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Site of the 1992 International Conference ( s e e i n s i d e f r o n t c o v e r )

Conference Registration Form Hotel Registration Form

Society off American Value Engineer*

32nd Annual International Conference

May 31 - June 3, 1992

The Pointe Hilton at Tapatio Cliffs , Phoenix, AZ

The Pointe at Tapatio Cliffs

Society of American Value Engineers

1992International Conference

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V A L U E W O R L D Apr./May/June 1992

E D I T O R I N C H I E F and A D V E R T I S I N G M A N A G E R O. James Vogl, CVS, FSAVE

P H O T O G R A P H Y O. James Vogl, CVS, FSAVE

P U B L I S H E R Society of American Value Engineers

A D V E R T I S I N G and P R O D U C T I O N O F F I C E 4909 via el Sereno Torrance, CA 90505 Phone (310) 378-1803 Fax (310) 378-0246

VALUE WORLD is published quarterly by the Society of American Value Engineers on the 15th of March, June, September and December, and is distributed internationally.

Contributions: Contributions to VALUE WORLD are welcome. Please send articles or other contributions to VALUE WORLD editor, 4909 via el Sereno, Torrance, California 90505. Articles should be double spaced and accompanied by a 100-word biography and black-and-white glossy photo of the author. Editorial changes and publication of an article or other contribution in any particular issue are at the discretion of the Editorial Staff.

Advertising: Advertising information, rates and specifications are available from the Advertising Manager. Subscriptions: Yearly rate to SAVE Members is included in annual dues rate. Non-Members, in U.S., $75.00; International, $100.00 (includes Air Mail postage). Technical society and organization bulk rates are available upon request from the Society of American Value Engineers, Northbrook, Illinois. Make all checks payable to SAVE in U.S. Funds on U.S. Bank.

Change of Address: Send all address changes to VALUE WORLD, 60 Revere Drive, Northbrook, IL 60062. Copyright ©, Society of American Value Hngineers, 1992. All rights reserved.

C o n t e n t s

What's In A Name? 2 by Richard G. Bradyhouse, CVS

Value Engineering in Construction: Past, Present and Future

3 by Alphonse J. Dell'Isola, PE, CVS, FSAVE

Applications of Value Engineering to Emerging Technologies for New and Advanced Gas Turbine Engines

8 by Charles J. league & R. Daryel Anderson, PE, CVS

Value Management A Methodology, Not A Tool 13 by J. Jerry Kaufman, BS, CVS, FSAVE

Can Expert Systems Improve V M Implementation 18 by Qiping Shen, Ph.D., & Professor P.S. Brandon

Organizing for Better Value - A Case Study from Tata Steel

2 5 by P.N. Roy

"Thunder" — Clean Out Your Desk Syndrom 2 8 by Tom King, CVS, FSAVE

E D I T O R I A L P O L I C Y : To provide informative, timely

and interesting communications pertaining to Value Engineering I Value

Analysis and related disciplines. VALUE WORLD enables contributors

to express themselves professionally in advancing the art. VALUE

WORLD is dedicated to the establishment of a mutual bond among

those seeking to better the quality of working life and establish a

communications network through which participants can interact for

mutual benefit.

The views expressed in VALUE WORLD are neither approved or

disapproved by the Society. They are the expressions of the author(s).

All papers have been edited — frequently condensed — by the editor.

What's In A Name?

by Richard G. Bradyhouse, CVS

Dick graduated from Loyola College, Baltimore, Maryland. He is employed by Black & Decker Corporation where lie is Technical Manager

Producibility. During his career, he has held the following positions: Industrial Engineer, Purchasing Manager, VE Manager and Operations Manager for the R&D Pilot Factory.

Dick is a very active member of SME and SAVE having served as President of the Chesapeake Chapter and National Director of Career Advancement.

He is a frequent speaker on Design for Manufacturability, Creativity, Rationalization of Components and a variety of VE topics.

Dick has conducted workshops in the USA, Canada and throughout Europe. In his free time, he operates his own consulting business.

Some companies, to personalize the Value Analysis (VA) program to their site, take the liberty of changing the name. Let's explore some of these names and the meanings they convey. One company has a VIP Program (Value Improvement Program). In a wor ld of initials, DOD, JIT, NSA, CAD, C A M , and C I M , the list seems endless. VIP has a modern snappy connotation while value analysis or even VA to them may sound dated. The term value improvement connotes a quality type program which of course is good, but if in reality its mission is to reduce product cost, the name then is misleading and can cause misunderstanding.

Another name I run into is PIP or Profit Improvement Program. Here it's clear what the mission of the program is, and that of course is to improve the profitability of the factory producing the product. But what about the customer? The resulting VA workshop executed in this atmosphere w i l l be more cost reductions than VA and less quality than required today.

Some companies have gone so far as to shed not only the name but the method as well, replacing it w i th newer buzz words such as:

Concurrent Engineering

Design for Manufacturability

Design for Simplicity

These programs are generally software driven and appeal to the computer enthusiasts. I have become very familiar w i t h these methods and have incorporated their unique benefits into my VA program because I feel we must and should keep up to date. However, I have also run these programs separately on the same product and found that they are less effective than VA. This is due to the scope of their mission. A DFA (Design for Assembly) program is primarily concerned w i t h reducing the assembly labor cost while a VE program is more concerned wi th total costs but may in fact do a poor job on labor cost. I , therefore, have expanded my VA program to look deeper into manufacturing processes and assembly than perhaps the average VA program has in the past. In this way, we have, i n fact, increased the cost improvement potential of our programs while retaining the benefits of the traditional VE program.

I also see some companies reaching back to VE when faced w i t h life-threatening competitive pressures, because they remember the solid results they formerly obtained f r o m VE and they trust the VE process more than newer techniques that have sounded good but not delivered the dollar savings. M y thesis, then, is that we, as Value Engineers, should not abandon a tool that has proven its wor th nor should we stick our head i n the sand and ignore the progress of newer techniques. The challenge is to constantly update our programs to keep pace w i t h our customers' needs. A

2 Value World, Apr./May/June, 1992

Value Engineering in Construction Past, Present and Future

by Alphonse J. Dell'Isola, PE, CVS, FSAVE

Alphonse ]. Dell'Isola, PE, CVS, FSAVE, is Senior Vice President and Director of the Washington, DC office and the Value Management Division of Smith, Hinchman & Grylls Associates, Inc. He has been a consultant in VA/E in the construction industry since 1966. He has also worked for the office of Chief of Engineers, Washington, DC, and the Naval Facilities Engineering Command. In 1969, Mr. Dell'Isola was appointed VA/E consultant to the President's Advisory Council on Management Improvement. He has lectured on VE in Europe, South America and the Far East.

He is the author of numerous articles and books on Life Cycle Costing and "Value Engineering in the Construction Industry."

Past

Value Engineering (VE) in Construction started in 1962. The intial introduction to VE was given by the representative of Carlise Rubber, who was a good friend of Morgan Roderick, the Value Engineer for Ships Systems Command. The same year I was assigned Materials Engineer - Head of New Materials at the Bureau of Yards & Docks now the Naval Facilities Engineering Command (NAVFAC).

Subsequently, I was invited to a SAVE meeting and joined SAVE. During SAVE meetings, I met key people such as: Larry Miles, Rudy Kempter, Department of Defense (DOD), Morgan Roderick, George Fouch, (DOD) and VE consultant, John Toomey. I was informed of the D O D Cost Reduction Program and the general VE Area. As a guest of the Naval Ship Systems Command, I attended an 80-hour VE training course in 1963 given by Roy Fountain of Value Programs for Industry.

In 1963,1 was appointed VE Coordinator of NAVFAC.

I n 1964,1 attended the SAVE National Conference i n Los Angeles. There I met and was motivated by the likes of Tony Tocco, Fred Sherwin, and John Bryant.

In 1964, I attended the first VE Workshop i n Construction, conducted by Dick Horrwor th and Glen Woodward. Based on the initial results, I met w i t h and convinced General DeLuca, the D O D Cost Reduction Program Head, of the potential of VE i n Construction. As a result, the Construction area (Navy & Army) was added to the D O D VE Program. The first program i n Construction was established in NAVFAC w i t h the issuance of Directives and Instruction under Capt. (now retired Admiral) Jack Dil lon. After meeting and briefing the Associated General Contractors, their support was gained for the program. As a result,

another landmark occurred in 1964 when VE Incentive Provisions were added to construction contracts allowing contractors to submit VE Change Proposals (VECPs) on their contracts.

I n 1965, the VE Program was expanded throughout the NAVFAC 13 divisions. Individuals selected as VE coordinators included Richard Engel (WESTDIV), Dick Effler (NORTHDIV), Don Parker (CHESDIV), and later Lindsay Gardner at LANTDIV. I conducted the first presentation on VE in Construction at the 1965 SAVE National Conference in Boston.

In 1966,1 was cited by Engineering News-Record for introduction of VE into the Construction industry. Subsequently, I left NAVFAC and went to the Corps of Engineers at Gravelly Point as Head of .the VE uni t under J. McBride, Head of Construction. However, I left the Corps w i t h i n six months frustrated because of organizational problems and inability to produce significant results.

In 1967,1 joined L.C. Kingscott and Associates (LCK), an A/E f i r m based in Kalamazoo, as Head of the VE Office i n Washington, DC. The President, Lou Jr., was an old fr iend and very supportive of VE. Through him, I met Hal Tufty, who was the congressional liaison and marketing person for LCK i n DC. At the same time, I met and was befriended by Richard O'Connell, Sr., former publisher of the Value Engineering Digest. Richard and subsequently his son, Richard, Jr., helped in spreading the VE concept i n the construction area, and offered many suggestions on how to spread it wi th in government and industry.

Major expansion occurred by working with I lal Tufty i n selling the 1st congressional exposure to VE in Construction. I n August 1967, through I lal's efforts, they participated in hearings before the Senate Public

Value World, Apr./May/fune, 1992 3

Works Committee chaired by Senator Jennings Randolph. From the hearing, the General Accounting Office and Office of Management & Budget became involved.

VE studies while w i t h LCK included a tr ip to SE Asia , a h ighway project f o r Depar tmen t of Transportation-State of New York, J.C. Penney stores, and General Services Administration specs for the Post Office Department. Riley Murray was Head of VE for the Post Office and was a great help i n setting up the initial programs. A task order contract was awarded to LCK by NASA under Robert Curt in (Gen. USAF Retired) for VE on space related facilities. I n addition, seminars and studies were conducted for Veterans Administration and Health Education & Welfare (HEW).

I n 1971, I joined McKee, Berger and Mansueto (MBM), a construction management f i r m based in NYC as Head of Washington, DC based VE offices. Shortly after (1972), I published, Guide for the Application of Value Engineering to the Construction Industry. The response to the book was so great that a second edition was published w i t h i n a year.

A major expansion of VE occurred through seminars, conducted both nationwide and in Canada and Puerto Rico sponsored by Advanced Management Research of New York City. Through these seminars (approximately 100) VE was introduced to over 5,000 professionals i n the f ie ld including owners and designers. Also, through these and other parallel efforts VE was recognized and integrated into the design and C M packages of several major areas. For example:

a) I n 1973, Don Parker under Ar thur Sampson set up a mandatory program for VE provision i n design and C M contracts for GSA. The Veterans Administration set up a program under Chun Fun Kwok, Head of Design. HEW set up a program under George Fremou, Head of Design, and James Bartlett.

b) The Bell system (AT&T) included VE provisions in their C M contracts and conducted nationwide training and studies under Don Lyons at Headquarters, NY, and in particular, Elmer Quint, Facilities Director at Mountain Bell, Denver.

c) Professional organizations such as AGC and ACEC, A I A and NSPE recognized the VE Concept as a reality and included references to VE in their standard documents.

