Risks and value management are very much interrelated tasks and should be undertaken in parallel. Value management is concerned with alternative solutions based on a set of constraints that have been analysed in order to approve the best available option in terms of specification, cost, etc. Risk management looks at generated alternatives to remove any elements of surprise. Poor risk management is therefore a main cause of project collapse. An adequate understanding of both value and risk management is a major contributor in improving project performance.
In practice, a value management exercise is performed first, to determine what represents value to the project or to the business as a result of delivering the project. Once a preferred option is identified, the risks that are likely to occur if that option was implemented are also identified. An integrated project team (value management and risk management) repeats the exercise of identifying value and the associated risks until they reach an optimum balance between value and risk.
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4.2 Value and value management:
Value, in a broad sense, is concerned with achieving benefit to the client. That is, the proposed project is worth it and benefits could be measured in business terms but not essentially in financial terms, for example, to create better working environments or to improve patients’ experience during treatment. Value implies ensuring the right decisions are taken to obtain an optimum balance of benefits with respect to cost and risk.
Value management then provides a systemised approach for assessing and developing a project to improve the chances of achieving project requirements at an optimum value for money. Value management is an ongoing process in which all relevant components in a project are critically appraised to verify whether more valuable alternatives are available. The emphasis of value management is on value for money and function not on reducing cost.
Benefits achieved through VM include an improved understanding of business needs and the flexibility to meet further future needs as well as the attainment of optimal value for money while meeting user requirement. VM also prevents unnecessary expenses by reducing waste, enhancing team work and having joint ownership of solutions.
Value engineering follows a work plan involving a series of stages that need to be executed in order so that the most promising proposals; or options can be determined. These steps are:
Orienting/identifying: This will involve identifying the business problem, customer priorities and needs.
Collecting information: This step entails collecting information or data regarding costs, values, risks and other project constraints.
Speculating/generating: This implies generating ideas to meet project needs and priorities which have been previously identified. This process is best carried out through a workshop with involving stakeholders and team members.
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