Value Management in Construction: Case Studies

Value management
in construction
Case Studies
About OGC CP0152/05/07

OGC - the UK Office of
Government Commerce -
is an Office of HM Treasury.
The OGC logo is a registered trademark
of the Office of Government Commerce.
OGC Gateway is a trademark of the
Office of Government Commerce.
OGC Service Desk
OGC customers can contact the
central OGC Service Desk about
all aspects of OGC business.
The Service Desk will also channel
queries to the appropriate second-
line support. We look forward to
hearing from you.
You can contact the Service Desk
8am - 6pm Monday to Friday
T: 0845 000 4999
E: [email protected]
W: www.ogc.gov.uk
Press enquiries
T: 020 7271 1318
F: 020 7271 1345
This document is printed on material comprising 75
Office of Government Commerce, Trevelyan House, 26 - 30 Great Peter Street, London SW1P 2BY per cent post consumer waste and 25 per cent ECF pulp.
Service Desk: 0845 000 4999 E: [email protected] W: www.ogc.gov.uk Crown Copyright 2007
Contents
Case Studies
Foreword 3
1 Hextable Dance 4
2 Open University 10
3 Kintry Housing Partnership 14
4 Home Happening 20
5 NHS Teaching Hospital 26
6 Withington Community Hospital 32
7 Bridging the Gap 38
ANNEX A Terminology 42
ANNEX B Achieving Excellence in Construction 43

Foreword
3
Value Management (VM); is a well-established methodology for defining and maximising

value for money. It can be applied to any type of project regardless of size or timeframe
and at all stages throughout the life cycle of the project from inception to completion.
The Office of Government Commerce (OGC) has joined with APM Group Ltd and the
Institute of Value Management to produce a series of case studies which demonstrate
how applying VM to public sector construction projects can result in first-class, whole-
life value-for-money programmes and projects that ultimately lead to better public
services. OGCs Achieving Excellence in Construction initiative (see Annex B) advocates
the application of VM to construction projects.
The following case studies demonstrate the benefits VM has brought to seven central and local
government construction projects. The case studies focus on the VM approach adopted on each project
and detail the key success factors, achievements and lessons learned. Issues addressed include:
I leadership and decision-making
I effective team working
I performance improvement (pre and post construction)
I innovation
I defect reduction.
Summary of the principal benefits realised through VM implementation
Case Studies
1 Hextable Dance achieving feasibility breakthrough
2 Open University getting more for less and increasing user satisfaction
3 Kintry Housing Partnership reducing cost and improving productivity
4 Home Happening right first time!
5 NHS Teaching Hospital the benefits of VM
6 Withington Community Hospital building the team, meeting the budget
7 Bridging the Gap adding value and reducing costs
Principal benefits
Improved definition and articulation of value
Clearer brief and improved decision-taking
Enhanced value and benefits for end-users
Reduced cost, improved affordability and value for money
Improved productivity, efficiency, collaboration and trust
Reduced waste and defects
Earlier management involvement
Benefits realised where previous methods failed
1. Hextable Dance
achieving feasibility breakthrough
4 Case Study
Case Studies
Principal benefits
5
A Value Management approach facilitated

an innovative design solution that permitted
the construction of a previously unaffordable
project by reducing costs by 420,000.
Summary
This case study describes how the Hextable
Dance project moved from being unaffordable
to reality, through the effective application of
VM techniques.
Hextable School, near Swanley, Kent has an

enviable reputation as a centre of excellence for
the performing arts. To build upon this, a project
was initiated to construct a dance school of
great aesthetic impact. The project was started
10 years ago but stalled because the design,
although innovative, was expected to exceed
the available construction budget of 2.1m
by 20% (about 420,000).
To get the project back on track, the project

team commissioned a VM study, involving all
the key project stakeholders.
I Enhanced spatial links between Hextable
The project was completed in 2005. The new Dance and existing school buildings.
Dance Development Centre now provides Benefits: Improved security, disabled access
previously unavailable performing arts facilities and landscaping.
and related services in north-west Kent, enabling I Involvement of all stakeholders in developing
the education, creation and performance of revised design principles. Benefits: Freeing up
dance to thrive. It comprises drama, production, of constraints by enabling the stakeholder
recording studios and media room, and is and end-user needs to predominate.
available to professional and amateur dance
organisations, as well as the local community. Principles and objectives
The facility was largely funded by Kent County Hextable Dance was intended to:
Council together with an award from Arts I become a community resource available for
Council England, through the National Lottery. use by local and regional arts organisations
Achievements and benefits I provide new creative opportunities for the
performing arts in north-west Kent and beyond
I The projects functional requirements were
reassessed. Benefits: Development of a new I have high-quality internal finishes to
design that met the clients requirements in complement the distinctive exterior
full and achieved 20% construction cost I provide excellent facilities in a
savings, thus meeting budget requirements. professional setting
6
I minimise operating costs the VM team recommended re-evaluating the

I enable performing arts to thrive through the project to focus on function. The project team
education, creation and performance of dance. effectively took one step back to move two steps
forward, to achieve maximum benefits by
conducting the early stages of a VM study.
Major issues
There were a number of major issues facing the The VM stages are listed below. Each stage
project team prior to the VM study: normally involves a period of preparation, one or
I two earlier schemes had failed and the current more workshops and a report, which identifies
proposal exceeded the budget by 20% actions to develop and implement. In this case,
the project team combined the first two stages
I due to the nature of the funding arrangements,
to fast-track towards a solution.
finances were fixed and could not be increased
I the project team was unclear as to the precise
Key VM Stages:
nature of the clients requirements.
I VM0 Need Verification
I VM1 Project Definition
VM in action
I VM2 Brief Development
The introduction of VM to the project was
I VM3 Value Engineering
originally envisaged as a value engineering
I VM4 Handover Review
exercise (a later stage in the VM process).
I VM5 Post-occupancy Review
However, as capital cost was a major concern,
7
Successful initiatives I keeping within funding requirements
The key to starting a successful VM study I optimising the use of space

(and a successful project) is to have a clear I complying with third-party constraints
understanding of what value means to the
I raising the profile of Hextable School
client and to establish the objectives.
I delivering functionality to match the schools
For Hextable Dance, this was all-important, as curriculum requirements.
saving one-fifth of the construction cost within
the constraints of an existing design was likely to Further discussion and analysis of these value
be an unrealistic target. Therefore, it was drivers enabled the project team to fulfil the
advisable to take a step back from the existing clients actual requirements.
design and to review the client brief, the
Being creative
required project benefits and important functions
of the new building. With these principles With a clear understanding of the clients needs,
established and agreed by the client, the project the team was able to view the project from
team could reach a common understanding for a functional perspective and to identify
the scheme. opportunities for stretching the constraints of the
existing design. This enabled the team to put
The discussions addressed and clarified many forward innovative design solutions, without
uncertainties, particularly in relation to client compromising the clients requirements.
needs. This led to the identification of important
functions key value drivers which ranged During this stage of the study, all suggestions
from delivery of the project to functions were captured without discussion or evaluation.
required of the completed building, including: This stimulated creativity and removed inhibitions.
8
Selecting the best I difficulty in obtaining planning permission

