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First developed in 1940's

The only business improvement process to be federally mandated

Can be applied to any project or problem from any discipline

Provides a means to measure value through Value Metrics

Incorporates a broad and diverse body of knowledge

Value Methodology is an organized process that has been effectively used by a wide range of industries to achieve their continuous improvement goals and governments agencies to better manage their limited construction budgets.  The success of the VM process is due to its ability to identify opportunities to remove unnecessary costs from facilities, products and services while assuring that quality, reliability, performance, and other critical factors meet or exceed the customer’s expectations.

The improvements are the result of recommendations made by multi-disciplined teams under the guidance of a skilled VM facilitator, commonly referred to as a value specialist.  The multi-disciplined teams can be comprised of those that were involved in the design and development of the project, technical experts that were not involved with the project or a combination of the two.  There are two essential elements that set the Value Methodology apart from other techniques, methodologies and processes:

These factors differentiate Value Methodology from other analytical or problem solving methodologies. 

The genesis of the Value Engineering methodology was in the World War II period from 1938 to 1945. Lawrence Miles, regarded as the father of Value Analysis/Engineering, was an engineer for General Electric Company.  Miles was assigned the task of “finding, negotiating for and getting” a materials and components that were in very short supply due to the war effort. 

Frequently, suppliers, already over-extended, said “No” to increased schedules or new necessary products. In this desperate situation Miles was forced to basics. “If I can’t get the product, I’ve got to get the function. How can you provide the function by using some machine or labor or material that you can get?” Time and again there was a way to do it. Engineering tests and approvals were rushed and schedules met. Thus “function” grew in vitality and was to later mature into the development of the VA techniques.

In March of 1944, he was transferred to Locke Insulator, Baltimore, Maryland, a subsidiary of GE, as Manager of Purchasing. He took line responsibility for delivery and cost of millions of dollars worth of materials and products per year. During nearly the next four years, he developed patterns of engineering, laboratory and purchasing teamwork which limited costs and improved products. He learned first-hand both the productive and the destructive force of human attitudes and practices, and their effect on appropriate designs and appropriate costs. His thinking was becoming more and more “What FUNCTION am I buying?” rather than “What material am I buying?”  Following the war, Miles formally developed the basis for today's Value Methodology.

The objective of any Value Methodology study is to improve the value of whatever is being studied.  Unfortunately, we all have our own opinions regarding what affects the value of a product or service.  Too often decisions are based on just one criterion such as cost, quality, or reliability.  This leads to less than optimum decisions.  A decision that improves quality but increases the cost to a point where the product is no longer marketable is just as unacceptable as one that reduces cost at the expense of quality or performance!  It is also important to avoid confusing cost with value.  Added material, labor or overhead increases cost – but not necessarily value.  Value is lessened if added cost does not improve the ability to perform the necessary functions.

Ultimately, it is the customer that must decide value.  The concept of customer (or "user," in the case of facilities) value is built on the idea that people make buying decisions based on the relationship between price and performance.  The primary variable is overall value; or, simply said, is the customer getting the most for his or her money?  The other two variables are what have been determined to be the main components of value: overall price (cost) and overall performance.  The impact of price versus quality is very different depending on the industry or products being measured.

Value seems to be something most organizations strive for in delivering their products and services to the customer, however, seldom is optimum value achieved.  Based upon observations in the marketplace, the level of customer satisfaction (which is a good indicator of perceived value by the consumer) for goods and services for many industries is in decline. Why is this so?  There are many reasons why poor value occurs.  Some of the more common ones are identified in the list below:

Value Methodology Job Plan

Within the Value Methodology, there is an organized approach that must be followed if significant results are to be obtained.  This organized, multi-phase approach is called the job plan.  Key to the success of the Value Methodology approach is following these steps in sequence and avoiding the temptation to jump ahead—to try to solve a problem before it has been thoroughly understood and analyzed. 

How does the VM approach to problem solving differ from that of the scientific method?  There are several important differences that merit further discussion.  These differences are best introduced by quotes attributed to Albert Einstein (1879-1955), one of history’s greatest thinkers and scientists. 

“The significant problems we have cannot be solved at the same level of thinking with which we created them.” 

The scientific method first states the problem and then gathers data pertaining to it.  The Job Plan states the problem, gathers data and then defines the functions.   This is an essential difference in understanding the problem.  The process of breaking problems down into functions does this very thing by broadening the level of abstraction involved in applying thought to. 

“Imagination is more important than knowledge...”

The scientific method develops a hypothesis (solution), or in some cases multiple working hypotheses.  The Job Plan dedicates an entire step to the creation of ideas that will address the functions.  There is a deliberate separation of creativity (imagination) and judgment (knowledge and experience).  This separation is essential if our imagination is to be fully realized.  

Since the creation of the original Job Plan, a multitude of variations have been developed to address the specific needs and requirements of individuals and organizations applying VM.  This proliferation not withstanding, these five basic steps as conceived by Miles continue to serve as the foundation for all of these, and any Job Plan that does not include them, and in the same relative order, is not properly applying the Value Methodology. 

The Job Plan that is being presented in this text consists of eight phases.  The phases include the five original steps identified by Miles in the same relative order.  Some of these have been divided into sub-phases and most have been renamed to add clarity to the Job Plan.  The eight phases of the Job Plan include:

Value Metrics was originally developed as a means to measure the effect of value studies on project performance for the State of California’s Department of Transportation where it was first called the “Performance Measures Process.”  This process was later expanded and refined as a means of measuring value.  Value Metrics is an extremely useful group of techniques that establish a means for the measurement of a project’s cost and performance as it relates to value improvement.  Value Metrics uses the equation for functional value, as discussed in Chapter 2 – Value, as the basis for measuring value improvement. 

As discussed earlier in this chapter, the quantification of cost is relatively straight forward.  The quantification of performance is not.  There are several reasons for this:

Value Metrics provides a standardized means of identifying performance, defining it, evaluating it and measuring it.  Once this has been achieved, and the costs for all value alternatives have been developed, it is a relatively simple matter of measuring value. 

Value Metrics is a complimentary system of concepts and techniques developed to compliment and augment the traditional Value Methodology Job Plan.  It is not absolutely essential that Value Metrics be utilized in order to perform a value study, however, it is well worth the additional effort as there are a number of significant benefits that it can convey.  Value Metrics can improve value studies by:

Project Management & Value Methodology

Experienced project managers, especially those with a thorough understanding of the Project Management Institute’s Project Management Body of Knowledge, will appreciate the similarities between the management of a value study and the management of a project.  In fact, a value study is a project!  It meets all of the criteria of a project: