the sandwich is completed by lifting the second slice of bread, turning it over and placing it on top of the ham and fi rst slice of bread.
A simple written description or diagram is often given to the patent attorney for the purpose of writing a patent to protect the invention. Our ham sandwich invention is clearly useful. It is not unobvious or novel as everyone knows how to make a ham sandwich. However, for purposes of this example,
we have assumed that no one ever thought of a ham sandwich. Now, our patent attorney may not know very much about ham sandwiches and because we are independent inventors without the benefi t of in-house counsel, we are trying to keep our legal costs down. Our attorney might feel that he/she can-not put a lot of time into understanding our sandwich tech-nology or reviewing prior art in great depth. Th e simple thing to do would be to write our patent claim as follows.
A method for making a ham sandwich comprising a slice of ham placed on a fi rst slice of bread, spreading mayon-naise on a second slice of bread, turning said second slice of bread and mayonnaise over by 180 degrees and placing said second slice of bread and mayonnaise on top of said fi rst slice of bread and ham.
Th is claim is very narrow indeed. A competitor looking at this claim could easily fi nd alternatives. Major steps in the method could be eliminated, circumventing our main claim. As a result, we could loose millions in potential ham sandwich licensing revenue.
Th e fi rst problem is that we started from a process fl ow diagram. A process fl ow diagram describes what we do fi rst, second, third and so on. While there is a lot of useful infor-mation to be gleaned from a process fl ow diagram, it does not help use describe the cause-and-eff ect logic of the inven-tion. Our patent claims need to describe “how” we make a ham sandwich. A process fl ow diagram is not particularly well
1)
1Th is example was used by Phil Emma of IBM in an article in the November-December 2005 issue of IEEE Micro.
A function model of our method to produce a ham sandwich is shown in Figure 3. This model describes
the major logic path which details the basics of how and why things are done in our method. It does not
contain any information about consequential functions that result from execution of the functions in the
major logic path. The model in Figure 3 is the Specific Function Model.
Figure 3: Specific Function Model for Producing a Ham Sandwich
Looking at the far right, we see the primary function of our method, “Assemble Ham Sandwich”. Next we
can ask “How do you produce the primary function, Assemble Ham Sandwich?” The answer is that we
Figure 2. Func� on Model
V A L U EWORLDVolume 32, Number 3, Fall 200932
suited for this purpose. Fortunately, there is a very well suited tool for this purpose: function modeling.
FAST diagrams (or function models) can be used to de-construct problems and reveal cause-eff ect relationships. For purposes of this paper we have taken liberties in the tradition-al layout of our function models as follows. In building our function models we consider two types of functions: useful and harmful. Useful functions are shown in green and harmful functions are shown in red. Th e arrows connecting the func-tions describe their relationship. A solid arrow means that the fi rst function produces the second function. An arrow with a hollow point on the end of the arrow means that the fi rst func-tion counteracts the second function. An arrangement of par-ticular interest is contradiction. A contradiction exists when a useful function produces a useful result and also a harmful ef-fect. We are interested in contradictions because the usual way to deal with a contradiction is to compromise between useful and harmful. However, if we can fi nd a way to resolve the contradiction, this often leads to step change improvements in performance.
The Specifi c Function Model
A function model of our method to produce a ham sandwich is shown in Figure 3. Th is model describes the major logic path which details the basics of how and why things are done in our method. It does not contain any information about consequential functions that result from execution of the functions in the major logic path. Th e model in Figure 3 is the Specifi c Func-tion Model.
Looking at the far right, we see the primary function of our method, “Assemble Ham Sand-wich”. Next we can ask “How do you produce the primary function, Assemble Ham Sand-wich?” Th e answer is that we “Combine Ham and First Slice of Bread” and “Turn Over the
Second Slice of Bread”. When we move in the opposite direction to the arrows in the major logic path, we ask “How”. When we move in the direction of the arrows in the major logic path, we ask “Why”. Asking “Why” provides verifi cation that our logic is correct. Why do we “Combine Ham and Fist Slice of Bread”? So we can “Assemble Ham Sandwich”. Why do we “Turn Over the Second Slice of Bread”? So we can “Assemble Ham Sandwich”, and so on.
