VM Guide PDF

vm guide ®
A Guide to the Value Methodology Body of Knowledge

A production of SAVE International ®
19 Mantua Road, Mount Royal, NJ 08061, USA
VM Guide® Technical Committee:

Ginger Adams, CVS®, FSAVE
Ashley B. Carson, CVS®
Tammy Dow, CVS®
Javier Masini, CVS®
Sebastian Meindl, CVS®
Robert B. Stewart, CVS®, FSAVE
Istvan Tarjani, CVS®
Hisaya Yokota, CVS®, FSAVE
Cover and book design by Jeremy Banka.
This edition copyright © 2020 SAVE International®.

All rights reserved.
Printed in the United States of America.

i
VM Guide®
Preface
First shared with the public more than 70 years ago, the Value
Methodology (VM) has been successfully applied, learned,
shared, and improved upon by many professionals and institu-
tions around the globe. Its evolution resulted in it being called
different names and varying in the number of phases followed
in its application. The use of a function logic map with many
variations became standard practice, different certification
levels emerged and changed, and many more interesting things
happened during this function-oriented story that began with a
man named Larry Miles.
Larry Miles invented a breakthrough in problem-solving that
has been tested and validated for decades. Since he planted
the VM seed in 1947, it has grown and branched significantly.
As of today, many authors have written about and around
Miles’ function-based methodology, adding much knowledge
to his original approach while the language around his legacy
evolved to match the need to successfully apply VM to other
applications such as the service industry, organizational devel-
opment, and management procedures.
All these important changes, experiences, and improve-
ments have forged a set of best practices around the Value
Methodology, recorded separately in SAVE International Value
Summit papers or in independently authored books. SAVE
International’s Executive Committee decided to gather, orga-
nize, and document all the most relevant experience and best
practices into a new document, the Value Methodology Guide
(VM Guide®). It represents the core knowledge that individuals
aspiring to achieve certification as a Value Methodology Asso-
ciate (VMA) or Certified Value Specialist® (CVS®) need to know
to qualify. In addition, the VM Guide® is rich with guidance and
examples that will serve as an excellent reference for new prac-
titioners and as a resource for seasoned value practitioners to
refresh their skills and/or maintain their continuing education
requirements to recertify.
The development of the VM Guide® was also inspired by re-
cent changes in the SAVE International® certification process,
the associated development of core competencies required
to become certified by SAVE International®, and the absence
of a single source to which one may refer while preparing for
professional certification. Multiple publications currently ex-
ist, like the Function Analysis Guide (SAVE, 2016) and the Value
ii
Methodology Memory Jogger, Second Edition (GOAL/QPC,
2018). These publications will be revised to align with the VM
Guide® that, going forward, represents the standard terminol-
ogy and practice to be used when teaching and applying VM.
The VM Guide® is a SAVE International® publication, au-
thored by members of SAVE, the Lawrence D. Miles Value Foun-
dation, and related VM organizations representing Canada,
Germany, Hungary, Japan, Mexico, and the United States. The
primary authors are Certified Value Specialists® with decades
of experience applying the Value Methodology to projects,
products, processes, services, and organizations. The content
of the VM Guide® was shared with the membership of SAVE
International for their review and feedback before the publica-
tion was finalized through multiple VM Guide® Chapter Review
Committees. Dozens of VM practitioners and program manag-
ers from around the world contributed to this book.
As previously stated, the VM Guide® is focused on identi-
fying information covering the theory, guidance, process, and
techniques that a SAVE International® Certified Value Special-
ist® (CVS®) should know. It is neither possible nor practical to
attempt to include all the knowledge available around the Val-
ue Methodology. Therefore, the VM Guide® does not include
all VM techniques available: it is important to honor the history
of VM while respecting the need to evolve.
A key task of the VM Guide® development process was to
ensure that the information included represents state-of-the-
art practice and is inclusive of different areas of application.
Techniques that are not covered in the VM Guide® are still
valid; however, the SAVE International® professional certifica-
tion process does not include them. Therefore, the VM Guide®
includes references and links to additional sources for infor-
mation discussed, and readers are encouraged to use outside
sources to further hone their skills in specific areas of interest;
e.g., creativity techniques, evaluation methods, facilitation
skills, etc. Finally, a significant effort was made to present the
information in a generic manner that is not industry-specific,
so it can be easily applied to projects, products, processes,
services, and organizations.
iii
VM Guide®
Contents
1
Preface............................................................... ii 1Introduction.......................................................1
1.0 Overview and purpose of this Guide.............................1
1.1 Foundational concepts..................................................1
1.1.1 Value...................................................................... 1
1.1.2 Function................................................................ 2
1.1.3 The Value Methodology........................................ 2
1.1.4 Divergent and convergent thinking..................... 2
1.1.5 Teamwork.............................................................. 2
1.1.6 VM facilitator......................................................... 2
1.2 Application areas.......................................................... 2
1.3 History and evolution.................................................... 3
1.4 VM Organizations.......................................................... 3
1.4.1 SAVE International®............................................ 3
1.4.2 Miles Value Foundation........................................ 4
1.4.3 Other Value Methodology organizations............ 4
1.5 References..................................................................... 4
iv
2
2The Value Concept..............................................5 2.3.2 Users..................................................................... 7
2.0 Introduction.................................................................. 5 2.3.3 Stakeholders........................................................ 7
2.1 Terms and definitions.................................................... 5 2.3.4 Design, project, product, development,

or delivery team........................................................ 7
2.1.1 Cost-benefit analysis (CBA).................................. 5
2.3.5 Decision makers.................................................. 7
2.1.2 Cost, initial............................................................ 5
2.3.6 VM team................................................................ 7
2.1.3 Cost, life-cycle (LCC)............................................ 5
2.4 Reasons for poor value................................................. 8
2.1.4 Customer.............................................................. 5
2.4.1 Lack of information.............................................. 8
2.1.5 Efficiency.............................................................. 5
2.4.2 Fixation with “standard” solutions..................... 8
2.1.6 Expected value..................................................... 5
2.4.3 Poor communication........................................... 9
2.1.7 Performance......................................................... 5
2.4.4 Misconceptions and wrong beliefs.................... 9
2.1.8 Productivity.......................................................... 5
2.4.5 Rigid adherence to standards............................. 9
2.1.9 Quality................................................................... 5
2.4.6 Habits and attitudes.......................................... 10
2.1.10 Resource............................................................. 5
2.4.7 Indecision........................................................... 10
2.1.11 Risk...................................................................... 5
2.4.8 Fear of failure..................................................... 10
2.1.12 Schedule............................................................. 6
2.5 Elements of value.........................................................11
2.1.13 Stakeholder........................................................ 6
2.6 Value measurement.....................................................11
2.1.14 Time..................................................................... 6
2.6.1 Inputs and outputs..............................................11
2.1.15 User..................................................................... 6
2.6.2 Costs and Benefits............................................. 12
2.1.16 Utility .................................................................. 6
2.6.3 Performance and Resources............................. 12
2.1.17 Value ................................................................... 6
2.6.4 Expected value.................................................. 12
2.1.18 Voice of the customer........................................ 6
2.7 References....................................................................13
2.2 Development of the value concept............................. 6
2.3 Who determines value?................................................ 6
2.3.1 Customers ........................................................... 6
v
VM Guide®
3 4
3Value Methodology Job Plan..............................15 4Preparation Phase............................................23
3.0 Introduction.................................................................15 4.0 Introduction................................................................ 23
3.1 Terms and definitions...................................................15 4.1 Terms and definitions.................................................. 23
3.1.1 VM facilitator....................................................... 15 4.1.1 Constraints......................................................... 23
3.1.2 VM Job Plan......................................................... 15 4.1.2 Subject matter expert (SME)............................. 23
3.1.3 VM proposal........................................................ 15 4.1.3 VM pre-study meeting........................................ 23
3.1.4 VM study............................................................. 15 4.1.4 VM study sponsor.............................................. 23
3.1.5 VM study subject................................................ 15 4.1.5 VM study decision maker................................... 23
3.1.6 VM team.............................................................. 15 4.2 Process........................................................................ 23
3.2 Evolution of the VM Job Plan.......................................16 4.2.1 Identifying VM study goals & objectives........... 23
3.3 The relationship of a VM study 4.2.2 Inputs and outputs............................................ 24

to the VM Job Plan.......................................................... 17
4.2.2.1 Inputs.......................................................... 24
3.4 Communication dynamics
and the VM Job Plan...................................................... 18 4.2.2.2 Outputs....................................................... 24
3.5 Phases of the VM Job Plan.......................................... 18 4.2.2.3 Activities..................................................... 24
3.5.1 Preparation Phase.............................................. 18 4.2.2.4 Process flowchart...................................... 24
3.5.2 Information Phase............................................. 19 4.3 Activities...................................................................... 24
3.5.3 Function Analysis Phase.................................... 19 4.3.1 Conduct VM pre-study meeting......................... 24
3.5.4 Creativity Phase................................................. 19 4.3.1.1 Identify VM study participants................... 25
3.5.5 Evaluation Phase............................................... 19 4.3.1.2 Identify VM study schedule and agenda... 26
3.5.6 Development Phase........................................... 20 4.3.1.3 Identify site visit requirements................. 28
3.5.7 Presentation Phase............................................ 20 4.3.1.4 Identify VM study logistics........................ 29
3.5.8 Implementation Phase...................................... 20 4.3.2 Identify, collect, distribute,

and review information........................................... 30
3.6 References...................................................................21
4.3.2.1 Identification and collection of information.30
4.3.2.2 Distribution of information........................ 31
4.3.2.3 Review of information................................ 31
4.4 References...................................................................31
vi
5
5Information Phase............................................33 5.3 Activities...................................................................... 37
5.0 Introduction................................................................ 33 5.3.1 Reviewing and transforming

subject scope information..................................... 38
5.1 Terms and definitions.................................................. 33
5.3.2 Reviewing and transforming subject
5.1.1 Balanced scorecard........................................... 33 performance and quality information.................... 38
5.1.2 Cost model......................................................... 33 5.3.3 Reviewing and transforming
subject time information........................................ 38
5.1.3 Gantt Chart......................................................... 33
5.3.4 Reviewing and transforming
5.1.4 Pareto model...................................................... 33
subject cost information........................................ 39
5.1.5 Process flowchart.............................................. 33
5.3.5 Reviewing and transforming subject risk
5.1.6 Project management plan................................. 34 information..............................................................40
5.1.7 Quality management plan.................................. 34 5.3.6 Conducting a VM study kick-off meeting.......... 41
5.1.8 Quality model..................................................... 34 5.3.7 Conducting a site visit........................................ 41
5.1.9 RACI matrix......................................................... 34 5.4 Basic techniques........................................................ 42
5.1.10 Resource model............................................... 34 5.4.1 Voice of the customer........................................ 42
5.1.11 Risk model......................................................... 34 5.4.2 SWOT analysis.................................................... 43
5.1.12 Risk register...................................................... 34 5.4.3 RACI matrix .......................................................44
5.1.13 Scope................................................................ 34 5.4.4 Process flowcharts............................................44
5.1.14 Specifications................................................... 34 5.4.5 Balanced scorecard.......................................... 46
5.1.15 Work breakdown structure.............................. 34 5.4.6 Gantt chart......................................................... 47
5.2 Process........................................................................ 34 5.4.7 Cost models....................................................... 47
5.2.1 Gathering and Organizing Information............. 34 5.4.8 Risk registers and scoring................................. 48
5.2.2 Reviewing and transforming Information......... 35 5.4.9 Work breakdown structure............................... 49
5.2.3 Orienting participants....................................... 36 5.5 Informative References...............................................51
5.2.4 Inputs and outputs............................................ 36
5.2.4.1 Inputs.......................................................... 36
5.2.4.2 Outputs....................................................... 37
5.2.4.3 Activities..................................................... 37
5.2.5 Process flowchart.............................................. 37
vii
VM Guide®
6
6Function Analysis Phase...................................53 6.2.3.4 Process flowchart...................................... 57
6.0 Introduction................................................................ 53 6.3 Activities...................................................................... 58
6.1 Terms and definitions.................................................. 54 6.3.1 Define functions................................................. 58
6.1.1 Activity................................................................ 54 6.3.1.1 Identify functions ...................................... 59
6.1.2 FAST.................................................................... 54 6.3.1.2 Classify functions ...................................... 60
6.1.3 Function.............................................................. 54 6.3.1.3 Organize functions .................................... 62
6.1.4 Function, all-the-time........................................ 54 6.3.2 Allocate resources ............................................ 63
6.1.5 Function analysis............................................... 54 6.3.3 Prioritize functions............................................ 63
6.1.6 Function, basic................................................... 54 6.4 Basic Techniques........................................................ 63
6.1.7 Function, higher-order....................................... 54 6.4.1 Random function identification......................... 63
6.1.8 Function logic path............................................ 54 6.4.2 FAST Diagrams................................................... 64
6.1.9 Function, lower-order........................................ 54 6.4.2.1 “How” and “Why” logic............................... 65
6.1.10 Function, one-time........................................... 54 6.4.2.2 “When” logic............................................... 66
6.1.11 Function performance specification 6.4.2.3 Structure of the FAST diagram.................. 66

(FPS) matrix............................................................. 54
6.4.2.4 AND/OR logic.............................................. 68
6.1.12 Function resource matrix................................. 54
6.4.2.5 FAST diagrams versus flowcharts............ 68
6.1.13 Function, secondary......................................... 54
6.4.3 Function resource allocation (matrix).............. 69
6.1.14 Function, unwanted.......................................... 54
6.4.4 Function performance specification matrix.....71
6.1.15 Random function identification....................... 54
6.4.5 FAST dimensioning............................................ 72
6.1.16 Subject objectives............................................ 54
6.5 References...................................................................73
6.2 Process and key concepts......................................... 55
6.2.1 The function concept......................................... 55
6.2.2 Why function analysis?...................................... 56
6.2.3 Process inputs and outputs.............................. 57
6.2.3.1 Inputs.......................................................... 57
6.2.3.2 Activities..................................................... 57
6.2.3.3 Outputs....................................................... 57
viii
7 8
7Creativity Phase...............................................75 8Evaluation Phase..............................................81
7.0 Introduction................................................................ 75 8.0 Introduction.................................................................81
7.1 Terms and definitions.................................................. 75 8.1 Terms and definitions...................................................81
7.1.1 Convergent thinking........................................... 75 8.1.1 Criteria................................................................ 81
8.1.2 Evaluation........................................................... 81
7.1.2 Creativity............................................................. 75
8.1.3 Grading............................................................... 81
7.1.3 Creativity techniques......................................... 75
8.1.4 Ranking............................................................... 81
7.1.4 Divergent thinking.............................................. 75
8.1.5 Weighting............................................................ 81
7.1.5 Freewheeling...................................................... 75
8.2 Process and key concepts......................................... 82
7.1.6 Hitchhiking.......................................................... 75
8.2.1 Process inputs and outputs............................... 82
7.2 Process and key Concepts......................................... 75
8.2.1.1 Inputs.......................................................... 82
7.2.1 The importance of functions in the
8.2.1.2 Activities..................................................... 82
creative process..................................................... 75
8.2.1.3 Outputs....................................................... 83
7.2.1.1 Framing problems using functions............ 76
8.2.1.4 Process flowchart...................................... 83
7.2.1.2 Leveraging the ambiguity of functions...... 76
8.3 Activities...................................................................... 83
7.2.2 Creative process.................................................77
8.3.1 Establish evaluation framework........................ 83
7.2.3 Process inputs and outputs................................77
8.3.2 Establishing evaluation criteria........................84
7.2.3.1 Inputs...........................................................77
8.3.2.1 Understanding the current state...............84
7.2.3.2 Activities......................................................77 8.3.2.2 Guide for establishing evaluation criteria.84
7.2.3.3 Outputs........................................................77 8.3.2.3 Examples of evaluation criteria................. 85
7.2.3.4 Process flowchart...................................... 77 8.3.3 Evaluating ideas................................................. 86
7.3 Activities...................................................................... 78 8.3.3.1 Evaluation in the context of human behavior.86
7.3.1 Generate ideas................................................... 78 8.3.3.2 Establishing the scope of evaluation........ 86
7.3.2 Record ideas....................................................... 78 8.3.4 Selecting ideas.................................................. 87
8.4 Techniques.................................................................. 87
7.4 Creativity techniques.................................................. 78
8.4.1 Coarse filter – simple evaluation techniques... 87
7.4.1 Brainstorming..................................................... 79
8.4.2 Medium filter – intermediate evaluation techniques.88
7.4.2 Brainwriting........................................................ 79
8.4.3 Fine filter – detailed evaluation techniques..... 89
7.5 References................................................................... 80
8.5 References...................................................................91
ix
VM Guide®
9
9Development Phase..........................................93 9.3.2.3 Assess time or schedule impacts............. 97
9.0 Introduction................................................................ 93 9.3.2.4 Assess performance and quality impacts.97
9.1 Terms and definitions.................................................. 93 9.3.2.5 Assess risk.................................................. 98
9.1.1 Annuity................................................................ 93 9.3.2.6 Develop narratives................................... 100
9.1.2 Break-even point................................................ 93 9.3.3 Review and revise VM proposals..................... 100
9.1.3 Escalation........................................................... 93 9.4 Basic techniques.......................................................101
9.1.4 Future value........................................................ 93 9.4.1 VM proposal development forms.....................101
9.1.5 Inflation............................................................... 93 9.4.2 Calculate a return on investment....................101
9.1.6 Interest rate........................................................ 93 9.4.3 Calculate a simple payback............................ 102
9.1.7 Life-cycle cost (LCC) analysis............................ 93 9.4.4 Life-cycle cost analysis................................... 102
9.1.8 Life-cycle period................................................ 94 9.4.4.1 The time value of money.......................... 105
9.1.9 Present value...................................................... 94 9.4.4.2 Inflation and escalation........................... 106
9.1.10 Return on investment (ROI).............................. 94 9.4.4.3 Life-cycle cost methods...........................107
9.1.11 Simple payback................................................ 94 9.5 References................................................................ 109
9.1.12 Time value of money......................................... 94
9.2 Process........................................................................ 94
9.2.1 The development process................................. 94
9.2.2 Inputs and outputs............................................ 95
9.2.2.1 Inputs.......................................................... 95
9.2.2.2 Outputs....................................................... 95
9.2.2.3 Activities..................................................... 95
9.2.2.4 Process flowchart...................................... 96
9.3 Activities...................................................................... 96
9.3.1 Assigning ideas to the VM team......................... 96
9.3.2 Develop VM proposals....................................... 96
9.3.2.1 Ensure technical viability........................... 97
9.3.2.2 Determine costs......................................... 97
x
10
10Presentation Phase........................................111 10.4.8 Overcome visual bias.....................................115
10.0 Introduction............................................................. 111 10.4.9 Be wary of PowerPoint....................................115
10.1 Terms and definitions............................................... 111 10.4.10 Recognize others for their efforts................116
10.1.1 Handout ........................................................... 111 10.4.11 Communicate concisely...............................116
10.1.2 Visual presentation......................................... 111 10.4.12 Effective Q&A.................................................116
10.1.3 VM study report............................................... 111 10.4.13 Use of graphics, sketches, and charts
instead of words....................................................116
10.2 Process.....................................................................112
10.4.14 Have a presentation moderator...................116
10.2.1 Inputs and outputs..........................................112
10.4.15 Remote presentations..................................116
10.2.1.1 Inputs.......................................................112
10.5 References................................................................116
10.2.1.2 Outputs....................................................112
10.2.2 Activities..........................................................112
10.2.3 Process flowchart..........................................112
10.3 Activities...................................................................113
10.3.1 Schedule the VM presentation.......................113
10.3.2 Select the VM proposals to present...............113
10.3.3 Prepare the visual presentation

and handouts.........................................................113
10.3.4 Starting the presentation...............................113
10.3.5 Develop VM study Report...............................114
10.4 Basic techniques......................................................114
10.4.1 Share the credit...............................................114
10.4.2 Find champions of change.............................114
10.4.3 Sell the concept of change early...................115
10.4.4 Use language to communicate ideas

