4. The Value Method Job Plan

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   1. Selection Phase

      Beginning at the beginning. Framing is one of the most important steps in decision-making. Good decision-framing procedures first examines what has the best opportunity for return for the effort involved. The Value Method starts this process in its systematic way with a Selection Phase. It is the first stride of the eight-step Value Method job plan.
      
      
      Step one in the Selection Phase is to elect an activity for focusing effort. This is done using the same systematic Value Method approach similar to that used to conduct a value study. Activity select should usually be based upon the expected return on investment as compared to the typical projected cost to obtain it. The value equation is used to obtain an ROI estimate.
      
      
      If the ROI is appears sufficient, the second step of the selection phase takes place. This is the question of how much resources should be devoted to the decision opportunity activity and the composition of those resources. The monetary and non-monetary costs for this is then fed back into the first Selection Phase step for refinement. The process continues until an appropriate plan for the effort is obtained.
      
      
      Selection people. The people that are in the "trenches" should be the people that have the greatest ability to recognize the potential of an activity for value study and the benefits it offers them and their customers. Unfortunately, due to lack of training in the field, and the phenomena of being "so close to the trees that you forget it is really a forest," the people that have the best-- ability to recognize it, affect high quality value study results, and benefit from its use, are often the last ones to suggest it. Selection identification training can help. However, when many activities or a single large activity is involved, it is best to a have an independent selection review by a person trained in selection processes.
      
      
      Potential value assessment. Few things are certain. Each decision we make affects future decisions. No one will ever know the actual enhancement they receive from making a better series of decisions. In the case of decisions, even hindsight is not perfectly clear. We must estimate the results. When selecting how to approach the decision, there are some features that can help us assess the potential for value enhancement through use of the Value Method versus the existing or other scenarios.
      
      
      When an activity (Project, Program or Activity) is just beginning, the cost to enact a change to the project is negligible and the potential benefits attainable due to a change are very great. As the activity progresses, choices are made, data are collected, resources are obligated and expended, customer and regulatory buy-offs are attained, etcetera. Accordingly, the cost to change the project increases, and the potential benefits available due to a change decline. For a time, at some point, the cost to change may exceed the benefits available. Thus, usually,the more effort placed into improving the value at the initial phases of the activity, the greater the potential benefits. This behavior is illustrated below.

      

      When assessing potential value enhancement, it is important to consider other factors beyond expenditure reductions. Other factors include: schedule improvement or recovery, improved product, improved client satisfaction, reduction of risk, and other features beneficial to the mission and intent of the activity. These should be considered value enhancements too. Value enhancement assessment can, and at times should, be based irrespective of the projected expenditures to attain it. For example, during Value Method selection review, if an approach for a proposed activity does not appear to have appropriate value to the customer, entails too much risk, or has other troublesome qualities, a person or organization may determine to initiate a value study based upon these factors. This type of decision is based upon avoidance of potential costs. When the comparison of potential worth and costs indicates that the benefits of formal Value Method use are sufficient, some form of value study should be scheduled and performed.
      
      
      Several techniques are often used to estimate value enhancement. They range from the broad and simple to the complex and specific. The detail of the analysis should be as value-based and the value study itself.
      
      

      1. Typical Percent Value Enhancement Expected in Value Study. One of the techniques used to estimate the potential for typical value enhancement available from value study is to multiply the total estimated project cost by a simple percentage. The percentages used are based upon experience in the Value Method field. Although it is not an optimum approach, calculating the potential for savings in a value study is reasonably representative of the results to be expected. Using these percentage reflecting the expected value enhancement is quick, easy, and do not require extensive Value Method expertise. Sometimes the current activity information is too scarce to make better determination, or a person with the adequate expertise is not available to perform a FAST or other selection technique. The percentages listed in the table below, for various phases of the activity, may be used as a conservative estimate of value study results. The results would be in the form of cost savings, cost avoidance, and/or efficiency improvements and are in percent of original estimated cost or value involved. Examples of savings greater or less than these averages abound.
         
         

         Phase
         Feasibility	Planning	Generate Method-Concept	Generate Method- Final	Maintain Activity Operation
         20%	10%	6%	2%	4%

         Recommended common value study result percentages used to estimate potential due to operation of a single value study.
         
         

      2. Assessment of Value Enhancement Expectation. A more accurate method to determine if an activity would benefit from value study is to make a detailed assessment. Two basic techniques are common, historical and actual estimates. Historical estimates require less Value Method expertise than actual estimating procedures and are often helpful for the people most involved in the activity to use to identify problem areas and when to request more formal Value Method activity.

         1.) Historical Common Value Mismatches. Value Method professionals have generated lists of items that are the more common features determined to contain a value mismatch. The list shown below is a compilation of common categories of endeavors and components that are often found to offer significant value enhancement through a value study. If one or more of these items are present in the activity (PPA), value enhancement, greater than that indicated in the previous percentages (typical percentage usually found in a value study) are probable. The items are:

         1. Involves large amount of expenditures or resources (staff or equipment). In such cases even a minuscule reduction can involve large expenditures or other resources.
            
            
         2. Costs exceed budgeted amount.
            
            
         3. Great complexity is noted in plans. (Often the more complex the plan, the more opportunity to improve value and performance.)
            
            
         4. Potentially involves major resource impacts (staff or equipment).
            
            
         5. Activity cycle is highly compressed. (Such situations usually generate short cuts. Often, the potential value impacts of shortcuts have not been fully evaluated.)
            
            
         6. Involves critical, exotic, hard-to-get, or expensive resources (materials or staff) and/or requires sole-sourcing to obtain them.
            
            
         7. Activity uses non-standard components such as specialized software, fasteners, unique sizes, computer equipment, or other resources.
            
            
         8. Plans include use of specialized components that have comparable counterparts available off-the-shelf.
            
            
         9. Activities involve advancement in the state-of-the-art.
            
            
         10. Involves status enhancement, new records (e. g., largest database, first time used), embellishment, special interest requirements, high viability, extensive political objectives, or strong controversy. (Such projects often involve strong, often conflicting, requirements that increase the costs and resources involved. Sometimes, the true cost, purposes, and trade-offs of such requirements have not been fully considered.)
             
             
         11. Highly skilled labor or time consuming tasks are involved.
             
             
         12. Items with poor service or cost history, or have high maintenance and staff operations, are proposed or being used.
             
             
         13. Plans have been in use or "on-the-shelf" for more than five years. (These activities, especially if they receive little or no changes in that period, are prone to losing touch with the present situation and overall mission objectives.)
             
             
         14. Solutions are included in activity to solve problems or improve conditions unrelated to immediate cost. Examples are: reliability, aesthetics, reliability, noise, safety, risk protection, simplification (KISS), maintainability, standardization, time, quality, resource use (e. g., energy, limited staff or equipment), environmental factors, performance, or past history avoidance.
             
             
         15. Components or functions are identified in a Value Methodology FAST diagram as being a potential value mismatches.
             
             
         16. Similar components or functions are being commonly submitted and accepted as Value Engineering Change Proposals (VECP's). This situation indicates that the VECP is not acting as only an added "safety net" to reduce costs and that added value at the initial stages should be examined.
             
             
         17. Activity has repetitious components. Repetitious examples include: several organization units being formed and/or destroyed or awarding multiple contracts.
             
             
         18. Activity has fallen behind the specified schedule. Such a condition often generates poor value situations in the effort to get the activity back on schedule. The nature of the value study effort can be used to illuminate the problem generating the delays and bring the project back on schedule.
             
             
         19. Activities have been operating for a long period of time without extensive review or modification. Such activities often continue to solve problems that are no longer relevant in the organization or do not include use of new innovations in the industry.
             
             
         20. Issues involved are highly charged with diverse interests present. Such situations often have highly favored solutions, that may have been the best option once, but continue to be favored long after the value has declined below optimum. They are often retained due to the perception that to change them would create problems in acceptance and would be difficult.
             
             
         21. Conditions have changed in the base assumptions used to make previous selections such that they are more costly, difficult to implement, and otherwise reduced in value. Larger projects often have this problem since the small issues are more difficult to keep track of and are perceived to be of lessor importance.
             