Generalizing the Invention — The Pure Function Model
Th e Specifi c Function Model of Figure 3 describes our ham sandwich method exactly as we created it.
However, we would like our patent to be written as broadly as possible. We have already seen that writing a patent claim directly from the process fl ow diagram produces a very narrow patent claim. A similarly narrow claim would result from the Specifi c Function Model. To get breadth, we can generalize the Specifi c Function Model by removing the physicality from the model wherever possible. For example, a ham sandwich is a structure comprising ham, bread, mayonnaise and per-haps other materials. Th erefore, we can replace our primary function, “Assemble Ham Sandwich”, with a more generalized function, “Assemble Structure”. Bread and Ham are physical “means” which are employed to assemble the sandwich. Th us “Combine Ham and First Slice of Bread” becomes “Combine First and Second Means”. Continuing this process for each function in the Specifi c Function Model produces the Pure Function Model shown in Figure 4.
A patent claim based on the Pure Function Model might look like the following.
A method for assembling a structure comprising a fi rst means placed on a second means, placing a third means on a fourth means, turning said third and fourth means
The Specific Function Model of Figure 3 describes our ham sandwich method exactly as we created it.
However, we would like our patent to be written as broadly as possible. We have already seen that
writing a patent claim directly from the process flow diagram produces a very narrow patent claim. A
similarly narrow claim would result from the Specific Function Model. To get breadth, we can generalize
the Specific Function Model by removing the physicality from the model wherever possible. For
example, a ham sandwich is a structure comprising ham, bread, mayonnaise and perhaps other materials.
Therefore, we can replace our primary function, “Assemble Ham Sandwich”, with a more generalized
function, “Assemble Structure”. Bread and Ham are physical “means” which are employed to assemble
the sandwich. Thus “Combine Ham and First Slice of Bread” becomes “Combine First and Second
Means”. Continuing this process for each function in the Specific Function Model produces the Pure
Function Model shown in Figure 4.
Figure 4: Pure Function Model
A patent claim based on the Pure Function Model might look like the following.
1. A method for assembling a structure comprising a first means placed on a second means, placing a
third means on a fourth means, turning said third and fourth means over by 180 degrees and
placing said third and fourth means on top of said first and second means.
Figure 4. Pure Func� on Model
Volume 32, Number 3, Fall 2009 33V A L U EWORLD
over by 180 degrees and placing said third and fourth means on top of said fi rst and second means.
A corresponding apparatus claim might look like this.
A structure comprising a fi rst means on top of a second means, a third means on top of said fi rst and second means and a fourth means on top of said fi rst, second and third means.
If these claims were to be held valid, it would be very powerful indeed. A cup on a saucer on a place mat on a dining room table would infringe our apparatus claim. Such a broad claim is not likely to survive the patent examination process. Our patent application must have a claim structure that lies some-where in between the claims derived from the Specifi c Function Model and the Pure Func-tion Model.
Getting Outside Prior Art – The Base Patent Model
Figure 5 shows all of the functions in the Specifi c Function Model in the left column and all of the corresponding functions in the Pure Function Model in the right column. Re-membering that the claims in our patent ap-plication must lie between the Specifi c Func-tion Model and the Pure Function Model, we can examine each corresponding function in these two models and defi ne a function that is as broad and inclusive as possible and also outside of the prior art. First, let’s consider the primary function. Starting from the right side, we could limit the Structure to Food Struc-tures. Th is would narrow the model consider-ably but we would still probably be covered by prior art. We could further limit the func-tion to foods used to make sandwiches. In this case our primary function might be “Assemble Sandwich”. Remember, we are assuming that the sandwich has not been invented yet and there is no reason to limit our patent to ham sandwiches. Th erefore, in Figure 6 we have entered “Assemble Sandwich” in the center column.
