Project
Value
Management
by Dr Jim Young
Purpose of this Presentation
To familiarise you with
the principles and
process of project
value management
(PVM)
Presentation Topics
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Origin and definitions
Some examples
Value formula
PVM benefits
Costs and challenges
PVM principles
PVM process
And time permitting – show
you the use of some tools
This presentation will take about one hour. For those who
choose to sleep, the presentation slides and a “white paper”
on the topic are available on your university website.
Origins of PVM
The PVM concept was born with
General Electric during World War Two
when there were severe shortages of
labour, materials and component parts.
The company looked for new methods
and locally substituted materials and
components that would perform the
same function.
Definition of PVM
PVM is the formal and systematic study of
a project to identify ways to achieve the
functions involved at the lowest cost
without loss of performance.
Some equivalent expressions are Value
Management, Value methodology, Value
Analysis, Value Engineering and Value
Optimisation.
PVM Application
• Potentially effective for all types of projects, but
best results usually obtained with larger and
more expensive construction projects.
• PVM usually adds greater value if applied early
in the project life cycle and preferably prior to
project execution.
• PVM intervention is in the form of a study
undertaken by an expert facilitator and involves
key stakeholders from the target project.
• Unfortunately, PVM is often only initiated when
project budgets seem insufficient or profit
margins are under pressure.
Some PVM Examples
• Russian liquid-fuel rockets allow for
rough welding.
• Japanese vehicle manufacturers
standardised processes and
components.
• Australian supermarket construction
introduced JIT practices to eliminate
inventory.
• NASA space shuttle specifications were
relaxed for non-critical functions.
Extreme Example
(JOKE)
But Without Loss of Quality
oops
PVM Studies Functions
• Function concerns what is done and not what
does it. There are usually a variety of ways to
complete a function.
• Function can usually be described with just a
verb and a noun. For example:
• The function of a pen is to “make marks”.
• The function of a spade is to “dig holes”.
• PVM recognises that if a function is needed then
we should systematically identify and evaluate
alternative ways to complete the function better
and/or more cheaply without loss of project
performance (functionality).
PVM Value Formula
Value = Function / Cost
Value-adding options are:
• Improve function and maintain cost
• Maintain function and reduce cost
• Improve function and reduce cost
Typical Benefits of PVM
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Improves communications and teamwork
Clarifies stakeholders’ needs
Resolves conflicts and misunderstandings
Challenges assumptions
Identifies unnecessary expenditure
Generates alternative ideas
Promotes innovation
Maximises resource use
Saves time, money and materials
Simplifies processes
Eliminates wastage and redundant items
Stakeholders Benefit from PVM
Properly applied PVM means:
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Clients achieve best value for their money.
Users’ needs are satisfied.
Designers meet client and user expectations.
Project managers complete the project within
prescribed constraints.
• Contractors complete work in the most costeffective manner and future business is
assured.
PVM Costs
To ensure that the benefits of applying
PVM are justified, the cost of the following
items needs to be considered:
• Engaging a facilitator
• Participants’ travel and
accommodation
• Venue hire
• Administrative support
• Disruption to target project
PVM Challenges
• Suitable date for workshop
• Project delay or disruption
• Key stakeholders excluded or
unavailable
• Real front-end cost versus
nominal downstream savings
• Threat to designers’ and planners’
reputations
• Short-term false economy
• Innovations add risk
PVM Principles
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Suitable facilitator essential
Senior management support
Willing and appropriate participants
Focus on more costly functions
Whole-of-life application
Integrate with project life cycle and
risk management
PVM Seven-Step Process
1. Prepare for study
2. Gather information about subject
project
3. Undertake functional analysis
4. Generate ideas for project
improvement
5. Evaluate ideas
6. Make recommendations
7. Follow-up
Step One – Prepare for Study
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Select subject project
Prepare terms of reference
Appoint facilitator
Decide study team composition –
includes key stakeholders
• Confirm study methodology and
timetable
• Identify logistic needs
• Book venue
Step Two – Gather Information
• Facilitator is provided with documentation:
project purpose, goal, objectives, assumptions, success
criteria, feasibility study, business case, charter, designs,
drawings, specifications, work breakdown structure,
estimates, risk and issues logs, project plan, budget and
schedule, and progress reports if project already underway.