with enthusiasm.....................................................115
10.4.5 Sell value improvement..................................115
10.4.6 Be prepared.....................................................115
10.4.7 Create excitement...........................................115
xi
VM Guide®
11 12
1Implementation Phase....................................117 12VM Facilitation and Team Dynamics.................125
11.0 Introduction.............................................................. 117 12.0 Introduction............................................................ 125
11.1 Terms and definitions............................................... 117 12.1 Terms and definitions.............................................. 125
11.1.1 Change management....................................... 117 12.1.1 Consultant...................................................... 125
11.1.2 Implementation meeting................................. 117 12.1.2 Facilitator........................................................ 125
11.1.3 Implementation plan....................................... 117 12.1.3 Neutral............................................................ 125
11.1.4 Resistance to change...................................... 117 12.2 General facilitation skills........................................ 126
11.1.5 Status reports.................................................. 117 12.2.1 Active listening............................................... 126
11.2 Process......................................................................118 12.2.2 Questioning ................................................... 126
11.2.1 Managing change ............................................118 12.2.3 Using feedback...............................................127
11.2.2 The forces of change.......................................118 12.2.4 Handling conflict.............................................127
11.2.3 Implementing change ....................................119 12.2.5 Consulting or facilitating?..............................127
11.2.4 Inputs and outputs..........................................119 12.3 Group dynamics ..................................................... 128
11.2.4.1 Inputs.......................................................119 12.3.1 Tuckman’s group development model ........ 128
11.2.4.2 Outputs....................................................119 12.3.2 Other group dynamics................................... 129
11.2.4.3 Activities................................................. 120 12.3.2.1 Groupthink.............................................. 129
11.2.4.4 Process flowchart...................................120 12.3.2.2 Small versus large groups...................... 129
11.3 Activities................................................................... 120 12.3.2.3 Social loafing ......................................... 130
11.3.1 Review and assess VM proposals.................. 120 12.3.2.4 The fallacy of silence
meaning concurrence...................................... 130
11.3.2 Resolve VM proposals.................................... 120
12.3.2.5 Heuristics................................................ 130
11.3.3 Develop the implementation plan..................121
12.4 Forming teams ........................................................ 130
11.3.4 Track and audit results....................................121
12.4.1 Team composition approaches .....................131
11.4 Basic techniques......................................................121
12.4.1.1 100% Independent .................................131
11.4.1 Implementation forms....................................121
12.4.1.2 100% Design team and stakeholder ......131
11.4.2 Implementation status reports..................... 122
12.4.1.3 Hybrid – Blend of independent
11.5 References............................................................... 122 and subject team/stakeholder ........................131
12.4.2 Team size ........................................................131
xii
13
12.5 Facilitation of Preparation Phase techniques........131 13VM Programs..................................................139
12.6 Facilitation of information phase techniques....... 132 13.0 Introduction............................................................ 139
12.7 Facilitation of Function Analysis Phase 13.1 Terms and definitions.............................................. 139
techniques................................................................... 133
13.1.1 Value engineering change proposal (VECP)... 139
12.7.1 Working with people unfamiliar
with function analysis........................................... 133 13.1.2 VM program .................................................... 139
12.7.2 Facilitating development of a FAST diagram .133 13.1.3 VM program manager..................................... 139
12.8 Facilitation of Creative Phase techniques............ 134 13.2 VM program elements............................................. 139
12.9 Facilitation of Evaluation Phase techniques......... 135 13.2.1 VM program manager..................................... 139
12.10 Facilitation of Development Phase techniques.. 135 13.2.2 Policies, standards, and procedures............ 140
12.11 Facilitation of Presentation Phase techniques... 136 13.2.3 VM program champion................................... 140
12.12 Facilitation of Implementation Phase 13.2.4 VM program information tracking and key
techniques................................................................... 136 performance indicators.........................................141
12.13 References..............................................................137 13.2.5 Qualified VM facilitator and team members. 142
13.3 VM program development...................................... 142
13.3.1 Location within the organization................... 142
13.3.2 Integration with other programs................... 142
13.3.3 Authority and reporting structures............... 142
13.3.4 Organizational awareness and training........ 143
13.4 VM program management...................................... 143
13.4.1 Selecting subjects for VM studies................. 143
13.4.2 Timing of VM studies...................................... 145
13.4.2.1 Planning phase....................................... 146
13.4.2.2 Design phases........................................ 146
13.4.2.3 Acquisition phase....................................147
13.4.2.4 Value engineering incentive clause....... 148
13.4.2.5 VM program requirements clause......... 148
13.4.3 Sustaining a VM program............................... 148
xiii
VM Guide®
Appendix A
14Glossary of Terms........................................................................... 149
Appendix B
15Historical and Cultural Perspectives on Value.................................. 155
Appendix C
16VM Standard Reference.................................................................. 161
17
Appendix D
18Index.............................................................................................. 161
19
xiv
xv
VM Guide®
xvi
1. Introduction
1
Introduction
1.0 Overview and purpose of this Guide the function required, as opposed to the specific piece or part
requested. Many of these “substitutes” performed as well as,
The VM Guide® is intended to form a basis for the knowledge
if not better than, the originally requested items and, in some
value practitioners need as they learn the Value Methodology
cases, for less cost. This was the birth of function analysis, as
(VM), prepare for a VM certification exam, and to serve as a min-
we know it today, and remains the single most important dis-
imum level protocol for CVS® practice throughout their career.
tinction of VM.
The Guide has been organized to convey the WHO, WHAT, WHY,
The VM Job Plan is defined in Miles’ Techniques of Value Anal-
and WHEN of VM – and is presented in three major components:
ysis and Engineering, (3rd Edition, 1989), as the “problem-solv-
● Core terms, concepts, processes, and activities of the ing system.” Since the inception of the “value method,” many
methodology. people have written books, taught courses, delivered presen-
tations, and facilitated teams through tens of thousands of
● Applications illustrating how the VM process (known as VM studies and training courses. And through that time, the
the VM Job Plan) and related techniques are executed problem-solving system—the VM Job Plan—remained intact. It
relative to projects, products, processes, services, and is a logical, sequential approach to analyze a subject, whether
organizations (collectively referred to as the “subject” of it be a project, product, process, service or organization.
a VM study).
1.1.1 Value
● Additional resources and templates to provide a basic Since its creation in the late 1940s, the Value Methodology
foundation for applying core techniques in a standardized described in this Guide has received different names, like value
way. Note that these examples and forms are not intended engineering or value analysis. Nevertheless, the word “value”
to be “required” by practitioners in the performance of is always there. To really understand the power of this meth-
actual VM studies. odology, the VM practitioner must grasp the essence of value.
It is not uncommon to find analysts or decision-makers using
It is important for readers to appreciate that VM is a systematic
the word “value” interchangeably with “price” or “cost”; this
process and not a “collection of standalone tools.” Each phase
common misunderstanding may lead to the wrong decision be-
of the VM Job Plan builds on the previous phases. As the VM
ing made, cutting corners, and cheapening the project. This mis-
Guide® presents the overall, decades-proven Value Methodol-
conception has also led many practitioners to refer to any cost
ogy, this concept of “system” is organized in focused chapters
reduction activity as “value engineering,” a very risky mistake.
threaded together to identify coherent professional practice.
When Larry Miles stated his famous axiom “All cost is for
Each chapter includes specific terms and definitions applica-
function,” he was stating that value is first established by the
ble to the chapter content. In addition, a complete Glossary of
user’s (or customer’s) needs and wants. Chapter 2 describes
Terms is included at the end of the VM Guide®.
in detail how the concept of value cares for both the custom-
er's needs and the organization’s interests in better using the
1.1 Foundational concepts available resources to satisfy these needs. Chapter 2 also
The foundational concepts of VM date back to the 1940s, focuses on the idea of a function as the means to describe the
when Lawrence D. Miles, the “Father of Value Analysis” (as he customer’s needs and wants which will be detailed in a manner
originally called it), worked for the General Electric Company to broaden the understanding of the problem or opportunity in
in Schenectady, New York. Tasked with providing increasingly such a way that it drives the generation of creative alternatives.
difficult-to-find materials and parts required for the military
during World War II, Miles began looking for ways to provide
1
VM Guide®
1.1.2 Function This change in framing problems is essential to changing the

The thorough analysis of expected and achieved functions is way we think about possible solutions. Figure 1.1 describes
the most important element that makes the Value Methodology the difference between traditional problem framing (which is
unique among so many problem-solving methods. “Function” object-oriented), and the Value Methodology problem framing
is the element of value that focuses on achieving the custom- (which is function-oriented). By using generic descriptions of
er’s needs while broadening the mind of the team performing the customer needs, using the function rules described in
the VM study. As explained later in this VM Guide®, VM defines Chapter 6, the team approaches the problem with a very differ-
a “function” as a non-specific abstraction, consisting of an ent and divergent mindset that leads to a more innovative set of
action verb and a measurable noun, that describes what an solutions. Also, Chapter 3 describes how the standard VM Job
element of a project, product, process, service, or organiza- Plan starts with divergent thinking until innovative ideas are
tion does or should do. In other words, VM acknowledges that generated, and later uses convergent thinking in the evaluation
customers never buy things, but the function (or result) they and development of those ideas into implementable proposals.
receive from those things. Chapter 6 describes the process to
perform a complete analysis of functions that will be used to 1.1.5 Teamwork
later generate alternative solutions to the problem that could One of the foundational concepts of the Value Methodology
not easily be found with traditional, “object-oriented” (instead states that a multidisciplinary team is responsible to improve
of function-oriented) approaches. the value of a project, product, process, service, or organiza-
tion through the analysis of functions. Teams assembled for VM
1.1.3 The Value Methodology studies are normally shaped as a task force, which implies the
The Value Methodology (VM) is a systematic process used by formation of a requisite group of subject matter experts who
a multidisciplinary team, led by a qualified VM Facilitator, to bring together a specific set of skills and disciplines to accom-
improve the value of a project, product, process, service, or plish a specific goal. Team members may come from different
organization through the analysis of functions. The formal VM areas within the same organization or outside it, such as clients,
process includes eight distinct phases referred to collectively designers, or any other stakeholders who will bring the required
as the VM Job Plan. Depending who uses this standardized ap- set of knowledge expected to achieve the desired results.
proach, the same methodology has been called other names
such as value engineering, value analysis, and value manage- 1.1.6 VM facilitator
ment, as stated in the SAVE International Value Methodology In every VM study, team members are the experts providing the
(VM) Standard (see Appendix C – VM Standard). All three of right set of skills and knowledge to the goal of the study. Al-
these terms represent the application of the Value Methodol- though it is beneficial if they understand VM, they are not nec-
ogy in either different moments of the life cycle of the subject essarily expected to be knowledgeable about the VM process;
under study or in different application scenarios within an that is the role of the VM facilitator. The VM facilitator is the one
organization. who will guide the work of the group to accomplish its goals.
The facilitator will plan, lead, and facilitate the VM study, and
1.1.4 Divergent and convergent thinking is expected to have the skills and experience described later in
As previously described in 1.1.2, the fact that the team focuses on this guide. Chapter 12 provides the common VM guidelines and
a generic description of what the customer needs (the function) best practices for VM facilitators.
requires the VM team to reframe the subject under study as a
statement of purpose or intent. The Value Methodology improves 1.2 Application areas
the problem framing process, which is the process of describing The Value Methodology may be applied to anything that
and interpreting a problem to arrive at a problem statement. performs a function. Applications encompass construction,
Problem framing is an important step in problem solving, as slight product design and manufacturing, supplies, transportation,
changes in framing a problem may lead to a vastly different prob- health care, government, environmental engineering, business
lem-solving process and the resulting solutions. processes, and service industries. Organizations that use the
Functions
divergent thinking innovative ideas
Object/Problem Solution
traditional approach
Figure 1.1 – How VM uses functions to generate divergent thinking, reframing the problem.
2
1. Introduction
Value Methodology span both private and public sectors and

include federal, state, and municipal agencies.
While the types of information and team structure vary, de-
“ In recognition of his outstanding accomplishment through
the establishment, organization, and development of a
Value Analysis Program, which has resulted in substantial
pending upon the VM study subject, the VM Job Plan is applied cost reductions.”
in the same sequential order in all cases.
VM helps to find solutions for all kinds of challenges. Be- In 1954, the U.S. Navy Bureau of Ships implemented the first
cause VM is, by design, a multidisciplinary, multicriteria meth- federal government VM program with assistance from Miles
od that looks at both value and costs, it can solve problems and and his staff. It was there that the name “value engineering”
produce solutions that can easily be implemented. By looking took hold. Nine years later in 1963, the Department of Defense
for the function, VM takes you away from a monodisciplinary (DoD) established specific requirements for a formal program
approach and opens a fresh perspective on the challenge at within the three military services. This included design and
hand. The language (verb and noun) and the method allow construction activities, as well as suppliers, and mandated
people with totally different backgrounds, disciplines, and incentive-sharing clauses in construction contracts. Contrac-
interests to work together and find common ground and “out tors were permitted to propose value engineering changes
of the box” solutions. (value engineering change proposals or VECP) and share in net
savings. The high level of success achieved by the DoD led to
great expansion over the next 15 years. This included agencies
1.3 History and evolution such as General Services Administration, Environmental Pro-
As previously noted, the Value Methodology was developed tection Agency, U.S. Forest Service, Veterans’ Administration,
during the World War II era, from 1939 to 1945, by Lawrence Federal Highway Administration, and the Department of the
Delos Miles during his employment with General Electric Com- Interior. Today, every federal agency with a significant con-
pany. Miles was repeatedly tasked with securing materials, struction or purchasing program employs VM in some form.
parts, and systems desperately needed for the military, and Most state Departments of Transportation employ VM, as do
consistently succeeded – despite overextended suppliers – in many municipalities throughout the U.S. and Canada.
supplying those needs by analyzing what functions they were Today, the terms “value engineering,” “value analysis,” and
required to perform. “value management” are often used interchangeably. Howev-
In 1944, Miles transferred to Locke Insulator, a subsidiary er, in some environments, they are distinguished differently.
of General Electric, in Baltimore, Maryland. As Manager of For example, the California Department of Transportation has
Purchasing there, he was responsible for delivery and cost of a value analysis program, while the Federal Highway Admin-
millions of dollars’ worth of materials and products per year. He istration has a value engineering program. The City of New
developed patterns of engineering, laboratory, and purchasing York, Office of Management and Budget, having had a highly
teamwork that limited costs and improved products. He learned successful program since 1982, designates value engineering
both the productive and destructive force of human attitudes when the methodology is applied to construction projects, and
and practices, and their effects on appropriate designs and value analysis for application to business process improve-
appropriate costs. His thinking increasingly turned to “What ment studies. In the manufacturing sector, value engineering
function am I buying?” rather than “What material am I buying?” is performed on a project in development, whereas value anal-
In 1947, Miles returned to GE in Schenectady to lead what ysis occurs after the product is designed and produced. When
was named the Purchasing Department Cost Reduction Sec- the General Services Administration started a program in the
tion. He researched and developed workable techniques that 1970s, they called it value management.
would secure more cost-effective achievements by the deci- The term “value methodology” encompasses all these nu-
sion-making employees in a plant or business. The new func- ances as an umbrella term that represents that the true Value
tion-based approach was introduced to GE’s Vice President Methodology –– the Job Plan as we know it –– is employed,
of Engineering who said, “This is the best method I have seen without regard for the setting in which it’s used.
to get competitive costs and retain quality. What are you going
to call it? Proper quality at proper costs equals value. Why not
call it value analysis?” From that point, Miles was tasked with
1.4 VM Organizations
training 1,000 people per year. He used people and products
1.4.1 SAVE International®
from different plants, applied the techniques, and showed
them how they could increase earnings and maintain competi- SAVE International® (SAVE) is the premier, international, pro-
tive positions. Training sometimes exceeded the annual target fessional association devoted to advancing and promoting the
of 1,000 people, and during the four years from 1948 to 1952, Value Methodology. The association provides its members ed-
$10 million in savings were reported. In 1950, GE gave Miles its ucation and training, publications, certification, promotional
highest award, the Coffin Award (named for and given in honor tools, networking, and recognition.
of their first president), with the citation: SAVE operates a certification program which is globally
recognized as the industry standard for competence in the ap-
plication of the Value Methodology. The annual Value Summit
3
VM Guide®
is SAVE’s major event and typically attended by delegates from Additional professional organizations with which SAVE often
every continent. collaborates include:
SAVE members are trained and certified in the practice of
the VM in more than 35 countries. Originally founded in 1959 ● Dutch Association of Cost Engineers (DACE), Netherlands
as the Society of American Value Engineers (SAVE), the society (www.dace.nl)
officially changed its name to SAVE International® in 1996.
● Hong Kong Institute of Value Management (HKIVM)
Find more information about SAVE online at www.value-eng.
(hkivm.org)
org. The name “SAVE International” became a registered trade-
mark in 2012. ● Value Analysis Canada (VAC) (www.valueanalysis.ca)
1.4.2 Miles Value Foundation ● Value Engineering Society of China (VESC)

The Lawrence D. Miles Value Foundation (MVF) is a charitable (www.vesc.org.cn)
foundation created, in 1977, to promote and fund the devel-
opment of educational programs, new applications, and a
research library for the study of the Value Methodology. 1.5 References
The MVF accomplishes its mission by: ● Miles, Lawrence D. Recollections, Miles Value Foundation,
1987, https://play.google.com/store/books/details/
1. Promoting public awareness of the Value Methodology Lawrence_D_Miles_Foundation_Lawrence_D_Miles_
through publications, multimedia programs, and technol- Recol?id=djFbDwAAQBAJ
ogy transfer programs
● Miles, Lawrence D. Techniques of Value Analysis and
2. Offering practical and innovative applications of VM in Engineering, 3rd Edition edited by Eleanor Miles Walker,
business and government Executive Director, Lawrence D. Miles Value Foundation,
1987.
3. Developing and teaching courses in the value principles
and methodology at the undergraduate, graduate, and ● Miles Value Foundation. The Value Methodology Memory
postgraduate levels Jogger® 2nd edition, GOAL/QPC, 2018. Print.
4. Encouraging professionals and students to undertake

research and development of value-related applications
and programs through scholarships and grants programs.
Find more information on the MVF online at valuefoundation.org.
1.4.3 Other Value Methodology organizations

With the spread of the Value Methodology came the formation
of VM organizations throughout the world. Several of those
organizations are SAVE International affiliates and operate the
SAVE Certification Program in their countries and in their native
languages. Those include:
● Society of Japanese Value Engineering (SJVE) (www.sjve.org)
● Indian Value Engineering Society (INVEST)

(www.invest-in.org)
● Society of Korean Value Methodology (SKVM)
● Society of Hungarian Value Analysts (SHVA)

(www.shva.hu)
● Value Management Institute of Taiwan (VMIT)

(www.vmit.org)
4
2. The Value Concept
2
The Value Concept
2.0 Introduction 2.1.5 Efficiency

The function of the Value Methodology is to improve value. This The ratio of useful output to total input. Efficiency refers to very
chapter explores the history, theory, elements, and approach- different inputs and outputs, depending on specific fields and
es to measuring value. industries.
2.1.6 Expected value

2.1 Terms and definitions A quantitative measure of value expressed by multiplying an
anticipated outcome by the probability of its occurrence.
2.1.1 Cost-benefit analysis (CBA)
A method used to ascertain the soundness of any investment 2.1.7 Performance
opportunity and provide a basis for making comparisons with The extent to which a project, product, process, service, or
other such proposals. All the positives and negatives of the VM organization achieves its intended function(s). Performance
study subject are first quantified in monetary terms and then can be measured quantitatively or qualitatively, the measure-
adjusted for their time-value to obtain correct estimates for ment of which answers the question of how well the function(s)
conducting a CBA. is(are) being performed.
2.1.2 Cost, initial 2.1.8 Productivity

The expenditure of all the resources needed to design, deliver, The rate of output per unit of input; usually for a production
produce, or establish a project, product, process, service, or process, however it is used also for construction activities.
organization. Cost has different dimensions that can be mea-
sured by factors such as materials, labor, equipment, time, risk, 2.1.9 Quality
etc. and be quantified in currency. Cost should not be confused A subjective term for which each person or sector has its own
with “price,” which is the amount of money exchanged or set definition. In technical usage, quality can have two meanings:
as consideration for the sale of something. Initial cost is also 1) the characteristics of a product or service that bear on its
frequently referred to as “capital cost.” ability to satisfy stated or implied needs; 2) a product or ser-
vice free of deficiencies. According to Joseph Juran, quality
2.1.3 Cost, life-cycle (LCC)
means “fitness for use”; according to Philip Crosby, it means
The sum of all recurring and one-time (non-recurring) costs “conformance to requirements.”
over the full lifespan or a specified period of a project, product,
process, service, or organization. It includes the initial costs, 2.1.10 Resource
operating costs, maintenance and upgrade costs, and remain- All inputs of cost, time, energy, space, materials, labor, etc.
ing (residual or salvage) value at the end of ownership or its required to accomplish a function.
useful life, including salvage or decommissioning costs.
2.1.11 Risk
2.1.4 Customer
An uncertain event that could have an impact on the cost,
A person or an organization that purchases a product or ser- schedule, or performance of a project, product, process,
vice. The customer plays a critical role, if not the most import- service, or organization. Risks can either be positive (oppor-
ant, in determining value. In some cases, the customer may tunities) or negative (threats). The Value Methodology must
also be a user. consider the impact of risks to value.
5
VM Guide®
2.1.12 Schedule value is established by the user’s—or the customer’s—needs