I worked wi th Hal in putt ing together another hearing before the Senate Public Works Committee. Hal Tufty found another VE champion, namely, Congressman Larry Winn, Sr. (Kansas). As a result, further inroads were made to have VE concepts integrated into Federal Government procurement especially in the construction.

From 1971 to 1975, while wi th M B M , the VE Division conducted over 150 management briefings and training seminars plus some 150 VE studies on various construciton projects. The major studies being: Univers i ty of Massachusetts for the State of Massachusetts; space related facilities for the Director of Facilities - NASA; various federal office buildings for

the Public Bui lding Service - General Service Administration (GSA); various health facilities for the Design Department - Veterans Administration & HEW; communicat ion related facil i t ies fo r Amer ican Telephone & Telegraph; and several governmental type facilities for the Public Building Service - Puerto Rico.

Another major factor i n expansion occurred in 1975 when ACEC under Sandy Pearson decided to conduct Nationwide Training Courses on VE. Over 2,000 key design and construction f i rms were introduced to VE and seminars provided a f o r u m to run test cases of VE application to actual projects. Subsequently, M B M was awarded a study contract by Government Accounting Office (GAO) to report the data collected regarding application of VE to wastewater projects. Through these efforts, GAO recommended to Congress that VE provisions become mandatory as part of the grant process fo r Wastewater Treatment Plants over $10,000,000. This recommendation was implemented by the Public Works Committee of Congress. As a fallout, VE was spread to other major government agencies; namely, Department of Transportation, Department of Interior and Bureau of Reclamation. Hal Tufty also set up Hearings on the House Side - namely, Post Office subcommittee and testified before this committee.

During this period some of the States moved into VE, the first ones being Pennsylvania and Massachusetts.

In 1975,1 transferred to one of the nation's largest A/E firms, Smith, Hinchman & Grylls (SH&G) headquartered in Detroit. The firm's principals, Phil Meathe, President, and Peter Darin, Executive Vice President, gave their wholehearted approval to support the Value Management Division located at Washington, DC.

While w i t h SH&G, major advances in spreading the concept occurred both nationwide and worldwide. Through the cont inued auspices of Advanced Management Research seminars, VE concepts were introduced to owners and managers of both design and construction agencies. Seminars were conducted i n over 30 major cities i n the U.S. and abroad i n Mexico, Brazil, England, New Zealand, Australia, Singapore, Canada, and Puerto Rico.

In addition, both the Navy (NAVFAC) and A r m y Corps of Engineers issued task order contracts and conducted formal studies both in the U.S. and abroad. Any military project over $2,000,000 was subject to VE. For example, through the Mediterranean Division of NAVFAC under Auggie Iglesias, S H & G conducted some 25 studies i n Spain, Italy, Greece and i n the U.S.A. Similarly, under Joe Waite of the Mobile District of the Corps, SH&G conducted several studies i n their area including a unique $200 mil l ion large rocket test facility.

On the adverse side, VE programs at NASA and GSA Public Buildings Service were disbanded due to changes in their administration.

During this period the V M Division was privileged to help the State of Maryland, Department of General Services (1978) set up programs. Also, Harvey Childs in the State of Washington, established (1980) a formal VE program on school construction.


To utilize new techniques i n VE applications, I and Steven J. Kirk published, Life Cycle Costing for the Design Professional (1981).

I n Saudi Arabia, the Corps of Engineers was supervising construction and doing VE on a selected case basis. When their workload decreased, the General Directorate of Mili tary Works (GDMW), General Otaishan, established a formal VE program under Filippo Borrello (formerly US Corps of Engineers) i n the early 1980's. A VE team was sent by SH&G i n 1984 to train local professionals and to conduct fo rmal VE studies on major mi l i ta ry facilities. Under Steve Kirk and Don Parker of SH&G, major savings were achieved and a "technology transfer" accomplished.

I n Kuwait, the Ministry of Public Works under the motivation of Leo Zanchetin (formerly of SH&G) established a program around 1986 i n which selected major facilities were formally VE'd. Over 25 facilities were studied before the invasion by Iraq i n 1990. The major facilities studied by SH&G were the 2 mi l l ion square feet A m i r i Diwan and the National Bank of Kuwait.

I n Australia, after several seminars and workshops, there developed a small, but dedicated, group practicing VE i n construction. The original pioneers w h o m S H & G worked w i t h i n setting up programs were the McLachlin Group and Leighton Contractors of Sidney.

In Taiwan, after missionary work by Larry Zimmerman, VE programs were established for the Department of Rapid Transit i n 1989 under Mr. Liou and by the Department of Communications on major transportation systems. S H & G conducted studies on the transit system as well as a study for a large dam for the Water Resources Authori ty of Taiwan.

For VE i n the private sector, seminars and/or programs were intiated by the V M Division i n the construction area of AT&T, United Technologies, Michigan Consolidated Gas, Sheraton Hotels, Ciba Geigy, Owens-Corning Fiberglas, Morrison Knudsen Contractors, Turner Construction, Union Carbide of Canada, B.F. Goodrich, Alcoa, Pittsburgh Plate Glass, Dravo, Potomac Gas & Electric, AIRCO, Xerox, Real Estate Division of I B M , ADP, E.B. Squibb, Chrysler Corp., Digital, and Frito-Lay.

However, the only real significant growth which occurred was i n the governmental sector. Again, through the efforts of Hal Tufty, hearings were held i n August of 1987 in the U.S. Senate's Committee of Government Affairs, Subcommittee on Oversight of Government Management. I was a keynote speaker. These hearings isolated another VE champion i n government, Senator Carl Levin of Michigan. O n the House side Congresswoman Cardiss Collins of Illinois pushed for stronger legislation. As a result, Office of Management & Budget (OMB) Circular A-131 - Value Engineering was issued and several government agencies became more involved in VE in construction. For example, the Department of Transportation required VE i n transit systems over $100 mil l ion. In

addition, they recommended VE on their large road projects and the Coast Guard established a formal program. The Department of Energy became more active issuing directives to their offices to encourage VE usage.

I n the municipal area, a new proponent of VE in Construction surfaced, namely, William McElligott f rom the Office of Management and Budget of NYC. I n 1984, I met Bill and discussed the potential of VE. Based on VE application to similar areas and the New York City Depar tment of Envi ronmenta l Protection, B i l l convinced his management of several trial applications of VE. S H & G was privileged to be involved in these early applications, whose results validated the VE concept. Since inception in 1984, NYC has conducted over 100 VE studies in which several hundreds of mil l ion dollars have been saved.

Present

I n evaluating the present situation of VE i n construction there has been some significant subtle changes. The VE concept is being applied to the early design stages during programming and concept phases. These applications have been very successful and have been better received by the A/E design consultants. I n addition, the techniques of life cycle costing have been used to a greater degree. Selected pluses and minuses follow:

Pluses

1. I n the Federal and local Government, VE exists i n many areas and is expanding into new areas. The Federal Government, under the impetus of recent hearings in Congress, is expanding formal VE. These include the State Department, FBO and Department of Interior, Bureau of Reclamation and Department of Agriculture. Several States and Municipal areas are adopting or expanding their VE efforts. For example, the State Highway Administration of Maryland is conducting a VE Study of their Standards and Criteria. The State of Washington still has a formal program in their school construction and i t has been expanded. However, the Maryland and Virginia programs are being strained due to budget restrictions.

2. I n DOD, the Corps of Engineers and Naval Facilities Engineering Command still issue task order type contracts at their Division offices.

3. Department of Transportation is requiring grantees to conduct VE studies on transit systems over $100 mil l ion, plus several state DOT's are conducting VE studies, some in-house and some through outside agents. For example, California, Florida, Massachusetts (Boston Artery project), Pennsylvania, Maryland, and Virginia. The U.S. Coast Guard issues task order contracts for VE services.

4. Department of Energy - Several areas art-conducting VE studies. For example, Lawrence Livermore, Brookhaven, Las Alamos National Laboratories are adding VE services to their large projects.

Value World, Apr./May/lum; 1992 5

5. The Environmental Protection Agency, although the original grant program has changed, still has a requirement for mandatory VE on wastewater plants over $10 mil l ion. Several large plants are currently contracting for VE. For example, large multi-bil l ion dollar facilities at City of San Diego, City of Boston, and City of New York.

6. City of New York is the most active of all municipalities w i th VE studies underway through the Office of Management and Budget, Department of Transportation, and Department of General Services. Also, as a result of the City Program, the Port Authori ty is establishing a VE program under David Kirk w i t h several large projects selected for study.

7. In the private sector, several large corporations are presently evaluating or actually conducting VE studies on their facilities. For example, Owens-Corning Fiberglas, Bristol-Meyers, Squibb, Xerox, Frito-Lay, Un ion Carbide of Canada, and Chrysler Corporation.

Minuses

1. Several Large Federal Government agencies have not adopted or even attempted to establish VE programs. The most significant are The Postal Service, NASA, Commerce, Justice, and Health and Human Services.

2. Attempts to introduce VE i n Construction in private industry, especially the process f ie ld have met w i t h failure or lack of support. For example, United Technologies Digital, AT&T, Exxon, Shell, Utilities (power plants especially), PPG, Ralston Purina, Heinz, General Motors, Ford, U.S. Steel, Republic Steel, DuPont, Ciba Geigy, etc. were introduced to VE in Construction but have dropped any further effort.

3. Attempts to introduce VE into municipality, local government and other political entities have been "very" minimally successful. For example, states such as Massachusetts, Cal i fornia , Texas, Colorado, etc. have not adopted formal programs, the cities of Washington, Orlando, Detroit, Philadelphia, Boston, Miami , San Francisco, Las Vegas, Denver and local counties such as Fairfax, Montgomery, etc. still are not convinced enough to f u n d formal studies.

Future

In projecting the future, one must look at and analyze the past. Where have been the successes, the failures and the underlying causes.

Summary

1. The greatest impetus of VE in Construction has come f rom the Federal Government.

2. The next most significant area has been municipal & local government.

3. Selected overseas reception of VE has been greater than reception in the U.S.

4. Private industry programs have proven to be diff icult to sell and short l ived.

Based on the above, what are recommendations i n order of priori ty to achieve growth and expansion of the VE Concept?

a) Work toward more mandated type VE programs i n the Federal Government preferably by congressional action.

b) Promote the concept and results of VE to the local, municipal levels of government.

c) Develop a plan and allocate resources to assist foreign representatives to sell VE to their governments.

d) Develop a plan and allocate resources to sell VE to the private sector.

