"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.