             
         22. Construction or rehabilitation activity involves: intricate shapes, deep excavations, high embankment slopes, steep slopes, large dewatering requirements, long material hauls, extensive quantities of borrow and/or waste, extensive reinforcement, and embellishments of a visual nature.
             
             

         If even one of these items are present, a value study is typically highly beneficial. If the potential looks promising, but value study costs or the return on investment remains a concern, a more detailed examination of the activity by a person with the appropriate Value Method selection expertise, may be helpful.
         
         

         2.) Actual Estimate Techniques. The staff at the location of, or involved with the activity, often have a good idea of where they think they are not getting good value. When they augment this expertise with Value Method techniques (FAST, function-worth-cost, cost modeling, etcetera), an extremely good estimate of the potential value enhancement through use of Value Method processes can be attained.
         
         

         In the event that the activity staff does not understand the Value Method sufficiently to make a detailed assessment, Value Method professionals with a good understanding and technical expertise in the activity, can make, or assist activity staff in making, assessments of the potential for value enhancement at any point in the activity cycle.
         
         

         1. Relative Cost Ranking. This method uses the relative cost of components to identify the most costly parts or functions of an activity. When the activity is large and/or complex, or the costs to perform a value study for the complete project appear to be too large, the use of Pareto's Law, "80-percent of the costs occur in 20-percent of the parts" is often used in the selection process of the activity section as well as value study operations. Highlighting the most extensive parts of the organizational budgeted program stretches limited resources to obtain maximum results.
            
            

            A caveat to relative ranking method use is prudent. Exclusive use of this method may generate losses in overall Value Method results and organizational performance. This is even more noticeable in large organizations. In one selection evaluation a mere one-percent of the overall Operation and Maintenance (O&M) budget for a small Federal bureau amounted to 2.4 million dollars. That amount would pay a staff of more than 20 to operate a project activity and represented a relatively large local project office for the bureau.
            
            

         2. Computation of Return on Investment Expectation. In this procedure the apparent benefits (value enhancement) are usually compared to the expected incremental cost to perform the value study endeavors. If personnel will be needed to be doing that type of work anyway, then no incremental cost would be incurred. In fact, in this situation, it is probable that their actual costs would be reduced due to the improved efficiency of their using the Value Method to perform those tasks. The Return on Investment (ROI) equation is:
            
            

            ROI=	Value Enhancement
            	Value Study Cost

            
            
            If the resulting ROI is sufficient, use of the Value Method should be initiated. If the effort shows sufficient promise such that forming a value study team for the activity is appropriate, a Certified Value Specialist or other suitably trained and experienced person should be contacted. They can perform the operations, or assist in team leader and other selection criteria.
            
            
            When an ROI is between 1 to 5, a value study should pay for itself and entails little risk of returning less than is invested. When the ROI is between 5 to 20, the return is usually good enough to invest the expertise of a complete Value Study Team and minimal risk of returning less than is invested in the value study. When the ROI exceeds 20, the project return is excellent and no risk of lack of return is contemplated. (The maximum ROI actually achieved in a SAMI study was more than 2,500 and its projected return was about 100.) So that the best effort can be attained and duplication of effort can be minimized, it is strongly recommended that a person with suitable expertise be called upon to facilitate the value study. Qualified Value Method facilitators improve the probability that the expected value enhancement will be attained or exceeded by a large margin.
            
            

         3. Mandated Project Selection. In the Federal and some other governmental sectors, a project is selected on the basis of its status. Since 1993, Federal regulations and applicable laws require the activity to be selected for value study performance by default. Most of these laws or regulations are for construction related projects, with award amounts greater than specified thresholds. Such projects also have mandatory goals and reporting requirements. The definitions for these types of projects are given in OMB A-131 and specific agency regulations. The awarded amount of similar component parts on the same Program, Project, or Activity (PPA), whether involving several contracts or not, are often considered to be a single PPA within the confines of the regulations and reported as such.
            
            
         4. Value Study Team Selection. Once a project has been selected for value study, selection of a team to perform the study is needed. (If an individual type value study is being done, consider it the team of you, yourself, and I. See the types of value studies section in this short course for more details.)
            