A procedural plan indicating the time, duration, and sequence of and wants.
activities or operations. Schedule may be considered as an input Miles stated that a product or service is considered to have
(a resource) or an aspect of performance, depending upon the good value only if it has appropriate performance and cost. He
context of the project, product, process, service, or organization. also made the following observations:
2.1.13 Stakeholder ● Value is always increased by decreasing costs (while, of

course, maintaining performance).
An individual, group, or organization who may affect, be affect-
ed by, or perceive itself to be affected by a decision, activity, or ● Value is increased by increasing performance if the custom-
outcome of the project (i.e., VM study). er needs, wants, and is willing to pay for more performance.
2.1.14 Time It follows that there are other ways to improve value. One way
The measured or measurable period during which an action, is to increase performance while increasing costs, such that
process, or condition happens. Time, as an element of value, the improvement in performance is greater than the increase in
may be considered as an input (resources) as well as an out- cost. Another way is to decrease performance while decreas-
put. For example, time may be considered as an input when ing costs, such that the decrease in cost is greater than the
considering the delivery of a project and as an output when decrease in performance while still delivering the functions
experiencing a service such as a massage. and minimal performance needed by the customer.
2.1.15 User
2.3 Who determines value?
A person or entity that utilizes or receives the results of the project,
As described above, value is frequently extrinsic and depends
product, process, or service, or is a member of an organization.
upon the individual’s point of view. Seldom is value singular in
2.1.16 Utility nature and it usually involves many perspectives. To improve
value, it is important to consider who determines value.
An economic concept that is used to quantify the usefulness
of, or level of, satisfaction derived from a thing. Utility is closely 2.3.1 Customers
related to the concepts of performance and quality.
The customer ultimately makes buying decisions and is fre-
2.1.17 Value quently also a user. The concept of customer value is based on
the idea that people make rational buying decisions based upon
An expression of the relationship between the performance of
the relationship between the total cost of ownership and perfor-
functions relative to the resources required to realize them. This
mance. The primary principle in this decision is overall value; or,
can be expressed as Value = (Function Performance)/Resources.
simply said, is the customer getting the most for their money?
2.1.18 Voice of the customer It is important to remember that customers closely relate
value directly to the function or functions that they are trying
A process and/or method of eliciting the preferences and re-
to acquire. Understanding what customers value is important
quirements of customers and users relative to value.
because it can help us better understand how people choose
among competing suppliers of goods and services. This ap-
2.2 Development of the value concept proach, which ties into traditional marketing disciplines, can
The history of the value concept is long. From the dawn of civi- help lead organizations to search for the answers to several
lization, the idea of value has engaged scholars, philosophers, important customer value questions such as:
mathematicians, economists, and psychologists. This section
is intended to provide some historical context to the thinking ● What are the key buying factors that customers value
behind the value concept while illustrating the importance of when they choose between a business and its most
concepts such as utility, cost, performance, time, uncertainty, closely related competitors?
and human perception in considering value. Refer to Appendix
● How do functions support customer “wants and needs”?
B for additional information on the historical and cultural per-
spectives on value. ● How do customers correlate an organization’s performance
In 1947, Lawrence D. Miles established the concept of value compared with its competitors for each key buying factor?
as a technical field of study. In 1961, he published Techniques
of Value Analysis and Engineering, which presented the con- ● What is the relative importance of each of these compo-
cept of function as an integral part of value. nents of customer value?
Miles defined value in terms of the relationship between
Often the view from the marketplace differs from the organi-
function and cost. This was eloquently stated in his axiom, “All
zation’s internally developed perception of customer values.
cost is for function.” Of equal importance, he stressed that
It is important that those seeking to apply VM appreciate the
importance of understanding the wants and needs of its cus-
6
tomers in improving value. Ultimately, the success of an orga- 2.3.3 Stakeholders

nization depends on how well it satisfies the needs and wants Stakeholders represent those who have an interest in the proj-
of its customers. ect, product, process, service, or organization. For example, a
The key criterion in measuring this is value. The Value Meth- salesperson or family member is a stakeholder in a customer
odology, as described in the chapters that follow, will provide buying an automobile. They have an interest in influencing the
the reader with a means of creating and improving value for the buying decision, but do not ultimately make the final decision.
projects, processes, products, services, or facilities an orga- Construction projects often have many stakeholders. For
nization provides. There are numerous techniques that can be example, stakeholders having an interest in a highway project
employed to capture and understand the customer preferences. might include regulatory agencies, community groups, utility
Voice of the customer (VOC) is a process used to capture companies, property owners, and the public, in addition to the
the requirements/feedback from the customer and/or user designers, consultants, contractors, subcontractors, etc.
(internal or external) to provide information regarding the level Manufactured products stakeholders consist of designers,
of performance and quality they desire. These are presented in manufacturing engineers and operators, finance, sales and
Chapter 5, Information Phase. marketing personnel, and service people, etc.
An organization must strive to hear its intended customers It should be noted that stakeholders have three different
or end users if it desires to succeed. Once the organization has views: those who support the activity, those who are neutral,
accomplished this first step, it will be in a better position to: and those who oppose the activity. Failing to identify all the
stakeholders in the beginning can lead to serious implications
● Understand what customers and users value from its proj-
for the project, product, process, service, or organization.
ects, products, processes, services, and organizations.
There are many tools and techniques related to identifying
● Measure value and communicate it to customers and users. and managing stakeholders. VM Facilitators should seek to
identify them and understand their interests, as they can sig-
● Prioritize what a customer wants as value and deliver it. nificantly influence value decisions.
● Retain existing customers (the cost of finding a new one is
2.3.4 Design, project, product, development, or delivery team
typically 5 to 10 times that of serving an existing customer).
Those involved in conceiving, designing, producing, or other-
● Convert unknown customers to known ones. wise delivering a project, product, process, or service have
significant influence on value. This group of people owns the
● Create a competitive advantage through the development
responsibility to interpret the needs of customers, users,
of a customer-focused organization.
stakeholders, and decision makers and transform them into
● Manage changes in customer expectations and optimize something of value that addresses those needs. In order to
processes to keep delivering optimum value. deliver value to customers and users, they must synthesize
these external values with their own perceptions of them. De-
Measuring customer’s value is dynamic throughout a project, sign teams that do not fully hear the voices of customers and
process, product, service, or organization. Periodic reassess- stakeholders will likely fall short of fully delivering value.
ment of value should occur to account for changes over time.
2.3.5 Decision makers
2.3.2 Users Decision makers, as key stakeholders, play an active role
Users may or may not also be customers. For example, some- in determining value and may, or may not, occupy any of the
one who purchases an automobile is a customer and will likely other roles described above. It is important to understand
also be a user. The same person’s family and friends who ride who has decision making authority relative to value judgments.
in the vehicle would be users. A lease company may purchase Customers are natural decision makers when they purchase
the automobile, but the individuals (its customers) that drive it a product or service. CEOs may make decisions about what
are users. to produce or how to price their products. A spouse could
Users must be considered as key stakeholders. Their expe- influence the decision of what clothing is purchased for their
rience with the project, product, process, service, or organiza- partner. Understanding what motivates decision makers is
tion will influence the behavior of future customers and other important in considering value.
users in determining its value. Sometimes, customers do not
adequately consider the preferences and perceptions of us- 2.3.6 VM team
ers. This occurs when the customer is disconnected from the The VM study team should seek to solicit and understand the
user. This disconnection is common for public projects where different value perspectives of the groups identified above,
the user is “the public” and the customer is the agency spon- as each influences its own perception of value. This may be a
soring the project. Organizations should seek to solicit input challenging and time-consuming activity, but it is essential if
from users whenever possible. Users should be considered for the VM study team is to improve value.
inclusion on VM study teams.
7
VM Guide®
2.4 Reasons for poor value All projects generally begin with several basic assumptions.
Too often as a project progresses, these assumptions become
There are many reasons why optimal value is not always
“criteria” or “requirements” if not challenged and either verified
achieved. The Value Methodology is a proven approach to
or changed. Value studies provide a structured way to question
identify these problems and provide solutions that improve
original assumptions, identify their cost and performance im-
value. While there are countless possibilities, some of the most
pacts, and replace or challenge them with facts. The greatest
common reasons include:
source of incomplete information or ignorance comes from not
● Lack of information fully understanding the customer’s needs.
● Fixation with standard solutions 2.4.2 Fixation with “standard” solutions

● Poor communication Humans have a natural tendency to resist change, especially
in relation to longtime solutions that appear to be working
● Misconceptions and wrong beliefs
just fine. We are all familiar with the mantra, “If it’s not broken,
● Rigid adherence to standards don’t fix it.” While there is an undeniable common sense to this
phrase, “we should not let it dull our creativity, nor our desire
● Habits and attitudes
to find a better solution.”
● Indecision, and Noted American geologist Thomas C. Chamberlin (1843–
1928) addressed this concept as it applies to the application
● Fear of failure
of the scientific method. He observed that a strong tendency
among scientists and researchers, in their desire to reach an
2.4.1 Lack of information interpretation or explanation, that commonly led them to a ten-
A basic lack of information can lead to poor value. People are tative interpretation based on an initial examination of a single
not all-knowing, and seldom is all relevant information available. example or case. He realized that this tentative explanation, as
Also, uncertainty arises from gaps in information. For example, such, did not threaten objectivity; but, if it began to be trusted
a project in the planning phase is likely to hold a high degree without further testing, it could blind us to other possibilities
of uncertainty due to the lack of scope definition and technical that were ignored at first glance. This premature explanation
information available at such an early stage of development. becomes a tentative theory and then a ruling theory, and, sub-
Making value judgments with imperfect information is an ev- sequently, our research becomes focused on proving the ruling
eryday fact of life. Examples where a lack of information could theory. The result is a blindness to evidence that disproves the
negatively impact value include: ruling theory or supports an alternate explanation. Only if the
original, tentative hypothesis was by chance correct does our
● A bridge project has identified specific locations to locate research lead to any meaningful contribution to knowledge.
the foundations; however, no geotechnical information is Through these observations, Chamberlin developed the
obtained characterizing the soils. This lack of subsurface method of multiple working hypotheses, which involves the
information could potentially degrade the project value development, prior to research, of several hypotheses that
if poor soils are discovered during construction, which might explain the phenomenon to be studied. Many of these
increases costs to mitigate and delays the project. This hypotheses will be contradictory, so that some, if not all,
uncertainty; however, is reducible through additional geo- will prove to be false. However, the development of multiple
technical investigations. hypotheses prior to beginning research lets us avoid the trap
● A consumer sees a pair of shoes on sale at a store. The of the ruling hypothesis and makes it more likely that our re-
customer purchases the shoes, ignorant of the fact that search will lead to meaningful results. Through this approach,
the same product is available at the store down the street all possible explanations of the phenomenon to be studied can
at a 20 percent lower price. Had the customer engaged in be considered with open minds, including the possibility that
market research, a better, higher value buying decision none of the explanations or solutions is viable and the possi-
would have been made. bility that a new explanation may emerge. One tool to perform
this analysis is a support/refute matrix.
● A company’s hiring process only searches for candidates As in the case of the first example, “If it’s not broken, don’t fix
in a specific locale. Limiting the geographic range reduces it,” Chamberlin’s observations are quite relevant. Generally, we
the pool of potential candidates by not considering poten- have a fixation with the existing solution or standard way of do-
tial applicants amenable to relocating to the company’s ing things. This can inhibit the potential for value improvement.
location, missing out on highly qualified individuals. The VM process helps to address this issue, as alternatives
Today’s good information often becomes tomorrow’s bad that challenge the status quo are free to be developed. The
information. Conditions can change quickly and without our benefits and risks associated with the change are quantified
knowledge, as was the case in the preceding examples. In this for the decision-makers. Often the risk associated with not
respect, an accurate assessment of value is only as accurate changing becomes the compelling rationale for action.
as the information upon which it is based.
8
2.4.3 Poor communication ogy that has arisen in modern society to which we all tend to
Most projects, especially those dealing with facilities and man- subscribe. In his bestselling book Freakonomics (2005), author
agement processes, involve multiple stakeholders. Nowhere is Steven Levitt identifies many underlying economic principles
this more evident than within public organizations where there which he discusses at length. Two of them support the notion
are typically several regional and local government entities, of honest, wrong beliefs. These are:
regulatory agencies, special interests, and citizen groups in-
● Conventional wisdom is often wrong. It is a commonly
volved in the project development process. These stakehold-
held belief in the United States that money wins elections.
ers often hold radically different views about the importance
One need only look at the 2008 presidential election to
of a project’s objectives. Typically, the dominant stakeholder
confirm this, right? The Obama campaign significantly out-
(usually the project’s “owner”) places their objectives ahead of
spent the McCain campaign, and guess who won? We often
all others, which are often not aligned with the customer’s or
see correlations where we want to see them; however, it
user’s. This bias often leads to the development of a project
doesn’t mean they are correct. Based on an analysis of data
scope that does not optimize value for all stakeholders.
presented in Freakonomics, a winning candidate can cut
Related to this phenomenon is the type of one-way commu-
their spending by 50 percent and lose only 1 percent of the
nication structure still pervasive in most organizations. In a one-
vote, while a losing candidate who doubles their spending
way communication structure, information primarily flows from
can similarly expect to pick up 1 percent more votes.
the top down. This is especially true of most public and many cor-
porate structures that are functional or departmental in nature. ● Experts use their informational advantage to serve their
Under this structure, most communication passes in one di- own agenda. Here, Levitt shows how experts can easily ex-
rection, from the upper echelons of management down through ploit our trust and lead us to believe they are working for us
the established hierarchy. Just like in an army, where the one- rather than themselves. Real estate agents typically work
way communication structure is common, this model makes for a commission of the total sale of a property. It stands
it easier to maintain control over the organization in meeting to reason that their interests are in line with their clients—
objectives, especially in very large organizations. However, the higher an agent can sell a client’s property, the more
there are only limited opportunities for communication back money they will both make. However, as Levitt shows, the
up the chain and, as a result, there is a high probability that the data paints a very different picture. The average realtor
information received by the lower tiers will be misunderstood makes 3 percent more on the sale of their own homes than
or misinterpreted. Further, this model tends to stifle construc- they do for everyone else. That’s $9,000 more on the sale
tive criticism and feedback (i.e., it has a chilling effect), which of a $300,000 house! Why don’t the rest of us get the same
are essential to innovation and improvement. value from their services?
VM utilizes a cross-functional, team-based organizational
structure. One of the primary strengths of this structure is that The application of VM facilitates challenging such beliefs with
it utilizes a completely different communication model, which current facts and helps to dispel honest wrong beliefs by de-
is multidirectional. In a multidirectional communication mod- veloping alternatives that would otherwise be dismissed with-
el, information flows freely among all participants. This is much out analysis and quantification of the benefits in the current
more conducive to innovation and improvement. environment. Through VM’s focus on the user, misconceptions
For this structure to be effective, a skilled, objective VM such as those identified above can be revealed and strategies
facilitator must provide direction and structure while also en- developed to address them.
couraging the free flow of information.
The application of VM within the context of a VM study is an 2.4.5 Rigid adherence to standards
intense, focused effort in which members of the VM study team, In today’s world, technological change is an accepted part of
project team, the project owner, and user representatives come life. Despite this, organizations are still prone to maintaining
together in the same room as a single team possessing a single outdated standards or relying on aging technology. Much
goal: to improve project value. Additionally, the VM techniques of this resistance is rooted in a belief that new technologies
applied at each step of the VM Job Plan gather, organize, and are unproven and inherently flawed. With this line of thinking,
develop information regarding the project; draw meaningful individuals and organizations can quickly fall behind their com-
conclusions from the project information through the appli- petitors. One such example is provided below.
cation of function analysis; and, foster direct communication A VM study was performed on a project by a state depart-
between team members through a consensus-driven approach. ment of transportation. During the Function Analysis Phase,
the function “Improve Sightline” was identified as describing
2.4.4 Misconceptions and wrong beliefs one of the major project elements involved regarding the cur-
Misconceptions and honest, wrong beliefs that result from rent design concept. To achieve this function, the grade of an
mental conditioning as does the ready acceptance of opinion, existing highway was going to be lowered to allow motorists to
rumor, and speculation without justification or verification. see over the crest of a gentle hill. The cost to do this was esti-
They result from the longtime propagation of many of the other mated in the tens of millions of dollars while creating significant
poor reasons for value cited here. There is a certain mythol- disruptions to existing traffic and requiring extended detours.
9
VM Guide®
During the Creative Phase of the VM Job Plan, one of the ideas The responses identified above represent obstacles to change
the VM study team developed was to adopt a different design based upon habitual ways of doing things. It is important to
standard. In fact, such a standard had been recently adopted recognize these for what they are and not to let them get in the
by the American Association of State Highway and Transpor- way of innovation. Remember, habits are a necessary part of
tation Officials (AASHTO), which resulted in the elimination of our life; however, their very nature is thoughtless. The best way
this work. The state had not yet adopted this standard but was to overcome habitual thinking is to make people aware of what
in the process of doing so. The change in question was driven they are saying and then get them to think critically about it.
by the manner in which driver sight lines were calculated. Due People are usually not even aware that their habitual respons-
to the higher volumes of SUVs and light trucks taking to the es are rooted so deeply. Once the roots are exposed for what
streets, average driver sat significantly higher above the road- they are, people are more apt to accept changes.
way than their counterparts from previous decades. This lag in
the adoption of new standards nearly cost taxpayers millions 2.4.7 Indecision
of dollars and thousands of hours in traffic delays. Decision making isn’t always easy, especially in the face of mul-
Value studies initiated by an organization are conducted tiple variables and uncertainty. It is human nature to delay chal-
under the premise that innovation is necessary in order to im- lenging decisions for a variety of reasons. These may include:
prove value. Considering this: VM provides an excellent vehicle
for presenting the ideas and technologies of tomorrow, and ● Accountability: Perhaps the decision makers wish to
challenging yesterday’s standards, within an environment that avoid accountability for their decisions. This is a common
is conducive to introspection and thoughtful consideration. phenomenon in politics that allows politicians to avoid
the disfavor of constituents by not choosing a position.
2.4.6 Habits and attitudes
● Insecurity: In some cases, decision makers may be
Individuals develop habits and attitudes over a lifetime. This
unsure of what to do. They delay making decisions in
ingrained form of behavior can lead to an appalling degree of
order to avoid making a poor choice.
ignorance with respect to making decisions that lead to good
value. We all possess many layers of habits and attitudes related ● Perfection: Sometimes people avoid making decisions
to culture, religion, profession, and lifestyle. While many of our because they are seeking the “perfect” solution. The
habits and attitudes are quite positive, they can also create blind reality is that perfection is seldom achievable, and the
spots with respect to our ability to make value decisions in the perfect choice today may be an imperfect one tomorrow.
workplace. Companies often get into trouble when the motivation
for profit, which is ingrained in corporate culture, takes control. ● Guilt: All decisions have consequences, both positive and
Habits and attitudes represent the greatest obstacle to negative. The negative consequences of decisions often
achieving good value. Habitual thinking can be extremely have emotional strings attached to them. One of these
difficult to overcome. If you repeatedly ask somebody, “Why is guilt, which can be a powerful influence in delaying
do you do it that way?” usually by the third time, they will re- decisions that make us feel uncomfortable.
spond, “Because that’s the way I’ve always done it.” This type
of response comes up even sooner if asked in the workplace. 2.4.8 Fear of failure
People perform tasks all the time without really thinking about The fear of failure is a significant factor in diminishing value. Fear
them or knowing why they are doing them. If they stopped to of failure is closely related to fear of embarrassment, which may
ask things like “Why are we filing these reports?” or “Why do be an outcome of failure. It can cause us not to even try something.
accounting and purchasing both need to approve this requisi- Fear of failure is the intense worry that we experience when
tion?” they might find that the answer is “You don’t need to.” we imagine the bad things that might happen if we do not
What follows are all good examples of habits and attitudes succeed. These negative feelings increase the odds of holding
influencing behavior in the workplace: back or giving up.
Fear of failure is what causes people not to try; to push back
● We did it that way on our last job.
on new ideas; and, to stay inside one’s comfort zone. It is a
● It deviates from standard procedures. very primal, and powerful phenomenon that must be managed.
One of the best ways to deal with fear of failure is by providing
● We’ve never done that before.
evidence that an idea or approach can be successful. Fear is
● It will set a precedent.
● It’s too risky.
● Management won’t like it.
● It hasn’t been tested.
● It doesn’t agree with company policy.
● Headquarters will never approve it.
10
rooted in uncertainty – of not knowing what will happen. Steps ● Cost. Like the previous definition, costs include all the
that can be taken to deal with fear of failure include: resources required to realize the subject. Cost includes
the salaries/wages of the people and equipment that do
● Thoroughly evaluate the advantages and disadvantages. the work, the materials they use, and all the other circum-
stances that require an expenditure of resources. Cost
● Consider the probabilities and impacts of threats.
can consider initial as well as life-cycle costs.
● Identify ways to manage the threats.
● Risk. We can never be certain that things will go exactly ac-
● Focus on good outcomes but do not become attached cording to plan. Therefore, the impact that uncertainty can
to them. have must be considered. Risks may be classified as either
threats (negative risks) or as opportunities (positive risks).
● Stay positive. There can be many risks to a project, both known and
unknown, that can affect one or all of the aforementioned
● Think of opportunities that lie out of the comfort zone. elements. Risk often manifests itself as fear, whether it is
fear of failure, embarrassment, or the unknown.
VM should seek to identify and manage risks. Doing so will help
reduce the chance that fear of failure will erode value.
2.6 Value measurement