Now consider the next functions in the list. Th e pure function model refers to means
Improve a Useful Function Counteract a Harmful Function
Figure 9: System of Inventive Principles from Guided Innovation Toolkit™
Each panel above contains a number of inventive principles. For improving useful functions and
counteracting harmful functions, we can consider principles that will change the outcome of the function,
change the way the function is performed or utilize available resources. For resolution of contradictions,
inventive principles are aimed at performing a separation such that in one state we obtain the useful result
and in another state, we counteract the harm.
Figure 10 shows the result of applying the system of TRIZ inventive principles to the Base Patent Model.
All of the functions in this model are useful. Therefore, we use the inventive principles to brainstorm
ways to improve each useful function. The table in Figure 10 lists each function in the Base Patent
Model, Ideas to expand each function, the TRIZ inventive principle that was used to generate each idea
and the definition of the TRIZ inventive principle.
Figure 9. System of Inven� ve Principles from Guided Innova� on Toolkit™
(Combine First and Second Means). Th is function can be nar-rowed to include only Food Means. Our studies of prior art indicate that this may still be too broad. We can further nar-row the function to reference Protein Means and Carbohy-drate Means. We have entered “Combine First Protein Means and First Carbohydrate Means” in the center column. Th is analysis is continued for each of the matching functions in the Specifi c Function Model and the Pure Function Model. Th e fi nal result is shown in Figure 6.
Next we build an analogous model using the functions in the center column as shown in Figure 7 (next page). Th is is the Base Patent Model. Th e Base Patent Model describes the invention that is outside of prior art and is likely to meet the patent offi ce requirement that inventions must be useful, novel and unobvious.
Expanding the Invention – Improving Useful Functions
Our model of the invention is still pretty specifi c at this point. We would very much like to expand it to cover all of the possible variations for producing a sandwich. We can ac-complish this in a very structured manner by expanding the Base Patent Model. One very useful characteristic of function models is there are only three approaches to improving perfor-mance as shown in Figure 8.
Improve useful functionsReduce or eliminate a harmful functionsResolve contradictions.
At this point, our model only contains useful functions.
Volume 32, Number 3, Fall 2009 35V A L U EWORLD
Func�on Name Principle Name Principle Defini�on Idea
Acquire First and Second Carbohydrate Means
Mobilize Resources - Substances - Raw Materials
Use raw materials as a resource to increase system Ideality
1. Use crackers
2. Use bread
3. Use pitas
4. Use tor�llas
Specializa�on Replace a universal system with set of specialized systems
5. Use specialty brea
Acquire Protein Means Mobilize Resources - Substances - Raw Materials
Use raw materials as a resource to increase system Ideality
6. Use ham
7. Use turkey
8. Use bologna
9. Use roast beef
10. Use cheese
11. use mayonnaise
12. Use mustard
13. Use BBQ sauce
14. Use vegetabls such as le�uce, tomato, peppers, etc.
Inversion Think the opposite. Replace ac�on in the system with an opposite ac�on.
15. Do not use any condiments
Apply Protein Means Intensify Intensify the func�on by concentra�ng resources
16. Use thick slices of ham
Apply Condiment Means Inversion Think the opposite. Replace ac�on in the system with an opposite ac�on.
17. Apply condiment (mayonnaise) to the ham
Excessive Ac�on Provide excess then remove the remainder
18. Apply more than one layer of condiment (mayonnaise)
Integrate Consolidate two or more systems or func�ons for a synergis�c effect
19. Combine condiments (mayonnaise with mustard, etc.)
Prepare first carbohydrate means
Intensify Intensify the func�on by concentra�ng resources
20. Use more than one layer of carbohydrate means (bread)
Prepare second carbohydrate means
Exclude Exclude auxiliary func�ons or elements by transferring them to remaining ones
21. Use only one slice of carbohydrate means (open face sandwich)
Matching Match func�ons or structures within a system to improve performance
22. use slices of protein means (ham) that are the same size as the carbohydrate means (bread)
Turn over second carbohydrate means
Inversion Think the opposite. Replace ac�on in the system with an opposite ac�on.