• Visit project site if work has started
• Research information about previous similar
projects
• Contact key stakeholders for preliminary
discussions
• Identify main issues for the PVM workshop
• Prepare and distribute information packs
• Brief presenters
Step Three – Undertake Functional Analysis
PVM participants attend a one or two day workshop where:
• Participants introduce themselves.
• Facilitator reminds group about purpose and scope of study,
workshop agenda and process, and issues to be resolved and
target functions to be analysed.
• Issues and functions are analysed in sub-groups, typically by
seeking answers to questions such as:
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What is its function?
Why is it needed?
What value does it add?
What would be the consequence if it was excluded?
What could do the same function more cheaply and/or
better?
Step Four – Generation of Ideas
Having clarified the issues and the nature and
need for selected functions, alternative solutions
are then sought typically through group
brainstorming for improved functionality and cost
reduction. Such ideas must not impair project
performance. The usual rules for brainstorming
apply:
• Quantity not quality
• Suspend criticism
• Encourage maximum participation
• Record all ideas for later assessment
Step Five – Evaluate Ideas
Options are now evaluated in against predetermined and weighted attributes such as:
• Technical feasibility, practicality and ease to
implement (time, resources and skills)
• Legal implications
• Consistency with organisation’s core values
• Impact on project objectives
• Whole-of-life costs
• Whole-of-life savings
• Risks created – their impact, probability and
mitigation strategies
Evaluation Tools
Some tools and techniques that might be used to select best
options to improve the project’s functionality and/or cost
and resolve issues are:
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Function analysis system technique (FAST)
SWOT analysis
Cost benefit analysis
Process mapping and analysis
Pareto analysis
Fishbone diagram
Paired-comparisons
Decision tree
Weighted attributes decision matrix
Step Six – Make
Recommendations
• A verbal presentation is likely to be
followed by a formal written report with
prioritised recommendations for the
client’s approval.
• The draft report should be circulated
for comment to those who participated
in the workshop study.
• Agreed changes are then included in
the project plan.
Step Seven – Follow Up
• Should PVM recommendations be
implemented, their effectiveness
should be monitored and measured.
• Lessons learned from the study
should help with future PVM
interventions.
• The PVM process can be repeated
periodically throughout the project.
Process Mapping
A process can usually be broken down into tasks that may be
undertaken either concurrently or sequentially.
Process Analysis
Typical questions asked in order to improve a process are:
• Is the process needed and do process outputs satisfy these
needs?
• Are process performance measures and targets in place and
appropriate?
• Are all inputs satisfactory in terms of cost, timeliness, quantity
and quality?
• Are there any process delays or bottle necks?
• Are all steps needed and do all steps add value?
• Is the process documented, understood and adhered to?
• Does rework occur?
• Is there scrap or waste?
• Is cycle time minimised?
• Should some steps be combined?
• Is better/cheaper technology available?
• Do the users possess the necessary knowledge?
• Could more steps be completed in parallel?
• Are all steps in the correct sequence?
Example Decision Matrix
Suppose Victoria University commissions a project to provide students
with free footwear. First the decision-makers identify appropriate criteria
or attributes to assess viable/functional footwear options and prioritise
these using a paired-comparison’s technique:
Rank Score
Attributes
4
3
2
2
3rd
1
1. Appearance
4
1
2nd
2
2. Maintenance
4
2
4th
0
3. Durability
4
1st
3
4. Comfort
1
Example Decision Matrix
Next the prioritised attributes go into a decision matrix. We give each
attribute a weight (from say 1 to 10) that represents its relative
importance, and then evaluate each option against each attribute, scoring
them, where say excellent is 5, satisfactory is 3, and adequate is 1. In this
instance Option B scores highest.
Attributes
Weight Option A
Option B
Option C
Comfort
10
x 3 = 30
x 4 = 40
x 2 = 20
Maintenanc
e
9
x 5 = 45
x 3 = 27
x 4 = 36
Appearance
6
x1=6
x 4 = 24
x 3 = 18
Durability
3
x 5 = 15
x3=9
x3=9
96
100
83
2nd
!st
3rd
Total Scores
Place
Summary
PVM is a powerful strategy that focuses on
delivering better project value. Top five
requirements are:
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Management support
Early application
Thorough preparation
Independent facilitator
Maximum involvement of stakeholders
Bring these five essentials together and PVM will
payback as a positive intervention.
Unless you have some very easy
questions, it’s
THE END
And many thanks and good luck with
your studies!