What are some actions that can be planned to achieve these objectives?

a) We are at the threshold of a major breakthrough w i t h Senator Carl Levin (OMB Circular A-131, Value Engineering) and the Congresswoman Cardiss Collins b i l l . SAVE construction oriented membership needs to allocate resources to change the working i n A131 to a mandated program and assist i n gaining passage of the Collins b i l l . For example, during the initial days of introduction to Congress i n the early '70s, a select group of SAVE construction oriented members donated funds for hiring a professional lobbyist to help push through initial legislation. A similar effort would appear warranted at this time.

b) Today, there is an excellent program existing in New York City. Why not use this program as the model and set up briefing schedules to expose the concept to say 13 large regional municipalities? I t would appear to be particularly timely i n light of the budget "crunches" almost every major municipality- is facing. Again, SAVE could sponsor these seminars using nationally recognized experts supported by local CVS personnel.

c) Each year we have a National Conference in which some 20 other nations attend. We go through a "charade" of discussions. Last year a SAVE milestone occurred in the agreement to set up an international VE society. VE in Construction can lead the way as illustrated by the VE program in Saudi Arabia under H u m o u d Al-Salmi. He leads the only known full-t ime VE staff i n any foreign government. There are several foreign areas just crying for more input f rom SAVE. These are India, Korea, Malaysia, Australia, Brazil, and Taiwan.

What efforts has SAVE allocated for assistance? For example, SAVE has some 50 to 100 foreign representatives each year at SAVE A n n u a l International Conference. How many SAVE members attend the Japanese SJVE, or Indian SIVAM? Why not set up each year a construction VE expert panel f rom SAVE to attend the National Conference of a selected country


to establish programs and relationships? I t is not wi thout some ulterior motive this is suggested. Fully 1/3 of the fees of the V M Division of SH&G for the past 6 years are attributed to overseas contracts.

d) Lastly, and the most diff icul t is how to expand VE into the private sector. Saving money is not one of the strong points i n U.S. management. In the construction industry, the amount of the capital expenditure is what establishes one's importance - not how efficiently one spends.

It can be concluded that the way we have approached this area does not work. A new approach tying VE into a more comprehensive application - say tying it to T Q M , etc. appears to be wor th a try. Selling VE to save money appears doomed. Selling VE to improve decis ion m a k i n g , improve " p r o f i t s " w i t h o u t degradation, improve the life cycle costs and higher quality at equal or lower price appears to be a better approach. A long term objective should be learning how to sell VE as a permanent tool rather than a one time remedial action.

A n example of a new approach is how SH&G has integrated VE into their designs. Finally, after 15 years of VE services outside, the f i r m under Steve Kirk's direct guidance has "adopted" VE as their classic approach to design services. SH&G has integrated the VE methodology into their design process by concurrent VE workshop during the design. The VE efforts are coordinated w i t h cost and quality control. These efforts

act as a quality assurance program on major design decisions. The objective of the new services is to improve the overall total cost effectiveness of design decision wi thout adversely affecting quality. In fact, i n most instances improving the quality of design:

1) VE services improve sales and marketing.

2. VE improves the service they give to clients.

3. VE improves client relationships.

One suggested new approach to open opportunities in the private sector is for SAVE to sponsor booths at large conventions or conferences that cater to the large spenders of private funds, e.g., Plant Maintenance, Public Works, B O M A . Through these efforts contacts would be developed to further exploration by the construction-oriented SAVE membership.

Conclus ion

The past has proven that VE is applicable and has a worthwhile role i n the construction industry.

The present gives an indication of how far VE has progressed and illustrates how some key programs are proving their wor th .

The future sets for th opportunities for expansion, and beckons the VE community to realize these opportunities i n a manner to raise the plateau of VE Applications. ^

Value World, Apr./May/june, 1992 7

Applications of Value Engineering to Emerging Technologies for New and Advanced Gas Turbine Engines

by Charles J. Teague & R. Daryel Anderson, PE, CVS

Charles J. Teague is a Materials Development Engineer at Allison Gas Turbine Division, General Motors Corp. He is responsible for the selection of materials and processes used in the Allison components of the T800-LHTEC engine. Charles has participated in several VE Workshops focusing on design-to-cost targets for the T800 engine. His practical understanding of gas turbine principles, engine/ airframe interaction, and experience with the quality system used in the aerospace industry has been an important contribution to these workshops.

With over 25 years experience in gas turbine engineering, R. Daryel Anderson is Manager, VE at Allison Gas Turbine Division, General Motors Corp. Daryel has focused the value process on meeting design-to-cost targets. He has led numerous successful VE studies on new products. Daryel is Vice President, Professional Development and President of the Central Indiana Chapter of SAVE.

Introduction

The aggressive performance requirements of low specific fuel consumption and high thrust-to-weight by the next generation of helicopter and fighter aircraft w i l l necessitate the development and fielding of new materials and advanced fabrication processes. Early on, these material systems and fabrication practices tended to be focused on specific component applications w i t h little emphasis on weapon system acquisition costs. Recently, the military and commercial customers for these advanced technologies have become more concerned about escalating costs. If we are to maintain a strong national defense and be competitive i n providing fast, safe transportation, we need to understand those variables associated w i t h cost escalation in advanced components and apply the financial and technical resources necessary to reduce unnecessary costs.

In recent years, NASA and the U.S. Armed Services have embarked on both near-term and far-term programs wi th aggressive performance goals. Near-term programs include the RAH Comanche helicopter and V22 Osprey. Far-term programs include National Aerospace Plane, Advanced Tactical Fighter, and Integrated H i g h Performance Turbine Engine Technology. These programs are intended to produce aircraft capable of faster speeds and greater maneuverability while at the same time improving reliability and maintainability over today's military

aircraft. The development of these aircraft w i l l require gas turbine engines w i t h newer materials and processing technology.

The aerospace industry has been a prolific user of new materials and processes. The development and application of polymer, metal, intermetallic, and ceramic matrix materials to reduce weight, increase stiffness, reduce corrosion, and increase fatigue resistance has been driven by military aircraft and engine applications because of the more aggressive operating environments. Somewhat lagging the development of these newer materials are the manufactur ing processes necessary to fabricate complex structures.

Current Trends

Today, the trends i n wor ld events such as the reduction in military confrontation i n Eastern Europe and the Soviet Union, and our domestic concerns about Government spending for costly weapons systems have contributed to a reduction in fund ing for current and newer programs. Therefore, the cost of applying new materials, including the fabrication of structures, to new aircraft and engine designs is an important factor i n determining their use. The requirements for safety, demonstrated durability, and life cycle costs w i l l be as important i n considering materials for future commercial and military applications as aircraft weight and specific fuel consumption (SFC).


Today, the trends in world events such as the reduction in military confrontation in Eastern Europe and the Soviet Union, and our domestic concerns about Government spending for costly weapons systems have contributed to a reduction in funding for current and newer programs. Therefore, the cost of applying new materials, including the fabrication of structures, to new aircraft and engine designs is an important factor in determining their use.

Allison Gas Turbine is i n a unique position i n the aerospace gas turbine business. The aggressive pursuit of advanced engine programs i n the 1980s resulted i n the successful wins of the U.S. Army's T800 engine for the R A H Comanche Helicopter and the Navy's T406 engine for the V-22 Osprey, the next generation vertical takeoff and landing (VTOL) aircraft. However, the technology development associated w i t h these programs does not end w i t h the contract signing. The growth of these engines is a continuing process of development and application of new technologies to increase the reliability and durability of the product for

the U.S. Armed Forces, while maintaining a reasonable acquisition cost.

The application of new technologies, especially in the use of new material and fabrication techniques, is not an inexpensive process. Acquisition costs for these technologies are high and it is necessary that costs be brought into conformance w i t h projected goals for engine production and intended aircraft application. VE becomes an integral part of understanding engine component and system costs. It can use many techniques to aid in defining unnecessary costs, propose solutions, or assist i n defining alternative strategies for material development or component fabrication.

Value Engineering — A Team Approach

VE is a function-oriented, team approach for providing value to a product, component, or manufacturing process.1 The VE approach used at All ison provides a fo rum for suppliers and their subcontractors to come together and work to understand factors that contribute to high acquisition costs, strive to eliminate these costs, and if necessary define technology development programs that may be used to reduce unnecessary costs subsequently lowering acquisition costs.

The VE method used at All ison is a multitask process that emphasizes understanding a component's cost on a per-function basis. The establishment of this cost is accomplished in three major steps: design-to-cost evaluation, pre-VE workshop orientation for the suppliers, and the VE workshop itself (Figure 1).

Design-To-Cost Progress

DTC Team Review

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Figure 1. The V E process at Allison Gas Turbine

Value World, A}>r,IMayl\uw, 1992 9

This process has an additional benefit of providing a vendor/customer interface that can eventually lead to the understanding of each other's concerns about the component.

The initial study of design-to-cost is accomplished using an extensive computer database containing material and fabr ica t ion costs f o r i n d i v i d u a l components. This database reflects current costs for fabricated components f r o m both the A l l i son manufacturing facility and f r o m current suppliers. The data is t racked m o n t h l y and compared against established cost goal values for each program. Any significant deviation f r o m these goals alerts All ison management and becomes the justification for VE analysis.

T h e Value Engineering Workshop

After management approval is gained for a VE study, those components that are to be the focus of the study are identified, and a VE workshop orientation is conducted w i t h the supplier and other subcontractors at the supplier's facilities. A n important aspect of the pre-workshop is defining the basic features of the component or system to be studied and the processes to be used to fabricate the component. Allison uses its design-to-cost values as a basis for this initial discussion and VE study. The goal of the orientation session is to assign cost values to the features so that costs can be later spread over the basic and secondary functions for the component i n the VE workshop. Finally, preparation is made for the VE workshop w i t h the designated specialists f r o m Allison, the supplier, and the supplier's subcontractors. The VE workshop

is conducted w i t h the support f r o m the purchasing, manufacturing, quality, and engineering departments. Representatives f r o m these specialty areas participate in a three-day workshop. The workshop begins w i t h a presentation of the engine program, customer requirements, design and manufacturing criteria, and quality issues for all participants.

The workshop proceeds w i t h the funct ion analysis for the key features of the component. The part costs, developed i n the pre-workshop, are allocated to the features and are used during the remainder of the workshop. Functions are defined and illustrated using Function Analysis System Technique (FAST) as indicated in the T800 engine example i n Figure 2. The creativity session of the workshop is used to "brainstorm" functions that account for 80% of the component cost and include any performance areas that need strengthening. The ideas developed in the brainstorming session are reviewed by the members; common ideas are pooled and restated, then graded against a predetermined set of criteria. The ideas are then ranked for inclus ion into proposals fo r management consideration and implementation.

The proposal phase is used to document assumptions made for the technical feasibility and cost savings associated w i t h each idea. Workshop participants prepare proposal forms that are presented in a meeting wi th management personnel at the conclusion of the workshop and are to be used as documentation and support for later implementation.

The implementation of the VE proposals occurs i n many ways including incorporation of design or

Air /Oi l Cooler Functions (Technical FAST Diagram)

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Figure 2. FAST Diagram for T800 air/oil separator


process changes, or initiation of a new request for quotation by the purchasing organization. The supplier may offer cost reductions identified by the VE workshop that require the customer's approval. Those proposals that would offer substantial cost savings by development of a new material or application of an advanced process technology are also considered for implementa t ion. The implementa t ion of these proposals may become part of a business plan strategy that includes obtaining support through internal research and development or Government-supported manufacturing programs. Applications of these technologies may be implemented later i n engine derivatives.

T h e 'Value' of Value Engineering

The application of VE to the material and manufacturing processes considered for advanced engine programs and components is important i n determining their acceptability, based on acquisition costs, for future aircraft application. The focus on VE is necessary for high-technology components that require both advanced materials and labor-intensive processing. When considering the cost of development for advanced components, the costs associated w i t h processing, materials, and inspection are often out of p r o p o r t i o n w i t h those of mature component technology (Figure 3). I n general, the gain i n manufacturing experience and economies of scale i n material availability, combined w i t h normal cost reduction effort, work toward reducing production costs.2 However, several years of production may be required for the new technology to become profitable. VE coupled w i t h good design-to-cost tracking provides a method to identify the level of effort needed and

specific areas which w i l l require emphasis on cost reduction early in the production phase.