23. Turn over the first carbohydrate means and place it on top of the second carbohydrate
Mobilize Resources - Time - Synchroniza�on
Synchronize process 24. Combine first and second carbohydrate means at the same �me
Assemble Sandwich Par��oning Divide then recombine in a more efficient way. Replace a one piece system with a par��oned one.
25. Cut the sanwich into two or more pieces
Figure 10. Brainstorming Func�ons in the Base Patent Model
V A L U EWORLDVolume 32, Number 3, Fall 200936
Page
Figure 11: Complete Patent Model
Figure 11. Complete Patent Model
We have not yet considered harmful functions which limit the performance of our invention. We can now examine each function in the Base Patent Model and consider how to im-prove it.
It would be very beneficial to have a structured method to explore opportunities to improve and expand the functions in the Base Patent Model. TRIZ (Russian acronym for Theory of Inventive Problem Solving) offers an effective way to find op-portunities to improve our model. TRIZ was first developed by Genrich Altshuller in 1946. At the time, Altshuller was a patent agent in the Soviet Navy and he saw a lot of patents, both foreign and domestic, come across his desk. He began to question whether invention was the result of creative ge-nius alone or was there a structure or method by which inventions were made? Altshuller studied about 200,000 patents looking for structure in the inventions. Of the 200,000 patents he exam-ined, he identified about 40,000 that embodied innovations. A further study of these 40,000 odd patents revealed 40 patterns of invention. These patterns are themes or abstractions that recur many times. Altshuller believed that these pat-terns could be the basis for an innovation algo-rithm.
In December 1948 Altshuller wrote a letter to Joseph Stalin addressed “Personally to Com-rade Stalin.” He told Stalin that there was chaos and ignorance in the USSR’s approach to inno-vation and that he had discovered a theory that could make the Soviet people the most innova-tive people in the world. Altshuller was in fact a patriot but his actions were treated as treason. Two years after he wrote to Stalin, he was arrest-ed and sentenced to 25 years in prison. He was transferred to Siberia’s Gulag where he worked as a logger and he also worked in the Varkuta coal mines. Throughout his incarceration, he contin-ued to develop his TRIZ theories. A year and a half after Stalin’s death, amnesty was granted to many political prisoners and Altshuller was re-leased.
Over his lifetime, Altshuller developed a number of innovation algorithms including ARIZ-71, ARIZ-77, and ARIZ-85. Virtually all of this work went unnoticed in the West because of the cold war. With the advent of Perestroika and the fall of the Soviet Union, Altshuller’s work became recognized throughout the world. In 1992 the leading TRIZ scientists in the world re-located to the United States. TRIZ now has over 50 years of research and development and has
been used to solve thousands of inventive problems in a wide variety of disciplines. There is no consensus about the number of TRIZ inventive principles. Many people are very effective using the original 40 principles which Altshuller developed. Others have proposed that there are hundreds of inventive principles. For our purposes, we have examined TRIZ varia-tions and selected a system of 60 principles that can be used to systematically examine opportunities for improvement.
Figure 7 is a method for organizing the 60 inventive prin-ciples from TRIZ: principles to resolve contradictions, prin-ciples to counteract harmful functions and principles to im-prove the performance of useful functions.
Each panel in Figure 9 (page 34) contains a number of inventive principles. For improving useful functions and
Volume 32, Number 3, Fall 2009 37V A L U EWORLD
Complete Patent Model
Th e ideas generated by application of the TRIZ inventive principles can now be added back into the Base Patent Model to produce the Complete Patent Model which is shown in Figure 11 (previous page). Th is model is now outside of prior art and has been expanded to cover a broad range of variations on the basic invention.
