"Value for money" is sought, specified and demanded in almost every investment endeavour, business transaction, Board recommendation and project brief.  Value Management provides the process which can help deliver better value for money outcomes.

Value Management is an essential, critical planning and review process which is distinctively different because of its structure of using a prescribed "Work Plan" and its analytical focus to achieve best value or, where appropriate, best value for money.

The Value Management process is proven to deliver better value outcomes.

Value Management started life known as "Value Analysis" in General Electric and then later as "Value Engineering" in the USA as an initiative to better manage scarce resources during post-war economic reconstruction.  It has been a key element in the ongoing success of General Electric by encouraging “boundaryless behavior” of its employees, as described by Jack Walsh, the chairman and CEO in the 20 years in which the company’s stock value increased by 4000%.

In Australia we have embraced the various titles assigned to the process under the single name: Value Management.  This has been the basis of the approach employed in the Australian Standard on Value Management and in the Institute's efforts in the value-debate and education course criteria.

An important starting point in understanding Value Management is the recognition that “value” and “value for money” are not the same thing.

In Value Management "value" and "value for money" are treated quite separately.  A complicating aspect in doing this is the fact that the term “value” is used in so many different ways and taken to mean so many different things in different contexts as well as the fact that it is sometimes used as an abbreviation for “value for money”.  

It is primarily for these reasons that the Australian Standard was introduced – so as to provide standard terminology and definitions for the purposes of implementing the Value Management process.

Value
One of the main tasks of the Value Management process is to identify the value of the entity being considered – not the monetary value – the process deals with money separately, but the value.  We can capture the perceived value of any entity in three factors, namely:

  • The useful purposes fulfilled by the entity
  • The Benefits that flow from fulfilling those purposes; and,
  • The features and characteristics of the entity that are seen to be especially important.

 

Value Management facilitators generally refer to these as the “value factors” and collectively, they become a “value statement”.  It is recognised that value is fundamentally a matter of perception and, therefore, will be different from person to person, organisation to organisation and, from time to time. The facilitated workshop phase of the Value Management process provides the opportunity to capture the value factors from various perspectives.

Value for money
This is where the “cost factor” is built into the picture. Having established where the “value” is in the entity, we may now explore opportunities and make proposals to achieve best “value for money”. This "cost factor" may be in capital cost terms, recurrent cost terms, or whole of life.  In some circumstances, the term “resources” is used instead of costs.

Value for money is a performance measure and is always based on comparisons of options or alternatives.  By having already established the “value” of the entity, options may be considered to determine which of those costed options delivers best value for money. This is achieved through systematic analysis of the extent of value provided by each option, compared with the cost of each option.

Value Management in action
Value Management may be applied to virtually any entity, activity or decision making task.

The Value Management process may be carried out as
(i) facilitated workshops involving groups of handpicked participants, at discrete points during the formulation or life of an entity or, it may be carried out
(ii) by an individual Value Analyst as an ongoing, day-to-day activity.
In both cases, there is a structured work plan to follow. This work plan is set out in the Australian Standard on Value Management (AS 4183-2007).

Value Management workshops are intended to nurture learning and collaboration amongst all participants. Indeed, it is by establishing shared knowledge and understanding of vision, the value factors, current proposals (if any) and context of the entity that groups are enabled to work collaboratively in developing proposals to achieve best value for money.

Value Management facilitators are trained to work with multi-disciplinary groups, taking the groups through the work plan in pursuit of specified objectives. A register of qualified and accredited Value Management facilitators is maintained by the Institute. 

Australian Governments, industry, consumers and professions are fortunate to have ready access to the recently updated Value Management standard.  The 2007 update makes the Australian Standard for Value Management the most current VM standard.

This Standard is an essential and a critical document for the understanding and practice of Value management in the Australian marketplace. Many other neighbouring countries employ and reference the Australian Standard as a basis for guaging practice within their public and private sectors.

value management standard

The Australia Standard for Value Management is AS 4183-2007.

The Standard contains key definitions, applications and links to other processes related to Value Management (particularly Economic and Financial Appraisal as well as Risk Management). The Standard also records the guiding principles of Value Management, delivering and following up a Value Management study. The Standard also describes the work of a Value Analyst who may work alone.

Standards Australia manages all Australian Standards documentation.  Although the Institute and a number of senior members contributed significantly to both the 1994 and the 2007 updated Value Management Standard, the Institute cannot reproduce or supply the text of AS4183:2007 on this website.  Information on buying the Australia Standard can be found here.