Armed with the resulting creative ideas, the I refusal of funding by Arts Council England
project team evaluated the merits of each and I vandalism to the finished building
selected the best. This evaluation was based on
I late changes to the design
criteria to ensure the selected ideas were consistent
with the original project requirements. I difficult access to the site.
The selected ideas were then developed into Risks were qualitatively assessed for likelihood
workable proposals for client presentation. of occurrence and potential impact. The project
team appropriately managed and regularly
Decision building reviewed these risks to ensure a successful
The existing design for Hextable Dance was for a project delivery.
multi-level roof of great aesthetic impact, with a
double-height ceiling in the main dance studio. Lessons learned
I Involving all key stakeholders in the VM study
One of the most important new ideas was to
was very important when defining value. It
lay the building over only one storey. This was
allowed stakeholders to buy into the process
radical, but exactly the kind of idea encouraged in
and ensured their needs were met.
the creative stages of VM. The innovative roof
structure and double-height studio ceiling could I The architects full support made the VM process
be retained by moving upper level areas to the much more effective. They were willing to take
ground floor, removing stairs and corridor space, suggestions from the project team and quickly
so improving the buildings efficiency. put forward relevant options.
I Willingness by the team to return to the clients
The project team also developed ideas to give
core requirements and to reassess the required
areas multiple functionality, thus increasing functionality opened the project to increased
flexibility and allowing two dance studios to be creativity by removing unnecessary constraints
combined into one. This resulted in a state-of- open mindsets really do make a difference!
the-art performance space seating 100 spectators.
The architects, Lee Evans LLP, fully embraced

the VM process and came up with a new design
incorporating these concepts. The new design
added extra value to the project by enhancing
access between Hextable Dance and the existing
school buildings whilst improving security,
disabled access and landscaping.
Crucially, the new design met the budget with no

loss of aesthetic quality or functionality.
Managing risks
Alongside VM, this project used risk management
to maximise its chances of success. As a central
part of the VM study, the team identified the
potential risks facing the project. These included:
9
Contacts
Summary of changes
How does your project compare?
Original layout:
For support, please contact Ravi Malhotra,
I two-storey building with associated
General Manager, Hextable Dance:
corridor and stairs space
t: 01322 618618
I multi-level roof structure created by
e: [email protected]
the two storeys
w: www.hextabledance.com/
I separate and distinct dance studios.
Any feedback on this case study?
Revised layout:
Please contact the OGC Service Desk:
I one-storey building with double-height
t: 0845 000 4999
dance show area
I two dance studios combined to give
This case study has been compiled using flexibility and state-of-the-art seating
information supplied by members of the Institute space for 100 spectators
of Value Management, www.ivm.org.uk I new building footprint
It also uses the OGC Achieving Excellence in I first floor and stair space not required.
Construction Procurement Guide 4 (AE4) Risk
and Value Management (order code: CP0064). Benefits of revised layout:
I works better as a dance studio
AE4 summarises the key principles of risk and
I cost 20% less to build
VM in the context of construction projects and
describes the practical steps that need to be I improved connectivity with the rest of
taken over the project life cycle. the school
I enhanced security.
Photographs courtesy of Ravi Malhorta.

2. Open University getting more for less and
increasing user satisfaction
10 Case Study
Case Studies
Principal benefits
11
Value management supported team- I Excellent value for money. Benefits: Savings of
learning at the Open University library 1.3m were achieved for a cost of 120,000
(the VM studies) a payback of over 1.1m.
that resulted in a benefit-to-cost ratio
I Users needs were identified before value-
greater than 10:1. adding proposals were generated. Benefit:
The team evaluated the potential for value
Summary enhancement before spending time on the
This case study describes how the Open Universitys detailed development of proposals, which
Estates Department delivered a 17m library might have resulted in little improvement.
project using the principles of partnering and I All members were encouraged to attend
VM. Cost savings of 1.3m were achieved at a meetings regardless of their position within
VM study cost of 120,000 a benefit-to-cost the team. Benefit: Fuller briefings with input
ratio of more than 10:1. from end-users.
I Good team spirit. Benefit: Team members
The partnership approach was adopted when could raise controversial topics without fear.
earlier attempts to design, tender, procure and
I Joint solutions to problems encouraged. Benefit:
build the library using traditional procurement
Reduced delays and costs associated with time-
routes, failed to meet capital budget constraints
consuming referrals to senior management.
and satisfy user requirements.
I Development of trust within the team.
The design and construct partnership was Benefit: Reduced correspondence.
appointed on best-value principles (not simply
awarding on lowest price, but evaluating Principles and objectives
commitment to the clients needs and budget). The Open Universitys objectives were:
The project team comprised Malcolm Reading I A new library building which:
and Associates, Swanke Hayden Connell Architects, I did not exceed the capped capital budget
Buro Happold, Galliford Try and Davis Langdon, I would be ready for occupation by the
together with management and staff from the stated moving-in date
library, and Open University end-users. I met user requirements.
From the outset the Open Universitys I The total and focused involvement of the
commitment to a programme of VM and other wider client body, in particular users of the
building and those responsible for its upkeep.
full-team workshops, led to a successful project
delivered on time and to budget, with high I A project team that would:
levels of client and user satisfaction, improving I identify and enhance value
from 61% at the outset to 70% on completion. I develop a common understanding of user
The project team enjoyed the experience and needs
took satisfaction and pride in delivering an I define common objectives.
outstanding building.
Major issues
Achievements and benefits The proposed library site was constrained by
I Involvement of department heads and existing buildings, car parking and natural features
end-users. Benefit: Library usage is double including a large tree and a pond that was
the pre-project estimate. home to a colony of great crested newts.
12
The failure to gain approval for previous proposals Knowledge sharing

had engendered doubts that a properly-functioning One of the principles of VM is that added value is
building could be delivered within budget, on time driven not only by workshops but also by the sharing
and also satisfy the aspirations of user groups, such of explicit and tacit knowledge throughout the
as the management, library staff, library users project and then using that knowledge to benefit
and researchers. the project. Explicit knowledge may be shared at
regular project design and site meetings, but tacit
Successful initiatives knowledge is rarely obtained in such an environment.
Core group
During review workshops, all team members
A core group was established which: benefited from communicating their views on
I comprised a representative from each project and team successes and opportunities.
partnering organisation They observed how these might impact on the
I met monthly to maintain an overview of the project, learning in cross-organisational groups
process and to support decision-making how to use this information to benefit the scheme.
I would be the arbiter in the event of a major issue Mitigating risk
I worked together in a structured programme of The University had previously endeavoured to
VM workshops and other full-team workshops procure the new library by traditional means. This
I aimed to add value by increasing client and did not yield proposals that could be delivered
user satisfaction within time and budget constraints and to the
I aimed to reduce costs, waste and time spent satisfaction of the end-users.
on re-working and resolving confusions.
The University Estates Department therefore
The team also focused on achieving satisfaction, adopted a project partnering procurement route
enjoyment and pride in an exemplary building, to achieve their objectives. The VM programme
adding value for all. was implemented to help reduce uncertainties.
Trust Reducing budget uncertainty

The increase in positive experiences, created by the As the project developed, it became clear that there
successful series of VM workshops, significantly was a potential mismatch between resources and
raised the level of trust within the team. expectations. This caused budgetary uncertainty.
The programme of face-to-face full-team VM
Regular performance assessment allowed the core workshops brought these issues into the open,
group to identify unresolved issues and tensions. enabling the team to propose and develop creative
This information was fed into KPIs which then led solutions to the problems. Further workshops,
to incentives and increased positive experiences during the design, development and procurement
for team members. There was an increase from stages, provided more opportunities for both costs
61% to 70% over a 19-month period for those savings and enhancements to meet user needs.
KPIs related to the issue of trust.
The outcome of the workshops was a reduction in
When team morale weakened it was apparent in construction costs of 20% whilst retaining essential
the team satisfaction KPIs. Consequently, the June client and end-user functionality (e.g. future flexibility,
workshop was limited to the morning, followed 24-hour opening, changing technology and growth).
by a Thames cruise in the afternoon. In the
context of a 17m project, this cost was minimal Cost-effectiveness of VM process
but it turned the morale and team-working The overall cost of conducting the VM programme,
around, as evidenced by the KPIs. including the salaries of those who attended and the
13
professional facilitation fees, was about 120,000. Contacts