Foundation Model
In preparing patent claims, we want the fi rst independent claim to be as broad as possible such that it covers as many variants of the invention as possible. Starting with the fi rst
counteracting harmful functions, we can consider principles that will change the outcome of the func-tion, change the way the function is performed or utilize available resources. For resolution of contra-dictions, inventive principles are aimed at perform-ing a separation such that in one state we obtain the useful result and in another state, we counteract the harm.
Figure 10 (previous page) shows the result of applying the system of TRIZ inventive principles to the Base Patent Model. All of the functions in this model are useful. Th erefore, we use the inventive principles to brainstorm ways to improve each use-ful function. Th e table in Figure 10 lists each func-tion in the Base Patent Model, Ideas to expand each function, the TRIZ inventive principle that was used to generate each idea and the defi nition of the TRIZ inventive principle.
A number of these ideas are derived from uti-lization of available material resources, such as us-ing turkey (Idea 7) or using mustard (Idea 12), may seem obvious. Some ideas are less obvious due to psychological inertia. For example, we think of a sandwich as having two slices of bread but the “Exclude” principle suggests eliminating one slice to form an open face sandwich (Idea 21) and the “Intensify” principle suggests adding more slices of bread to form a triple-decker sandwich (Idea 20). Th e “Integrate” principle suggests combining condi-ments such as mayonnaise with mustard (Idea 19). Th e “Inversion” principle suggests using no condi-ments at all (Idea 15). Because Guided Innovation Toolkit™ contains 60 inventive principles derived from over 2 million patents and other inventions, a small team of subject matter experts can use Guided Innovation Toolkit™ to generate a nearly exhaustive set of improvement ideas.
Figure 12: Development of the Foundation ModelFigure 12. Development of the Founda� on Model
independent claim as the foundation, we can write dependent claims to provide more and more specifi c detail. Th e Founda-tion Model can be derived starting from the Complete Patent Model. Figure 12 (above) shows the Complete Patent Model previously developed for our ham sandwich invention. Re-member that the primary function in this model is “Assemble Sandwich”. For each function in the Complete Patent Model we ask the following question. “If this function is eliminat-ed, will the primary function still be minimally delivered?” If the answer is yes, the function being considered is eliminated from the Complete Patent Model. Th e resulting model is the Foundation Model. Th e functions marked with a red X are eliminated to form the Foundation Model as shown in Figure
V A L U EWORLDVolume 32, Number 3, Fall 200938
13. Th e Foundation Model describes the simplest method to deliver the functionality of our invention.
Developing Pre-Claims
We can now develop pre-claims working from the Foun-dation Model backward to the Complete Patent Model. Th ese are pre-claims because they still need to be reviewed by a pat-ent attorney and put into proper context and syntax for the patent application.Th e pre-claims are developed from a struc-tured analysis of the functionality delivered by the invention and will thoroughly cover the inventive space in a way that provides the broadest coverage. Th e fi rst independent pre-claim is written directly from the Foundation Model. It is a simple declarative sentence starting from the primary function working backward.
A method for assembling a sandwich comprising the steps of placing a protein material on top of a fi rst carbohydrate material.
Th e fi rst dependent pre-claim is developed by adding the previously deleted functions back into the Foundation Model.
Th e method according to Claim 1 further comprising the step of adding a second carbohydrate material on top of the protein material.
The functions marked with a red X are eliminated to form the Foundation Model as shown in Figure 13.
The Foundation Model describes the simplest method to deliver the functionality of our invention.
Figure 13: Foundation Model
����������������������
We can now develop pre-claims working from the Foundation Model backward to the Complete Patent
Model. These are pre-claims because they still need to be reviewed by a patent attorney and put into
proper context and syntax for the patent application. The pre-claims are developed from a structured
analysis of the functionality delivered by the invention and will thoroughly cover the inventive space in a
way that provides the broadest coverage. The first independent pre-claim is written directly from the
Foundation Model. It is a simple declarative sentence starting from the primary function working
backward.