2.5 Elements of value There are several different approaches to measuring value.
There are several basic elements that provide a measure of The methods described below are all valid and have their uses.
value to the customer. These elements comprise performance, Some of these, such as Cost Benefit Analysis, are well estab-
quality, perception, time, cost, and risk. They provide the basic lished methods that are widely practiced and understood. It
building blocks from which all value emanates: is not the intent of the VM Guide® to fully detail the nuances
of these methods, but rather to point to them as recognized
● Performance. Performance is defined as the capacity of a
methods to measure value.
project, product, process, service or organization to fulfill
It is important when considering the measurement of value
its functional requirements. For example, a performance
that the focus is on functions; in other words, what is the value
attribute for a sports car might be “speed” measured in
of the desired functions?
kilometers per hour while for a hammer it might be “du-
Measurement makes value even more tangible and transpar-
rability.” Performance can be measured quantitatively or
ent. This can be unwanted in organizations driven by prestige
qualitatively. The level of desired performance should be
or politics. On the other hand, it gives insights to where value
determined by the customer or user.
can be improved.
● Quality. The American Society for Quality (ASQ) defines
2.6.1 Inputs and outputs
quality as “a subjective term for which each person or sec-
tor has its own definition. In technical usage, quality can Several variations are used to measure value relative to the
have two meanings: 1) the characteristics of a product or concept of inputs and outputs. These can be categorized un-
service that bear on its ability to satisfy a predetermined der two basic approaches: efficiency and productivity.
requirement or stated or implied needs; 2) a product or Efficiency, as an expression of value, is one way to consider
service free of deficiencies.”In the first meaning, quality is the relationship between inputs and outputs. For example, an
synonymous with “performance” as described above. In efficiency ratio that considers expenses (E) relative to revenues
the second meaning, quality is more about conformance (R) yields the following relationship:
to standards and/or specifications.
Expenses
● Perception. Our perception of value can significantly Efficiency =
Revenues
influence our reality. Many psychological, cultural, and
behavioral phenomena affect how we interpret value. For For example, if expenses are $2,000 and revenue is $10,000,
example, our perception of clothing fashions may change the efficiency ratio is 0.20 or 20% (20/100)—meaning that
over time, based on cultural norms and the effects of $0.20 is spent for every dollar earned in revenue. It should be
advertising. The discipline of behavioral economics is acknowledged that this method is very cost-centric and may
concerned with identifying, studying, and quantifying the not adequately capture other dimensions of value. However, it
effect of cognitive bias on value judgments. is one possible way to consider value from the standpoint of
efficiency. Caution should be used in applying this perspective,
● Time. The customer requires acceptable delivery, usually as it could lead an organization to efficiently produce products
at a specific place within a given period. The best projects, of poor value or even the wrong product.
products, processes, or services are of no value if they Productivity is another expression of value that considers
cannot be provided to the customer in a timely fashion. inputs and outputs. Labor productivity can be measured as a
11
VM Guide®
ratio of the total output (goods or services) in dollars to the Decisions are made through CBA by comparing the net present
number of person-hours to produce the output. Labor produc- value (NPV) of the subject’s costs with the net present value
tivity may also be measured as the ratio of total output to the of its benefits. Decisions are based on whether there is a net
number of workers used to produce the output. benefit or cost to the approach; i.e., total benefits minus total
costs. Costs and benefits that occur in the future may have less
Outputs weight attached to them in a cost-benefit analysis. To account
Productivity = for this, it is necessary to “discount” or reduce the value of
Inputs
future costs or benefits to place them on par with costs and
For example, assume a company generates $80,000 in goods in benefits incurred today. The “discount rate” will vary depend-
1,500 hours. To calculate the labor productivity, 80,000 dividing on the sector or industry, but public sector activity gener-
ed by 1,500 = $53 of revenue generated per hour of labor. Using ally uses a discount rate of 5 – 6%. The sum of the discounted
the same example, if the labor was performed by 30 employees, benefits of an option minus the sum of the discounted costs,
then the net productivity per employee would be calculated by all discounted to the same base date, is the “net present value”
dividing 80,000 by 30, yielding a value of $2,666 in revenue per of the option. Many governmental agencies require CBA to be
employee. This method considers outputs (measured in costs) performed to justify the expenditure of taxpayer money on
relative to inputs (measured in terms of labor – either person large public projects.
hours or number of people).
Both methods are simplistic, but useful, in comparing the val- 2.6.3 Performance and Resources
ue of different options from the standpoint of inputs and outputs. Another form of value measurement considers outputs in terms
of a mixture of qualitative and quantitative factors (perfor-
2.6.2 Costs and Benefits mance) relative to all inputs (resources). While like Cost-Ben-
One method of expressing value is to quantify the costs and efit Analysis (CBA), it differs greatly in how it approaches the
benefits of a thing using a monetary unit for both (such as U.S. quantification of these factors. This more nuanced view of
dollars or Japanese yen). This is typically expressed as a ratio. value allows for measurements that are not purely money- or
Using such a method, all the resources required to actualize time-based.
the subject are compared to the benefits it delivers, which are Performance describes the capacity of the subject to pro-
expressed in currency equivalents to enable the calculation vide key customer or user functions. Resources describe the
of the net cost or benefit. This method is popularly known as monetary costs, time required, labor, materials, etc. to pro-
Cost-Benefit Analysis (CBA). duce the desired performance.
As a technique, CBA is used most often at the start of the
development of a project, product, or process when different Performance of Functions
options or courses of action are being appraised and compared Value =
Resources
as options for choosing the best approach. It can also be used,
however, to evaluate the overall impact of a program in quan- Resources are quantitative by nature and can be readily mea-
tifiable and monetized terms. Economists often use CBA to sured in terms of monetary or time-based units. The measure-
consider the value of social programs and major public investment of performance can be more challenging and requires
ments. In these applications, it may be used to quantify value specialized methods, because performance can be expressed
by assigning monetary equivalents to things such as mortality both qualitatively and quantitatively. Such methods, referred
and carbon emissions. It must be acknowledged that while one to collectively as Multi-Criteria Decision Analysis (MCDA) tech-
may indeed assign monetary values to human life and climate niques, include, but are not limited to: The Analytic Hierarchy
change, the validity of such estimates is open to debate. Process (AHP), the Analytic Network Process (ANP), and, the
CBA adds up the total costs of a program or activity and Hierarchical Decision Model (HDM). The application of these
compares it against its total benefits. The technique assumes methods allows for decision makers to assign numeric values
that a monetary value can be placed on all the costs and bene- to performance criteria that reflect their preferences and pri-
fits of the subject, including tangible and intangible returns to orities using mathematical algorithms to express total value.
other people and organizations in addition to those immediate- This approach eliminates the need to assign monetary values
ly impacted. As such, a major advantage of CBA lies in forcing to qualitative criteria as is the case with CBA methods.
people to explicitly and systematically consider the various
factors which should influence strategic choice. 2.6.4 Expected value
Expected value seeks to incorporate the concept of uncertain-
Expected value seeks to incorporate the concept of uncertain-
Benefits of Functions ty and is defined as the predicted value of a variable, calculated
Value = as the sum of all possible values with each multiplied by the
Costs
probability of its occurrence. In the practice of risk analysis,
the expected cost value of a risk is calculated by multiplying
the anticipated value of the outcome (also referred to as an
12
“impact”), expressed in monetary units, by the likelihood of

occurrence, expressed as a percentage.
Expected Value = Outcome × Probability
For example, if there is a 50 percent chance that a project will

be $2,000 over budget, the expected value of the overage would
be $1,000 = $2,000 x 0.5. It should be noted that the same
formula applies to the expected value of time or schedule risk
where units of time are used instead of money. There are more
sophisticated articulations of expected value that consider
multiple outcomes and include more complicated logic.
Expected value can be combined with some of the previous-
ly described methods for measuring value to consider risk and
uncertainty.
2.7 References
● Miles, Lawrence D. Techniques of Value Analysis, Mc-
Graw-Hill, 1961.
● Fallon, Carlos. Value Analysis,”2nd. edition, Wiley-Inter-

science, 1980.
● Levitt, Steven. Freakanomics, William Morrow, 2005..
● Stewart, Robert. Value Optimization for Project and

Performance Management, John Wiley & Sons, 2010.
● Cretu, Ovidiu; Stewart, Robert; Berends, Terry. Risk

Management for Design & Construction, R.S. Means, 2012
● American Society for Quality, Glossary – Entry: Quality,

retrieved 2019-9-10
● Project Management Institute. A Guide to the Project

Management Body of Knowledge (PMBOK® Guide), 5th
Edition, Project Management Institute, 2013.
13
VM Guide®
14
3. Value Methodology Job Plan
3
Value Methodology Job Plan
3.0 Introduction 3.1 Terms and definitions

The Value Methodology follows a sequence of phases, or steps,
designed to lead a multidisciplinary team through a structured 3.1.1 VM facilitator
way of thinking. This process is referred to as the Value Meth- One who is substantively neutral, has no significant deci-
odology (VM) Job Plan. The VM Job Plan must be followed, from sion-making authority, enables a group to improve how it de-
start to finish, to fully realize the benefits of value improvement. fines and solves problems, and increases a group’s effective-
The VM Job Plan includes the five original steps identified ness. In the context of VM, one who leads the group through
by Larry Miles in the same relative order, although some have the VM Job Plan.
been renamed to add clarity while other phases were added
to expand its scope and enhance its effectiveness. The VM Job 3.1.2 VM Job Plan
Plan now includes the following phases: A sequential approach for applying the Value Methodology,
consisting of the following eight phases: 1) Preparation,
1. Preparation 2) Information, 3) Function Analysis, 4) Creativity, 5) Evaluation,
6) Development, 7) Presentation, 8) Implementation.
2. Information
3.1.3 VM proposal
3. Function Analysis
A developed idea resulting from the application of the Value
4. Creativity Methodology during a VM study to increase the value of a project,
product, process, service, or organization. VM proposals may
5. Evaluation alternately be described as alternatives or recommendations.
6. Development 3.1.4 VM study
7. Presentation A structured effort to improve the value of a project, product,
process, service or organization through the application of
8. Implementation the Value Methodology by a multidisciplinary team facilitated
by one who is competent in VM techniques, ideally a Certified
The VM Guide® dedicates a section to each of the eight phases Value Specialist (CVS®).
of the VM Job Plan, which provides additional information
concerning the processes, activities, and basic techniques for 3.1.5 VM study subject
each phase. A brief introduction to each phase, its primary ob- The subject of the VM study can be anything for which there is
jectives, and relevant considerations is provided in this chapter. a desire to explore opportunities for improvement. The Value
Methodology is commonly applied to define new, or enhance ex-
isting, products, processes, projects, services, or organizations.
3.1.6 VM team
A multi-disciplined group of participants, led by a trained facilita-
tor, that apply the value methodology to the subject of a VM study.
15
VM Guide®
3.2 Evolution of the VM Job Plan The original VM Job Plan, as conceived by Miles, consisted of
the following five steps:
The VM Job Plan has evolved over time. To develop a better
understanding of the VM approach, it is useful to first discuss 1. Information. Develop an understanding of the subject.
the scientific method which is perhaps the most widely under- The key to this step is the process of asking questions of
stood and applied approach to problem solving. The original the customers and stakeholders.
development of the scientific method is largely attributed to
Francis Bacon (1561–1626), a persuasive, seventeenth-centu- 2. Analysis. Develop an understanding of the subject’s func-
ry English statesman and philosopher, who argued that knowl- tions. This step represents the main point of departure of
edge was gained only by gathering empirical data rigorously Value Methodology from other problem-solving approaches,
and logically refined into a single, essential conclusion. The including the scientific methvod. Miles created an entirely
scientific method consists of four distinct steps: different way of thinking about problems and systems based
on what the subject does rather than what it is.
1. Observation. State the problem and research it. Observe
a phenomenon or a group of phenomena and gather data. 3. Creativity. Identify alternative concepts to achieve the sub-
ject functions. Although creativity is a routine component
2. Hypothesis. Formulate a hypothesis (or multiple working of just about every problem-solving method, the creative
hypotheses) to explain the phenomena. In many fields of process in VM focuses on functions rather than the things
study, the hypothesis can often take the form of a causal that perform them. This may at first appear to be a rather
mechanism or a mathematical relation, while in general subtle difference; however, the implications are profound.
problem-solving instances, a potential solution to the prob-
lem or a prediction of the expected outcome, is identified. 4. Judgment. Evaluate the alternative concepts based upon
their merits. Miles regarded this as a rather straightforward
3. Experimentation. Perform experiments to test the pre- step with the assumption that basic common sense would
dictions. In science, the use of numerous, independently be used to select the best ideas for additional development.
reproduced experiments to verify and validate the original
findings is generally required. 5. Development Planning. Develop the alternative concepts
into detailed recommendations. Also originally included
4. Conclusion. Draw conclusions from the experiments. within this step was the implementation of the alternative
Summarize the results of the experiments into meaningful concepts into the project.
conclusions relative to the original hypothesis.
start
Creativity Generate Ideas
Preparation Identify Subject
Identify Goals
Define Value
Evaluation Evaluate Ideas
Organize Effort
Select Ideas
Information Analyze Information Development Transform Ideas

Transform Information Develop Information
Orient Participants
Presentation Present Information

Propose Change
Function Analysis Define Functions
Allocate Resources
Implementation Implement Change
Allocate Performance
Manage Change
Prioritize Functions
Realize Value
end
Figure 3.1 – Phases and functions of the VM Job Plan
16
Value Study
Information
Function Analysis
Creativity
Preparation Implementation
Evaluation
Development
Presentation
Figure 3.2 – Typical configuration where the Preparation

and Implementation Phases occur outside of the Value Study
How does the VM approach to problem solving differ from 3.3 The relationship of a VM study
that of the scientific method? There are several important
differences that merit further discussion. These differences
to the VM Job Plan
are best introduced by two quotes attributed to Albert Einstein It is important to recognize the difference between a VM study
[1879–1955], one of history’s greatest thinkers and scientists. and the VM Job Plan. While it is essential that all phases of the
VM Job Plan be followed to fully actualize value improvement,
“ The significant problems we have cannot be solved at the

same level of thinking with which we created them.”
the VM study (where the full, multidiscipline VM study team
applies VM) is oftentimes a subset of these phases.
Traditionally, a VM study is most often identified as including
The scientific method first states the problem and then gathers the Information, Function Analysis, Creativity, Evaluation, De-
pertinent data. The VM Job Plan states the problem, gathers velopment, and Presentation Phases. This is usually the case
data, and then defines the underlying functions. This is an es- where a third-party VM study team is brought in to perform an
sential difference in understanding the problem. The process objective analysis of a project, product, process, service, or
of breaking problems down into functions broadens the level organization. In this situation, the sponsoring organization
of abstraction involved to understand and to solve the problem would likely handle both the VM study preparation as well as
at the most appropriate level. the ultimate implementation of the VM proposals resulting
“
from the VM study (see Figure 3.2 ).
Imagination is more important than knowledge.”
The sponsoring organization must adhere to the VM Job
The scientific method develops a hypothesis (solution), or in Plan to successfully reap the benefits of the effort. That said,
some cases multiple working hypotheses. The VM Job Plan ded- the VM study could vary somewhat in terms of the participants
icates an entire step to the creation of ideas that will address at certain phases. For example, for some organizations, the VM
the functions. There is a deliberate separation of creativity study team members may be involved in the Preparation and
(imagination) and judgment (knowledge and experience). This Implementation Phases. In other organizations, it is possible
separation is essential if our imagination is to be fully realized that others might be involved in the Development Phase. Re-
and applied to the problem. gardless, all phases must be followed in the proper order.
Although many variations of the VM Job Plan emerged over
the years, all of them included this same fundamental se-
quence of activities and thinking, even though the names of the
phases may have differed or new phases were added.
17
VM Guide®
3.4 Communication dynamics must utilize all their facilitation and leadership skills to optimize
the value of every step of the VM Job Plan. Ultimately, effective
and the VM Job Plan value leadership is directly linked to good communication.
Maintaining good communication is essential to the flow of the
VM Job Plan. Figure 3.3 illustrates a model of group communi-
cation relative to the VM Job Plan. Although this model was origi-
3.5 Phases of the VM Job Plan
nally developed to demonstrate group decision-making, it also
3.5.1 Preparation Phase
applies to the communication dynamics of the VM Job Plan.
It is important to understand how the steps in the VM Job Thorough preparation is critical to the success of any VM
Plan relate to the dynamics of group communication. The study. The first part of this preparation is identifying what is to
participants of a VM study are first introduced to the subject’s be studied (the VM study subject) and when it is to be studied. A
problems, issues, and objectives. The exchange of informa- variety of techniques may be employed to select the best sub-
tion begins and thinking becomes divergent, which results in jects for study and identify the proper timing for the VM study.
divergent communication. The initial presentation of project
information leads to questions, which in turn leads to more Key activities involved in the Preparation Phase include:
questions. Thinking continues to diverge through the process
● Defining and confirming the VM study goals and objectives;
of Function Analysis, which frames problems in the abstract.
This trend increases during the Creativity Phase. At about the ● Identifying the key participants, customers or users,
midway point of the VM process, thinking begins to converge as and stakeholders;
the diverse ideas generated are evaluated critically. This con-
vergence in thinking and communication continues through ● Determining how value is defined;
the development of alternative concepts, is summarized in the
Presentation Phase through reports and presentations and ● Identifying the study duration; and,
culminates in deciding which alternatives to accept or reject.
● Identifying the logistics required to support the
Another way to think about the dynamics at play: the appli-
VM study effort.
cation of VM applies creative dismantling followed by critical
reconstruction to improve project value. The VM facilitator
VM Job Plan
Preparation Information Function Analysis Creativity Evaluation Development Presentation Implementation
co
n
ng
ve
rg
ki
in
ent
th
th
nt
in
ge
ki
er
ng
v
di
?
Problem Solution
ng
di
ki
v
in
er
th
ge
nt
nt
e
rg
th
in
ve
ki
n
co
ng
Ideas
Figure 3.3 – Dynamics of Group Communication and the VM Job Plan
18
A basic level of understanding is provided by gathering and re- 3.5.3 Function Analysis Phase
viewing the appropriate information before starting a VM study. Function analysis is the heart of the Value Methodology. The
Depending upon the type of VM study, the information required ultimate objective of the Function Analysis Phase is to identify
will vary slightly. However, in all studies, information pertaining functions that do not provide good value and those that are
to the subject scope, performance or quality, time or schedule, altogether unnecessary. There are three steps in the Function
cost, and risk should be identified, gathered, and organized for Analysis Phase:
use in the Information Phase.
A pre-study meeting is usually conducted as a vehicle for 1. Define the subject’s functions. This includes the activi-
planning and organizing a VM study. This meeting typically ties of identifying, classifying, and organizing functions.
includes the value practitioner and key stakeholders and, in
some cases the rest of the VM study team. This meeting helps 2. Allocate resources to functions. Project information
ensure a well-defined VM study by aligning all participants and related to cost, performance, schedule, risk, and other
focusing their effort on value improvement relevant to the VM information (such as size, weight, etc.) is associated with
study sponsor’s goals. specific functions to identify an understanding of these
relationships and enhance the team’s understanding of
3.5.2 Information Phase value improvement opportunities.
The primary objective of the Information Phase is to obtain a
3. Prioritize functions for value improvement. Ultimately,
thorough understanding of the subject under study. The infor-
the objective of function analysis is to prioritize specific
mation gathered prior to and during the VM study is reviewed
functions for value improvement. These will serve as the
and discussed by the team. Typically, the stakeholders respon-
focus for the Creativity Phase and aid the team in thinking
sible for the study subject will present the current state of the
laterally about potential alternative solutions.
things to the VM study team and answer their questions. Key
considerations in this phase include:
3.5.4 Creativity Phase
● Human relations are very important to the success of any
In the Creativity Phase of the VM Job Plan, a creativity session
VM study. “People problems” are oftentimes more difficult
is conducted for each function targeted for improvement
to resolve than technical problems. The effectiveness of
during the Function Analysis Phase. During these creativity
a value practitioner’s efforts depends upon the amount of
sessions, any idea that can be associated with that function
cooperation they can obtain from the various stakeholders
is recorded for later evaluation. Creativity techniques are typ-
involved with, or responsible for, the subject under study.
ically employed to identify numerous ideas on each function
● All pertinent facts concerning the subject must be requiring improvement. Generating a large quantity of ideas is
uncovered and drawn together, including but not limited the goal, rather than the quality of the ideas. A large quantity of
to customers, stakeholders, the sponsor’s objectives, the ideas leads to a greater number of quality ideas. A key element
history of the subject and its development, cost, time and of creativity is to avoid evaluating ideas generated during the
schedule, quality and performance requirements, imple- creative process.
mentation successes and failures, and potential risks. A variety of creative techniques can be employed to stim-
ulate the VM study team’s imagination. Team brainstorming is
● All aspects of the subject should be questioned, ana- typically used to initiate the creative process. All members of
lyzed, and examined. It is often helpful if the subject can the VM study team must be encouraged to participate, because
be observed in actual operation (if applicable). The main a high level of participation motivates and energizes the cre-
considerations are getting all the facts and getting them ative process. The focus should first be on the development of
from the best available sources. ways to perform the function, and secondly on ways to improve
the value of the function.
● The subject information must be thoroughly analyzed and
meaningful conclusions drawn from it. One of the key ac- 3.5.5 Evaluation Phase
tivities of the Information Phase is to transform the “raw” The objective of the Evaluation Phase is to reduce the large
information into a form that the VM study team can use to quantity of ideas generated in the Creativity Phase to the best
focus them on value improvement. This effort ultimately value improving ideas through the evaluation process. The
assists the team in identifying areas of opportunity and VM study team will discuss and evaluate each idea relative to
allocating the most pertinent information to functions in performance, quality, time, cost, and risk. This process iden-
the subsequent phase. tifies the major benefits and challenges of each idea and how
it would impact value. Once this is done, the team agrees on
a rating for the idea. Rating serves as a filter, with the better
or higher rated ideas generally advancing to the next step and
being developed further.
19
VM Guide®
Frequently, several ideas or a combination of competing ideas 3.5.6 Development Phase