Application of VE to the T800 and T406 engine development programs requires accurate cost estimates of future production costs for each cost driver i n the engine to determine those components that are candidates for study. I n the advanced engine programs a great deal of effort is expended to optimize the material and component manufacturing process w i t h little effort to identify high-cost materials or processes. Therefore for VE to be effective i n defining and reducing unnecessary costs i n these components, the cost data used must focus on the processing steps involved. A variation of the previously described VE methodology used at All ison, would be to develop costs associated w i t h the advanced processes used i n component manufacture. The development of processing costs may require that suppl iers ' manufacturing processes be evaluated. The results of the analysis would be information that is used in a VE study.

Therefore for VE to be effective in defining and reducing unnecessary costs in these components, the cost data used must focus on the processing steps involved.

The VE study, including variations previously discussed, would produce several proposals that may identify the required capital equipment, identify

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alternate sources of material or fabrication techniques, and define programs for further activities. The realized goal is a shortening of the time required for identifying unnecessary costs which is usually accomplished in either l imited or f u l l production of a component. A n additional benefit f r o m this analysis process is the viability of the technology for the intended application. This is important i n defining and implementing a business strategy for fu tu r e engine programs and derivatives.

The realized goal is a shortening of the time required for identifying unnecessary costs, which is usually accomplished in either limited or full production of a component. An additional benefit from this analysis process is the viability of the technology for the intended application.

Conclus ion

The VE study provides immediate solutions and long-term opportunities to gain competitive advantage through technology insertion (Figure 4). The process used is an effective method for identifying unnecessary costs i n component acquisition. The VE process helps to clarify the primary functions of the part or system while providing a fo rum for the customer and supplier to work together on reducing the cost to manufacture the part. The outcome is a strategy for implementation of changes that eliminates unnecessary costs for today's component and may be applied to future component technologies. The f inal goal is to provide a quality product to the customer at a lower cost.

References

1. Definition of Value Engineering, G . Frank, department of Defense.

2. Project and Cost Engineers Handbook, American Association of Cost Engineers, pp 18-21. ^

Design-To-Cost Progress

R E Q U I R E S

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Figure 4. Technology insertion into new and existing products.


Value Management A Methodology, Not A Tool

by J. Jerry Kaufman, BS, CVS, FSAVE

J. Jerry Kaufman, BS, CVS, FSAVE is founder and president of J.J. Kaufman Associates, Inc., a Value Management Services Firm. He holds engineering degrees from the Academy of Aeronautics and Johns Hopkins University. Formerly the corporate director of Value Programs and internal consultant for Cooper Industries, Mr. Kaufman was responsible for developing and successfully implementing VE in the strategic business units and divisions of the corporation. Mr. Kaufman is Past President of SAVE, Past Chairman of the CVS Certification Board, and Trustees Chairman of the L. D. Miles Foundation.

Summary

Value Management (VM) is more than a tool or technique to be used for product cost reduction. V M has matured into a methodology employing a set of disciplines that has been successfully and dramatically used to solve a broad range of management issues. To acquire some appreciation for the scope and effectiveness of this methodology the major emphasis w i l l be on exploring some of the key, but subtle points, that make the V M methodology work so wel l i n the manufacturing sector for which i t was originally developed. The VE Job Plan process w i l l only be lightly touched because it is universally practiced by Value Practitioners.

Introduction

The application of V M to Total Quality Management (TQM), Productivity Improvement, Organization Effectiveness, Process Improvement, New Product Development, and Improving Value Added contributions, are but a few examples where V M has proven itself as a very effective methodology. The market segments i n which V M successfully operates are equally diverse. Consumer products, capital equipment, construction, processes, services, and government are a few global examples. The common denominator of all the products, services and markets served by V M is that they all represent a business venture.

Def in ing T h e Problem (or Opportunity) to be Resolved

The process begins w i t h a problem or opportunity that needs to be resolved. There are many problem solving approaches available w i t h many more variations to choose f rom.

The problem w i t h most problem solving disciplines is that they assume that the problem has been identified. Problems are diff icult to define because the

difficulty usually articulated is the symptom rather than the root cause. Problems are not easily expressed because those who "own" them, or those most concerned w i t h their resolution, express the problem f r o m a biased viewpoint. That bias describes the symptom, or what is bothering them about the problem. This is especially true when interdisciplinary V M task teams are asked to define the problem they are to resolve.

The problem with most problem solving disciplines is that they assume that the problem has been identified. Problems are difficult to define because the difficulty usually articulates is the symptom rather than the root cause.

Each team member, representing a unique discipline, expresses the problem differently as seen through the eyes of their discipline. To be successful, problem solving should not begin unti l the team, charged w i t h its resolution, has reached consensus in defining the problem.

I n industry, managers who cannot objectively describe a problem often express it in term* of m i l reduction. "Cost reduction" they say, " i h our biggc*! problem and we must take all steps to aggrrwaivfly reduce cost." On the contrary, cost reduction l» not a problem; it is a solution to a problem, 'lb efht l lvr ly uw V M , the reasons for cost reduction should Ix* ruplorrd before attempting to reduce cunt Vrry o f t r n I h o w reasons are sales and profit improwmcnl , i t K r r a w i l

market share, time to market, improved mlrtn.il taW

Utlur Hnltl. AprlMavhme, I'W l^

of return (IRR), etc. Cost reduction can contribute to achieving the problem objectives, but it is not the only available, and often not the best option.

Value Managers fu l ly appreciate that the success of products or services in the market place is based on offering "functions" that the market is wil l ing to pay for. The Value Manager also realizes that those functions are not readily apparent. To aggressively attack cost without knowing which functions are "customer sensitive" may result i n dramatic cost reductions, but those actions may also adversely affect sales.

Problems vs. Symptoms

As an example, a seemingly successful VE cost reduction program to reduce the standard cost (and price) of a line of thermocouples d id nothing to reverse the downward trend in lost sales.

A n in depth V M problem analysis later found that the root problem was i n the time to respond to an order, not the price of the product. Sales improved after order entry changes, recommended by the V M Team, was implemented.

The City of New York employed V M to reduce the 8 plus years it took to refurbish and modernize high schools. Before beginning the process the team discussed the problem in terms of seeking time saving measures. When the problem was better defined it was determined that the 8 years was the symptom, not the problem. The problem was discovered to be that no single individual or agency took responsibility for managing the effort. There was no single point of accountability for the management of a high school refurbishment project. After an organization realignment supported by procedural changes proposed by the V M Team was put into effect the refurbishment time was cut by more than 50%.

When reducing the number of lines of code was cited as a software problem, it was determined that the cost of maintenance, not the number of code lines was responsible for uncontrolled cost of military software programs.

It is for these and other reasons that the V M Methdology focuses on "cost effectiveness" rather than "cost reduction." Cost effectiveness targets the problem; cost reduction impacts symptoms which often results in the problem emerging i n another form, w i t h greater consequence. This is not to say that cost reduction is not important to V M . It is, but it should be pursued to resolve problems, not attack symptoms.

Function Analysis and Problem Solving

The principal technique in the V M methodology that separates symptoms f rom problems is funct ion analysis. "Function Analysis System Technique," or FAST as it is commonly known, is the most effective of the function analysis processes available to the V M Practitioner.

FAST focuses on problems in two ways. By moving through various levels of abstraction the root cause of the problem can be identified. Additionally, the intuitive logic concept w i t h i n FAST forces the team members to

resolve "how" and "why" functions exist, which continually questions whether the problem or its symptoms are being addressed. The process also identifies and reconciles the basic functions wi th the problem statement and graphically illustrates funct ion dependencies.

T h e Value Management Job Plan

Key to the V M methodology is the Job Plan. This is a disciplined approach consisting of selected steps that guide the V M Team through the problem solving process. L.D. Miles developed the 5 step job plan which has stood the test of time. The Job plan can be found in a number of modif ied forms, depending on its application. Common to all are the fol lowing steps:

Information

The evaluation of all available information relating to the V M project and translating that information i n funct ion terms.

«•

Speculation

The creative process of developing a large quantity of ideas (not solutions) that address how functions that relate to the problem definition can be achieved.

Planning (or Analysis)

The evaluation of those ideas previously generated, using weighted guidelines, performance, and other requirements, to sift and sort for the "best" ideas.

Execution (or Evaluation)

The clustering and evaluation of surviving ideas into proposals which include technical, financial and implementation plan recommendations.

Reporting (or Presentation)

The preparation and presentation of recommended V M team proposals to the management board, or Steering Committee, seeking approval to implement those actions to resolve the V M problem or opportunity objectives.

Surrounding these steps are important events which "sandwich" the Job plan. These events and their activities are designed to enhance the expectations of the Job Plan and the successful resolution of the issues being addressed. The two events are called "Pre-event" and "Post-event."

Pre-event

The activities w i t h i n the Pre-event describe the planning that must be achieved prior to the start of the V M task team assignment and the beginning of the Job Plan.

The event starts w i t h a V M planning meeting w i t h the V M Manager and those managers most concerned w i t h the resolutions of issues to be addressed by the V M Task Team. A summary of topics to be addressed during this meeting include the fol lowing:

Management Orientation

Management should not only be apprised of the V M methodology and expected results, but they should


become aware of their commitment and required actions to assure a successful venture. If Management is doubtful that funds w i l l be available to implement approved V M Team proposals, or key members of the team w i l l not be available to take part i n the implementation process, serious consideration should be given to launching the venture.

If Management is doubtful that funds will be available to implement approved VM Team proposals, or key members of the team will not be available to take part in the implementation process, serious consideration should be given to launching the venture.

The Steering Committee

Forming a steering committee, or executive review board as it is sometimes called, is another key element to the success of the V M process. Venture capitalists and team accountability are two important functions of the committee.

Venture Capitalists

Collectively, the steering committee acts as a group of venture capitalists. They listen to the proposals presented by the V M Task team(s) and rule on their acceptability. Approved proposals also reflect management's commi tment to implement the proposals. Individually, the steering committee members allocate the necessary time and resources to insure effective implementation.

Team Accountability

The scheduled presentation to the steering committee is a major milestone to the V M task teams. They know that the steering committee, composed of key managers, expect to hear proposed resolutions, supported by detailed plans, to resolve the issues of their concern. This i n itself provides the motivational pressures to reach a successful conclusion. This also places the V M Facilitators i n a supporting role to the teams in meeting their objectives. Without team accountability the facilitator would be perceived as being responsible for the results.

Understanding the problem

Since the steering committee is made up of managers wi th different functions, it is important that the "sense" of the problem, if not the root problem, be understood by the V M Manager. This is necessary because the problem definition and the expectations of the Steering Committee, i n terms of project performance objectives, determine the make-up and professional level of the V M team. Problems associated w i t h defining the problem have been discussed above.

Project Selection

The effectiveness of the V M process is i n the implementation of approved proposals, not the magnitude of potential benefits reported at the conclusion of a V M Workshop.

The probabi l i ty of implementa t ion should be determined during the Pre-event, not fol lowing the presentation of proposal recommendations. Given the choice of project to select f r o m in conducting a V M study, it is best to pick those issues wi th the best chance for implementation. The amount of potential cost reduction does not necessarily equate to the probability of implementation. A more important factor is to determine if the study issues being considered are supported by management champions who are capable of fund ing the implementaion expenses.