1. A method for assembling a sandwich comprising the steps of placing a protein material on top of a
first carbohydrate material.
The first dependent pre-claim is developed by adding the previously deleted functions back into the
Foundation Model.
Figure 14: Pre-Claim 2
2. The method according to Claim 1 further comprising the step of adding a second carbohydrate
material on top of the protein material.
Figure 13. Founda� on Model
Th e remaining claims are developed in a similar manner adding functions back into the function model until all of the functions marked with a red X have been restored.
Th e method of Claim 1 further comprising a second car-bohydrate material in which the combined protein mate-rial and fi rst carbohydrate material are placed on top of said second carbohydrate material.
Th e method of Claim 1 in which the fi rst carbohydrate material is any of bread, pita, cracker, tortilla, or pan-cake.
Th e method of Claim 2 in which the second carbohy-drate material is any of bread, pita, cracker, tortilla, or pancake.
6. The method of Claim 1 in which the protein material is any of ham, turkey, bologna, salami,
pepperoni or cheese.
Figure 18: Pre-Claims 7 and 8
7. The method of Claim 1 comprising the further step of adding a condiment.
8. The method of claim 7 in which the condiment is any of mayonnaise, mustard, BBQ sauce or
vegetables.
Figure 18. Pre-Claims 7 and 8
Th e pre-claim development process continues until all of the functions starting from the Foundation Model through the Complete Patent Model have been included. Function modeling provides a method to deconstruct the invention and structure it in a way that makes pre-claim development both effi cient and thorough. A summary of our ham sandwich pre-claims is shown in Figure 20.
Conclusions
A structured method to analyze and expand inventions and develop a broad set of pre-claims has been developed. Th is method addresses many of the broad issues that often surround the transition from invention to patent as follows.
Constructing the Specifi c Function Model provides an eff ective means for the inventor and patent attorney to begin communicating. Traditionally, the patent attorney reviews a write up of the invention and discusses the in-vention with the inventor. Th e patent attorney does this to understand the how–and-why of the invention. Th e function model simplifi es this communication and makes it easier for a complete description of the invention to
9. The method according to any of the above claims in which the sandwich is cut into two or more
pieces.
The pre-claim development process continues until all of the functions starting from the Foundation
Model through the Complete Patent Model have been included. Function modeling provides a method to
deconstruct the invention and structure it in a way that makes pre-claim development both efficient and
thorough. A summary of our ham sandwich pre-claims is shown in Figure 20.
Figure 19. Pre-Claim 9
1. A method for assembling a sandwich comprising the steps of placing a protein material on top of a fi rst carbohydrate material.
2. The method according to Claim 1 further comprising the step of adding a second carbohydrate material on top of the protein material.
3. The method of Claim 1 further comprising a second carbohydrate material in which the combined protein material and fi rst carbohydrate material are placed on top of said second carbohydrate material.
4. The method of Claim 1 in which the fi rst carbohydrate material is any of breat, pita, cracker, tor� lla, or pancake.
5. The method of Claim 2 in which the second carbohydrate materials is any of bread, pita, cracker, torilla, or pancake.
6. The method of Claim 1 in which the protein material is any of ham, turkey, bologna, salami, pepperoni, or cheese.
7. The method of Claim 1 comprising of the further step of adding a condiment.
8. The method of Claim 7 in which the condiment is any of mayannaise, mustard, BBQ sauce, or vegetables.
9. The method according to any of the above claims in which the sandwich is cut into two or more pieces.
Figure 20. Summary of Pre-Claims
V A L U EWORLDVolume 32, Number 3, Fall 200940
follow. In addition, gaining an understanding of the in-vention through the Specific Function Model will require less time from the patent attorney, assuming the attorney is already familiar with the basics of function models. This first step, building the Specific Function Model, all by it-self delivers significant value to both the inventor and the patent attorney by establishing a common language for analysis of the invention.