remain. When this occurs, an evaluation matrix may be used that The objective of the Development Phase is to develop the best
better quantifies the impact of competing ideas to identify which ideas identified during the Evaluation Phase into specific VM
will best meet the VM study Subject’s need, purpose, perfor- proposals, recommendations, or alternatives that have been
mance, and cost objectives. Key considerations include: technically validated. The impact of each VM proposal should
also be quantified as much as possible. Key questions and
● Spending money as you would your own. This is an import-
considerations include:
ant rule when considering the cost of implementing an idea.
● Does the proposal clearly explain the nature and rationale
● Evaluating the ideas relative to performance and quality.
of the proposed change?
● Understanding how the ideas will impact time and risk.
● Does the proposal consider all the impacts to resources
Will the idea take more time than the current approach?
(e.g., initial cost, life-cycle cost, schedule, etc.)?
Will it reduce uncertainty by maximizing opportunities or
minimizing threats? ● Does the proposal consider how the change will be imple-
mented?
● Identifying implementation factors, such as the time
required and resources available to integrate the change. Ensure that each VM proposal has been fully documented and
The challenges related to acceptance of the ideas and is presented in a format that will enable decision makers to
resistance to change should also be considered. clearly understand all relevant information.
● Comparing the benefits and challenges of each idea rela- 3.5.7 Presentation Phase
tive to the current state of the subject.
A final report containing the VM study team’s alternatives and
● Refining ideas that might be otherwise rejected. Often addi- a presentation to the VM study sponsors and/or stakeholders
tional creativity techniques can be used to develop a solution concludes the VM study. The objective is to inform the audience
for a problem that arises during idea evaluation. It is useful to of the VM study team’s findings. This initial presentation should
think of the Creativity and Evaluation Phases as an iteration not be advertised as a decision meeting—the decision-making
process in nature. The surviving ideas are then refined, and process should occur in the final phase; Implementation. The
more cost information is obtained. Detailed estimates are VM study team typically provides the written report after the
prepared only for the more promising alternatives. presentation. Key considerations in presenting results include:
● Selecting ideas for further development. Ideas with the ● The presentation of the VM proposals, both written and
greatest value improvement potential are normally chosen oral, must gain the cooperation of the decision makers
to be developed with further study, testing, refinement, and their advisors. It is therefore important that VM
and information gathering. If there is more than one out- proposals be developed and conveyed in as clear and
standing idea addressing a specific function or the differ- concise a manner as possible. Avoid decision making
ences between two or more ideas are not clear enough meetings at VM study presentations.
to eliminate any of them, then all should be retained and
● The VM study team can elaborate on those points that are
carried over into the next phase.
not clear to the listeners, and questions regarding the VM
● Selecting ideas for further development. Ideas with the proposals can be answered instantly.
greatest value improvement potential are normally chosen
to be developed with further study, testing, refinement, 3.5.8 Implementation Phase
and information gathering. If there is more than one idea
The Implementation Phase is critical to the ultimate success of
addressing a specific function that is outstanding, or
the VM Job Plan. During this phase, the sponsors and/or stake-
the differences between two or more ideas are not clear
holders involved in the decision-making process will review and
enough to eliminate any of them, then all should be re-
assimilate the data given to them in the Presentation Phase. An
tained and carried over into the next phase.
implementation meeting should be conducted once sufficient
time has passed to review the VM study team’s findings. The pur-
pose of this meeting is to decide the acceptability of each VM
proposal. Ideally, the VM study team will be present to provide
clarifications and assistance to the decision makers. Accepted
proposals require the development of an implementation plan
and schedule for integration into the VM Study Subject.
Tracking the implementation of VM proposals and auditing
the results helps to measure the efficacy of the VM effort. The
20
subject should have some kind of mechanism put in place that

will allow the changes to the subject’s scope, performance,
quality, schedule, cost, and risks to be managed.
3.6 References
● Miles, Lawrence D. Techniques of Value Analysis and Engi-
neering, 2nd Edition, McGraw Hill, 1972.
● plato.stanford.edu/entries/scientific-method/
● Kaner, Sam. Facilitator’s Guide to Participatory Deci-

sion-Making (Jossey-bass Business & Management Series),
3rd Edition, Jossey-Bass, 2014. (Note: Figure 3.3 is an adap-
tation of an original diagram found on page pg. 6.)
21
VM Guide®
22
4
Preparation Phase
4.0 Introduction 4.2 Process

The success of a VM study depends upon the quality of infor-
mation used by the team during execution of the study. The 4.2.1 Identifying VM study goals & objectives
organization, planning, and information required for the VM Establishing the goals and objectives of a VM study is critical.
study must be defined and systematically collected in order to The VM study sponsor will no doubt have identified a desired
meet the study’s goals and objectives. goal(s) which is the catalyst for the VM study. Goals broadly
All VM studies are unique. Therefore, the VM facilitator must describe desired outcomes. These can be further articulated
understand the scope as well as the goals and objectives of the as objectives that identify specific results which may be de-
VM study in order to ensure that it is well planned and organized scribed using key performance indicators (KPIs). Sometimes,
to obtain maximum benefit. If the scope, goals, or objectives the VM study sponsor will have identified both goals and objec-
are not clear or agreed upon, the Preparation Phase can be tives, but frequently they have only the goal in mind.
used to reach common ground while facilitating team building. VM studies may have varying objectives, depending on what
is being studied and the needs and wants of the sponsor, cus-
4.1 Terms and definitions tomers, users, and stakeholders. The VM facilitator (as well as
the VM study team) should have a clear understanding of what
4.1.1 Constraints the sponsor’s goals and objectives are prior to commencing the
VM study. The goals could vary dramatically, depending upon the
The state of being checked, restricted, or compelled to avoid or
state of the project and the reasons for performing the VM study.
to perform some action. For most VM studies, there are restric-
tions on some parameters of a solution (e.g., laws, standards,
For example, a VM study’s goals and objectives could be:
market demand, policies, resources, commitments made,
etc.). These restrictions are called constraints and can be real
or perceived. VM may be an effective tool for turning perceived
constraints into opportunities for value improvement. Goal Objective
Identify a means
4.1.2 Subject matter expert (SME) Reduce it by two weeks.
to reduce processing time
A person who is an authority in a particular area, discipline, or topic.
Build consensus among Identify a project scope
4.1.3 VM pre-study meeting stakeholders as to what the that can be delivered
A formal exchange of information that identifies, clarifies, and project scope should be. within the annual budget.
communicates the conditions of a VM study, including its sub- Improve product Improve market share
ject, objectives, participants, schedule, and logistics. market share. by 5 percent
4.1.4 VM study sponsor Get the project
Reduce project costs.
The person or organization responsible for defining the specific back within budget.
objectives of the VM study and the stakeholders’ needs.
Reduce them
Reduce production costs.
4.1.5 VM study decision maker by 10 percent.
A person involved in determining the acceptance or rejection Identify specific methods
of VM proposals. Reduce project risk.
to reduce litigation risks.
23
VM Guide®
As these goals and objectives indicate, the Value Method- 4.2.2.3 Activities
ology can be used in a number of different ways, all of which ‒ Conduct VM pre-study meeting
aim at improving value. They should always relate back to the
VM Study Subject’s scope, performance, quality, cost, sched- ‒ Identify VM study participants
ule, and risks and can be general or specific in nature. Having
a clear statement of the VM study’s goals and objectives will ‒ Identify VM study schedule
help the VM study team stay focused and achieve the sponsor’s
expectations for the VM effort.
‒ Identify site visit requirements

‒ Identify VM study logistics
‒ Distribute and review VM study subject information

4.2.2.1 Inputs
‒ VM study Subject
4.2.2.4 Process flowchart Figure 4.1
‒ VM study sponsor goals.
4.3 Activities
4.2.2.2 Outputs
4.3.1 Conduct VM pre-study meeting
‒ VM study objectives
As with all studies, conducting a pre-study meeting(s) is
‒ VM study subject information essential to the planning and organization of the VM study. The
purpose of this meeting is to ensure a well-defined VM study
‒ VM study participant list by aligning all participants and focusing the effort on achieving
the goals and objectives of the study. The pre-study meeting(s)
‒ VM study agenda
should ideally occur a minimum of two weeks in advance of the
‒ VM study site visit requirements VM study to ensure that all required information is compiled
and all required pre-study activities are completed. This also
‒ VM study meeting location allows time for the VM team to review the information and
request additional information prior to the study, as it may be
‒ VM study environment and meals difficult to obtain this information in a timely manner after the
study begins.
‒ VM study information requests.
inputs activities outputs

Conduct VM
VM Study Subject VM Study Objectives
Pre-Study Meeting
VM Study Sponsor Goals VM Study Subject Information
Identify VM Study Participants VM Study Participant List
Identify VM Study Schedule VM Study Agenda
Identify Site Visit Requirements VM Study Site Visit Requirements
Identify VM Study Logistics VM Study Meeting Location
VM Study Environment and Meals
Distribute & Review VM

VM Study Information Requests
Study Subject Information
Figure 4.1 – Preparation Phase Flowchart
24
The participants attending the VM pre-study meeting may VM study teams of five to seven members excel;
vary, depending on the VM study. This meeting typically includes however, there is no limit to the number of team members
the VM facilitator and key stakeholders, and in some cases and it is not uncommon to have larger VM study teams.
the rest of the VM team. The VM facilitator should remember The size of the VM study team should be based on the
that, in some instances, this may be the client’s and/or design disciplines necessary to address the relevant aspects of
team’s first exposure to the Value Methodology. Therefore, the the project and to achieve the VM study objectives. If large
VM facilitator should be prepared to answer their questions VM study teams are to be utilized, consideration should be
and explain the Value Methodology process. During the pre- given to having two or more VM facilitators. This allows for
study meeting, the following should be discussed: flexibility in the design of the VM study, such as breaking
the VM study team into multiple teams. It also allows for the
● An overview of the project, process, service, product, or VM facilitators to consistently discuss how the VM study is
organization that is the focus of the VM study proceeding and make any required adjustments in order to
ensure the VM study goals and objectives are being met.
● Identification and clarification of the VM study goals and
In some scenarios, it can be helpful if a communication
objectives
specialist and/or behavioral specialist works with the VM
● What information is available, in what format, and how it facilitator(s) in larger groups.
will be provided to the VM facilitator Once the required disciplines are established, the
individuals to fill these roles should be discussed. The VM
● Identification of the information needed to support any study team participants may be obtained from several sources:
of the Information Phase techniques likely to be utilized
(e.g., Pareto chart, Gantt chart, etc.) ‒ VM study sponsor’s organization;
● How the project, process, product, service, or organization ‒ Stakeholders;

information is to be distributed to the VM team and by whom
‒ Subject matter experts within the design team
● Whether additional pre-study analysis is required (e.g., organization who are independent from the design team;
research on similar products, highway safety analysis,
market research, etc.) ‒ Members of the design team;
● The scope of work for the VM study (i.e., is the entire ‒ Subject matter experts from an independent
project, product, service, process, or organization the consulting firm with no involvement in the design
subject of the VM study or just a portion?) team organization;
● The schedule and end date for the VM study ‒ Other agencies or organizations; and,
● The disciplines required for the VM study ‒ Customers and/or users.
● VM study logistics (i.e., location, site visit requirements, Regardless of the composition of the VM study team, the
agenda [including timing for the midpoint review and team selected should consist of individuals who are:
results presentation])
‒ Experienced in their field of practice;
● What performance or quality criteria and requirements
are to be considered ‒ Creative, open to new ideas, and able to share their
knowledge and expertise;
● VM study report format and submission dates, as well as
Implementation Phase requirements. ‒ Able to promote the ideas of other VM study team
members;
4.3.1.1 Identify VM study participants ‒ Able to respect the ideas generated by other VM
Once the VM facilitator understands the project, process, study team members;
product, service, or organization, they can begin to discuss
‒ Will fully participate in the VM study process and
the size and disciplines required for the VM study with the
actively provide their knowledge and expertise; and,
VM study sponsor and/or the subject team. The VM team
should be multidisciplinary, should mirror the disciplines ‒ Able to fully commit to the time requirements of the
involved in the original design/development of the study VM study.
subject, and should incorporate the knowledge required
to cover the issues and objectives of the VM study.
25
VM Guide®
4.3.1.2 Identify VM study schedule and agenda For a typical 5-day VM study, the baseline includes time
The VM facilitator must discuss and establish the overall VM allotments as shown in Figure 4.2 . The shaded area
study schedule during the pre-study meeting. This includes: represents those phases of the VM Job Plan that occur as a
‒ Study duration and dates; team effort.
Some value practitioners require that a longer period
‒ Meetings that should include study sponsor, designer/ of time be devoted to the VM study. Reasons a study may
developer, and stakeholders (e.g., kickoff meeting on need to be longer include solving problems, creating new
the first day of the study, midpoint review meeting); concepts or designs, planning strategies, or streamlining
processes or procedures. This may vary from six or eight
‒ Presentation of VM study results duration and dates (e.g., days to as long as twelve days or more. Longer studies
on the last day of the VM study, or after the VM study); typically require a split schedule and, depending upon
the study target, may necessitate a variation in the time
‒ Date for submission of the draft VM study report;
allotted to specific VM Job Plan activities.
‒ Date for the implementation meeting; and, In some cases, VM study sponsors may attempt to limit
VM studies to three days or even shorter periods without
‒ Date for submission of the final VM study report. regard for the scope of the VM study subject or the
integrity of the VM Job Plan. Time limitations may result
Determining the appropriate length for the team portion in more enthusiastic participation by the study sponsor’s
of the VM study should be the priority in determining the personnel, because they “lose” less time away from
overall VM study schedule. For many years there was a their normal work effort. At the same time, these time
widely perceived notion that a VM study should be five days constraints require that some portion of the VM Job Plan
long, or 40 hours. In fact, the duration of a VM study should be compromised. The VM Job Plan is often construed
be based on several different factors, which include: to apply only to the formal phases included in the team
study: Information, Function, Creativity, Evaluation,
‒ Size and complexity of the project; Development, and Presentation. The Preparation and
Implementation Phases, while not always considered
‒ VM study goals and objectives;
formal steps of the VM Job Plan, are integral to the success
‒ VM study scope; of any value improvement effort and are addressed as such
in this discussion.
‒ Size and expertise of the VM study team; and, Regardless of the study type, the study subject, or
the length of the VM study, certain pre-study activities
‒ Resources available to conduct the study. must always occur. In addition to project identification,
definition of the VM study schedule, and team selection,
Number of Hours per Study Value Type
VM Job Plan Phase Project Product Process Procedure
Preparation 8–24 8–16 20–30 40–60
Information 4–6 2–6 2–6 2–6
Function Analysis 2–4 6–10 4–8 2–6
Creative 3–6 3–6 3–6 3–6
Evaluation 4–6 2–4 3–6 3–6
Development 16 4–8 12 8
Presentation—Oral 2–4 2–4 2–4 2–4
Presentation—Report 40 8–16 40 40
Implementation Times will vary and depend on VM study sponsor.

Figure 4.2 – Five-Day VM Study Model
(shaded area represents VM Phases that are part of the study)
26
extensive preparation work is required in the form of data is impacted in some way. Of additional consideration, pre-
collection, cost analysis and models, team information study and post-study times must be increased as a result
packages, and logistical arrangements. Once the team of the compressed team study schedule.
study is concluded, additional documentation may be A 3-day VM study may limit results to mere validation
required to complete or further refine the developed VM of a project’s functional concepts rather than lead to
proposals. A complete report is prepared to document significant project improvements. VM proposals developed
the study efforts and its results and to determine what during a shortened study are likely to be more conceptual
implementation actions must occur. and less detailed than those produced in a longer study;
None of the phases and activities associated with the and, as a result, they may prove more difficult to implement.
Value Methodology Job Plan (as described in Chapter 3) Most importantly, the results may not be optimized due to
may be eliminated by reducing the length of a team study: the limited time the VM study team has had to exploit the
all must occur for every VM study, regardless of how long techniques of the Value Methodology and gain the benefits
the team sessions last. of team communication and project understanding those
Using a construction project as an example, assume the techniques offer.
study sponsor has requested a 3-day VM study. The Even when constrained by a 3-day study, it is possible
compressed time is required to maintain the design to have impressive results that dramatically demonstrate
schedule, the budget to conduct the VM study is limited, the power of the VM process. However, this scenario
and the key team members are unable to commit to more represents a double-edged sword, because impressive
than three days away from their regular responsibilities. results only encourage ongoing use of the abbreviated VM
Figure 4.3 shows how the hours per phase would differ study approach. Note that a successful VM study in a 3-day
for a 3-day study compared to the 40-hour model period depends highly upon an experienced VM facilitator
previously illustrated. The shaded area represents those and VM study team.
phases of the VM Job Plan that occur as a team effort. Many reasons exist as to why a VM study might require
There are both advantages and disadvantages more than the typical five days. A high profile, controversial
associated with the 3-day VM study approach. While it project, or multiple funding entities may create specific
reduces the VM study sponsor’s cost for the study, the VM issues that require more attention by the VM study team.
team and VM facilitator are put under tremendous pressure A more involved study may be required if the project is
to accomplish a great deal in a short period of time. In over budget, has problems associated with completion, or
order to maintain the integrity of the VM Job Plan and, at the is very complex, having more elements on which to focus
same time, prevent the activity from being simply a cost and requiring a larger team to perform the study.
reduction exercise, the VM facilitator’s job of keeping the Much can be gained by increasing the time available
VM team focused and on track becomes even more critical for a VM study. First and foremost, the VM study team
than usual. As noted earlier, every phase of the VM Job Plan can be more intimately involved in the pre-study planning
VM Job Plan Phase Number of Hours Effect of Reduced Time
More pre-study time required by the VM Facilitator to prepare for the

Preparation 24-32
abbreviated VM study
Information 4 Site visit eliminated
Less time for team interaction; increased VM Facilitator influence; reduced

Function Analysis 2-3
time for cost/performance/function analysis
Creative 2-3 Fewer ideas generated; potential loss of significant ideas
Evaluation 4 Reduced depth of team discussion and analysis of ideas
Development 8-10 Less detail, potentially less credibility related to VM proposals
Presentation—Oral 2 Fewer VM proposals to present.
Presentation—Report 64 More time required in report writing to complete development of value proposals.