Other nations and the European Union, also have their own applicable Standards to which the Value Management work carried out in those jurisdictions must comply.

 

Proven Process

"Value Analysis" and "Value Engineering" were key processes in the ongoing success of General Electric, from their development in the late 1940's, by encouraging “boundaryless behavior” of its employees, as described by Jack Walsh, the Chairman and CEO.  During the 20 years of his tenure the company’s stock value increased by 4000%.

In Australia we have embraced the various titles assigned to the process under the single name: Value Management.  This has been the basis of the approach employed in the Australian Standard on Value management and in the Institute's efforts in the value-debate and education course criteria.

Effective application of Value Management has delivered benefits in the private and public sectors in over 25 of the world’s major economies. It can be applied either generatively or as a review for new ideas or entities and to the upgrading and improvement of existing entities or situations.

Science Technology Communications  

FINANCING OPTIONS   innovation Psychology

ENGINEERING   People Systems 

ENVIRONMENT Marketing
 

Processes   Manufacturing  Staffing

The tools and techniques inherent in Value Management, including the generic Function Analysis approach, means that the Value Management process has a very wide application in delivering value-improved outcomes that achieve the best, balanced use of all resources and targeted value for money.

Structure of the Process

The Value Management process may be carried out as:

(i) facilitated workshops involving groups of handpicked participants, at discrete points during the formulation or life of an entity or, it may be carried out
(ii) by an individual Value Analyst as an ongoing, day-to-day activity.
In both cases, there is a structured work plan to follow. This work plan is set out in the Australian Standard on Value Management (AS 4183-2007).

A "Work Plan" establishes the template for the conduct of a Value Management process and it is detailed in the Australian Standard 4183:2007 for both a Value Management Study involving a facilitated workshop phase and for the activity of a Value Analyst.  Whilst the detailed activities in the Work Plans can be reviewed in the Standard, the primary stages for the Value Management study are:

  1. Pre-workshop planning, logistics and preparations;
  2. Workshop eventfacilitation and management;
  3. Post workshop reporting
  4. Post Study implementation of action plan, directions and agreements

 
Value Management workshops are intended to nurture learning and collaboration amongst all participants. Indeed, it is by establishing shared knowledge and understanding of vision, the value factors, current proposals (if any) and context of the entity that groups are enabled to work collaboratively in developing proposals to achieve best value for money.

Value Management facilitators are trained to work with multi-disciplinary groups, taking the groups through the work plan in pursuit of specified objectives. A register of qualified and accredited Value Management facilitators is maintained by the Institute.

Is VM applicable to my Industry or problem?

Value Management may be applied to virtually any entity, activity or decision making task.

Value Management has been used in virtually every industry category of private and public sector endeavour, some examples being:

  • Communications Services
  • Defence
  • Education
  • Healthcare and Community Services
  • Mining
  • Manufacturing
  • Property developments (commercial, residential, retail – new and refurbishment)
  • Services infrastructure (electricity, gas, sewage disposal / recycling, water, renewable energy)
  • Transport infrastructure (air, ports, rail, road, transport interchanges, control centres)


Within these sectors Value Management is presently used within and across critical and challenging business areas, including:

  • Strategic planning
  • Management systems (information technology and manual systems)
  • Long-term infrastructure and service delivery programs
  • Building construction and Industrial projects
  • Product development
  • Services delivery and process flow projects
  • Existing building and industrial plant refurbishment and upgrades
  • Integrated programs and projects that address environmental and sustainability issues

 

When should VM be appied?
Value Management is most effective when applied at the earliest point in the decision-making process as it ensures a common understanding of the context, scope and required outcomes by the customers / users and the project team. Thus, Value Management proactively guides the preparations of briefs of action and development of solution options by ensuring that all stakeholders have a common understanding of the core value factors, any issues, givens and assumptions and the required functional outcomes.

The perceived constraints, influencing factors expectations, priorities and assumptions are laid bare through the value management process enabling progress with greater confidence lesser risk.

 

Key success factors in achieving the most effective application of Value Management, obtaining stakeholder consensus and securing best value for money, include:

  • use of a prescribed Work Plan
  • an appropriate mix and commitment of value management study group members
  • effective management of value management studies
  • senior management commitment and support in the commissioning organisation
  • effective study facilitation by an experienced registered Value Management Study Facilitator
  • follow-up by the commissioning organisation of the actions agreed at the conclusion of the study