The Pure Function Model describes the functionality de-livered by the invention in the broadest sense. In addition to being useful to determine the boundaries of prior art, the Pure Function Model makes it easier to see other fields where the invention might apply. By considering which other products, processes, technologies, etc. have the same or similar functional issues and needs, application of the invention and the patent can be broadened.
Building the Base Patent Model from the Specific Function Model and the Pure Function Model provides additional structure and logic to prior art search. By considering corresponding functions in the Specific Function Model and the Pure Function Model, the minimum number of concessions to prior art can be made giving the resulting patent as much breadth as possible.
Applying TRIZ inventive principles to the Base Patent Model stimulates the inventor to leverage his or her sub-ject matter expertise and expand the invention. Because the TRIZ inventive principles are derived from a very extensive set of known inventions, the inventor will consider expan-sion options that would otherwise remain undiscovered.
The Foundation Model provides a systematic method to construct a first independent claim of the patent. By sys-tematically removing non-essential functions from the Base Patent Model, the minimum functionality required to de-liver the primary function of the invention is revealed.
The Complete Patent Model is an exhaustive description of the invention in diagrammatic form. It is useful not only for patenting purposes, but it is also a simple and effective means to explain to others how and why the in-vention works.
There are other implications for the Structured Patent De-velopment Method as well.
An existing patent, perhaps a competitor’s patent, can be deconstructed by building a function model from the pat-ent claims. Reverse engineering a patent in this manner makes it easier to find ways to expand upon an existing patent and/or develop functional alternatives to the in-vention described in the patent. Functional alternatives can then be examined by a patent attorney to determine if the provide the legal basis for a patent outside the prior
art of the original patent.
Limitations in the current invention can be added to the Complete Function Model as harmful functions. With the addition of harmful functions, there are three opportuni-ties to improve upon the invention. You can find ways to improve useful functions, find ways to counteract harmful functions and find ways to resolve contradictions among useful and harmful functions. The TRIZ inventive prin-ciples can be used to exhaustively search for these new op-portunities. The inclusion of harmful functions followed by application of the TRIZ inventive principles results in new product and process ideas that can form the basis of completely new inventions.
Acknowledgement:
The author wishes to thank John Warren, Legal Area Man-ager, Petrobras America Inc. and formerly Associate General Counsel for Research and Intellectual Property Management, University of Houston System, for his insights into the needs and issues surrounding inventions and patent applications.
References
“Writing the Claims for a Patent”, IEEE Micro published by the Institute of Electrical and Electronics Engineers, No-vember-December 2005, pp 79-81.
From Ideas to Assets, Edited by Bruce Berman, John Wiley & Sons, 2002, ISBN 0-471-40068-8, pp27-63.
David Pressman, Patent It Yourself, 11th Edition, NOLO, 2005, ISBN 1-4133-0180-0, pp 9/3-9/32.
About the Author
Peter Hanik is the founder and President of Pretium Innova-tion, LLC, a firm providing assistance to clients to improve the generation of sustainable economic value from intangible assets. Prior to founding Pretium, Mr. Hanik was Senior Vice President of Technology at Millennium Chemicals, President and CEO of Millennium Petrochemicals, Vice President Chemicals & Supply Chain at Quantum Chemical, Vice President Reengineering and Information Systems at Quantum Chemical, Director Applied Research & Technical Service at Quantum Chemical, Regional Sales Manager at Northern Petrochemical, Engineering Manager at Northern Petrochemical and Production Superintendent at Northern Petrochemical. He began his career as a Systems En-gineer developing computer based process models and advanced computer control systems. Mr. Hanik holds a B.S. degree in Chemical Engineering from Illinois Institute of Technology and an MBA from the University of Chicago.
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