Selecting the team(s)

Selecting the right mix of technical, managerial and support personnel i n structuring a V M team depends to a large degree, on the definit ion of the problem and the expected results. This offers a great variety of functional mixes that make the V M team. Common to all team mixes are selecting people that represent three general areas: those who "own" the problem, those responsible for the problem resolution, and those affected by the resolution of the problem. The last area is important to ensure that the resolution of the problem does not create other problems i n seemingly unrelated parts of the organization. There are other criteria that should be considered i n forming the V M team. Among which are:

Span of control

The size of the team is an important consideration in maximizing effective output per allocated time. A team too small w i l l not have the necessary resources or talent to adequately explore a broad range of alternate proposals. A team too large wi l l polarize into smaller teams chasing parallel but of ten unrelated issues.

A proper size team ranges f rom five to eight active participants. This does not imply that all issues can be effectively resolved with a single team. Complex issues may require that the problem be divided into smaller units, wi th each unit's performance goals linked to the other teams to create a "win-win" situation. This encourages the teams to network w i t h each other to achieve their objectives and prevents one team f r o m meeting its goals at another team's expense.

A Core Team

When multiple teams are formed to address a single issue, or are working on separate problems, a central core team that includes (as an example) Finance, Procurement, Quality assurance, etc. should be formed to support multiple V M task teams. The core team acts as the supporting staff to the (line) V M teams. This is an effective way to make maximum use of l imited human resources.


Level of competence

The output of the team w i l l only be as effective as the weakest member of the team. The competence level of participating team members w i l l not improve as a result of the V M process, but the process w i l l bring out the very best in each participating team member.

Post-event

Post-event activities fol lowing the Report step of the VE Job Plan relates to those efforts that ensure effective implementation of the approved proposals presented to the Steering Committee. The transition f r o m proposal approval to proposal implementation represents the most diff icul t process in the V M Methodology. Failure to implement has led many critics to claim that V M results i n "paper savings." The reasons for not implementing the accepted and approved proposals can be traced to a poorly executed Pre-event. The effectiveness of the Post-event is therefore very much dependent on how effective the Pre-event activities were performed. A summary of those key points that should have been resolved during Pre-event are:

A Steering Committee member has been designated as the Program Manager (or similar authority level).

Key task team members have been assigned to the implementation team as project managers or advisors to the team.

Interim fund ing has been approved to validate assumptions made by the V M Team and for performing any required qualification tests and evaluations.

Progress meetings have been scheduled w i t h the Steering Committee.

The preliminary implementation plan has been expanded and approved.

The approved proposals have been assigned project account numbers

Project milestone reviews have been scheduled.

V M Task Team follow-up meetings have been scheduled to track implementation progress and resolve unforeseen anomalies.

The effectiveness of the Post-event is therefore very much dependent on how effective the Pre-event activities were performed.

The Workshop Format

Most V M Task Team projects are carried out in a workshop environment. This is a brief intense program held i n a designated facility for small teams engaged

i n problem solving. V M is best suited for this environment because the V M Methodology focuses the team members on the problem by freeing them f r o m normal work routine distractions. The result is work normally scheduled for 6 to 12 months can be accomplished in a 5 to 15 day period, fol lowing effective Pre-event activities.

Continuous Improvement

The continuous improvement process often used i n TQM allows for an open ended intradepartmental activity designed for small but continuous incremental improvements. This is diametrically different f r o m the V M Methodology which calls for a structured problem solving discipline, performed by carefully formed interdisciplinary teams, working against measurable performance goals to a highly concentrated time schedule.

There are a number of workshop format schedules that can be employed ranging f r o m the part-time weekly meetings to the compressed five day schedule. The more effective workshops are those t ime compressed schedules.

The five day format

This five day format is most popular w i t h outside V M consultants. The time spent in the one week workshop often exceeds 50 highly intense working hours. The effectiveness of this format depends on the completeness of the Pre-event activities leading to the start of the workshop. Major advantages of this approach include: maximum use of productive time, a focused mind set by the team on the project, and effective team building. A disadvantage is the lack of available time to test assumptions.

The 3-2-2 format

This five day format is interrupted by a two week period to test assumptions and investigate the credibility of the surviving ideas fol lowing the Planning Phase of the VE Job Plan. Important to this format is keeping the first three days together because it is during this period that the team structure is formed. Another advantage of this approach is i n acquiring highly competent team members who could not otherwise take five f u l l uninterrupted days out of their normal work schedule. Disadvantages include an interruption to the process and increased expenses if outside consultants are used.

Part-time meetings

This alternative best describes the traditional task team approach in which the assigned group meets periodically over a 3 to 12 month period to resolve a V M project. This is the least effective format i n terms of the resultant output over the total effort spent to achieve the results. This approach is often characterized by a lack of team development and commitment, inconsistent attendance, diluted focus, and varying degrees of success.


T h e Role of the V M Facilitator

The effectiveness of the V M methodology is only as effective as the V M facilitator who ensures the proper application of the V M methodology.

The F M facilitator's role is varied, requiring a mastery i n a number of fields. As an expert i n the principles and applications of V M he must also be an effective teacher i n transmitting that body of knowledge to the team members i n a way that they, not the facilitator, experience the satisfaction of successfully applying that knowledge to real problems.

The effectiveness of the VM methodology is only as effective as the VM facilitator who ensures the proper application of the VM methodology.

Team Building

Simply putt ing the mixed disciplined participants in a room w i t h the project information and problem statement does not make a team. At this point they are a crowd.

Team building is a delicate process requiring facilitator skills and the forming of a trust relationship between the facilitator and the team. To be effective the facilitator must be a student of group dynamics and behavioral modification techniques. Being ever watchf u l for the emergence of the dominant personality and those factors that f o r m a team culture, the facilitator becomes the catalyst i n guiding the events that bu i ld and f o r m a competent team.

The Team Circle

I n striving to bui ld a team, the facilitator must be careful not to enter the team circle. To do so would

result in the loss of the facilitators role and his effectiveness as a resource to the team. To maintain a safe distance, some facilitators adapt a detached attitude toward their team. They present the V M methodology and are available for team member questions that relate to the methodology, but do not get involved w i t h the problem. The team, for the most part, is left to themselves to work out the problem and arrive at a successful conclusion.

Working Closely With the Team

The approach I favor is to work as close to the team as possible, wi thout entering the team circle. This requires the facilitator to research the project and have a good understanding of the problem and expectations in resolving the problem.

That knowledge should be used to ask challenging and provocative questions while subtly keeping the team on schedule and on track. It should not be used to take a consultant or leadership role i n the team. The danger of this approach is i n losing the facilitator's professional detachment by becoming emotionally bonded to the project. However, the project results and forming strong interpersonal and professional relationships among team members far exceed the potential dangers.

Clos ing

Webster's dictionary defines a methodology as "a body of methods, rules, and postulates employed by a discipline." The body of methods can be found i n the variety of tools and techniques that fits comfortably under the V M Process. Rules governing this methodology are described in the order and discipline required to sequentially progress, step by step, through the V M Process.

FM has stood the test of time and matured into a methodology consisting of many tools and techniques. V M should therefore no longer be classified as "a tool." g\


Can Expert Systems Improve VM Implementation

by Qiping Shen, Ph.D. & Professor P.S. Brandon

Mr. Qiping Shen is a Ph.D. research student at Department of Surveying, University of Salford, U.K. He obtained his first degree (BEng) in Structural Engineering from Tsinghua University, Beijing, PR. China in 1981. He has spent two years on the research of whether Expert Systems can be applied to VM practice in construction. His major research interest remains in ES development; ES applications to VM; Construction planning and Stochastic network analysis, etc. He is a member of British Computer Society Specialist Group on Expert Systems and SAVE.

Professor Brandon is the Chairman of Department of Surveying, University of Salford, U.K.; Chairman ofRICS Research Committee, Chairman of UK Science and Engineering Research Council Building Subcommittee and Construction Management Steering Group. His major research interest is in Expert Systems and he has undertaken and managed several research projects in this field.

Presented at the 31st International Conference, Society of American Value Engineers, Kansas City, Kansas, May 5-8, 1991.

T h e Need for Expert Systems

During the past two decades, ES technology, as the most f r u i t f u l branch of Artif icial Intelligence (AI), has grown up f r o m its infancy stage.1 Many ESs have been developed successively in various domains, f rom Mycin (a bacterial infection diagnosing system) to Xcon (an ES for configuring computers). A fairly comprehensive list of ES applications is: 2

Interpretation, Planning, Prediction, Monitoring, Design Ins t ruc t ion Cont ro l , Debugging Diagnosis and Repair.

Generally speaking, the following roles can be found in various existing ESs:3

Consultancy, Communication, Demonstration, Training, Knowledge Refinement, Programmed System & Checklist.

As far as ESs in the construction industry are concerned,4 5 6 etc. we have theorized how ESs might be structured and usefully applied to the construction industry. Many ES applications wi th in the industry have been introduced which cover almost all stages of a construction project, i.e., f rom project feasibility study, through cost p lanning and estimation,

engineering design & evaluation, contract documentat ion and management, construction planning and operation, to maintenance and rehabilitation.

I n the U.K., although V M is not as widely used as it is i n the USA, the tremendous potential for the applications of V M to the construction industry has already been noticed. The awareness that V M is a systematic method for reducing overall cost without sacrificing required functions and performance makes some clients eager to apply this tehcnique to their projects. However, there are a number of problems which inhibit the implementation of V M i n the construction industry. They include:

1. Qualified V M consultants and V M companies who can provide V M services are so scarce that it is diff icul t to f i n d suitable V M specialists to undertake V M work when it is required.

2. The formal 40-hour job plan is often blamed by the designers whose criticism states that time delay to the design program and work interruption during construction can be more costly than potential savings.7

3. The fee for providing V M services is thought to be high, some clients therefore are reluctant to spend such extra money, unless they have good experience of V M in advance.

4. Al though some consultants purport to provide V M services for the construction industry,


frequently, V M methodologies have not been used properly. Some consultants see V M as purely a cost reduction technique, as they do not analyze the functions of the building or elements at all.

It is these problems which make the idea of building an ES to improve V M implementation in construction projects an important consideration. The most important point is that, if V M is to be practiced in the U.K., then it must be practiced properly. 8 A n ES w i t h properly acquitted V M domain knowledge and expertise facilitates proper V M implementation, which should also improve the accessibility and efficiency of the V M program when applied to building design.

Salford University Research into Value Management

Objectives and Scope

The research at the University of Salford is to explore whether ES technology might be succesfully used to improve V M implementation in the construction industry. If i t is feasible, to develop an ES w i t h V M domain knowledge (1) to support project managers in their decision-making by assisting them i n clarifying client's objectives and accomplishing project definition of an office bui lding in the early conceptul design stages; (2) to assist project managers in evaluating sketch design solutions of an office building to reduce overall costs while maintaining or enhancing required functions.

The proposed system also fulf i l ls the following roles:

a) Aid ing the process of f i rming up the client's brief for the development of office buildings by making systematic funct ion analyses and explicit comparisons of alternatives, through the use of V M methodologies and human expertise.

b) Training relevant staff and encouraging its implementation in the U.K. The proposed system provides a transparent analysis process w i t h explicit explanatory facilities, so the users could learn a considerable amount of expertise and become familiar w i t h V M concepts, methodology and procedures.