The realised cost savings were 1.3m, representing How does your project measure up?
a payback of over 10:1.
For support, please contact Mike Rhodes, Head of
Early involvement of all parties Projects, Estates Division, The Open University:
Bringing the full team together early on enabled t: 01908 652946
the client to take advantage of the knowledge of e: [email protected]
all professionals, including key specialist contractors. w: www.open.ac.uk
Each workshop featured a team exercise to reinforce Any feedback on this case study?
a learning point or introduce a process. These 15- Please contact the OGC Service Desk:
minute activities also helped to breakdown barriers. t: 0845 000 4999
The core group was positively committed to e: [email protected]
empowering team members to resolve issues This case study has been compiled using
before they became problems. This led to more information supplied by members of the
timely issue resolution, maintenance of the project Institute of Value Management,
and a lower cost of resolving issues, as senior www.ivm.org.uk.
management had less input on minor matters.
It also uses the OGC Achieving Excellence in
Continuous improvement Construction Procurement Guide 4 (AE4)
Continuous improvement was a target for the Risk and VM (order code: CP0064).
library project. But it did not stop there. The
information and knowledge generated from the AE4 summarises the key principles of risk and
workshops has been used to improve subsequent VM in the context of construction projects and
schemes for the Open University. All the data describes the practical steps that need to be
leading up to the teams decisions was listed in taken over the project life cycle.
detail within the workshop reports. This formed
an audit trail of objective decision-making and Summary of changes
also provided an information base to guide users, Before:
specifiers, designers and constructors involved in
The procurement route was traditional.
future Open University projects.
After:
Lessons learned The revised procurement route involved
I The success of the VM workshop programme partnering with regular VM reviews.
has led the client to adopt the same
approach on subsequent projects. Benefits:
I The process allowed the client to feel part of I increasing collaboration as the project
the project and also involved the end-users, progressed
enabling both client and user needs to be met I clients and end users expectations
in a resourceful and value-adding manner. met in full
I The workshops helped the team to push I costs reduced by 20% to remain within
the boundaries of cost, time and quality. capped budget
Normally, one would expect a gain in one of I effective VM reduced uncertainty
these criteria at the expense of the other two, of unproven procurement route to
but in this project the team achieved better- acceptable levels.
than-expected performance in all three criteria.
3. Kintry Housing Partnership
reducing cost and improving productivity
14 Case Study
Case Studies
Principal benefits
15
Value management has improved I Identifying and implementing many small
partnering performance delivering a 7% improvements. Benefits: The cumulative

effect of these made a significant
cash saving and increased profits in the contribution to the 7% cost saving.
supply chain. I Exploring alternative ways of working.
Benefits: Working in partnership and
Summary collaborating in advance with local utility
This case study illustrates how VM was used providers, reduced management time
during one phase of a major housing project to and costs.
improve partnering performance which resulted I Applying imaginative design to car parking
in a 7% saving of 500,000. spaces. Benefits: This encouraged community
ownership of the local environment at no
The Kintry Housing Partnership project was
extra cost.
launched in 2000 to deliver 400 new homes
I Encouraging each building trade contractor
for rent or sale. The project was part of the
to improve design features for the residents.
regeneration strategy for the Craigmillar area
Benefits: Simpler designs and standardisation
of Edinburgh and was funded by Communities
made homes easier to build whilst reduced
Scotland. It was unusual for two reasons: waste and costs contributed to the 7% saving.
I Castle Rock Edinvar acted as the client,
I Encouraging collaboration. Benefits:
on behalf of itself and three other housing Improvement opportunities were identified
associations (Canmore, Edinvar and Link) through the building trades co-operating with
I the project was taken forward in full the contractor and other professionals (e.g. the
consultation with the local community. architect and the building inspector).
I Applying principles from lean manufacturing
One of the phases in the project was for the
(cutting out waste) to reduce cost and
construction of 114 houses. A tender was
improve productivity. Benefits: Reduced costs,
negotiated and agreed at 7.5m, which was in time and reworking, enhanced profits and
line with pricing levels on earlier phases. However, lowered costs for all parties.
Kintry and Communities Scotland wanted to
I Strong leadership from client and contractor
ensure this contract benefited from learning
senior management. Benefits: Team
through partnership working, rather than just
commitment improved and time spent on
market pricing. day-to-day problems was significantly reduced.
A structured framework of VM was introduced
to stimulate improvement. The resulting step-
change in performance enabled Communities
Scotland to confirm an extension to the
housing programme.
Achievements and benefits

I Applying VM processes within an existing
project team. Benefits: By improving
partnering performance, savings were made
without adversely affecting suppliers profits.
16
Principles and objectives Two of the studies focused on the physical

The project team had a desire to introduce further elements substructure and superstructure
innovation in order to stimulate improved performance. and the other two on the process elements
handover (customer and supplier interaction)
and waste reduction (eliminating defects and
Major issues
inefficiencies).
The tendered price, based upon previous phases,
was higher than desired and if accepted, would The VM process was completed in less than one
have put future phases of the housing programme month, allowing for an early flow of benefits.
at risk.
Imaginative design
The challenge was to improve on the tendered The superstructure working group found that by
price by incorporating learning from earlier phases, working closely together within the collaborative,
without jeopardising supply chain profits. facilitated, value engineering environment of
a workshop, contractors were empowered to
Successful initiatives improve design features and reduce ongoing
VM workshops were set up with the initial aim of maintenance. At the same time, they created
improving working relationships on site, reducing a simpler design that was easier to build, with
defects at handover and improving value in design. less waste in materials and less need for
reworking. As a result, performance improved
The combination of VM, in-house design, and costs were reduced.
function cost analysis and lean thinking, proved
to be powerful and resulted in more benefits One workshop group took an imaginative
than expected. approach to the design of private space. It
reduced space on the public road by moving
Focused studies boundary fences to create private areas for
Four working groups, selected from management driveway car parking. This led to a relatively
and frontline operational workers, were formed car-free environment on the estates roads,
to address the four core elements of the project which encouraged a sense of community
substructures, superstructures, defects and ownership of the space and a renewal of the
supply chain. local environment at no extra cost.
17
As an example of innovative thinking, the discounts for materials, contributing a further

electrical wiring was re-routed and standardised, saving of 93,000.
thus reducing the length of wiring loom and
Improvements
fitting costs. This enabled an extra fire alarm to
be installed, providing protection over and above I Fewer corners and joints. This meant:
normal building standards, whilst saving costs. I less plumbing work
I fewer electrical fittings
Focus on detail
I fewer timber-frame components
The houses were designed as timber-frame
I easier, quicker and less costly erection
structures with imaginative use of colour, light
and space to create a pleasing living environment. I savings in materials and labour
I reduced waste.
Within the overall design, the VM studies looked
I A simplified bin store. A delineated area,
at how value improvements could be made on
screened by a wooden fence was used
individual components. Each contractor looked
instead of a brick structure.
at how their contribution could add value or
I Timber floor joist sizes were selected to
reduce costs. Their efforts resulted in a
optimise the cost of materials and fitting.
simplified layout which produced savings of
more than 300,000. I The design was refined and standardised to
suit a modular template, with fewer separate
Furthermore, improving choices for timber joists timber components. The modular size was
and room dimensions removed unnecessary chosen to facilitate easy handling and
design components and created volume machine arrangements within a factory.
18
Partnership ethos Other examples of improved efficiency and