            
            Selection of the team membership should incorporate the multi-discipline team procedures. To avoid the "group think" that can develop and hinder team performance, no more than two of any one discipline should be allowed. In many cases, the value study team should be from people that have not been involved in the activity prior to the study. Ideally, the staff responsible for the activity's execution are conferred with to obtain their viewpoint on the major types of expertise that they believe is needed. A common error in team selection is using a strict cost basis. ("I can afford only two people on this team.") High cost but simple off-the-shelf components may not gain as much value enhancement from value study as a much less costly, but very complex and difficult to complete component.
            
            
            1. Blending. Combining the team member attributes is an important feature in team selection to the success of the value study proposals. Study components that have high importance need more than just one person's expertise working on it. If this is allowed, the team effort can end up being more of an individual rather than team effort. When more than one member with same expertise is needed, extremely similar backgrounds should be avoided. The team members should also have sufficient experience that will allow them to understand the difficulties involved in the activity being studied. An appropriate, and if possible, optimum balance of experience, training, and background is desired.
               
               

               Another common mistake is paying too much attention to the technical side of the activity. Non-technical expertise should be included too. Client, site, and other viewpoints should be represented on the team by participation from the organizations with the most affect on the activity. However, inclusion of different viewpoints should not be allowed to bias the study result. If this is viewed as a possibility, use of special team member status such as ex-officio or consultant status may be needed within the confines of the value study.
               
               

            2. Group Interactions. Expertise and expertise blending go a long way towards ensuring that a team can generate good value study proposals. However, it takes more than smart people to make a good team. Team selection should also consider if the members can operate as a smart group. The Value Method uses many techniques to generate a high performing team. The process is tuned to get team members to an optimum performance level quickly. However, the individual human equation can harm this performance. Team membership needs to include people that can understand not only their specialty, but can also interact with and accept the concepts of other disciplines, accept the philosophy of changing an approach (think "outside the box"), play with the team and accept a team selected direction, able to understand and apply the Value Method procedures and principles, and will accept responsibility.
               
               
            3. Prior Involvement. In all cases, a general rule applies and is generally accepted by practitioners throughout the Value Method field in team type value studies of an ongoing activity. No team member should be intimately involved with the activity, its design, or prior decisions, nor should they have had strong participation in the design, planning, management, or execution of the activity. There are a multitude of reasons for this stipulation.
               
               

               1.) It is difficult for a person who has been heavily involved with the current conceptual design to be objective enough to take an "outsider's view" of the project.
               
               

               2.) Most people use their most recent experience for ideas, people involved in the design under study are usually unable to divorce themselves from the project enough to garner a different idea as is desired and a stated object for performing the study.
               
               

               3.) Other team members may come to rely too heavily on the activity intimate knowledgeable person and this can effectively constrain other team members to preset solutions already considered;.
               
               

               4.) It is unfair to ask a intimately involved person to pursue, develop, and support ideas which may affect the present accepted direction of the activity or could generate unpopular proposals (e. g., "How could you propose to downgrade our jobs?", "As your client I told you that I did not want to consider that!", and "Why did you present the idea of using concrete when we had already agreed to use steel?").
               
               

               5.) Results of such studies indicate a reduction in the value of proposals generated by the value study team. Further, in the case of construction related projects in the Federal sector, it is contrary to the specified practices as listed in guidance documents and regulations.
               
               

               While team membership is not appropriate or accepted in the confines of the value study room, consulting with the people with prior involvement is not only encouraged, cooperation between the study and activity team is required. but is even required. Failure by the these teams to consult is a criteria used in the Verification Phase that specifies poor value study performance and may be a basis for criticism of the value study. In the Federal sector, it is a basis for invalidation of the study activity by an auditor.
               
               

            4. Study Team Quantity. To perform optimally, the team should consist of no more than about five to eight people. Due to the number of sub-group interactions that can be formed and other factors, teams with nine to ten people become hard to manage and productivity suffers. Therefore, if possible, formation of a large study team should be avoided. (Additional information on the basis of this quantity is available in the Facilitator Course.)

A computable JavaScript template is available to assist you in calculating the actual estimate.

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