The proposed ES w i l l not substitute human V M specialists, as the creative and environmental aspects still need human input to provide an optimal solution. "Every expert system, except for very well constrained simple problems, should be seen as a support for human decision-making and not a replacement.''"

The research is concentrated on ESs applied to office buildings only, which are a more straightforward type of building, f r o m which it is relatively easy to start. I n addition, we know through a successful ES application — ELSIE 1 0 that essential cost data and cost estimating expertise for office buildings exist wi th in the U.K. construction industry.

Theoretically, all the high cost elements which represent 75% of the overall cost of an office building, 1 1

should be chosen to undertake in-depth analysis. However, w i t h i n the timetable of the project, i t has only been possible to choose three elements for test. They are the Roofing System, HVAC System and External Works.

Domain Suitability

A list of criteria i n selecting suitable domains for developing ESs has been suggested by Brandon. 1 2

These criteria are:

—The knowledge should involve a small number of concepts.

—The knowledge should already be well organized and formalized.

—The majori ty of the knowledge should be well documented.

—There should be a consensus on domain knowledge.

—The knowledge should be stable and well tested.

—An explicit methodology or model should be available.

—The problem should be well constrained.

—Large problems should be able to be split into sub-tasks.

—The problem solving strategies should be well known/documented.

—The problem should provide a return on investment.

—Experts should be able to explain the steps to arrive at solutions.

Apply ing ESs to V M is a new concept. Careful analyses against above successful criteria should be undertaken before saying that it is a suitable domain for ES application. Two issues have to be addressed: 1) How could V M support decision-making wi th in design? 2) How could ESs facilitate the use of V M in building design? A n analysis of the techniques used in the domain of V M would reveal the indications:

—The functions of an element or a component can be determined based on designers' and V M specialists' expertise. This sort of knowledge can be represented in a frame wi th functions as a slot of i t , which is unlikely to be a road-block. The cost estimation has been proved to be a suitable domain for ES applications by the ELSIE project'! The method of determining functional worth would be similar to that of cost estimation, as it is mainly based on cost data f r o m previous similar projects, up-to-date construction technology and new building materials.

Applying ESs to VM is a new concept. Careful analyses against above successful criteria should be undertaken before saying that it is a suitable domain for ES application.


Conventional computing is thought to be more suitable for processing well-structured information, whereas human thinking has the unique advantage of dealing wi th unstructured information. ESs are suitable to solve problems which are somewhere in between the structured and ill-structured information, although i n theory all ESs could be built w i t h conventional computer languages.

A survey has shown that more than 50% of the individuals cited as instrumental i n achieving significant V M savings have an average of 20 years industrial experience.1 4 This sort of expertise is obviously not wel l structured. The solutions given by the V M specialists are based on the inference of this knowledge and expertise. It would be very difficult for conventional programs to cope w i t h problems w i t h knowledge-based inferences. O n the other hand, the 40-hour V M job-plan, which provides a fundamental structure for V M , is well structured. V M concept and methodology are well documented.

The above analysis suggests that the building of an ES w i t h V M domain knowledge to support decisionmaking w i t h i n early design stages of building projects would be feasible. The advantages of ESs, e.g. ease of updating knowledge, transparency of inference, ease of implementation, etc., make the proposed system more widely acceptable by the users.

Phased Development Methodology

The methodology of phased development introduced by Brandon 1 5 has been adopted in the research, which includes the fol lowing phases:

STARTING UP: At this stage, knowledge requirements should be identified, i.e., the fol lowing questions should be considered: Who w i l l be the likely users? What w i l l be the likely requirements and expectation of the system f r o m the users? I n what situations is the ES to be used? The answers to these questions strongly influence the research direction i n later stages.

SKELETON SYSTEM: This skeleton system is built only to act i n approximately the right way. A n accurate answer is not necessary. It gives the users an idea of what the expected ES wi l l look like. This stage generally takes 3 to 4 weeks.

DEMONSTRATION SYSTEM: Although the accuracy is still poor, this demonstration system provides broadly acceptable results by asking a set of questions. I t can be used as a basis to determine whether to continue, change direction or abandon the research. Further knowledge acquisition and knowledge representation whould be done during this stage.

WORKABLE SYSTEM: This is a refined demonstration system achieved through validating and debugging, which should be able to provide more accurate results, but some questions and parts of the report still need to be refined.

USABLE SYSTEM: If resources such as time and personnel are available the system can be developed into a usable system, which is the working system

made usable w i t h some help and screen altering facilities. Al though it still lacks perfect wording i n questions and explanations, it can be used by the users, and business benefits can be expected.

T h e Prototype System

General Structure

The system includes two modules: Concept Design Analysis Module (CDAM) and Sketch Design Analysis Module (SDAM), as major design decisions are usually made in the early design stages. Experience shows that the earlier V M is applied to a project, the better the results that can be expected. Later applications of V M could cause abortive design work and probably cause delay to project completion, which is therefore unlikely to be accepted.

A blackboard structure has been designed to organize knowledge sources w i t h i n the system. Here the term "blackboard structure" is used loosely, i t is the concept of a blackboard architecture that is adopted in the system. The blackboard structure provides a means for storing information that is common to more than one modu le , and facil i tates communica t ions and coordination among different modules as well as other developed systems which may be l inked to this proposed system. The overall architecture of ESVMDOB is shown i n figure 1.

C L I E N T S O B J E C T I V E S

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S D A M

P R O J E C T D E F I N I T I O N

P R O J E C T O P T I M I S A T I O N

Figure 1. Structure of E S V M D O B System

Within the structure, the blackboard is purely a medium through which all communications among different modules take place. I n one sense, it can be viewed as a global database. Interactions among knowledge sources take place solely through the


changes on the blackboard. Solutions may be built up incrementally onto the blackboard. The information input and the results generated in the two modules are shared through the blackboard.

The controller l inked w i t h the blackboard performs an inference mechanism, it decides which module or technique should be loaded onto the blackboard. Most of the instructions given by the controller can be updated by the user — project manager who also performs the role of a controller, and forms an integral part of the system. Since the system is to perform a similar role as a V M consultant, a special interface must be designed in the system to facilitate the communication between the system and the user. A n interface definit ion module might be necessary for the system to understand information given by the user.

Concept Design Analysis Module (CDAM)

The C D A M is to guide the end users, project managers, to clearly define an office building project through the using of V M technique at Concept Design stage. Figure 2 gives a clear view of the structure of this module.

REPORT GENERATION

Figure 2. Concept Design Analysis Module

System Generates Appropriate C F D

Based on the building type of the project being analyzed and the requirements f rom the client, the system suggests a Concept design Functional Diagram (CFD). A CFD is a structured diagram representing the functional relations wi th in a building, which is based on the why-how logic in Function Analysis System Technique (FAST) diagrams, to define the project in functional terms which could lead the users into deeper thinking and better understanding about the project. Disagreement on how to give suggested CFD among V M consultants and the format of a CFD has been found during interviews wi th them. Further knowledge acquisition should be done to get the required causal knowledge.

M o d i f y System Suggested CFD

This is the main part of the CDAM, which is to guide the user through the modification of the suggested CFD; to make it appropriate for the user's specific project and to generate a variety of alternates. A number of facilities have been designed in the system to help the users. They include:

1. Retrieval of historical V M archives — the user can review previous V M documents on similar projects stored i n the project database which have been well organized into a hierarchical structure. If necessary, a number of quite different projects are retrieved to obtain cross-fertilization;

2. Suggest combinations of verbs and nouns — w i t h i n V M , it is essential to think of a project i n functional terms, rather than in elemental terms.

The system provides verb/noun combinations to help the users in describing functions.

3. Explanation of glossary — the same words might mean different things to different persons wi th in different projects. It is therefore critical to have explanations of those key words used by the system, otherwise misunderstanding might occur during consultation w i t h the system. This facility is provided through the use of Hypertext, which is defined as the ability to provide nonlinear textual documentation on a randomly accessible basis, w i t h selection being keyed on words and phrases;

4. User-friendly interface — w i t h this well-designed interface, the user can easily modify and/or adjust system assumptions for the major functions as well as the functions at detail level, unt i l they are appropriate for the specific office building being analyzed. The user can easily add functions, which are suitable for the particular project being analyzed, and can also easily delete some functions which are suggested by the system;

5. Introduce methods of creative thinking — a number of methods of creative thinking are introduced by the system which helps the users in generating a large quantity of ideas. The methods are: combine ideas, modify ideas, piggyback ideas, use checklist, think of ideal answers and imagine impractical and w i l d ideas.

6. Provide a stimulating checklist — A checklist is to stimulate the user's creative thinking, which pops up on the screen when required by the user. This k i n d of self-questioning method has been proved to be a very useful technique in stimulating creative thinking and encourage people to think more deeply and systematically.16

With the help of the above facilities provided by the system, the end user — project manager may gradually bui ld up a specific CFD appropriate for his specific project, w i t h alternative means of achieving functions.


Evaluate Alternatives

The system uses V M consultants' and project engineers' knowledge to support the user to evaluate alternatives which were generated in previous stages. But there are many occasions when there is no clear decision available and the matter rests on subjective judgement. I n such cases the facilities e.g. weighted evaluation, LCC analysis etc. is used to expedite the selection of best alternative design solutions.

But there are many occasions when there is no clear decision available and the matter rests on subjective judgement. In such cases the facilities e.g. weighted evaluation, LCC analysis etc. is used to expedite the selection of best alternative design solutions.

I n addition to funct ion analysis, costs play an important role i n the comparisons of alternative design solutions. A n interface between C D A M and ELSIE Budget Module is designed to support the comparison of the cost factors among different alternatives. This facility is used w h e n alternatives have similar advantages and disadvantages i n achieving same functions. The decisions made w i t h i n the C D A M provide a clear input data to ELSIE Budget Module. Wi th the help of the Budget module, a reliable cost estimation of the project can be produced.

With the assistance of the above facilities, the f inal CFD containing the best ideas of achieving each required function is then produced. A clear, specific and precise picture of the project definition is available to those who have an impact on the scope of the project.

Conclude Analysis and Fabricate Report

A report summarizing the analysis is produced at the end of each consultation.

Sketch Design Analysis Module (SDAM)

If the project analyzed is under a Sketch (Schematic) Design, the SDAM uses the fol lowing strategies to analyze the project:

Select Elements With Big Saving Potential

The SDAM uses cost estimation expertise to estimate overall cost of the building and elemental costs of each element based on the design work done. As soon as elemental costs are known, the system uses a cost/LCC model to compare estimated elemental costs wi th target elemental costs (a target cost represents the lowest costs of an element to perform required functions). Those elements w i t h high saving potential are therefore located based on the ratio of estimated cost/target cost.

Analyze Functions and Determine Worth

After isolating elements w i t h high saving potential, the system analyzes the functions of the components of each selected elements and divides them into basic and secondary functions. Based on the V M expertise, historical cost data and latest technical information regarding new materials and methods, the functional worth of each component is determined. The worth of each element is then obtained by summarizing the functional worth of its components. The functions of office buildings and the functions of their major elements have been defined i n the system.

Generate Alternatives

By comparing the functional wor th of each selected element w i t h its initial estimated cost, elements w i t h value mismatch, i.e. high ratio of initial estimated cost over functional wor th are located. A list of alternative means which can achieve the required functions but w i th lower overall cost is then suggested by the system. Studies have shown that "researching materials, manufacturing processes, and design requirements to generate design alternatives is one of the most time consuming efforts i n a V M program. 1 7" The time spent on this speculative phase can be reduced dramatically when the system is used to generate a number of useful ideas. Wi th the help provided by the system, the users can generate some alternatives by themselves.

