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The application of value management in real practices; the definitions, the effective way in delivering value management and the functional basis for embellishing the business.

Value management was first introduced in Malaysia in 1986. Currently there is evidence of some organisations in Malaysia applying some concepts of VM in their project operations. It is clearly indicated that, in Malaysia, its application is still in its infancy thus, to promote the application of VM in the industry, it is crucial to understand its current state of its application before a system of VM philosophy can be developed to suit the current local scenario. The clients’ understanding towards the VM concept is important as it is not just merely considering the cost but it considers the relationship between value, function, quality and cost in a wider perspective leading to the fundamental contribution of VM application whereby it eliminated the unnecessary cost which does not contribute to the project’s value, system and facilities. This assignment requires a case studies or direct application of value management on the workplace of company or organization. By completing this task it will reveal the concept as well as the preparation and the challenges of applying the VM into real business of practices.  

1.Literature Review.

History of Value Management.

Definition of Value Management and concepts of Value Management.

Responsibilities of Value Management Study Team.

2.Company or organization background;

Introduction and background of the company or organization.

Type of business or activities.

Objectives of the company or organization (Mission and visions).

Type of clients.

Definition of what the owners and end users mean (or should) by value, thus providing a precise basis for making decisions throughout the project

A basis for ensuring the project is the most effective way of delivering business benefits and satisfying business needs.

A functional basis for embellishing and refining the business casefor the project, by addressing both the monetary and non-monetary benefits.

A functional mechanism to measure value, taking into account monetary and non-monetary benefits and thus demonstrating value for money.

Literature Review

The phrase value management has been introduced in the history of management innovation, order to make comparison between alternative materials for developing a decision regarding the most suitable material that can function potentially at a lowest possible cost. It is essential to mention that the history as well as development of the concept of value management is essentially interrelated to the development of internal and external corporate complexity. The concept of value analysis may be underpinned in the late 1940s though in the early 1731, an individual named Daniel Bernoulli presented a paper at the St. Petersburg’s Imperial Academy of sciences regarding “value of an item” (Kelly et al., 2014). Bernoulli’s paper implied that value of any individual item should not be based on its price but on its power of being utilized. The particular concept presented in the early era is considered as the fundamental base of every value disciplines (Verhoef & Lemon, 2013). The origin of value management possibly dates from the time of Second World War, when the phrase “value management” was codified as value analysis. Initially, the concept of value analysis proved ineffective, over times and with continuous improvements, value analysis or engineering helped to overcome any kind of roadblocks with impressive consequences (Martinsuo & Killen, 2014).

However, prior to the Industrial revolution, there has been less necessity to have value management as per the reason that organizations used to be small and therefore their internal complexities also used to be ignorable. At the same time, the external environments of the organization were found to be stable. In that early period of industrial revolution value creation has been understandably simple as well as straightforward. Nevertheless, the earliest form of implicit value management has been found in the 18th century. In that time, with the help of mechanizing along with industrial revolution, it used to be possible to gain economies of scale by investing machines as well as production workers. In this initial stage, both the efficiency and methods of productivity have been under continuous development (Nasir et al., 2016).  Towards the 19th century, the methods of productivity and sales growth improved with the help of transportation as well as with mechanisms of communication. However, the improved system was engaged in evaluating the productive potentiality of the decentralized system of production. Nevertheless, towards the late 19th century, the explicit management became significant with the increased complexity (Fleming et al., 2016). As per the reason that the organizations started to possess a diversified range of product assortment, the need of asset allocation became significant. In terms of explicit value management, towards the end of 90s, “activity based costing” was developed (Nawi et al., 2014).

Company or Organization Background

It is necessary to mention in this respect that the fundamental concept of value management was first introduced in the United States of America during the time of Second World War, when the manufacturing sector started to face the shortage of necessary components (Hwang et al., 2014). The founder of the Value management procedure is Mr. Lawrence Miles of The General Electric Company and after his establishment of the technique of value management, not only the manufacturing but a varied types of industries started to adopt it (Naeni et al., 2014). In the contemporary world of business and management, not only USA but also Australia, Saudi Arabia, United Kingdom, Korea and Malaysia adopt the procedures and techniques of Value management and apply it in the capital projects. Precisely, in Malaysia, the concept of Value management has been introduced in the year 1986 through a training program in the “Quantity Surveying department” in UTM (University Technology Malaysia) (Patterson & Pun, 2014).

Fundamentally, value management is a method that is concerned with improvising as well as sustaining an appropriate and desirable balance between the needs of stakeholders and the resources, which are required to satisfy them. According to Rubio et al., (2015), the concept of value management is based on the principles of defining along with adding measurable value by concentrating on the objectives prior to the solution and on all the functions to increase management innovation. Value management is also known as an analytical and systematic procedure for the development of innovative holistic solutions to mitigate complex issues (Oke & Aigbavboa, 2017). In other words, value management is considered as the appropriate application of value analysis and techniques related to value engineering for improving effectiveness as well as efficiency of a business. However, as per Kusters (2016), value-based management is a distinct application of a set of established techniques to define as well as refine needs of business, delivery strategy and best value concept through setting objectives for the customer and determining success criterion.