Because the studies were professionally facilitated, waste reduction were:
team members were able to take a full operational I Unnecessary fittings were eliminated, purely
role in the team. This avoided the pitfalls of cosmetic treatments were removed to give
traditional, adversarial, cost-cutting meetings. residents more personal choice and to reduce
unnecessary cost to the housing association.
In the superstructure group, seven different building Experience from previous developments
trades co-operated with the main contractors showed that some decorative features such
management team (and other professionals), as mirror doors were typically removed and
achieving a real partnership ethos. This enabled replaced by residents when they moved in.
the team to generate over 94 ideas for improvement.
I Better quality paint materials were selected
Cost savings to reduce cost of application.
The 500,000 saving was achieved on 114 Leadership
new homes an impressive 4,000 per house.
The senior leadership input, at chief executive
Aggregating such savings across such a large
and managing director level, enabled the project
regeneration programme, enables more homes
team to have the confidence to develop project-
to be built.
specific working procedures. This allowed people
The savings were achieved without reducing the to spend more productive time on delivering the
profits of local firms undertaking the work, hence new homes for the community because it reduced
providing additional benefits to the local community. the number of day-to-day problems, which cost
time and money to resolve.
Reducing waste
The waste reduction group examined generic Lessons learned
areas of reducing waste, including cost savings I The personal involvement of key business
that could be passed on to the client. The group leaders at the initial stage and their presence at
identified 148 areas of potential waste, of which the start and end of the workshops, was highly
the use of inappropriate working processes was, beneficial. It established a clear imperative for
by far, the most significant. performance improvement and empowered
Examples of improved working processes each group to make recommendations that
included advance works with utility providers. could be directly implemented.
This led to greater certainty of outcomes and I VM provided structure for the team to
reduced the cost of management time incurred collaborate and gain the benefits of partnering.
by both the contractor and client in liaison and I The VM programme was designed and delivered
co-ordination activities. in less than one month. This meant that the
flow of benefits began almost immediately.
Another area of improvement was in the handover
I The construction process became more
between contractors. The changes implemented
allowed smoother transitions with fewer defects. efficient through redesigning the way in which
the different building trades handed over work
Importantly, the building trades also saved their to each other and the way the contractors
own time, wasted fewer materials and needed handed over completed homes to the client
less reworking. These improvements in efficiency and the community. This speeded up progress
improved their profit margins. and reduced defects in the new homes.
19
Contacts
Summary of changes
How does your project measure up?
Before:
For support, please contact David Brotherston,
Traditional contracting with each firm
Kintry Housing Partnership, Castle Rock Edinvar
looking after its own interests.
Housing Association:
t: 0131 525 6550 After:
e: [email protected] Collaboration between all members of
w: www.placesforpeople.co.uk/castlerockedinvar/ the delivery team and the client through
a series of VM workshops.
Any feedback on this case study?
Please contact the OGC Service Desk: Benefits:
t: 0845 000 4999 I 7% cost reduction
e: [email protected] I trade contractors profits maintained
or increased
This case study has been compiled using
I more efficient working and reduced waste.
information supplied by members of the Institute
of Value Management, www.ivm.org.uk
It also uses the OGC Achieving Excellence

in Construction Procurement Guide 4 (AE4)
Risk and Value Management (order code:
CP0064).

describes the practical steps that need to be
taken over the project life cycle.
4. Home Happening
right first time!
20 Case Study
Case Studies
Principal benefits
21
Value management methods reinforced I A move from traditional confrontational
partnering performance to double procurement to collaboration. Benefits: Better

decision-making, involving all parties.
productivity and reduce defects by 10%
I Improved supply chain performance.
and costs by 1.75m. Benefits: Supply chain delivery has improved
from being within the top 25% to the top
Summary 10%, assessed against industry standard KPIs.
This case study illustrates how applying VM I Increased productivity. Benefits: Production
methods from the outset on a project can more than doubled, from fewer than 50
stimulate a dramatic improvement in production homes a week to 100.
efficiency and free-up cash savings for
I Decisions based on value. Benefits:
reinvestment, without compromising profit
Opportunities for savings of 9.75m over the
margins for the supply chain.
life of the programme have been identified,
At 144m, Home Happening is Scotlands largest of which 1.75m has been realised to date.
council housing improvement programme. The Quality has improved by about 10%.
five-year housing renewal programme will I Combining VM with other collaborative
improve 25,000 homes and build community strategies. Benefits: All parties worked
spirit across South Lanarkshire. together to resolve issues using value as the
key decision criterion.
A forward-looking procurement strategy brought
together partnership working and VM practices, I A right first time policy was adopted.
which ensured that client and user requirements Benefit: Service satisfaction has risen from
were addressed right from the start. The contract between 90% and 95% to a consistent 98%.
was awarded in 2004 and continuing VM
workshops have helped deliver sustained,
improved operational efficiency and value-for-
money designs that are fit for purpose.
Home Happening is now transforming homes

across South Lanarkshire by providing:
I new kitchens and bathrooms
I rewiring
I external fabric renewal
I environmental improvements
I other projects, such as lift replacement
in high-rise towers.
Achievements and Benefits

I A Partnering Charter was developed.
Benefits: Linking all parties through a quality
system allowed them to exchange
information and work together as a
partnership whilst shortening communication
channels between the client and supply chain.
22
Principles and objectives Successful initiatives

The Home Happening partnership comprises South Home Happening is being delivered by an
Lanarkshire Council, CCG Ltd, Symphony Plc, integrated team of public and private sector
Jewson and Graham and Michael Graham partners. The focus for the first year was to
Consultancy. The aim is to improve homes and establish a good project team and efficient
communities across South Lanarkshire so that they working processes.
meet or exceed Scottish Housing Quality Standards.
Right first time
It was vital to set the pace and culture for
VM principles emphasise the need to strive
the project at the outset to achieve the desired
for the highest levels of customer satisfaction.
higher levels of productivity and quality. A
traditionally confrontational approach would not Every small defect, delay or weakness in
have helped, so a new strategy was adopted communication has an adverse effect on
whereby VM was employed alongside other service satisfaction.
collaborative initiatives to stimulate people to
For Home Happening, a right first time policy
work together in innovative ways.
delivered improved process reliability and
significant reductions in defects. Supply chain
Major issues
delivery for the project has often been rated
Previous housing improvement projects had been perfect and the reliability of delivery is
procured traditionally and suffered from: consistently within the top 10% of national
I confrontational attitudes performance, according to industry standard KPIs.
I poor quality This has released resources to be spent on
I low productivity. customer care, service delivery and achieving
production targets.
The challenge was to achieve end-user
satisfaction whilst still meeting budget and Specific performance improvement targets were
programme commitments. agreed against KPIs.
23
Targets The Home Happening workshops developed new