Figure 4.3 – Three-Day Value Study Model for a Construction Project
27
VM Guide®
(Preparation Phase), resulting in increased and improved occurs within an organization, etc.). Visiting the site and
information gathering. Of equal importance, the VM discussing what they have seen helps stimulate the VM
study team may meet with project stakeholders and study team’s ideas in the Creativity Phase of the VM study.
decision-makers at the midpoint of the study to validate If a site visit is to occur, the planning and coordination
the direction the team is taking with their VM proposal of the site visit needs to be discussed during the pre-study
development. Additionally, when complex problems are meeting to ensure that the time allotted for the site visit is
considered, more time is available to spend on function used effectively. Following are some of the requirements
analysis to address these problems. for a site visit that should be discussed:
Obviously, a study spanning more than five days
requires a split schedule of some sort. There is a significant ‒ Will the site visit occur during the Preparation Phase
advantage to having a break of several days between team or during the Information Phase of the VM study?
sessions, as it offers the opportunity for team members
to do research and gather additional information needed ‒ Some clients require that the VM study team
for development of VM proposals. Avoid too much time undertake the site visit prior to the study.
between team meetings to reduce the potential for loss of
the VM study team’s momentum.
‒ In a typical 5-day VM study, the site visit occurs
during the Information Phase.
Assuming an 8-day VM study, the breakdown of time
spent on each phase of the VM Job Plan might be as shown ‒ Whether the site visit occurs during the Preparation
in Figure 4.4 . Phase and/or Information Phase, the following
The true issue is not whether a VM study is conducted questions should be discussed:
over three days or three months. The key is maintaining the
integrity of the Value Methodology Job Plan and making the ‒ How long will it take to get to the site, tour the
necessary adjustments in the time allotted for all elements site, and return to the location of the study?
of the process to maximize the results generated. The key
is achieving a “fair return” for something exchanged—in ‒ How is the VM study team to travel to and from
this case, time. the site?
4.3.1.3 Identify site visit requirements ‒ How accessible is the site?
During the pre-study meeting, whether a site visit will be ‒ Does lunch need to be provided (e.g., bag lunch
undertaken must be discussed. A site visit can provide or stop to eat near the site)?
the VM study team with invaluable information on the
existing conditions as well as any project constraints (e.g.,
proximity to another building, right-of-way restrictions,
how a part is manufactured, how a business process
VM Job Plan Phase Number of Hours Effect of Reduced Time
Preparation 32 Includes pre-study meeting
Information 8 Enhanced site visit and discussions with stakeholders.
Increased function analysis possible; multiple FAST diagrams can be con-

Function Analysis 8
structed.
Creative 4-8 Additional time for creativity; different techniques may be employed.
Evaluation 12-16 Increased evaluation time allows more thoughtful consideration of ideas.
Development 24-28 More credible, well-developed VM proposals.
Presentation—Oral 4 Increased number of VM proposals to present.
More time required in report writing due to greater number of value

Presentation—Report 72
proposals developed.
Figure 4.4 – Eight-Day Value Study Model for a Construction Project

28
‒ What safety equipment, if any, is required (e.g., ‒ What security requirements, if any, apply?
hard hats, work boots, safety vests, safety Must VM study team members go through
vehicle (if stopping alongside a highway, an security each day and, if so, do they need
active construction site, a manufacturing to be escorted while in the facility? What
assembly line)? documentation is required for security?
‒ Who will lead the site visit (e.g., client and/or ‒ Power supply availability. All VM study team members
design team)? Remind them to focus on areas are required to bring their laptops. Therefore, it is
of potential risk, challenges, and constraints, essential that enough power supply is available.
as these are areas the VM study team will
review during the study. ‒ Accessibility of the meeting location to the site.
The advantages of having the study near the site
‒ What documents will be required as reference allows the VM study team to undertake a site visit,
during the site visit? potentially access the site later in the study to
assist in the development of an idea, and potentially
A site visit may not be possible due to time limitations of allows them access to maintenance and operation
the VM study and/or the location of the site with respect to personnel.
the meeting location (e.g., the site is in a remote location
or it will take a significant amount of time to travel to and ‒ Meal requirements. The VM facilitator must
from). In this case, the site visit may consist of the VM understand whether the facility has easily accessible
study team reviewing the site via Google Earth, Google locations for lunch, whether catering is required or
Maps, videos, and/or photos. permitted, whether the VM study team must bring
their own lunch, and typical timing requirements
4.3.1.4 Identify VM study logistics with respect to lunch in order for them to develop
The location of the VM study is an essential component the study agenda. For example, if the facility has a
to its success and should be discussed during the pre- cafeteria where the VM study team can go for lunch,
study meeting. Some factors that the VM facilitator should when is the best time for them to break for lunch to
discuss with the client and/or design team with respect to facilitate their timely return to the study?
the study location include:
‒ Internet access. The VM facilitator should confirm
‒ Size of the meeting room to comfortably what type, if any, internet access is available. For
accommodate the VM study team, as well as example, at some government offices, internet
additional participants in the Information Phase and access is available only for government personnel
Presentation Phase. When a lot of people are on the with special card access. If internet is not available,
team, extra meeting or breakout rooms are beneficial. the VM study team should be informed that they
should bring all the materials and documents
‒ Minimizing travel expenses for the VM study team. required to undertake the VM study on their laptop
computers. Alternatively, they could use their cell
‒ Minimizing distractions to the VM study team. For phones as a hotspot.
example, having the study in the office or facility
where the majority of the VM study team works may ‒ Audio/visual. A telephone with teleconference
result in team members being pulled out of the study capabilities should be available in the meeting room
to deal with issues and/or not return in a timely to allow those who are attending the Information
matter from breaks or lunch. Therefore, it may be and Presentation Phases via teleconference/web
beneficial to hold the study close to, but not at, said meeting to participate. This also allows the VM study
facility. team to call the client and/or design team as well as
another subject matter expert during the VM study.
‒ Accessibility of the meeting location for the VM study Other appropriate audiovisual equipment, such as
team. This refers to potential restrictions on the VM multimedia projectors, monitors, whiteboards, and
study team, such as: flip charts should be available as necessary.
‒ What hours is the meeting space accessible? Regardless of where the VM study is to be held, the VM
For example, can the VM study team start at or facilitator will be responsible for minimizing distractions,
before 8:00 a.m. and stay later than 5:00 p.m.? ensuring that the VM study team members have what is
Can the VM study team leave for a few hours required to undertake the study, access to the facility,
and then return later in the evening, if required? making travel arrangements, arranging meals, and
whatever else is required to undertake the VM study.
29
VM Guide®
Study meeting room environment shape, and the VM facilitator’s preference. The important
thing to remember is that the projector and/or flip charts
The study environment is also important to the success of
must be visible to all VM study team members and visiting
a VM study. Remember, the VM study team will be working
participants, and that the VM study team members are able
for long hours for up to five consecutive days in the meeting
to face each other. The VM facilitator will be responsible
room. When selecting a meeting room for undertaking the
for setting up the meeting room to accommodate the VM
VM study, the following items should be considered:
study team and visitors.
‒ Availability. The meeting room should be available
on a 24-hour basis for the duration of the study.
This allows for the VM study team to leave their
Meals and breaks
displays on walls, tables, easels, etc. in place. It It is important during the pre-study meeting to discuss
also allows them to leave materials in the room, as meals and breaks during the study, as this may impact the
well as work as long as they wish without having to study agenda. For instance, if meals can be provided (i.e.,
lose momentum due to having to leave the room by a catered), then this allows for the flexibility of a working
specified time. lunch, if needed. For example, providing the VM study team
with lunch allows them more time during the Development
‒ Size. The meeting room(s) must be large enough to Phase to work on their VE proposals. If lunch is to be
accommodate not only the VM study team and all provided, consider dietary restrictions. The VM facilitator
their materials, but also the design team and client should coordinate with the VM study team to address such
as well as anyone else who will be attending the needs. Keep in mind that sharing a meal can also have a
Information Phase and Presentation Phase. For team bonding effect.
the VM study team, the room must accommodate It should also be noted that, due to a study being held at
free movement around the table, being able to a remote project site, the VM study team may be required
put displays on the walls and review them without to bring lunch. This is important for the VM facilitator to
disturbing another team member and provide a clear know, as they will need to relay this to the VM study team.
view for all participants to the projection screen and If lunch is not provided, then an understanding of where
flip charts. It is ideal to have extra space available for the VM study team can go out for lunch and the anticipated
tables for materials and/or products as well as any amount of time needed for them to go out for lunch, eat,
supplies the VM facilitator brings to the study (e.g., and return is required. This amount of time needs to be
printer, scanner, etc.). For very large teams, consider included in the overall study agenda.
one large room and several smaller rooms.
4.3.2 Identify, collect, distribute, and review information
‒ Location. As previously discussed, the location of the
meeting room relative to the site or manufacturing 4.3.2.1 Identification and collection of information
plant should also be considered in terms of allowing
During the pre-study meeting, the project, product,
the VM study team to undertake a site visit, as well as
service, process, or organization as well as the available
revisit the site if required later during the VM study.
information will be discussed. The information provided
‒ Lighting. A room with natural lighting/windows should should identify the purpose and need, deliverables, cost,
be provided. However, care should be taken as to schedule, and details on the “base case” design. The
the amount and size of the windows provided, as this VM facilitator needs to understand the project, service,
could potentially impact the temperature of the room product, process, or organization for which the VM study
as well as the participants’ ability to see the projector is to be undertaken in order to understand what level of
screen and/or computer screen due to the sun. details will be provided in the documentation. Information
Having a meeting room that does not have natural regarding the study subject should cover the basics,
light/windows may have a negative impact on the including:
productivity of the VM study team, which may result
in more breaks being required. ‒ Scope,
‒ Temperature control. The ability to control the ‒ Performance and quality,

temperature of the meeting room will ensure a
‒ Schedule,
comfortable working environment for the VM study team.
‒ Cost, and
It is the responsibility of the VM facilitator to ensure that
the meeting room can accommodate the VM team for the ‒ Risk.
duration of the VM study. There is no standard arrangement
for the set-up of tables in the meeting room. The table setup
depends on the type of study, table shapes and size, room
30
4. Preparation Phase
4.3.2.2 Distribution of information

Once the VM facilitator receives the project, product,
process, service, or organization materials, they distribute
that information to the VM study team. There is no standard
format for providing information to the VM study team.
However, some clients may have special requirements for
the distribution of materials. For example, some clients may
require that the development of a workbook with the relevant
information be provided to the VM study team. Additionally,
some clients require that the materials be provided to the
VM study team prior to the study (e.g., one-week prior).
Therefore, it is essential that the VM facilitator discuss with
the client or owner their requirements for distribution of the
materials as well as timing during the pre-study meeting.
Often, some or all the information is confidential. It might be
necessary to make the team members aware, or even have
them sign a confidentiality agreement.
4.3.2.3 Review of information

All the VM study team members are required to review the
materials provided prior to the VM study. The VM study
team will be asked by the VM facilitator to submit any
requests for additional information. Such requests should
be compiled by the VM facilitator and sent to the VM study
sponsor and/or design team prior to the study. Additional
guidance relative to the review and analysis of VM study
information is covered in Chapter 5, Information Phase.
4.4 References
● Adams, Ginger R. and Hays, Terry R. “The Value of Time,” SAVE
International Conference Proceedings, 1994 The content of
this section is condensed and revised from this reference.
● Resource on team size retrieved from:

knowledge.wharton.upenn.edu/article/is-your-team-
too-big-too-small-whats-the-right-number-2/
31
VM Guide®
32
5. Information Phase
5
Information Phase

The Information Phase concerns the processes of gathering,
organizing, reviewing, and transforming information about the 5.1.1 Balanced scorecard
subject under study and orienting the study participants to the A technique used to document and communicate the objec-
subject, to each other, and to the VM study process. In this tives, related key performance indicators and targets, and
phase of the VM Job Plan, the goal of the VM facilitator, as well anticipated outcomes of an organization (and/or its projects,
as the other VM study team members, is to develop a thorough products, processes, and services).
understanding of the subject.
5.1.2 Cost model
The Information Phase includes the following activities: A resource model used to graphically depict the relationship
of elements relative to their cost. For example, a cost model
● Gathering and organizing subject information; of a building might show the relative cost of each of the major
systems (foundation, superstructure, exterior enclosure, etc.),
● Reviewing and transforming subject scope information;
sorted from high to low, on a bar chart. Cost models are often
● Reviewing and transforming subject performance and augmented with a Pareto distribution (see Pareto model below).
quality information;
5.1.3 Gantt Chart
● Reviewing and transforming subject time information; A Gantt chart is a type of bar chart that illustrates the relation-
ship of activities to a schedule. Articulations of Gantt charts
● Reviewing and transforming subject cost information; may show interdependencies of activities and define the “crit-
ical path” (the longest series of required sequential activities)
● Reviewing and transforming subject risk information;
of a project or process.
● Conducting a VM study kick-off meeting; and,
5.1.4 Pareto model
● Conducting a site visit (if applicable). A further articulation of any resource model that graphically
illustrates the cumulative distribution of values. For example, a
In the Preparation Phase, consideration was given to collection Pareto distribution curve overlay a bar chart that shows the cu-
of the subject information. The Information Phase focuses on mulative contribution of each element of cost. The basis of the
the review and transformation of that information by the VM Pareto model is the so-called 80/20 rule, which means that 80
study team. It is important to remember that the Information percent of the total cost of a system can be linked to 20 percent
Phase is not a one-way street. In other words, developing a thor- of its elements. Pareto analysis is used to select important ele-
ough understanding of the subject is best achieved through the ments, to prioritize problems, and to highlight important issues.
establishment of an active dialogue between the subject team, It also helps to see the small number of important issues as well
customers, users, owners, stakeholders, and the VM study team. as their relative importance to each other.
5.1.5 Process flowchart

Process flowcharts are tools for visualizing manufacturing,
business, administration, etc. processes. Process flowcharts
usually have two sides, and the processes are placed hori-
33
VM Guide®
zontally on it. All the processes in the organization are placed form of risk rankings), HEAT maps, histograms, and probability
between customer expectations (left side, input) and customer density curves.
satisfaction (right side, output). Organizational processes in-
clude management processes, value-creating processes, and 5.1.12 Risk register
supporting processes. There are many international standards A matrix used to record information concerning subject risks.
for displaying process maps, such as UML (Unified Modeling Risk registers usually include a description of the risk, type of
Language), Event-driven Process Chain (EPC), Business Pro- risk (threat or opportunity), probabilities, impacts, triggers,
cess Modeling Notation (BPMN) (ISO/IEC 19763-5: 2015), and and possible response strategies.
VSM (Value Stream Map).
5.1.13 Scope
5.1.6 Project management plan The defined parameters of the subject under study. The subject
A project management plan is a tool for planning and managing a scope is often supported by various forms of information that
project. The document continuously evolves with the project and include narratives (or a scope statement), specifications, draw-
is always updated with the latest relevant information. The project ings, schedules, plans, estimates, and other supporting analysis.
management plan should be accessible to all project members,
as it is one of the most important documents of communication. 5.1.14 Specifications
A specification often refers to a set of documented requirements
5.1.7 Quality management plan to be satisfied by a material, design, product, or service. The
A document defining the acceptable level of quality, which characteristics of quality and performance are usually defined
is typically defined by the customer and describes how the by specifications for projects, products, processes, and services.
project, product, process, or service will ensure the specified Different types of specifications have different meanings. Exam-
level of quality. Quality control activities monitor and verify that ples include functional, technical (i.e., design and engineering),
deliverables meet defined quality standards. Quality assurance operations, and maintenance specifications.
activities monitor and verify that the processes used to manage
and create the deliverables are followed and are effective. 5.1.15 Work breakdown structure
A tool that splits a project into components. It identifies all the
5.1.8 Quality model project’s tasks and deliverables and breaks them down into many
A model that illustrates the relationship between customer sat- small, meaningful, manageable parts (work packages). A WBS
isfaction and the degree of quality provided by a project, prod- helps to show the scope of the project, regulate progress, set
uct, process, or service. One such example is Quality Function accurate costs and timetables, and shape project teams. Once
Deployment (QFD) which is a method to transform qualitative a WBS has been created, it may be transformed into a schedule.
user demands into quantitative parameters, to deploy the
functions forming quality, and to deploy methods for achieving 5.2 Process
the design quality into subsystems and component parts and,
ultimately, to specific elements of the manufacturing process. 5.2.1 Gathering and Organizing Information
The initial process of the Information Phase is to gather and or-
5.1.9 RACI matrix
ganize relevant subject information. Having the right information
RACI is an acronym for “responsible, accountable, consulted,
at the right time is a critical ingredient for the success of any VM
and informed.” A RACI matrix is typically used to cross refer-
study. This process begins in the Preparation Phase and continues
ence activities and deliverables with stakeholders to define
in the Information Phase as additional information is developed
the level of involvement. For example, a public agency might be
and gaps are identified, requiring supplementary information.
identified as “consulted” for the review of a project document.
For example, assume that a VM study is to be conducted on
The information on a RACI matrix is used in supporting commu-
a public infrastructure project. If the success of the project is
nication and managing stakeholders.
directly related to the quality and timeliness of the information
on which it is based, then this is especially true for VM stud-
5.1.10 Resource model
ies. Most projects, especially during the latter phases of their
A graphic and/or numerical representation (such as a spread-
development, generate volumes of information. The project
sheet, pie chart, cost model, Gantt chart, etc.) indicating re-
team, which has been responsible for generating, collecting,
sources such as cost, space, time, and energy and associated
and organizing the data, possesses a level of familiarity with
performance or risk allocated to each component of a project,
it that the VM study team cannot match. Furthermore, few, if
product, process, service, or organization.
any, members of the project team will have a full appreciation
and understanding of all aspects of the information used to
5.1.11 Risk model
develop the project.
A resource model that represents the probabilities and impacts
With respect to subject information, the VM study team
of threats and opportunities. Risk models can be qualitative or
may be in an unusual position. While team members begin the
quantitative in nature. They include tornado charts (a graphic
34
study from a relatively uninformed standpoint, assuming they 5.2.2 Reviewing and transforming Information
have not been previously involved with the subject, this lack of Many of the activities in the Information Phase concern trans-
knowledge frees them from the assumptions and conclusions forming information in its “raw” form into meaningful insights
held by those currently involved with the subject. that will help guide the VM study team in achieving the study’s
Information sources should have been initially identified objectives. In reviewing the available information, it may be
during the Preparation Phase. Typically, the sponsoring orga- determined that adequate information does not exist, at which
nization, supported by other stakeholders, either has in their point a decision must be made as to whether the VM study can
possession or has identified the sources of the information proceed without that information. Alternatively, the VM study
needed to support the VM study effort. The VM facilitator should team may be tasked with helping to create this information.
coordinate receipt of this information and ensure that it is orga- Ideally, the following information should be reviewed and
nized and complete before distributing it to the VM team. analyzed for the subject under study.
Ideally, the primary information sources were identified in
the Preparation Phase. In thinking about information, it is useful ● Scope information;
to classify it as either primary or secondary sources. A primary
source is an original report, study, document, object, or eyewit- ● Performance and quality information;
ness account. In other words, this is the source where any given
● Time and schedule information;
information first appeared. For example, a VM study focused
on the design and construction of a hospital would consider ● Cost and financial information; and,
plans, specifications, the basis of design, schedules, and cost
estimates as examples of primary sources of information. ● Risk information.
A secondary source is a document that is written about the
primary source. These include documents that report, analyze, Frequently, existing information requires additional analysis
discuss, or interpret primary sources. Examples of secondary for it to be readily usable during a VM study. For example, a
sources of information relevant to a VM study for a hospital product study may include a detailed bill of materials (BOM);
might include: however, that may be lengthy and difficult to read. The VM
study team would benefit if the cost information were trans-
● A newspaper article that covers the local politics related formed into a cost model that showed which product sub-as-
to the funding of the hospital project; semblies or components make the greatest contributions to
total cost. Further, time or schedule information may not exist
● A report related to a third-party analysis of the process at a sufficient level of detail to provide the VM study team with
used by the hospital authority to determine the program- a meaningful understanding of how the various manufacturing
matic needs of the hospital; or, activities are contributing to overall production time. In this
example, the VM study team would benefit from having a Gantt
● A Wikipedia article entry about hospitals.
chart available which details the duration and relationship of
Secondary sources can provide additional insight that sup- the various activities in the work breakdown structure of the
plement primary sources; however, it must be recognized that manufacturing process. Transforming both the cost and time
primary sources are essential to the performance, and must information into informative resource models will aid the VM
form the basis, of a VM study. Indeed, primary information team in drawing meaningful conclusions about the impact of
sources form the foundation for any comparative analysis of the product’s various components relative to total value. Fur-
value emanating from a VM study. ther, this transformed information will prove invaluable during
The VM facilitator should work with the study sponsor and the subsequent phases of the VM Job Plan.
stakeholders to identify both primary and secondary informa- As was mentioned, frequently some of the key information
tion sources. Oftentimes, there is more information available necessary to fully consider value improvement may be missing
than there will be time for the VM study team to process. In or unavailable. In such cases, the VM study team may need to
such cases, judgment must be exercised to determine what take the initiative to create this information, ideally with the
information is given priority. The study sponsor and other key participation of key stakeholders, either before or during the
stakeholders should be consulted in making this determination. VM study. For example, assume a VM study is to be performed
Once the information has been gathered and organized, it on an existing process that is poorly documented and perhaps
should be reviewed for completeness. It is possible that the evolved out of necessity rather than by design. As a result, no
information provided is incomplete, incorrect, or missing key existing process flowchart exists. It is determined prior to the
elements. In such cases, clarifications and/or requests for VM study that the VM study team should help develop a pro-
additional information can be made prior to the VM study. cess flowchart with the stakeholders. Members of the VM study
team then interview current users and stakeholders to identify
activities, durations, and sequences to develop a process flow-
chart that will serve to define the current state of the process
during the VM study.
35
VM Guide®
The techniques identified in Section 5.4 will aid the VM Team ‒ Performance and quality information (may vary by
in transforming raw information to forms that are more readily subject and industry)
usable throughout the course of the VM effort.
‒ Specifications and/or requirements
5.2.3 Orienting participants
The other key process of the Information Phase is orienting the
‒ Quality management plan
VM study participants. This includes: ‒ Warranty and/or defect information
● Orienting the participants to each other. This includes in- ‒ Voice of the customer information
troducing the VM study team, sponsor, delivery team, and
other stakeholders. ‒ Surveys and/or interviews
● Orienting the participants to the VM study subject informa- ‒ Marketing data

