What is this Value Management in the construction industry? Most of the people are misunderstood that value management is the method to reduce 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. In order to do it developer or building team should optimized below mentioned key elements of the project.
Key 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 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 the 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 design should take advantage of natural ventilation and day light. Usage of 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 usual practice. But after few years owner might be paying more than the saved cost for rectification works. Quality material can add an 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 optimize 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 optimized 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.
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.
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 complete life cycle of the project. They can decide 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 in to trouble. In this market condition it will be difficult to sell these apartments.
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 in to 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 apartments in market.
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 optimize the costs between building and maintaining of particular work.