I Resident (public) satisfaction ways of working which speeded up decision-
I Client satisfaction
making. Deployment of the workforce was
balanced against the skills required, waiting time
I Lower capital and whole-life costs
between tasks was reduced and the need for
I Reduced design, supply and construction time rework was almost eliminated. Particular attention
I Fewer defects and ultimately, zero defects was given to detailed planning at survey stage
I Improved safety and to personal customer liaison, so that delays
I More predictable design cost and disruption during the works process were
eliminated wherever possible.
I Higher productivity
I Improved sustainability. The result was that production levels more than
doubled, from fewer than 50 homes completed
Right First Time Drives Satisfaction per week to a record of more than 120 and the
85%
annual production level was the highest for
Scotland in 2005.
Customer Satisfaction
Service Overall
95%
One key management decision was to introduce
dedicated frontline customer liaison officers by
90%
redeploying administrative officers. This boosted
motivation, improved customer understanding,
85%
70% 80% 90% 100% strengthened the capacity to manage a growing
Customer Satisfaction with right first time workload and eliminated unnecessary back-office
activity. The focus was placed on management
Collaboration effort and partnership.
Independent facilitation has been a key factor The impact across the supply chain was
in making the collaborative approach work. substantial as knowledge and learning flowed
The early VM workshops frequently proved to be between the public and private sector partners.
the first time that people had sat down together This good start to the programme established
as a team to plan the programme and tackle a sound base for further improvements such
cultural issues. as increased productivity and improved cost
The structured VM approach enabled the whole efficiency, quality and service for each year
team to focus on delivering value for the end- over the life cycle of the partnership.
user. The client has played a full role in the Step Changes in Production
team, avoiding the pitfalls of adversarial cost-
120
cutting or scope-changing meetings between
100
the client and contractor.
Production Rate
80
Step-changes in production 60
40
VM experience shows that improvement comes
20
from many small steps at operational level.
0
This is encouraged by customer satisfaction Q2-04 Q3-04 Q4-04 Q1-05 Q2-05 Q3-05
and management initiatives. All the small steps Time
are kick-started at formal workshops. Average Quarterly Production Rate
24
Cost reduction Lessons learned

During the second year, the team was able I Independent objective facilitation enabled the
to concentrate on improving value for money. team to maintain progress and adopt new
Efficiency gains of 9.75m over the life of the
approaches.
programme were identified, of which 1.75m
could be captured immediately. Achieving the I VM has resulted in more effective working,
balance of 8m identified savings has set the significantly improved customer satisfaction (by
agenda for the future. 10%) and reduced costs.
Tracking improvements I Martin Dorby, Head of Project Services at South

Lanarkshire Council, summed up:
The management team also met between
workshops to discuss actual and potential Weve learned a lot. Our board meetings have
improvements. These meetings ensured an moved from heated debate to an informed,
up-to-date record of improvements. controlled environment, where hard decisions
are made to add value. Our successes have
After the first year the management team
conducted a further formal VM study to celebrate given us confidence and the live feedback on
improvements achieved, to set an agenda for customer satisfaction spurs us on. Early
cost-efficiency savings and to explore ways of involvement of staff has changed the culture
improving value for money. and given people ownership.
25
Contacts
Summary of changes
How does your project measure up?
Before:
For support, contact Mark Whittet,
Little buy-in to partnering and
South Lanarkshire Council:
low productivity.
t: 01698 455065
e: [email protected] After:
w: www.southlanarkshire.gov.uk Widespread commitment to collaboration
and contributions to VM programme.
Any Feedback on this Case Study?
t: 0845 000 4999 I productivity doubled
e: [email protected] I defects reduced by 10%
I costs reduced
This case study has been compiled using
information supplied by members of the I supply chain delivery improved to the
top 10% in Scotland.
Institute of Value Management, www.ivm.org.uk
It also uses the OGC Achieving Excellence

Risk and Value Management (order code: CP0064).

5. NHS Teaching Hospital
the benefits of Value Management
26 Case Study
Case Studies
Principal benefits
27
Value Management closed the PFI project

affordability gap for two major projects I Building a clear understanding of the project
at the University Hospital of North imperatives and the factors that drive value.
Benefits: Generating ideas that added value
Staffordshire NHS Trust. or reduced costs without compromising
essential performance or quality. This led
Summary to a reduction of 4.5m in the annual Unitary
This case study shows how the University Payment, equating to over 10% a year or
Hospital of North Staffordshire NHS Trust 135m over 30 years.
(UHNST) used the lessons learned by the I Involvement of the contractor consortium
Project Director on previous VM exercises to (Equion) in the Fit for the Future project
deliver significant benefits on two major workshops. Benefits: Active collaboration
construction projects. between the contractors and the Trusts
UHNST is a large Acute Trust with an annual teams in particular the architects and service
operating budget of over 290m. It serves engineers developed imaginative proposals
almost 500,000 people and employs over which saved time and money.
7,400 staff. It has an annual capital budget of
up to 25m. Two of its major construction
projects were:
1. An Integrated Clinical Education Centre (ICEC).
The VM study helped build a common
understanding of the Project Brief. The team
achieved savings of about 4m on this
13m project.
2. A 350m PFI scheme to modernise the acute
hospital and the associated North Stoke
Community Hospital.
The VM workshop achieved annual savings
of 4.5m on the 52m annual Unitary
Payment.
Achievements and Benefits

ICEC project
I Bringing key contributors together in
independently-facilitated workshops.
Benefits: Mutual learning and creation of trust
between all parties, reducing confrontation
and building team spirit.
I Applying a carefully planned structure to the
workshops. Benefits: Helping individuals to
understand underlying issues and differing
priorities enabled them to reach agreement
on issues where differences existed.
28
Principles and objectives I an appropriate environment to promote the

ICEC project patients well-being
The purpose of this project was to provide a I dedicated childrens services in line with the
6,000m2 ICEC which would: National Service Framework
I be available to both UHNST and Keele I facilities to support anticipated development
University staff and students of clinical networks in acute care
I integrate the Nurse Education Centre and the I support of education for staff, undergraduates
Undergraduate Medical School and post-graduates
I accommodate the needs of post-graduate I flexibility to accommodate healthcare changes
students and growth over the next 30 years
I include 1.3m of hospital accommodation. I the development of the Community Hospital
at North Stoke.
The ICEC VM study had two objectives:
I to bring the team together to align the The aim of the VM studies for the PFI scheme was to
priorities of UHNST and Keele University. reduce the annual Unitary Payment to a figure that:
I to eliminate the 4.3m affordability gap, I was affordable within the Business Case
without adversely affecting the requirements I did not compromise the quality requirements
of the agreed Project Brief. of a major acute hospital
I achieved acceptable risk-sharing with the
PFI project
contractors.
The purpose of the PFI project (between UHNST
and the Special Purpose Vehicle (SPV) Equion,
led by Laing ORourke) was to provide:
Major issues
Both projects were experiencing difficulties. They
I affordable acute hospital and services
co-located to support the agreed model of care had escalated in terms of cost following contractor
selection, albeit for very different reasons.
I a Diagnostic and Treatment Centre giving
fast-track access to one-stop diagnosis and On the ICEC project, UHNST and Keele University
treatment of 80% of all planned procedures had differing priorities, which were reflected in the
I efficient use of resources (e.g. acute inpatient stay project brief. A second major issue was that cost
within top 25% of equivalent providers in UK) estimates exceeded the available budget.
29
The 2004 figures on the PFI project estimated To help overcome the areas of disagreement and
an annual Unitary Payment of 57.9m a year to achieve consensus, key areas of reconciliation
4.5m over budget. The first VM study were identified. They included:
successfully addressed this issue but by 2005 I operational and management strategy of
there were still difficulties in achieving financial the centre (including who would control it)
close. A further affordability gap had opened up
I access and infrastructure
due to changing circumstances including Health
Service funding rules. I accommodation needs.
Design clarification
Successful initiatives
The studies resulted in improved understanding
The primary objective of the VM studies was
of client requirements by the design team. The
to help both project teams develop affordable
team was able to redesign the building to provide
schemes.
the agreed accommodation and promote more
ICEC project effective sharing of space. This reduced the
overall size of the building and saved a total
Reconciling different objectives
of 4.3m.
Bringing together the requirements of two
institutions in one facility exposed gaps in PFI project
expectations. Consultation with the key Closing the affordability gap
stakeholders identified a host of issues that
The first study in 2004 resulted in savings of
needed resolution if the integrated facility was
4.5m on the annual Unitary Payment. The
to be a success. A workshop, involving all the
principal areas of savings included:
stakeholders, was held to identify those issues
where there was unanimous agreement and I reduction in excessive circulation and
those where there was significant disagreement. waiting areas
I redesign of key operational areas to
improve the way in which they worked
I removing uncertainty in the provision
of key items of equipment.
This closed the affordability gap and enabled

the project to proceed until 2005 when further
savings were required.
Risk allocation
In 2006, in order for the project to proceed, it
was necessary to find additional savings in the
Unitary Payment. The team identified a potential
8m a year of additional savings. Part of this was
achieved by re-allocating parts of the PFI back to
the UHNST which had the effect of re-allocating
the risks across the project, thus reducing the
amount payable to Equion.
30
Lessons learned
The positive outcomes of the VM workshops
included:
I creation of a team spirit between all parties
I clear communication of project objectives
as well as the changes to be made
I the achievement of significant savings with
better design solutions.
The principal items transferred were the ICEC project