tion, including any analysis of that information.
‒ Value stream map
● Orienting the participants to the VM study process. This in-
cludes introducing and reviewing the VM study agenda, VM ‒ Time information (may vary by subject and industry)
study scope and objectives, and discussing key VM study
deliverables and milestones.
‒ Major milestones
● Orienting the participants to the subject site and environ-

‒ Schedules
ment. This includes conducting a site visit to a project site, ‒ Project’s critical path
observing that manufacture and/or assembly of a product,
and observing the execution of a service or process. ‒ Process throughput
‒ Gantt charts
‒ Cost information (may vary by subject and industry)
5.2.4.1 Inputs
‒ Initial cost estimates, bill of materials, labor
‒ Scope information (may vary by subject and industry)
costs, etc.
‒ Scope statements
‒ Operations costs
‒ VM study’s goals and objectives
‒ Maintenance costs
‒ Project management plan
‒ Salvage costs
‒ Supply and/or value chain information
‒ Disposal, demolition or reuse costs
‒ Work breakdown structure (WBS)
‒ Economic data (i.e., inflation, escalation,
‒ Process flowcharts financing, cost indices, etc.)
‒ Time and motion studies ‒ Applicable discount rates
‒ Drawings ‒ Sales and marketing data

‒ Part or component lists ‒ Risk information (may vary by subject and industry)
‒ Technical reports
‒ Risk management plan
‒ Stakeholder information
‒ Risk register
36
5.2.4.2 Outputs ‒ Conduct VM study kick-off meeting

‒ Voice of the customer feedback (e.g., interviews,
‒ Conduct site visit
surveys, focus panels, etc.)
‒ RACI matrix 5.2.5 Process flowchart Figure 5.1
‒ Process flowcharts
5.3 Activities
‒ SWOT analysis The VM study team should have enough time to review all rel-
evant subject information prior to commencement of the VM
‒ Balanced scorecard
study. It is recommended that at least one week, and prefer-
‒ Schedules or other time models ably longer, be allotted for VM study team members to review
the subject information. Additional time may be warranted,
‒ Cost models based on the quantity and complexity of available information.
Invariably, there will be pieces of information that will either
‒ Life-cycle cost analysis and/or models not have yet been developed or that are not organized in a for-
mat immediately usable by the VM study team. Ideally, these
‒ Risk models
“information gaps” will have been identified during the Prepa-
ration Phase, and the owners of the information will be working
5.2.4.3 Activities to develop it so that it can be made available during the VM
‒ Review and transform scope information study. Sometimes the information will simply not be available
in time. When this situation occurs, it will be necessary to iden-
‒ Review and transform performance/quality information tify the assumptions to be used in place of the information. The
VM facilitator should work with the study sponsor to identify
‒ Review and transform time information these assumptions and document them for inclusion in the
report that will summarize the VM study team’s findings.
‒ Review and transform cost information
‒ Review and transform risk information

Review and Transform SWOT Analysis, RACI
Scope Information
Scope Information Matrix, Process Flowchart
Performance & Quality Review and Transform Voice of Customer

Information Performance & Quality Info Balanced Scorecard
Review and Transform

Time Information Schedules, Time Models
Time Information

Cost Information Cost Models
Cost Information

Risk Information Risk Models
Risk Information
Conduct VM Study Discussion, Clarification,

VM Study Participants
Kick-Off Meeting Subject Issues
VM Study Agenda
VM Subject Information
VM Team Awareness,
Site Visit Requirements Conduct Site Visit
Enhanced Understanding
Figure 5.1 – Information Phase flowchart
37
VM Guide®
5.3.1 Reviewing and transforming subject scope information Examples of performance information for an elementary
Scope information describes and defines what the subject school project might include:
“is.” Examples of scope information include project charters,
● Compatibility of the interior spaces to the
product descriptions, basis-of-design reports, space planning
educational program;
documents, drawings and plans.
The types of information related to a subject’s scope may ● Flexibility of classrooms for accommodating small or
include, but are not limited to, the inputs identified in Section 5.2 large class sizes;
above. Most of these information types are either self-explanato-
ry or defined in the Terms and Definitions section of this chapter. ● Energy efficiency of the building envelope;
While it is important to understand the information that de-
fines what the subject is, additional information stating what it ● Safety and convenience of vehicular circulation for bus
“is not” is also helpful. This type of information is often referred and parental pick-up areas;
to as constraints or limitations and can help clarify for the VM
● Number of parking spaces and proximity to the building; and,
study team how the subject scope is defined.
It is essential that the VM study team have a clear under- ● Degree of site illumination for safety and to support
standing of who the customers, users and stakeholders are nighttime activities on playing fields.
and what their interest is in the subject and their influence on
scope. Stakeholder analysis is an important activity, and there This information may be readily available, or it may require
are numerous techniques that can be employed to perform this. the application of some of the basic techniques identified in
Process flowcharts are particularly useful for VM studies Section 5.4 to identify and define.
where the subject is a process or service (detailed in Section A key concept related to performance is identifying the de-
5.4.4). Experience shows that most processes, in practice, gree and customer preference for performance. Performance
occur differently than how they are documented — if they are scales can be developed that identify minimum acceptable and
documented at all. Development of a process flowchart as part ideal levels of performance. There are a variety of prioritization
of a VM study can help validate existing processes as well as techniques that can also be used to help determine the relative
establish a baseline for poorly documented ones. The creation priorities of different performance attributes using more so-
of a process flowchart, by virtue of listing all activities, also phisticated multi-criteria decision analysis (MCDA) techniques.
generates a work breakdown structure. Adequate scope in- Regardless, the goal of this activity is to ensure that the VM
formation is the foundation from which all cost, schedule, and study team has a thorough appreciation of how customers and
risk information emanates. A good WBS provides the building stakeholders perceive and understand performance.
blocks on which to build this information for many subject Quality, as discussed in Section 2.5, can be viewed as syn-
types, especially for processes and services. onymous with “performance,” or it can be considered as how
well something conforms to its specifications. With respect
5.3.2 Reviewing and transforming subject performance to the latter, quality information may be useful for identifying
and quality information where quality is deficient, revealing opportunities for value
It is of vital importance that the VM study team have quality improvement. For example, a consumer product will likely have
information and a clear understanding of the subject’s per- information related to manufacturing defects and/or warranty
formance. Depending upon the nature of the subject under issues. It is important to understand this information and trans-
study, this information can be obtained through a variety of form it into meaningful insights
techniques, including interviews, surveys, and focus panels as
well as through documentation such as specifications, require- 5.3.3 Reviewing and transforming subject time information
ments, quality management plans, and terms of reference. A thorough review of a project’s time, or schedule, information
Performance and quality information is vital in understand- is an important step in the Information Phase. Hopefully, the
ing “how well” the subject must deliver its functions. This project will have a well-developed work breakdown structure
information can be either qualitative or quantitative in nature. (Refer to 5.1.15.). The VM facilitator should be aware that a
WBS may exist at several different levels within the project.
For instance, one WBS may define the delivery of the design of
a facility, while another WBS may define its construction. De-
pending on the timing and scope of the VM study, one or both
work breakdown structures may be relevant.
A project schedule is generally derived from the WBS. Nu-
merous project scheduling tools and techniques for project
managers exist. Some of the more prevalent software programs
on the market today include Microsoft Project® and Primavera
P6®. Programs such as these allow detailed schedules to be de-
38
veloped from a WBS. In addition, these programs allow project procedures, policies, and processes may be unknown. In either
resources to be linked to activities occurring within the WBS. case, the use of cost visibility techniques is essential in devel-
There are several different ways in which a project schedule oping an understanding of project costs.
can be graphically represented, all of which can be accom- Life-cycle costs are another important aspect that must be
plished using project management software. These include bar considered. Life-cycle costs reflect the total cost of ownership
charts (also known as Gantt charts) and network diagrams (also of the VM study subject. Techniques to analyze life-cycle costs
known as PERT—program evaluation and review technique— are presented in Chapter 9.
charts). Gantt charts are useful for showing the relationship of Cost visibility techniques establish costing ground rules to
activity start and end dates. These are easy to read and are the determine what is included in the project cost. This helps the
standard schedule representation used for most applications. VM study team organize the cost and understand the current
If a Gantt chart is used, it can be further articulated by cost situation, including the cost-driving elements.
identifying the critical path of the schedule, which represents First, determine the appropriate level of cost for the subject,
a series of key activities that drive the total duration of the depending on the stage of its life cycle. For example, a VM study
schedule. Identifying the critical path can help the VM study focusing on the construction of a new hospital early in the
team spot opportunities for adding value to the subject by design process would probably use area costing (i.e., cost per
focusing on innovative ways to modify, reduce, or eliminate square meter). A study focusing on an existing product would
critical path activities. utilize detailed unit production costs (i.e., bill of materials).
Once a level of costing has been decided on, it is important to
5.3.4 Reviewing and transforming subject cost information maintain whatever level was chosen throughout the VM study in
As mentioned in the previous section, the potential for achieving order to maintain consistency and avoid confusion in communi-
major savings in any project is greatest during the early phases cating the cost of alternative concepts.
of the project life cycle. It becomes increasingly expensive and The following are several important items to consider as
time-consuming to make changes, regardless of benefits, as cost data is analyzed:
the project progresses toward completion. Finally, a point is
reached where the cost to make a change exceeds any poten- ● Determine total cost. Based on the costing ground rules,
tial benefit; it is then simply “too late.” Therefore, application of determine the total cost for the subject. For goods, a
the Value Methodology at an early phase is important. product that retails to the customer for $18.29 may have
As one writer has put it, “Cost is the principle dimension in a total production cost (material, labor, and some portion
value analysis. Without cost for comparison, the analysis of val- of overhead) of $12.79 for the purposes of the study. For
ue must necessarily be subjective—and consequently fall short construction projects, the total cost would include all
of the full potential.”1 It is desirable to develop a cost estimate design costs, contractor overhead and profit, design and
for each VM proposal, which can then be compared to the sub- estimating contingencies, real estate, and mitigation costs.
ject’s baseline. Yet in the early phases of a project, when the For processes or services, the total cost would include
potential for savings is at a high point, many areas that are to direct and indirect labor costs, as well as any support costs
be estimated are not yet clearly defined. Only after the project (materials, transportation, office space, etc.).
is well advanced and everything has been fully developed can
● Determine cost elements. Break down the elements of
the task of estimating project costs be made relatively easy and
total cost into major areas such as material, labor, and
straightforward. Unfortunately, by this time it may be too late
overhead. For construction studies, costs can be broken
to change, and the cost to redesign will be too high and many
down using a standard estimating format such as Unifor-
VM proposals must be dropped by the wayside. It is essential,
mat and MasterFormat.
therefore, to look at methods by which the VM facilitator can
gain an appreciation of costs very early in the project cycle. ● Determine incremental unit costs. This step identifies where
Cost is one of the most misunderstood items in business to- costs are being created on a unit basis by component or by
day. The cost of a product under study may vary greatly, depend- elements of a process. This translates into cost per hour,
ing upon whom you ask and the level of cost with which they cost per cubic meter, or cost per subassembly.
are familiar. Is the cost fully burdened? Does it include profit?
Is it just material cost? Construction costs, for which detailed ● Determine annualized costs. To establish a base for de-
parametric information and historical data is often available, termining cost improvements, calculate the annualized
are heavily influenced by the availability of skilled labor and vary cost of the study item by multiplying the unit cost by the
widely from region to region. Finally, the true cost of procedures number of units produced per year. For product studies,
and processes within organizations is often unknown. annualized costs will be used at the end of the study to
While a primary goal of many VM studies is cost reduction, determine annualized savings.
some organizations set up their costing systems to determine
whether cost and/or profit targets will be met, without neces-
sarily answering the question of how much it costs to produce
the product. As mentioned earlier, the cost of management
39
VM Guide®
● Determine life-cycle costs. Many VM study sponsors will ● Risk analysis. This level expands upon the risk register
want to consider the long-term costs associated with the by further analyzing potential risks. Risks are categorized
maintenance and operation of products, facilities, and according to their probabilities and impacts.
processes. These are costs with which the customer and/
or owner will be very concerned. Life-cycle costs will be ○ Identify the most critical risks by analyzing the
discussed in greater detail later in this chapter. risk register to permit appropriate focus on the
top 10 – 20 risks.
Once the subject cost data has been gathered and reviewed,
○ Identify the risk event description.
the next step is to transform this “raw” cost information by
modeling it. There are numerous ways in which cost models can ○ Develop a detailed description concerning the
be developed, and Section 5.4 identifies several useful methods potential impact of the risk event.
which include initial cost models and life-cycle cost analysis.
The application of such techniques is essential in helping the VM ○ Identify best case, worst case, and most likely scenarios.
study team identify opportunities for cost improvement. ○ Define the probability that the risk event (regardless
of its degree of impact) will occur.
5.3.5 Reviewing and transforming subject risk information
Value Methodology can play a significant role in the manage- ○ Define the impact of the risk. At its basic level, risk
ment of risk by minimizing threats and maximizing opportuni- impacts can be described qualitatively using terms
ties. The first step in addressing project risk is to gather and like high, medium, and low. If the analysis is more
review the project risk information. This includes the project’s sophisticated, it will include actual quantities such as
risk management plan, risk register, any qualitative or quanti- money and time.
tative risk analysis, and the risk response plan.
As the discipline of project management becomes more ● Risk response planning. This level concerns the identifica-
sophisticated, the management of risk has drawn increasing tion and development of strategies and action plans to deal
attention. The tools, techniques, and training available to proj- with risks by reducing threats and enhancing opportunities.
ect managers and team members have grown rapidly in recent ● Risk monitoring and control. This level is where risk is ac-
years, and it is likely that some level of risk information will be tively measured and managed. Identified risks are tracked,
available to the VM study team. Figure 5.2 below outlines the old risks are retired, new risks are added, response plans
steps involved in risk management. are executed, and the effectiveness of the risk management
The following is a brief description of the activities associat- plan is monitored.
ed with each step of the risk management process:
The project’s risk management plan will provide an overview
● Risk management planning. This level focuses on of how the project is addressing risk. The level of detail and
determining the general approach, or strategy, for dealing complexity with which this is done varies from project to
with project risk. It addresses who will be involved, what project. Ideally, the project will at least have a risk register
activities will be performed, and how risk will be handled available for the VM study team to review. A risk register will
in relation to other project development activities. provide information on specific risks to the project and should
● Risk identification. This level identifies potential project include at least some qualitative analysis on them, including
risks and formally organizes them into a risk register. Risk their probability and impacts.
identification includes the following steps: If no qualitative analysis has been performed, the VM facilita-
tor should consider adding this activity to the VM study agenda,
○ Identify risk categories appropriate for the project. either as part of the VM study or as a separate activity performed
prior to it. If the project team has not performed any form or risk
○ Brainstorm potential risks associated with management, then it is likely that they are unaware of what risks
each strategy. exist and how they could impact the project. If the risks are known
○ Organize, prioritize, and define key project risks. and have at least passed through some degree of previous analy-
sis, then the VM study team will be in a better position to consider
○ Set up the risk register. threat mitigation and opportunity enhancement strategies.
Risk Management Planning Risk Identification Risk Analysis Risk Response Planning Risk Monitoring & Control
Figure5.2–Information Phase Flowchart
40
5.3.6 Conducting a VM study kick-off meeting should, for example, include input from the following project
The team portion of the VM study should always begin with a team members concerning the following project elements:
kick-off meeting. The kick-off meeting orients the participants
● Project manager: scope statement, project history,
to the VM study process and the subject information. The kick-
objectives, and budget.
off meeting should focus on the following activities:
● Medical facilities planner: medical facility specifications,
● Introduce the VM study process, objectives, and agenda;
user requirements.
● Provide an overview of the subject of the VM study;
● Architect: functional requirements, building layout,
● Identify constraints and stakeholder issues related exterior and interior finishes.
to the subject; and,
● Structural engineer: building structure.
● Perform any additional information gathering as appropriate.
● Civil engineer: site work, vehicular circulation, site utilities.
The VM study kick-off meeting should be attended by the VM study
● Mechanical engineer: HVAC systems, plumbing,
team, design/engineering team (if applicable), owner and/or
fire protection.
study sponsor, customer representative(s), and any other stake-
holder(s), as prudent, who have a vested interest in the project. ● Electrical engineer: electrical distribution, lighting, data
It is likely that the majority of those present at the kick-off and communication systems.
meeting will be unfamiliar with the Value Methodology and may
not understand the importance of conducting a VM study. The VM The point here is to acquaint the VM study team with the “big
facilitator must always keep in mind that the performance of a picture.” Hopefully, each member of the team will have had time
VM study involves a significant allocation of time, money, and re- to conduct a more detailed review of the technical documents.
sources. Some individuals will question the need for conducting Following this presentation, the VM study team should be
the VM study in light of the cost, which is why it is important that afforded the opportunity to ask questions and receive additional
the VM facilitator carefully and effectively communicate to partic- clarification concerning the information. The VM facilitator should
ipants the VM study process, objectives, and agenda. Copies of ensure that the VM study team members utilize good interper-
the VM study agenda should be distributed to all participants, and sonal communication practices during this dialogue and that the
an attendance sheet should be distributed to the group so that questions are not phrased in a critical manner. The project team
names and contact information can be documented. will be the VM study team’s best source of information, making it
After all participants have been properly introduced, the VM fa- critical that a high level of professionalism be maintained in order
cilitator should begin by clearly stating the objectives for the VM to foster trust and openness during the VM process.
study, which should have been identified in the pre-study meet- While all the key participants are present, the VM facilitator
ing. Following this, the VM facilitator should refer everyone to the should take the opportunity to ask the project team to identify
VM study schedule and provide a brief overview of each major constraints related to the project. Project constraints typically
activity. It is important to stress that the VM study will consider relate to issues beyond the control of the project team and may
all aspects of value, not just cost. As cost cutting carries with it include political considerations, funding or revenue issues, reg-
many negative connotations, it is best to emphasize the value im- ulatory requirements, and legal challenges. The VM study team
provement aspects of VM to maintain a positive and collaborative must have a basic understanding of these constraints, as they
VM study environment. will have an impact on the types of proposals the VM study team
Often the VM study’s sponsor, who may be the “owner” of the will generate later in the VM study process.
subject, will want to make a few statements regarding the study In addition to project constraints, there may be other con-
objectives and the current state of things. The importance of cerns that external stakeholders will want the VM study team to
demonstrating the visible involvement of the study sponsor at consider. These may include issues related to indirect project
this early stage of the process cannot be understated. The VM impacts to the public. Issues of this nature are common for con-
facilitator should always encourage this, as it sends a strong struction projects where there may be citizens and businesses
message to the participants. Management involvement is much directly or indirectly affected by the project. This information
better than management support. should be solicited from the stakeholders and documented. It
An informational overview of the subject should be presented is recommended that the VM study team record this information
by the appropriate stakeholders. Following this introduction, a for all to see, so the meeting participants can be involved in the
more detailed presentation of the subject should be made by the documentation of these constraints and issues.
appropriate stakeholders representing expertise in the various
disciplines necessary to develop key project areas. This briefing 5.3.7 Conducting a site visit
should focus on discussing major elements rather than finite VM studies may include a site visit as part of the Information
technical details. A project overview focusing on a new hospital Phase. The function of a site visit, simply stated, is to allow
the VM study team to observe the subject. A site visit provides
41
VM Guide®
VM study teams with an excellent opportunity to gain valuable 5.4 Basic techniques
information about the subject that may not otherwise be
obtained through other means. A site visit, depending on the 5.4.1 Voice of the customer
nature of the subject of the VM study, might include:
One of the simplest and most effective techniques for gathering
● Project. A VM study focused on a new highway interchange information on scope, performance, and quality is to gather it
might involve a visit to the location where construction will directly from customers, users, and other stakeholders through
occur. The VM study team may walk the site; observe the interviews, surveys, and focus panels. This group of techniques
operation of existing traffic; consider potential traffic de- can be used to gather and analyze information on a number of
tours; identify construction access opportunities; identify important questions, including (but not limited to):
potential utility conflicts; and, identify adjacent property
1. What are the customer and/or stakeholder problems
impacts.
or needs?
● Product. A VM study focused on the improvement of a
2. What are the customers and/or stakeholder priorities?
forklift might involve a visit to a warehouse where multi-
ple competitor forklifts have been staged. VM study team 3. What are the strengths and weaknesses of the
members could operate and observe the different forklifts study subject?
and compare their function and performance. Similarly,
certain sub-assemblies of the vehicles could be disassem- 4. How well is the current approach meeting the
bled and inspected. customer’s needs?
● Process. A VM study focusing on a facility inspection pro- 5. What are the stakeholder issues?
cess might involve having the VM study team accompany
an inspector to observe how that person performs the 6. How does the customer define value?
work. This would allow the VM study team to ask questions
The answers to these questions are essential for the VM study
of the inspector; record how long it takes to perform cer-
team to understand if they are to improve customer value.
tain activities; and, observe the inspection methods and
techniques employed.
Techniques for capturing the voice of the customer include,
● Service. A VM study focused on a fast-food restaurant cus- but are not limited to:
tomer experience could be observed whereby members
● Interviews
of the VM study team act as customers. During this experi-
ence, they could interact directly with the restaurant staff ● Focus panels
and gauge the quality of their work; inspect the quality of
the food; and, survey the restaurant environment relative ● Surveys
to its impact on their own customer experience.
● Questionnaires
● Organization. A VM study focused on developing a strate-
gic plan for a public agency might conduct interviews with ● Product or service reviews
groups of employees to ask them about their experiences
● Technical support feedback
and share their insights about working in the organization.
A SWOT analysis format might be employed to help identify ● Warranty feedback
what works well within the organization and not as well as
to target potential threats and opportunities. ● Experts opinions
Sometimes, it may be advisable to schedule a site visit a week or ● Tracking of customers’ behavior
more prior to the VM study. This allows for adequate time to visit
the site which may be in a different physical location than the ● Customer satisfaction assessment
study. Scheduling the site visit in advance also allows time for
● Online product reviews
additional analysis of the information that is gathered, thereby
making it more useful during the performance of the VM study. ● Quality function deployment (QFD)
● Field reports
● Market demands
● Complaints log.
42
Interviews involve scheduling a time and place to interact 5.4.2 SWOT analysis
directly with customers and stakeholders. This can be accom- SWOT is an acronym that stands for strengths, weaknesses,
plished through phone calls, videoconferencing, or in face-to- opportunities, and threats. SWOT analysis involves organizing
face meetings. Interviews should be designed in advance with a group of stakeholders and leading them through a discussion
input from the VM study sponsor and their representatives. A focused on those four topics. SWOT is best performed by fram-
script should be developed that includes key questions. Ques- ing these topics in the form of questions:
tions should be open-ended in nature to lead to rich discussion
and dialog, rather than simple yes or no responses. Interviews ● Strengths: “What is currently working well?”
have the advantage of allowing the interviewer to ask follow-up
questions based on initial feedback. Generally, this method is ● Weaknesses: “What is not working well or needs
recommended when there are individuals who have critical in- improvement?”
put and/or limited time. A 10 – 30-minute interview can obtain
● Opportunities: “What positive things could occur in the
a significant amount of important information.
future that could add value?”
A focus panel (or focus group) is a interview variation that
involves selecting a cross section of customers who typically ● Threats: “What negative things could occur in the future
provide feedback on a specific product or service. Focus pan- that could degrade value?”
els can be used to:
Alternatively, SWOT can be reframed slightly to think of
1. Obtain feedback on customer satisfaction. strengths and weaknesses as being internal attributes (easier
to control or change) and opportunities and threats emanating
2. Identify marketing issues on product acceptance,
from the external environment (more difficult to manage or
features, ideas for future products and services, and
control). The facilitator should lead the conversation and elicit
other related issues.
feedback from the stakeholders. Oftentimes a flipchart or
3. Understand how well customers’ expectations are being whiteboard can be used, and the information captured in a
met in the area of customer service. simple 2x2 matrix ( Figure 5.3 ).
4. Obtain leverage to identify value improving opportunities.