 In this context, it is essential to mention that the core definition of value management says that it is a management procedure of creating value, managing value and finally measuring value. It can be therefore interpreted that a value-based management is a procedure that has a purpose to maintain the consistency of corporate mission, corporate strategy, corporate culture, decision process, performance management and corporate governance (Mir & Pinnington, 2014). It is to consider in this respect that the value management is entirely dependent upon corporate purpose as well as corporate values. Value management involves representatives of organizational stakeholders within a facilitated organization and it is several times defined as a structural analysis that helps an organization in acquiring cost optimization. On the other hand, Too and Weaver (2014), has offered that value management is a cost-effective way for reliably accomplishing customers’ desires and expectation by eliminating unnecessary cost that does not add any value to the service and organizational system.  

Prior to list down the responsibilities, which a value management team is accountable to pursue, it is essential to mention that the entire procedure of Value management is considered as an approach, which is structure team-based. Therefore, every Value management study team is responsible for identifying all the functional requirements, which are required for achieving the optimum function in order to maintain minimum cost. More precisely, a Value management study team is responsible to pursue the following activities –

  • Generating ideas, which focuses on the creation of thoughts by volume (Brainstorming of mind showering)
  • Analysis of the costs, which are implemented for achieving organizational benefits
  • Giving assistance to submitting any kind of the business case (Ashworth & Hogg, 2014)
  • To identify most possible risks associated with the projects

On the other hand, every Value management Study team is responsible for reviewing project information prior to pursue with the value analysis study. At the same time, it has been understood that it is one of the fundamental duties of the value management study team to stay prepared always to take challenge against project assumptions. It means, the study team should stay accountable in serving to validate concepts, which lead to interesting, valuable as well as considerable alternatives. At the same time, the team should always maintain a positive mentality towards handling any kind of projects and should help their team leaders in reviewing the design of various projects. In this context, it is essential to mention that the Value management study is related with the activities of the Value analysis team (Harris & McCaffer, 2013). Precisely, the value management study team is responsible for responding to each of the questions imposed by the value analysis team. However, the team leader of the value management team is responsible in successfully pursuing the function analysis or FAST diagram along with the Cost and Performance analysis.  

In order to achieve a concise understanding about how value management can be applied in real world organizations, it is necessary to take an organization of the contemporary era and apply the value management tactics to improve its operations. On behalf of the aforementioned requirement, the construction company – Gamuda has been chosen. Gamuda or Gamuda Berhad is a construction, engineering, property and infrastructure based business organization in the forefront of Malaysia that is considered as one of the largest infrastructure organizations, which have taken local as well as international business projects. Some of the considered organization’s accomplishments are – “Klang Valey MRT lines”, varied highways, railways, dams and infrastructure concessions. The organization was founded in the year 1976 and in the year 1992, the organization was listed in the chief board of Bursa Malaysia (, 2017).

The chief activities of the business organization include making designs for infrastructure, construction works and property projects. In the financial year of 2013, the organization earned near about 3.88 billion worth of revenue and some of the organization’s key products, which have achieved appreciations, are their MRTs, water treatment plans, road tunnels and expressways. In the year 2008, the organization has been awarded with the EDTP or the Electrified Double Track pack worth of RM 12.485 billion from the province of Ipoh to the Padang (, 2017). It is necessary to mention here that the considered organization’s mission is to reliably deliver the innovative as well as high standard infrastructure along with “premier lifestyle properties” for the clients through their activities of infrastructure and construction development.

On the other hand, it has been identified that the organization’s vision, which accompanies the fundamental mission is that the organization aims to direct the nation in the innovative breakthrough solutions for a large scale of property development as well as public infrastructure. The clients of the organization are understandably both the government and private firms. Considering the organizations approach towards designing innovative as well as world-class and accomplishing them for a large extent and at the same time the accomplishments of the company till now, are indicative of the fact that the organization has clients from both the government as well as from the private organizations. Most significant aspects to enlist in this respect are the proposed value by the organization, which the hierarchy is responsible to manage with utmost priority. Following will give a hint of the organization’s proposed values for their customers –

  • To take charge of personal ownership and deliver responsibilities
  • To depict the appropriate values (, 2017)
  • To pursue honest communication for discussing an issue and resolving it
  • To demonstrate dedication and perfection through team work

It has been found out that the organization’s monetary as well as non-monetary desires and benefits are fundamentally revolve around the aforementioned values proposed by the considered organization. It is significant to mention here that the organization’s value management procedure involves three precise stages, which are driving creative solutions, establishing and controlling property developments in a sustainable manner and finally pursuing management of the concessions of large-scale infrastructure. It is essential to mention in this respect that the strategy for accompanying the aforementioned procedure for value management is chiefly through nurturing as well as identifying the local talents (, 2017). However, it has been identified as well that for the considered organization, the tool for creating and managing value is through sustainable activities. For the organization, therefore value management is more than an aspect for minimizing cost of operations and balancing value of the chief shareholders.