Community Hospital in North Stoke, selected soft VM provided an excellent forum for reconciling
services and inflation risk above RPI. differing stakeholder priorities. The resulting
common brief allowed for the effective sharing
Improved layout of space between different activities taking place
The balance of the 8m came from changes in at different times of the day, thus reducing the
design. Equions architects produced imaginative size of the building that was needed.
ideas for improved layouts that reduced the area
of building needed. Service engineers were PFI project
innovative in suggesting better ways of delivering The VM study allowed the team to agree many
services. The value of their involvement and recommendations for reducing the Unitary Payment.
commitment was a major positive factor in Further reductions were identified through the
the study. re-allocation of risk from the SPV to the Trust.
31
Contacts AE4 summarises the key principles of risk and

How does your project measure up? VM in the context of construction projects and
For support, contact Andrew Underwood,
Project Executive Director:
Fit for the Future Project Office
Royal Infirmary, Princes Road, Hartshill Summary of changes
Stoke-on-Trent, ST4 7LN ICEC project:
t: 01782 554860 Increased efficiency in the use of space
e: [email protected] through sharing and rationalising of
accommodation needs, leading to a
w: www.uhns.nhs.uk
reduction in the size of the building.
PFI project:
Please contact the OGC Service Desk: Simplification of design, improvements in
t: 0845 000 4999 key operational areas and re-allocation of
e: [email protected] risk between the Trust and the contractor.
This case study has been compiled using ICEC Benefits:

information supplied by members of the Institute 33% reduction in construction cost.
PFI Benefits:
It also uses the OGC Achieving Excellence Significant reductions in the annual
in Construction Procurement Guide 4 (AE4) Unitary Payment by the Trust.
Risk and Value Management (order code: CP0064).
6. Withington Community Hospital
building the team, meeting the budget
32 Case Study
Case Studies
Principal benefits
33
Value Management provided much-needed Achievements and Benefits

structure to cutting-edge healthcare I VM workshops were held. Benefits: The total
provision under ProCure21 procedures. integrated project team was brought together
for the first time facilitating the building of
Summary the team into a working unit.
This case study describes how VM methodology I Agreeing the project mission statement.
facilitated the successful delivery of a project Benefits: This provided the basis for
using an innovative procurement approach. developing a common understanding of
Withington Community Hospital is an early the clients requirements.
example of the NHS initiative to provide I The identification and presentation of the
ambulatory diagnostics and treatment within the clients values to the project team ensured a
community. The hospital offers a one-stop common understanding of the comparative
shop solution, in line with the NHS Plan to importance of specific values. Benefits: These
relieve pressure on acute hospital services.
were captured in a table showing performance
ProCure21, which had been recently launched, attributes (or value drivers) and their relative
was adopted after traditional procurement failed importance to the client.
to come up with a solution within the budget I Improved understanding of the clients
of 20m. The project team South Manchester requirements enabled the team to develop cost
Primary Care Trust (the client) and Interserve controlling measures. Benefits: The out-turn
Health were not familiar with the form of
cost was 19.5m within the 20m budget.
the hospital or ProCure21. Therefore VM was
introduced to provide much-needed structure I An integrated team was built into a working
at an optimal time in the early project stages, unit. Benefits: Improved relationships and
whilst key decisions were being made. collaboration throughout the project.
34
Principles and objectives The Value Drivers

Interserve Health had used VM on many previous I Capital costs to be contained within the
projects and had confidence in the techniques 20m budget
used and the benefits it brought. They commissioned I Operating costs to be minimised
two studies. The first was to help in the building I Delivery on time
of an integrated project team, develop a clear I Minimised environmental impact
project mission statement and ensure a clear I Flexibility of operations
understanding of the functions of the project and I Patient comfort
client values. The second study was commissioned
I Service to the local community.
to improve value for money and bring costs in
line with the 20m budget. Of these, the last three were deemed to be the
most important.
The Project Mission Statement was agreed as:
To improve the health of the community by Major issues
focusing and enhancing local health services Originally this project was to be procured using
by meeting the NHS Plan through developing the traditional route of full design followed by
Community Hospital and Diagnostic Treatment fixed-price competitive tender for construction.
Centre (DTC) facilities. This stalled when predicted costs considerably
35
exceeded the 20m budget. The NHS had I allowed instant feedback on the design and
recently launched their ProCure21 method of construction implications of certain requirements
procurement, embodying current procurement I provided information for the architect who
best practice. The method encouraged close used an adjacency matrix, coupled with
collaboration throughout the project team. The
feedback on space planning in the design
client therefore decided to adopt this approach.
of the community hospital.
The second novel feature of the project was
The review of accommodation requirements
the type of hospital to be procured. Withington
and adjacencies highlighted key issues. For
Community Hospital was an early example of
example, the planned drug rehabilitation unit
the new NHS initiative to provide ambulatory
diagnostics and treatment within the community had no adjacency requirement (i.e. it did not
with the aim of largely removing outpatients need to be located in the hospital) and was
from acute hospitals. subsequently omitted from this project to be
constructed elsewhere.
The client team for this project was in unfamiliar
territory with regard to both the form of the Improving value for money
hospital and the new procurement system, Once designs had been developed, a second
ProCure21. workshop concentrated on value for money and
keeping costs within the (now confirmed) 20m
Successful initiatives capital budget. The team explored innovative
Clarifying the project objectives ways to meet the project functions by conducting
The first challenge was to build a common a brainstorming session which generated 76 ideas
understanding of the objectives for the hospital. covering technical and organisational functions.
This was achieved by careful analysis of the functions
of the hospital and resulted in an agreed Project
Mission Statement supported by eight value drivers.
These clearly articulated the projects functional
and performance requirements.
Understanding project issues

The team identified, categorised and ranked all
the stakeholder issues such as client organisation,
location, community finance, time, legal etc. It
quickly became apparent that time was a significant
problem, so the team developed a high-level
programme to build a better understanding of
key target dates.
Use of space
The first VM workshop:
I confirmed accommodation requirements
in terms of size and adjacency of spaces
I helped distinguish between essential and
desirable items
36
These ideas were evaluated against the Value I Development of a robust brief using VM, results
Drivers, so that the most promising could be in a scheme that meets client expectations.
developed for implementing the final designs.
I Fine-tuning of developed designs using VM
Selected ideas: techniques provides a way to ensure that
I Shared reception and waiting areas projects can be delivered to clients
reducing the size of the building expectations on time, within budget,
whilst delivering the functionality required.
I More efficient construction methods
reducing construction time
Mike Green, Chair of the South Manchester
I Improved management procedures
PCT Board and member of the Save
reducing decision-making time.
Withington Hospital campaign, said:
The benefits of these changes ensured that the
The Save Withington Hospital campaign
project was completed on time and within the
succeeded. The new community hospital is
20m budget.
a direct response to the wishes of South
Manchester residents for a first-class health
Lessons learned
facility in their area, meeting their needs.
I VM is an effective way to determine and The hospital will provide quicker access,
articulate client objectives on a complex project, more capacity, high quality and more
thereby facilitating development of a robust satisfaction for patients and staff.
design brief reflecting the clients requirements.
37
Contacts: It also uses the OGC Achieving Excellence