Evaluate Alternatives

Alternatives can be evaluated both qualitatively and quantitatively. Qualitative evaluation can be obtained by ranking alternatives i n terms of advantages and disadvantages. Quantitative evaluation is available using a weighted evaluation technique and obtaining the user's judgement through a specially designed user-fr iendly interface. A LCC analysis is used to compare the original design w i t h alternatives as required to choose the one w i t h lowest LCC, a saving potential can therefore be determined. A standard report including VMCPs is provided at end of a consultation.

Studies have shown that "researching materials, manufacturing processes, and design requirements to generate design alternatives is one of the most time consuming efforts in a VM program."

Knowledge Refinement Within the System

A V M consultant is unlikely to have detailed expertise on all kinds of projects. However he/she can accumulate and refine his/her knowledge and expertise through this V M practice, i.e. when other V M programs on similar projects are carried out, he/she can use the expertise accumulated before to provide better guidance.


A knowledge refinement faci l i ty is therefore designed i n C D A M to emulate the expertise refinement and accumulation process, so that the system can update its knowledge base automatically during each consultation. The processes of knowledge refinement are diagrammatically shown on figure 3.

K N O W L E D G E B A S E

STANDARD FUNCTIONS

K N O W L E D G E R E F I N E M E N T WITH U S E R S E X P E R T I S E

GUIDANCE P R O V I D E D A T CONSULTATION WITH S Y S T E M

Figure 3. Model of Knowledge Refinement

The information, e.g. functions and alternatives to achieve those functions, generated dur ing each consultation is saved i n a specially designed project database, which can be retrieved by the system later as users require. The knowledge obtained during previous analyses can also be retrieved, so that when the system is used, i t can give advice f r o m its original knowledge base as wel l as f r o m newly gained knowledge f r o m the user's expertise. The user can input his/her expertise again, which consists of another source of knowledge base. The knowledge base therefore can be gradually refined through its use and begins to grow.

Expected Benefits

The expected benefits f r o m building and using of the system are:

1. Improvement in efficiency —Usually a V M team should concentrate on a particular project for at least five days, that is the 40-hour job plan, of which most time is usually spent on gathering information. 1 8 One of the most time consuming efforts in performing a V M study is researching materials manufacturing processes and design requirements, etc. to generate alternatives. While w i t h the help of the system, the time spent on information gathering is significantly reduced. Tremendous amounts of time and effort of the Value Specialists (or other users) can be saved.

2. Store and refinement of V M knowledge —Every organization faces the same problem of occasional change of work force, e.g. retiring. In spite of personnel changes the system can maintain the knowledge by storing it i n the knowledge base, which may otherwise be lost to the organization. Obviously, the system can store more historical V M archives than human memory. O n the other hand, throughout the processes of developing the system, especially the knowledge acquisition process, any gaps wi th in the expertise used by the specialists is highlighted, the knowledge and expertise is therefore refined.

3. Freedom of accessibility —Because of the l imited number of value specialists, i t is often diff icul t to f i n d them to analyze the design of a project, the initial design therefore has to be considered as the best design which, i n fact, sometimes could have big saving potential. The proposed system wi th V M domain knowledge makes the scarce V M expertise more widely available. The fu l ly developed system wi th properly represented knowledge, which has been elicited f r o m a high level V M team, in its knowledge-base, can be used throughout the development of a building project w i t h ease. It should be able to assist the user in the initial V M studies.

4. Training of relevant staff —Once design staff become more experienced in V M technique, they w i l l participate more actively in the V M study, however most of them usually know little of V M . Through the use of the proposed system w i t h the fu l ly developed help and explanation facilities, the users can learn V M concepts, principle and human expertise, for the system can explain the steps and reasoning process to generate results i n a readable and understandable format. Thus the user can be trained at any time w i t h relatively small expenditure of resources.

5. Reduction of V M costs and provision of standard V M reports —The cost for providing V M services varies f r o m project to project w i t h an average of 0.5% of total project cost19. Whereas the initial investment on such a system and the cost for running the system is much less than this figure.

Human experts could exhibit biases during an analysis, while the system does not. The final report including VMCPs generated by the system is well organized in a standard format, which is thought to be extremely valuable as historical V M documentations in the succeeding V M programs.

Conclus ion

At the time of wri t ing this paper, a prototype system has been built i n a knowledge representation language — LEONARDO (version 3.20), which is continuously refined. Most of the knowledge wi th in the prototype

Value World, Apr./May/june, 1992 23

was obtained f r o m books, papers and reports on V M in construction projects, part of them were elicited f rom V M consultants of the U.K. industry.

The prototype system has been successfully built to show what the expected system looks like, what type of facilities could be available i n the fu l ly developed system. It has been remarked as a "satisfactory and very promising system" by the U.K. industrial V M specialists. We may conclude that the building of an ES w i t h V M domain knowledge to support decisionmaking w i t h i n the early design stages of buildings is desirable and feasible. We believe that the system introduced here w i l l certainly make contributions to V M implementation in the U.K. construction industry.

References

1. Cleal D M and Heaton N, Knowledge-based System — Implications for Human-computer Interfaces, Ellis Horwood Limited, 1988.

2. Hayes-Roth F, Waterman D A, Lenat D B, Building Expert Systems, Addison-Wesley Publishing Company, Inc. 1983.

3. Brandon P.S., et. al., "The Strategic Planning of Construction Projects," The RICS/ALVEY Research for Chartered Quantity Surveyors, R I C S , 1988, pp 16-19.

4. Levitt R E , "Expert Systems In Construction," U S A - C E R L Special Report P-87/01, October, 1986.

5. Hamilton G and Harrison Anne, "Expert Systems for the Construction and Services Industry," BSRIA Technical Note, T N 7/86, 1986.

6. Mohan S, "Expert Systems Technology in the Domain of Construction," Proceedgins of Fourth International Symposium on Robots and Artificial Intelligence in Building Construction, Haifa, Israel, 1987.

7. Kelly J, & Male S, " A Study of Value Management and Quantity Surveying Practice," R I C S , 1988, pp 22-23, 47-49.

8. Ibid.

9. Brandon PS, "Expert System — "The Hype is Over," CIB 90, Volume 2, Expert Systems, International Council for Building Research Studies and Construction, Australia, March 1990.

10. Brandon, P.S. et al, op. cit.

11. Chamberland T R, "Construction Cost Distribution Study," SAVE Proceedings, 1984 International Conference, Sacramento, California, 1984.


13. Ibid.

14. Rogers R E , "Selection of Value Engineering Personnel," SAVE Proceedings, 1966 National Convention, April 25-27, Miami Beach, Florida, 1966.


16. Osborn Alex F . , Applied Imagination, Charles Scribner's Sons, New York, Third Revised Edition, 1963.

17. Gibbs R E , "Value Engineering Expert System," Value World Vol. 12, No. 2, pp 13-14, 1989.

18. Ibid.

19. Dell'Isola A. , Value Engineering in the Construction Industry, Van Nostrand Reinhold Company, Inc. third edition, 1982. ^

24 Value World, Apr. May/June, 1992

Organizing for Better Value -A Case Study from Tata Steel

by P.N. Roy

Mr. P.N. Roy is General Manager (Works) at the Tata Iron & Steel Company Ltd., Jamshedpur, India. He has a B.Sc. (Hons.) in Physics from Patna University, India, B.Sc. (Eng.) degree in Electrical and Mechanical Engineering from Benaras Engineering College. He joined Tata in 1952 and was appointed General Manager (Works) in .1987. He is a director of several companies. Mr. Roy'is Chairman of the Indian Value Engineering Society (INVEST), Easter Zonal Chapter, Jamshedpur and also Vice President of the National Council of IVEST. Mr. Roy is the President of Indian Institute of Supervisory Management, Jamshedpur.

m m '

V

Presented at the 31st International Conference, Society of American Value Engineers, Kansas City, Kansas, May 5-8, 1991.

The story of Tata Steel began in 1907, when it was considered impossible to produce even a pin in India. Over the years, a fu l ly integrated steel plant, supported by its own mines, collieries, power plants and townships, has emerged. We have, through several stages of expansion, been updating our technology and increasing the capacity. A talent pool of engineers and skilled technicians has been built . We have engineers and professionals i n every department who make it possible for an 80 year old plant to produce consistently at f u l l capacity.

The product range is h ighly diversified. We manufacture finished steel products like plates, sheets, bars, rounds, channels, bearings, steel plant equipment and a variety of special steels and tubes. Today, the company has developed abilities as diverse as the needs. From feasibility planning to mineral exploration, designing steel plant equipment and shops to developing mines - expertise to handle any project f rom drawing board stage onwards.

The company employs well over 70,000 employees and during 1989-1990, had a sales turnover of US $1.26 bil l ion out of which $86 mil l ion was exported. The company holds an outstanding record of 50 years of industrial peace and harmony in the country.

History of V E i n Tata Steel

The concept of VE was introduced in 1964 as a tool for cost improvement after a two mill ion ton expansion program. W i t h professional help and support f rom some strong VE enthusiasts, this powerful

management technique gained importance. The VE effort was mainly directed towards training executives in the technique and in taking up VE projects f rom time to time. The scope of VE expanded in the years that followed, both i n its application and regular use. In 1988, the company gave i t a formal status by constituting the VE Group to promote, coordinate and support VE activities company-wide and assist VE teams in their project analysis and implementation.

The VE Group, attached to the Industrial Engineering Division, is headed by a senior executive and assisted by a Senior Value Engineer and four other value engineers. The selection of the executives was based on passing an examination and their aptitude for creative work.

The VE Group:

The group work on all VE related activities, f u l l time. This includes:

• Planning, organizing and conducting VE training.

• Selecting VE projects and appropriate teams.

• Organizing and conducting VE workshops.

• Organizing regular review meetings.

• Obtaining management sanctions wherever and whenever required.

• Implementing VE Change Proposal (VECP) w i t h the department concerned.

• Perform the technical audit of the project.

• Make the cost audit of savings.

• Arrange for exhibitions and publicity for successful case studies through company newsletters and journals.

• Arrange for recognition of successful VE teams.


The V E process i n Tata Steel

In practice, the VE process consists of a series of steps that help identify unnecessary costs and minimize them, if not eliminate them altogether. The VE study normally follows a planned and systematic approach to analyzing VE projects. This approach, called the Job Plan, is followed meticulously in Tata Steel. Our experience clearly shows that success results f r o m a rigid adherence to the Job Plan. Al though several versions are in common use w i t h slight variations, we follow an eight phase job plan that is shown in Table I .

Table 1 V E lob Plan

1. Orientation Phase 5. Evaluation Phase

2. Information Phase 6. Recommendation Phase

3. Function Phase 7. Implementation Phase

4. Creation Phase 8. Audit Phase

Orientation Phase

This phase relates to the initiation of ideas for studies and their evaluation, selection and authorization prior to the conduct of a specific VE study. This is done by the VE group in consultation w i t h the Divisional Teams and Value Management (VM) Team. This phase also inc ludes the selection of team leaders and multidisciplinary team members including specialists for the specific VE projects selected. We give more emphasis to this phase of the Job Plan since right selection of the project, team leader and members largely contributes to the success of the project. The importance is seen by the fact that every project is approved for a VE study by a very senior management person at the level of Assistant General Manager and has the approval of the Genera Manager (Works) well before the VE workshop is scheduled.