The term owner or higher authority in the context of value management is indicative of the particular role that is used for serving the responsibility of identifying as well as managing all kinds of risks, which is related to the proposed value. More precisely, the higher management or the owners are considered as the responsible individuals, who are supposed to develop consciousness regarding the values as well as the risks associated with them among the subordinates (Schilke, 2014). On the other hand, in the industry of construction and infrastructure development, owners mean a designation that holds the responsibility to acquire an optimal balance among some of the chief aspects of a business organization, like cost, functionality and revenue. Thus, in relation to value management, it can be said that an owner is not only an individual who only possesses financial share in the organization. The reference of owner regarding value management says that owners have the responsibilities to make his requirements clear for the other parties. At the same owners are the responsible authorities for making significant decision regarding the proposed value of each of the project, selecting expert designers, placing orders and estimate risks.

On the other side, end-user in the context of value management means those who acquire the roles to acquire the values appropriately proposed by the organization and return back adequate amount of benefit to the value providers. It means end users are those who are supposed to use or enjoy the given value and pursue monetary as well as non-monetary returns to the providers. However, it is to keep in mind that unlike the users, end-users are not expected to give support to a particular product. Most significantly, end-users do not possess any technical understanding regarding any product and proposed value associated with it (Caron et al., 2013). In this context, it is essential to mention that end-user is one of the prime contributing factors for responding to the utmost value proposed by a service or product as per the reason that end users acquires product, which are made by other users.  For the considered organization, owners are the higher authority and the end users will those who will finally use the infrastructure and housing complexes made by the organization.    

In order to satisfy business needs as well as to deliver business order according to the proposed values, every organization like the considered one, needs to have a firm management of the construction projects. A strong basis for that will be an integrated system of setting objectives, comparing their potentiality to meet the values and deciding strategies to accomplish them. Without a system like the aforementioned one, it is not possible to make sure that a project is going to effectively earn the values and management them for success or not.  

In order to embellish as well as refine the considered business case, it is essential to keep in mind that the considered enterprise proposes values to a wider perspective, thus in order to refine it, both monetary and non-monetary benefits should be taken into account. It seems that the organization most possibly pursue some of the chief analytic basis like the cost benefit analysis, cost utility analysis, cost effectiveness analysis and possibly the “Rank correlation of cost vs. impact” analysis (Martinsuo & Killen, 2014). However, for the considered case, it is required to keep in mind that the organization’s activity and their service is highly related with the society, thus evaluation of the efficiency of the resources as well as their social returns are needed to be evaluated. As the considered organization has the need to measure both monetary and non-monetary benefits, the organization could think about pursuing the BER analysis or the “Basic Efficiency Resource Analysis” (Walker, 2015).

With the help of a BER analysis, an organization like Gamuda can have a stable framework for making evaluation of varied complex programs and projects by comparing the impact to the resources. At the same time, a BER analysis mechanism the business organization can offer a relative and convenient perspective on the performances as well. However, considering the key activities of the organization, it can be also said that the organization can think about the SROI analytic basis along with the BER analysis (Harris & McCaffer, 2013). A SROI (Social return on investment) analysis is an analytic basis for evaluating value for social return on investments. With the help the aforementioned analytic base, it is easy to measure the values of an organization, which have been imposed on social, environmental as well as economic costs and benefits. Organizations like Gamuda, which pursues varied programs and projects, the SROI approach helps in comparing those with adequate and equal measure. The particular functional basis is applicable for the chosen case though the process is time consuming thus the BER analysis would be more effective.   

Prior to identify and thereafter suggesting an appropriate functional mechanism to measure value, it is essential to mention that to choose a convenient functional mechanism, it is essential at first to assess whether the individual organization is meeting commitments and improvising their selves or not. It should be kept in mind that the fundamental purpose of a functional mechanism to measure value is to estimate whether the proposed values are meeting the chief commitments towards the customers or not. Considering the considered case of Gamuda, it is understandable that a functional mechanism is required for measuring the organization’s proposed value for money (Ashworth & Hogg, 2014). At the same time, the non-monetary benefits need to be taken into account too. Hence, in terms of a convenient functional mechanism, the MEAL system or the “Monitoring, Evaluation, Accountability and Learning” system can be suggested. However, the mechanism chiefly prioritizes the monetary benefits of an organization.

More precisely, in terms of value for money, the organization will get a basis for data integration, adaptive programs, and while at the same time with this mechanism, the organization would be able to ensure the outputs, which will deliver the desired outcomes. Most significantly, with the help of the MEAL, the organization can successfully determine whether they are providing service with assured quality or not. On the other hand, considering the fact that the organization like Gamuda needs to measure the non-monetary benefits too, some of the methods of measuring values regarding non-monetary values are – skills inventory, methods of performance evaluation, rankings, ratings and alternation ranking (Kusters, 2016). With the help of skills inventory, the organization can fruitfully measure values like knowledge, skills and experience of the human resource. Besides, with the help of performance evaluation methods, rating and ranking comparison between the values regarding non-monetary benefits can be done. The aforementioned methods are some of the most convenient forms of mechanisms for ensuring reliability of the measurement too.  


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