The following website gives general information in Construction Procurement Guide 4 (AE4)
with regard to the Withington Community Risk and Value Management (order code:
Hospital: CP0064).
http://www.southmanchesterpct.nhs.uk/treatmen AE4 summarises the key principles of risk and VM
t-and-care/withington_diagnostic.htm in the context of construction projects and
For specific information on the describes the practical steps that need to be taken
VM studies contact over the project life.
Andrew Jowett, National Operations Manager,
Interserve Health: Summary of changes
t: 0121 344 4888 Before:
e: [email protected] The project lacked procurement structure.
w: http://www.interserveplc.co.uk/
After:
projectservices/building/regional+building/
nhs+procure+21.htm VM used to reduce uncertainty and provide
structure to the procurement.
t: 0845 000 4999 I defined a clear mission statement and
e: [email protected] key value drivers
I improved relationships and collaboration
This case study has been compiled using I improved use of space
information supplied by members of the Institute
I project delivered within budget.
7. Bridging the Gap
adding value and reducing costs
38 Case Study
Case Studies
Principal benefits
39
Value Management was used on the I Further away from nesting eagles. No need
project to replace Antlers Bridge in to fill large ravine on the south side. Benefits:
Impact on the natural environment improved
California, which saved 7m and
by 50%.
improved performance by 19%.
I Further away from an existing boat ramp.
Benefits: Impact on local community
Summary
improved by 40%.
This case study shows how VM can enable a
I Poor geometry of existing bridge improved
broader assessment of value for money than that to avoid curves of less than 300m radius
based on cost alone. It also demonstrates the and gradients exceeding 6%. Benefits: Traffic
benefits that flow from automatic inclusion of operations improved by 20% including safety
VM on major projects. improvements due to improved road alignment.
In 2004 the California Department of I Generating an improved alternative bridge
Transportation (Caltrans) began a project to design. Benefits: Construction costs reduced

replace the Antlers Bridge Crossing, across the by nearly 12%.
Sacramento River arm of Lake Shasta, with a I Improvements in value for money. Benefits:
new 58m structure. The United States Federal Improving performance by 19% and reducing
Highway Administration requires VM studies for costs by 7m increased value for money by a
all projects exceeding $25m (13.8m). total of 36%.
Furthermore, Caltrans requires the assessment of
non-monetary benefits on all VM studies. This
Principles and objectives
is currently not the case in the UK. The project goals were to:
I provide a new bridge with a minimum
VM studies were undertaken four at concept 100-year life expectancy
design stage and four at preliminary engineering
I correct poor geometry at the approaches
stage. These resulted in cost savings of 7m and
to the bridge
improvements in traffic operations,
I accommodate up to 10m of future increases
constructability and environmental impacts.
in the water levels of Lake Shasta
Achievements and Benefits I minimise the impacts of the new structure
I Involvement of the whole project team on the natural environment and also on the
in a formal, facilitated VM workshop. recreational activities in the area.
Benefits: Contributions from all stakeholders
The objectives for the VM study were to:
in the generation of proposals to improve
I develop solutions to address difficult
the project.
transportation issues, such as construction
I Identification of non-monetary benefits. sequencing and the best way to manage
Benefits: A 19% increase in project traffic dislocation and re-routing during the
performance. construction phase
I Revised structural design reducing need for I reduce the projects initial costs and life
imported fill. Benefits: Constructability cycle costs
improved by 28%. I improve project performance and quality.
40
The project stakeholders included Caltrans, the US

Forest Service, the Californian Department of Fish
and Wildlife, Local Community Recreational
Interests (marinas and resorts), the Union Pacific
Railroad and the US Bureau of Reclamation.
Major issues
The existing bridge had been constructed
with road curvatures and gradients that were
unacceptable for modern traffic. The new bridge
had to conform to modern requirements, in which
approach curves must not be tighter than 300m
in radius and gradients must not exceed 6% to
prevent speeding. Disruption to the natural
environment, as well as the local natural
recreational activities on Lake Shasta, was
a major challenge:
I the proposed design required a new 90m-long
viaduct on the southern approach, which added
significantly to the volume of imported fill that
would be needed.
I a pair of nesting eagles had been spotted
nearby, because they are a protected
species measures were needed to avoid further bridge widening. Realignment avoided the
disturbing them. need for a viaduct on the southern approach, thus
removing the need for large fills and retaining walls
Successful initiatives on the south tie-in of the bridge. Cut material
The collaborative efforts of those present at the from the south side of the bridge was used for
VM study resulted in the following improvements. any necessary fills on the northern end (hence
lessening the need for imports).
Operations
Environmental recreational
The project had two design options to deal with
the problem of speeding and safety a baseline and This alternative bridge alignment not only provided
an alternative. The original bridge had encouraged a more forgiving curve but also placed the
speeding due to a steep gradient and tight curve. structure further away from the existing Antlers
The alternative option was chosen because it boat ramp. This significantly reduced the bridges
provided for a larger radius curve which improved the impact on this important recreational facility.
geometry of the whole bridge and road safety.
Environmental natural
Construction Impacts The US Forest Service offered support for the
Structural improvements were made to the design alternative bridge structure because the alignment
of the bridge to reduce maintenance. The hard was further away from the nesting eagles. It also
shoulders were widened so that an additional lane avoided filling in a deep drainage ravine on the
could be accommodated in the future without south side.
41
Cost Contacts
The revised design saved 7m in construction How does your project measure up?
costs, principally by shortening the length of the For support, contact Eric Akana, Project Manager,
bridge by about 90m and eliminating the need for Caltrans, District 2
a viaduct or embankment on the southern approach. P.O. Box 496073, Redding, CA 96049-6073 USA
t: 001 530 225 3530
Performance and value improvement
The VM process included methods to identify,
weigh and assess performance against a number Any Feedback on this Case Study?
of non-monetary attributes. These included traffic Please contact the OGC Service Desk:
operations, construction timescale, maintainability, t: 0845 000 4999
constructability and environmental impacts. e: [email protected]
Assessment of the revised design (following VM) This case study has been compiled using
against the original showed a 19% overall information supplied by members of the Institute
performance improvement. This was achieved at of Value Management, www.ivm.org.uk
a reduction in cost of 7m or 11.8%. It also uses the OGC Achieving Excellence
Value (for money) may be represented Risk and Value Management (order code: CP0064).
by the expression:
Value = benefits investment. VM in the context of construction projects and
In this case the improvement in value was describes the practical steps that need to be
1.19 (1 - 0.118) = 1.35, or 35%. taken over the project life cycle.
Lessons learned
Summary of changes
I VM has enabled non-monetary benefits to
be identified, assessed and realised. This is Before:
particularly useful for public projects of a Straight replacement bridge linked to existing
high-profile nature that usually have numerous highway by tight curves.
intangible benefits. After:
I The ability to objectively assess non- Following VM a revised design was adopted
monetary benefits enabled the project team giving a better road alignment.
to include environmental improvements, such
as reduced impact on nesting eagles, alongside Benefits:
other benefits such as improved safety. I nearly 12% reduced construction cost
I The inclusion of a system such as that I improved safety through better alignment
demonstrated in this case study, on all and grade
significant public projects would enable a I reduced environmental impact
broader assessment of value for money than I less intrusion on local recreational facilities
that based on cost alone (see Getting Value for I overall improved performance of 19%
Money from Construction through Design. How I overall improved value of 35%.
Auditors Can Help NAO, CABE & OGC, 2004).
Annex A: Terminology
42
Affordability Ability to pay for a project (cash flow as well as quantum).