Selection of Projects

VE projects may be suggested by top management, department heads, participants of the VE training programs and by members who attend the periodic VE review meetings. Through discussions at various levels a VE project gets selected w i t h f inal approval f r o m the General Manager.

The Team

The team leader is invariably the person who is most affected by the project. For example, if a project has been identified in the Eight and Structural M i l l Division, then the Division Manager wi l l be the team leader. The VE group also ensures that the team leaders have been trained for at least two days in the details of the VE technique before they are selected. The members are selected from a pool of officers from the departments that have undergone at least a two-day training program.

Informat ion Phase

Since most of the workshops are held in-house and conducted by the VE group, there is a lot of flexibility

during this phase. As soon as the project and its team has been selected and has management's approval, the team meets at least two weeks before the workshop to discuss the project. The Value Engineer associated w i t h the project explains the use of the VE Work Book, specially prepared for our company. He explains the need for systematic collection and assimilation of relevant data. This helps in many ways.

1. A l l members become familiar w i t h the project.

2. Data collection and member responsibility is decided. The members start fol lowing the work book f r o m the beginning.

3. Cost data, that invariably takes maximum time to collect, is discussed wi th the Acconts Department and is generally made available well before the workshop.

4. The enthusiasm of the team is gradually built and reaches a peak by the workshop date.

5. Sufficient time is devoted to this phase, and data analysis begins even before the workshop.

The VE workshop

Module I suggested by SAVE is followed. During the workshop, great emphasis is laid on the fol lowing phases of the Job Plan:

• Completion of Data Collection

• Creation Phase

• Recommendation Phase

Our experience is that involving senior executives during the Evaluation Phase helps in refining the team's ideas and improves their recommendations. I t positively enhances the implementation probability. We invite senior executives, usually at the Division Manager level, and sometimes Assistant General Manager, for the th i rd or four th day of the workshop for a midcourse correction meeting; the team gets the benefit of their experience and knowledge. Even suppliers and other specialists are involved depending on the need of the project and the team.

Implementation Action Plan and Strategy

After the management presentation and the approval for implementation of the recommendation, a team meeting decides the implementation plan and strategy. Review meetings at the Assistant General Manager7s level and also at Executive Director's level are organized so that there is no slack in the implementation program. These review meetings help i n identifying the new project for VE studies.

Audi t

No VE work is treated as complete unless the benefits are audited by an independent department, whose officers are not members of the VE team. The audit is in two stages: 1) The technical benefits are determined and confirmed by the VE team and verified by the VE group, w i t h the help of the department concerned and experts i n the area. 2) Only after the technical audit is the project referred to the Finance Division for a

26 Value World, Apr. /May/June, 1992

cost audit to determine the savings accrued f r o m the implemented VE proposal. Management gives great importance to the cost audit and recognizes a project only after the audit is completed.

Training in V E

The best way of keeping pace w i t h changes and advances taking place around the wor ld is to continuously train and update skills of the employees. Tata Steel, being a dynamic and professionally managed organization, attaches a great deal of importance to training.

Providing training in VE was one of the key areas of the VE Group soon after its formation. From the first line supervisors to Division Heads, everyone i n the organization is being trained in a systematic way w i t h the help of our Tata Management Development ,.i Centre. Since the VE Group's formation about 4,000 officers and supervisors have been trained i n VE.

Rewards

Recognizing good work and encouraging people to participate i n the company's improvement process has been an important aspect of the company's personnel development policy f r o m the beginning. VE is no exception to this general practice. The successful teams, after the cost audit reports are received, are recognized in a formal way i n a specially arranged funct ion called the VE Awards Banquet Nite. During this gala function team members and their spouses are invited and are hosted at a special dinner by top management.

Achievement

Our efforts i n VE have paid rich dividends during the last three years. Wi th a group of 6 dedicated f u l l time value engineers, the returns are more than 50 times the cost of maintaining an independent VE group and the cost of VE training and workshops.

Out of 151 VE projects, 31 have been f u l l y implemented and the cost audited savings is as high as US $2.5 mil l ion and growing every year.

Benefits

In addition to cost reduction and capital savings through cost avoidance, the fol lowing intangible benefits have been achieved:

• Improvement in divisional and product/process performance.

• Improvement in quality.

• Easy maintainability.

• Improved parts availability.

• Higher employee morale through a sense of achievement and recognition.

• Better understanding of the company's operations.

• Better and more cohesive teams.

Awareness and Publicity

Knowing the importance of VE and its impact on Cost Improvement and product/process performance, management readily gave its concurrence to starting an in-house quarterly publication exclusively for VE called "TISAVE." This publication features all the VE activities and presents a successful case study in every issue. It highlights the team's effort and savings achieved. I t provides recognition to the team, acts as a generator of ideas for others and enthuses many to take up VE projects i n their own areas.

Several publications have been brought out by the VE Group i n the last three years. They include VE Guide, TISVALUE (a booklet containing VE case studies f r o m the company), and Reading in VE and many others.

Conclus ion

Our experience clearly shows that VE is a very potent tool and can be successfully used in any organizat ion fo r cost improvement programs. Management support, a committed group and an organized approach are the main pillars for the success of the VE program. A

Value World, Apr./May/]une, 1992 27

"Thunder"

Clean Out Your Desk Syndrome

by Tom King, CVS, FSAVE

Job layoffs are always tough.

Often the manner in which the notification occurs multiplies the hurt .

The questionable practice being aired here for ethical review is one that w i l l be descriptively labeled —

"The Clean Out Your Desk Syndrome" The way the process works is that the person to be

terminated is given no prior notice of the impending termination. At some point during a given working day often on a Friday afternoon, the subject is called into a superior's office and told he/she is being terminated, effective immediately. This is to be his last day of work and he is to (a) leave the premises immediately or (b) is to clean his desk of personal belongings and leave, say, w i th in the hour. Reason(s) for the dismissal is sometimes given as business conditions, or that the employee's performance or manner has not been viewed as satisfactory by the decision maker.

T H E C A S E FOR proponents of the "clean out your desk syndrome" put forth the following rational arguments for the immediate dismissal tactic:

• Humane concern for the dismissed's welfare. If one is terminated immediately it is customary to receive two weeks severance pay in lieu of working out the notice. Thus time can be usefully spent looking for a new job while receiving income.

• If allowed to remain in the workplace for two weeks, the terminated individual might be disruptive, causing trouble in the ranks, or causing an embarassment in some way.

• The terminee might steal company secrets or sabotage equipment and systems as revenge.

• Being a "short-timer" he/she might not be motivated to do much work during this phase out period.

• Management's desire to start the new replacement right away.

OPINION AND COMMENTARY This principle might seem pragmatic to the decision

makers and to the casual observer, but to the vict im it is devastating. One almost has to experience this situation to really appreciate the damage to the human psyche.

The message is immediate. You are not valued. If you can leave this instant, then the fol lowing seems true. "You are expendable." The job is unimportant. The things you have been doing are unimportant. There is no need to pass on data f r o m work in process. Leave immediately. You might steal something. You might sabotage the computer. You could be disruptive and probably won't do much work anyway.

Domestically, one suffers shame, embarrassment, and self doubt through perceived feelings of letting down the family. How is this person going to feel going home to family at an unorthodox hour and saying, " I 'm fired." H o w about the neighbors, the church people.

Is the best of human behavior (ETHICS) at work in this situation? No. Obviously not. There is insensitivity at work here, perhaps largely unintended. A point to keep in mind : one is always strong enough to stand up under another's grief. But how about one's own?

I favor a position of being more sensitive to human dignity, even if that means erring on the side of generosity or supposed weakness. This sensitivity would be manifest by offering to permit the person to work out, say a two to four-week period. This can be a period of adjustment while he/she, the family, colleagues, get accustomed to the change, to sort out one's th inking and make the best one can out of i t . Meanwhile, one foot can be placed in front of the other, going through the necessary healing process f r o m the smaller wounds that were inflicted. Also, i t is a lot easier to get a job while one is still employed, even if in the waning days of the job.

Another fact often lost sight of — What do the remainder of the employees in the unit think of this abrupt happening?

Wouldn't you really be concerned about the atmosphere i n a workplace and social conscience and ethical mentality of a workforce that looked forward to these affairs w i t h excitement and curious pleasure?

I n summary, the "clean out your desk syndrome" should be sacked.

A more humane approach considering the dignity of human beings would be a welcome change. ^

28 Value World, Apr. May/June, 1992

P U B L I C A T I O N S B O O K S : "Techniques of VA & V E (3rd Edition)" by L.D. Miles. This book, authored by the originator of Value Analysis and Engineering Technology, shows management and professional people specific steps to disciplined thinking, giving them 25-50 percent more efficiency—both i n the quality and quantity of their mental work. COST Non-Member $36.00 Member $32.00

"Innovative Change, 101 Case Histories Value Engineering" by A.E. Mudge. This book describes 101 Case Histories resulting f r o m the application of the value engineering methodology to both hardware and software, system, procedural and organizational projects. The case histories have been drawn f r o m the worldwide applications of Value Engineering's systematic approach to both commercial and military projects. ' , COST Non-Member $38.00 Member $33.00

"Value Control Design Guide" by Value Analysis, Inc. This 400 page "Guide" classifies and compares 60 different manufacturing processes used to produce individual parts made f r o m either metallic or plastic materials. I n addition to general design information and a detailed explanation of each process, there is a relative cost comparison for producing any quantity of parts, as well as tooling, labor and material waste cost comparisons. COST Non-Member $110.00 Member $90.00

V I D E O T A P E S "Principles of Value Analysis/Value Engineering" The Miles Value Foundation, i n cooperation w i t h the Society of American Value Engineers and North Carolina State University, produced this 35 minute presentation to introduce you to the concepts and benefits of Value Analysis. COST Non-Member $195.00 Member $145.00

"Value: The Success Criterion" This executive-overview videotape explains the value process and gives examples of applications in : Federal Government-Defense, State Government-Construction, Private Industry-Manufacturing. Tape includes excerpts f r o m a workshop at the Westinghouse Productivity and Quality Center and concludes wi th executive assessments by: Hon . William H . Taft IV, Deputy Secretary of Defense; Leo J. Tromabatore, Director, Calif. Dept. of Transportation; John H . Fooks, VP Corp. Productivity & Quality, Westinghouse Electric Corporation. 12 minutes. COST Non-Member or Member $40.00

"Keeping the Competitive Edge with Value Analysis" by Robert Brethen, President and Chief Executive Officer, Philips Industries, Inc. Mr. Brethen tells an exciting story about how his company has applied the tools of VA to achieve dramatic resutls i n product enhancement, market share growth, cost reduction, and profit improvement. Philips Industries received the society's highest a w a r d -Excellence in Value Engineering for 1988. COST Non-Member or Member $20.00

"Manufacturing: A Competitive Weapon" by A l Mattaliano, Staff Vice President, Manufacturing, Hughes Aircraft Company. Mr. Mattaliano describes a revolution i n manufacturing technology that is occuring at Hughes. The concepts and practices of just-in-time, expert systems, cycle time management, automated work instruction, flexible manufacturing, and computer aided design and manufacturing, integration are illustrated through example f r o m the several manufacturing plants. The role of VE in this environment is identified. COST Non-Member or Member $20.00

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