What is Value management

Value Management

What is this Value Management in the construction industry? Most of the people are misunderstood that value management is the method to reduce the cost of construction. As per the correct definition, value management is the systematical method used to develop a project to achieve its utmost benefits for the users and owners. To do it, the developer or building team should optimise below mentioned critical elements of the project.

Critical elements of Value management

Functions of the project

As an example, if a client wants to build a hotel building team can do a feasibility study on the location; also, they can do a survey on the number of tourists’ visits per day. Based on this information value management team can propose the number of rooms and the size of the hotel, restaurant size etc. If 100 number of tourists are visiting a particular area per day. The hotel should not be designed to serve 250 numbers of guests per day.

Performance of the project

Building team can take such precautions to reduce the electricity bill of the building by installing proper insulation system or using a sustainable energy source (such as solar panels). Also, the design should take advantage of natural ventilation and daylight. Usage of a better insulated external wall can reduce the energy consumption of the cooling or heating system.

Quality of the final product

Usage of cheap material to reduce the building cost is the usual practice. But after few years owner might be paying more than the saved price for rectification works. Quality material can add extra value to the building.


As an example, if a client wishes to reduce all the costs related to the safety system by using low-quality material that can be the worst value management decision taken in the project.

Cost of the project

There are various ways to optimise the cost of a project. Also, there are three costs involved in the life cycle of a project. They are Initial building and design costs, Operation or running cost and disposal cost. Cost of the project should be optimised to reduce these three costs. Building team should do a proper analysis that any decision made to reduce the initial cost should not increase the running cost of the project or disposal cost of the building.

Working Procedure

Mostly the process is starting in the design stage of the project. And the design team has to take the lead of the process. The contractor also can participate in the process. There are many techniques to do value management, but these all techniques can be divided into three main categories.

Value planning

In the initial stage of a project, the stakeholders are deciding the purposes, main risks, quality etc. In this stage, the building team can identify cost-effective ways to execute the project. Value planning should be done for the complete life cycle of the project. They can decide on building cost, running cost etc. As an example, a client is building a residential apartment building. This contains 20 numbers of apartments in the building. Complete cost is estimated as $1,000,000 for building. So he should sale each apartment at least ($1,000,000/20) = $50,000 (+ profit). If the market value of a normal apartment is around $35000, the client may lead to trouble. In this market condition, it will be difficult to sell these apartments.

Value engineering

In this phase, the value engineering team is identifying the critical elements of the project. And systematically developing and design them to reduce the building cost, maintenance cost, or running cost. There might be few or more designs can be identified for each critical element at this stage. The value management team will identify and select the best design options from the above-developed options. Example- Same above client wishes to add solar panel power source into the building which can be fulfilled 25% of the energy requirement of the building. This will add additional value to the building and client can market the apartment, highlighting that this apartments electricity fee is 25% lesser than the other flats in the market.

Value analysis

In this stage, the value management team can identify the operation costs and the initial cost of any kind of work. Also, the value management team will develop the selected alternative design options in order to optimise the expenses between building and maintaining of particular work.

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