Achieving Excellence Achieving Excellence promotes the use of risk management and VM as core
tools, which are key to the successful delivery of construction projects.
Case Studies Examples of the application of a process.
Cash Flow The sum of income less costs over a given period.
Embedding Consolidating concepts and skills in an organisation.
Function What someone or something does. A function may be physical (turn
handle) or intangible (enhance appearance). It is normally expressed by an
active verb and a measurable noun.
Function Analysis Method of analysing the functions of the constituent parts of a project or a
product. A core technique in VM is changing the focus from what things
are to what they do.
Key Performance Indicators A set of metrics to assess performance against key outcomes or activities
(KPIs) in the Construction Industry.
Stakeholders Individuals or organisations with an interest in the conduct or outcome of
a project.
Value Assessment of the benefits brought about by a project in relation to the
resources needed to implement it.
Value and Risk Management Activities to improve value and reduce uncertainty.
Value for Money The optimum balance between the benefits expected of a project and the
resources expended in its delivery.
Value driver A functional attribute that is necessary to fully deliver the expected benefits
from a project (equivalent to a Primary Function).
Value Index Dimensionless measurement of value for a project, not confined to cost
and time but utilising all the Value drivers.
Value Management An umbrella term used to embrace all activities and techniques used in the
effort to deliver better value for the client, commonly abbreviated to VM.
Value Management Stages Different types of VM study (see below) related to the stage in a projects
life cycle.
Value Management Study A process involving the gathering and analysis of information (preparation),
one or more workshops to process information, a report summarising the
outcomes and including an implementation plan, all consistent with best
VM practice, designed to add value to a project or part of a project.
Value Metrics Use of the Value Index to measure improvements in value before and after
a VM study.
Workshop A formal facilitated event, involving multiple stakeholders and disciplines,
taking participants through a structured process to a prescribed outcome.
Annex B: Achieving Excellence in Construction
43
Introduction Principles of risk and VM

Through the Achieving Excellence in Construction Risk and VM are interrelated tasks that should be
(AEC) initiative, central government departments carried out in parallel. In practice, VM exercises
and other public sector organisations commit are carried out first on a project, to determine
to maximise, by continuous improvement, the exactly what constitutes value to the client.
efficiency, effectiveness and value for money of A preferred option (or options) is identified,
their procurement of new works, maintenance together with the risks that are likely to occur if
and refurbishment. that option was implemented. The integrated
project team repeats the parallel exercise of
The AEC initiative was introduced in March 1999 defining value and associated risks until they
by the Chief Secretary to the Treasury to improve arrive at the optimal balance of risk and value.
the performance of government as a client of the
construction industry.
Further information
The AEC was launched as a three-year initiative OGC Service Desk:
and its key aspects include: t: 0845 000 4999
I partnering e: [email protected]
I the development of long-term relationships w: www.ogc.gov.uk
I the reduction of financial and decision-making
approval chains
I improved skills development and
empowerment
I the adoption of performance measurement
indicators
I the use of tools for value and risk
management and whole-life costing.
The AEC procurement guidance is contained

within a set of 11 guides and two high-level
guides. It builds on departments recent
experience, supports future strategy and aligns
with the OGC GatewayTM process.
Procurement Guide Number 4:

Risk and Value Management
This guide promotes the use of risk management
and VM as essential tools for the successful
delivery of construction projects. VM helps the
client to identify the best ways of meeting
business need. Risk management is used to
manage the risks associated with the solution
that offers best whole-life value to the business.
Risk management should not be seen as a barrier
to innovation; the most successful projects have
well-understood and effectively-managed risks.
Value management
in construction
Case Studies
About OGC CP0152/05/07

OGC - the UK Office of
Government Commerce -
is an Office of HM Treasury.
The OGC logo is a registered trademark
of the Office of Government Commerce.
OGC Gateway is a trademark of the
Office of Government Commerce.
OGC Service Desk
OGC customers can contact the
central OGC Service Desk about
all aspects of OGC business.
The Service Desk will also channel
queries to the appropriate second-
line support. We look forward to
hearing from you.
You can contact the Service Desk
8am - 6pm Monday to Friday
T: 0845 000 4999
E: [email protected]
W: www.ogc.gov.uk
Press enquiries
T: 020 7271 1318
F: 020 7271 1345
This document is printed on material comprising 75
Office of Government Commerce, Trevelyan House, 26 - 30 Great Peter Street, London SW1P 2BY per cent post consumer waste and 25 per cent ECF pulp.
Service Desk: 0845 000 4999 E: [email protected] W: www.ogc.gov.uk Crown Copyright 2007

Value Management in Construction: Case Studies

Uploaded by

Copyright:

Available Formats

Value Management in Construction: Case Studies

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Value Management in Construction: Case Studies

Uploaded by

Copyright:

Available Formats

Value management

About OGC CP0152/05/07

3 Kintry Housing Partnership 14

5 NHS Teaching Hospital 26

6 Withington Community Hospital 32

7 Bridging the Gap 38

ANNEX B Achieving Excellence in Construction 43

Value Management (VM); is a well-established methodology for defining and maximising

Summary of the principal benefits realised through VM implementation

A Value Management approach facilitated

Hextable School, near Swanley, Kent has an

To get the project back on track, the project

I minimise operating costs the VM team recommended re-evaluating the

Successful initiatives I keeping within funding requirements

The key to starting a successful VM study I optimising the use of space

Selecting the best I difficulty in obtaining planning permission

The architects, Lee Evans LLP, fully embraced

Crucially, the new design met the budget with no

Photographs courtesy of Ravi Malhorta.

The failure to gain approval for previous proposals Knowledge sharing

Trust Reducing budget uncertainty

professional facilitation fees, was about 120,000. Contacts

Value management has improved I Identifying and implementing many small

partnering performance delivering a 7% improvements. Benefits: The cumulative

Achievements and benefits

Principles and objectives Two of the studies focused on the physical

As an example of innovative thinking, the discounts for materials, contributing a further

Partnership ethos Other examples of improved efficiency and

It also uses the OGC Achieving Excellence

AE4 summarises the key principles of risk and

Value management methods reinforced I A move from traditional confrontational

partnering performance to double procurement to collaboration. Benefits: Better

Home Happening is now transforming homes

Achievements and Benefits

Principles and objectives Successful initiatives

Targets The Home Happening workshops developed new

Cost reduction Lessons learned

Tracking improvements I Martin Dorby, Head of Project Services at South

It also uses the OGC Achieving Excellence

AE4 summarises the key principles of risk and

Value Management closed the PFI project

Achievements and Benefits

Principles and objectives I an appropriate environment to promote the

This closed the affordability gap and enabled

The principal items transferred were the ICEC project

Contacts AE4 summarises the key principles of risk and

This case study has been compiled using ICEC Benefits:

Value Management provided much-needed Achievements and Benefits

Principles and objectives The Value Drivers

Understanding project issues

Contacts: It also uses the OGC Achieving Excellence

Transportation (Caltrans) began a project to design. Benefits: Construction costs reduced

The project stakeholders included Caltrans, the US

Affordability Ability to pay for a project (cash flow as well as quantum).

Introduction Principles of risk and VM

The AEC procurement guidance is contained

Procurement Guide Number 4:

About OGC CP0152/05/07

You might also like