Helpful Harmful
One of the key ideas behind focus panels is that they should
To achieving the To achieving the
involve multiple customers at the same time. The purpose is to
objective objective
create a group conversation around the VM study subject and
to have customers share their experiences.
Surveys provide a less direct means of asking questions like
those that might be asked in an interview. Surveys are useful
Internal
when trying to elicit feedback from many respondents. They have

Strengths Weaknesses
the advantage of potentially being anonymous and more candid,
but often do not gather as much useful information as interviews
or focus panels. Nowadays, there are many ways to conduct
surveys easily and efficiently through the internet using e-mail or
specially designed software as a service platform. Survey ques-
External
tions should be thoughtfully designed to ensure that responses

Opportunities Threats
are useful and meaningful. They should be developed in conjunc-
tion with the VM study sponsor and their representatives.
All these techniques can be structured, if desired, in the
form of a SWOT analysis which will be further detailed in Sec-
Figure 5.3 – Example SWOT analysis matrix
tion 5.4.2. In all cases, the VM facilitator should ensure that all
feedback is recorded so that it can be referred to later in the SWOT analysis can be combined with other information gather-
VM study process. Oftentimes, the raw feedback is organized, ing techniques, such as by leveraging it in interviews, focus pan-
categorized, and summarized into a report, presentation, or els, and surveys. For example, a survey could be designed using
through the use of charts and graphs. a SWOT structure. The feedback from this could be summarized
and shared with a group of stakeholders and then used to elicit
additional feedback in the form of an interview or focus panel.
43
VM Guide®
5.4.3 RACI matrix 5.4.4 Process flowcharts

RACI is an acronym that stands for responsible, accountable, A process flowchart is a way to illustrate the sequence and in-
consulted and informed. A RACI matrix is used to identify the terrelationships between the activities of a process or service.
level of stakeholder involvement for various activities or ele- The VM study team may be either the recipient of a process
ments. For example, the activities of a WBS could be cross-in- flowchart developed by others or they may need to construct a
dexed with stakeholders to identify their roles. flowchart where none exists.
Nowadays, there are several commercially available soft-
The four terms are defined as follows and are illustrated in ware programs facilitate the construction of flowcharts, such
Figure 5.4 : as Microsoft Visio® which allow flowcharts to be easily devel-
oped. Flowcharts use a common symbol language comprised
● Responsible: A stakeholder who is identified as “respon- of different shapes, lines, and arrows. The standard ANSI and
sible” means that they are tasked with performing the ISO symbols are identified in Figure 5.5 .
activity or completing the task. Flowcharts can be created horizontally and/or vertically. They
provide a simple but powerful way to describe a process and, us-
● Accountable: A stakeholder who bears the responsibility of
ing the symbol language identified above, can convey a significant
ensuring that an activity or milestone is achieved. Often-
amount of information that is easy to understand and follow.
times, this involves managing or overseeing the work that
“Yes” and “no” statements, or probabilities, or other conditional
is performed by those that are “responsible.”
information can be added to the connecting lines of a flowchart to
● Consulted: A stakeholder whose input or feedback is identify the underlying process logic. Figure 5.6 provides an
explicitly required for a given activity or milestone. example of a simple flowchart.
A common technique in developing flowcharts is to leverage
● Informed: A stakeholder who is kept apprised of the status interviews or focus panels to elicit process flow information
of an activity or progress toward achieving a milestone. which is then used to develop a flowchart. This excellent ap-
proach allows for the interviewees to provide feedback on the
RACI matrices are particularly useful for understanding pro- sequence and logic of the flowchart as it is developed.
cesses and services. They can help identify communication
gaps and potential communication risks.
Buyer Seller Agent Lender Escrow
Identify Property A I R I I
Negotiate Price A A R C I
Open Escrow I I C C A
Obtain Financing A I I R I
Close Purchase A A I I R
Figure 5.4 – Example RACI Matrix
44
Standard
Name Description
Shape
Flowline Shows the process' order of operation. A line extends from one symbol and points to another.
(Arrowhead) Arrowheads are added if the flow is not the standard top-to-bottom, left-to-right.
Indicates the beginning and ending of a program or sub-process. Represented as an oval or

Terminal rounded (fillet) rectangle. They usually contain the word "Start" or "End" or another phrase sig-
naling the start or end of a process, such as "submit inquiry" or "receive product."
Represents a set of operations that changes value, form, or location of data. Represented as
Process
a rectangle.
Shows a conditional operation that determines which one of the two paths the program will take.
Decision
The operation is commonly a yes/no question or true/false test. Represented as a diamond.
Indicates the process of inputting and outputting data, as in entering data or displaying results.
Input/Output
Represented as a parallelogram.
Document Indicating a specific document, form, or other formal modality for recording information.
Predefined Shows named process which is defined elsewhere. Represented as a rectangle with dou-
Process ble-struck vertical edges.
On-page Pairs of labeled connectors replace long or confusing lines on a flowchart page. Represented
x
Connector by a small circle with a letter inside
Figure 5.5 – Flowchart symbols and their meaning
Identify
organizational
needs
Request new
Identify alternative
position approval Request
NO solutions with
from Human approved?
Dept. Head
Resources Dept.
YES
Complete job
description form
Advertise position
Request Advance candidate
and review YES
approved? for screening call
applications
NO
Figure 5.6 – Example process flowchart for a staff recruiting process
45
VM Guide®
5.4.5 Balanced scorecard ● Customer. What is important to the customers and stake-
The balanced scorecard is a method that was originally de- holders? KPIs might include: performance specifications,
veloped as a strategic management tool and introduced to quality standards, customer satisfaction, repeat custom-
the business world in the 1990s. As a strategic management ers, etc.
tool, it is used to consolidate the objectives, key performance
● Internal business processes. How do we deliver our prod-
indicators (KPIs) and targets, and initiatives relative to four
ucts and services? KPIs might include: cycle time, unit
“perspectives.” These included:
cost, yield, new product introductions, etc.
● Financial. What are the financial (cost) objectives? KPIs
● Learning and innovation. How can we continue to improve,
might include: initial cost, life-cycle cost, cash flow, sales
create value, and innovate? KPIs might include: time to
growth, operating income, return on equity, etc.
develop a new generation of products, life cycle to product
maturity, time to market versus competition, etc.
RESTAURANTS – BALANCED SCORE CARD
STRATEGIC KEY PERFORMANCE TARGETS INITIATIVES

OBJECTIVES INDICATORS CURRENT INTERVAL NEXT PROGRAMS BUDGET
Increase company
% Net profit margin 7% Q 12%
profitability
FINANCIAL
COST /
$ Net cash flow 22.101 M 24

N/A N/A
Optimize revenue and
$ Sales to date 30.564 Q 35.05
expenses
$ Cost per call 0.24 M 0.12
Maintain high levels of
% Survey excellent score 32% Q 50%
customer satisfaction
CUSTOMER / QUALITY /
% Call abandon rate 16% M 10%

PERFORMANCE
Begin customer rewards

Increase customer project $5,000.00 initiative
$ Revenue per client 300 M 350
profitability
$ Average new customer Project to train 0.5 hour per
12 M 5 employees on new employee
acquisition cost
customer rewards
Build and improve the
# New customers 315 M 350
customer network
% Market share 6% Q 10%
Increase call-handling
Average call handling time 315 M 350
expertise
TIME / SCHEDULE
% Scheduling adherence 6% Q 10% Training for call

0.25 hour per call
Improve service delivery % Processes optimized 9 M 7 handlers
handler
% Active projects running Review the service
75% M 85% 5 hours manager
on time delivery process
and on budget 50% M 55%
50% M 50%
Build a culture that # Employee engagement Ask for and reward
27 Q 40
encourages innovation index employee ideas that
# Ideas received for new/ improve processes
LEARNING / THREATS /
improved service from 25 M 25

OPPORTUNITIES
employees Write up employee

$25/idea, $5,000/
innovations in the
Nurture high-performing successful idea
% Employee satisfaction 75% Q 85% company newsletter
employees
Groups
% Employee turnover 9% M 5% Determine bonus
5 hours manager
structure for successive
Continuously improve # Training hours per 1 hour manager
15 M 18 years of service
skills and competence full-time employee
% Employees meeting Group to decide
professional development 72% Q 85% rewards for completed
requirements training programs
Figure 5.7 – Example of a balanced scorecard used for a VM study.
46
Many variations can be made on the balanced scorecard concept. Gantt charts can be further articulated to show the “critical
For example, a “value scorecard” might consider similar questions path” of the project or process. This is usually achieved by color
framed from the standpoint of the elements of value: perfor- coding all the tasks involved in determining the total duration of
mance/quality, cost, time, and risk ( Figure 5.7 ). the project. Color coding is especially helpful in large, complex
The balanced scorecard technique can be used to summarize projects and processes having hundreds of tasks. Tasks on the
key subject information in a way that the VM study team can eas- critical path should be of interest in a VM study, as they offer the
ily digest and understand. Further, this technique can be com- greatest opportunity for schedule improvement. It should be
bined with the various voice of the customer methods to develop noted, however, that other tasks not on the critical path could
a better understanding of the subject’s performance objectives. become part of it should their durations or dependencies change.
The subject of a VM study may not have a Gantt chart pre-
5.4.6 Gantt chart pared. If this is the case, the development of some form of time
The Gantt chart, named after its inventor, Henry Gantt (1861- or schedule model should be considered. Gantt charts are
1919), is the most common technique used for communicating recommended, as they provide a clear, understandable model
time information. It is a graphical way of communicating the of the element of time for the subject under study.
duration, interrelationship, and sequence of activities involved
in the execution of a project or process. Gantt charts are usual- 5.4.7 Cost models
ly presented as a horizontal bar chart. Gantt charts are con- Cost models provide a means to organize and communicate
structed by listing the activities and/or milestones of a project cost information for the purpose of improving cost visibility. Any
or process along the vertical axis and the start and end dates type of cost information can be modeled, including initial costs
along the horizontal axis. Most scheduling software available and life-cycle costs. The first step in preparation of a cost model
allows a WBS to be entered, with the start and finish dates is to validate the available cost information. The reason for ver-
(which indicate the total duration) added, automatically creat- ifying cost information is to ensure that cost information aligns
ing a Gantt chart ( Figure 5.8 ). with the scope and schedule information. Sometimes, there is
This Gantt chart shows 10 activities that are associated with a disconnect with this information, which means that the costs
the staff hiring process. Activities that have a duration associ- may not be accurately captured. If there are discrepancies in
ated with them are shown as bars, and milestones (which have the costs, these should be identified early to avoid confusion or
no duration and represent key accomplishments) are typically misunderstanding during the later phases of the VM study.
shown as diamonds. Lines with arrows connecting the activity To construct a cost model, the VM facilitator, or cost SME,
bars and milestones indicate dependencies. For example, Task organizes cost by specific categories such as component,
6 (Submit form to HR Dept.) can only occur after completing assembly, process, construction trade, system, or another log-
Task 5 (Complete position request form). This example was ical breakdown. This helps the VM study team at the beginning
created using Microsoft Project®, however other software of the VM study to know where the major costs are to be found.
tools such as Microsoft Excel® and Microsoft Visio® can be Typically, this information is communicated using a bar chart.
used to create Gantt charts. Oftentimes, cost models include a Pareto distribution, or
curve, which augment the cost model. Italian economist Vilfre-
Feb 10, ‘19 Feb 17, ‘19 Feb 24, ‘19 Mar 3, ‘19 Mar 10, ‘19 Mar 17, ‘19 Mar 24, ‘19 Mar 31, ‘19
ID Task Name Duration
SMTWT F S SMTWT F S SMTWT F S SMTWT F S SMTWT F S SMTWT F S SMTWT F S SMTWT F S
1 Staff Hiring Process 33 days
2 Identify organizational needs 0 days 2/15
3 Conduct monthly HR planning meeting 1 day
4 Define staff position needed 5 days
5 Complete position request form 1 day
6 Submit form to HR Dept. 0 days 2/26
7 HR Dept. reviews request 10 days
8 Complete position description form 5 days
9 Create job posting 1 day
10 Review candidate applications 10 days
11 Schedule candidate phone screening calls 0 days 4/3
Figure 5.8 – Gantt chart of a hiring process
47
VM Guide®
do Pareto (1848–1923) developed the curve known as Pareto’s ○ Specific. A good event description should answer the
law of distribution. This cumulative distribution function can following questions:
be applied to any system in which a significant number of ele-
ments are involved. It points out that, in any area, a small num- ▸ Who. Who is involved? Who is responsible?
ber of elements (20 percent) command the greater percentage
▸ What. What will happen?
of total cost (80 percent). A Pareto cost model is constructed
by first creating a bar chart where the cost items are sorted ▸ Where. Where will it happen?
from high to low (moving left to right), while a cumulative distri-
bution (Pareto curve) is overlaid. A Pareto cost model is a sim- ▸ When. When might it happen? Could it happen
ple but effective technique for focusing attention on those cost more than once?
items that have the greatest contribution to total cost and can
point to opportunities to improve value ( Figure 5.9 ). It should ▸ Why. Why will it happen? What causes it to happen?
be emphasized that Pareto distributions can be applied to
○ Measurable. Establish concrete criteria for how you
other elements as well, such as time, performance and risk –
will know when the risk occurs.
whatever is important to the customer or user.
○ Attainable. Think of “attainable” as “manageable.” Can
5.4.8 Risk registers and scoring
the risk be managed or controlled in the first place?
Understanding risk information is important to improving value. A This was discussed earlier in the chapter, but consider
core risk management technique that all VM practitioners should it in greater detail. Sometimes risks that initially
be familiar with is the development of a risk register. A risk register appear to be manageable turn out to be quite unruly.
includes the following information as illustrated in Figure 5.10 .
○ Realistic. To be realistic, the risk must be something
● Risk ID: A number or code assigned to each risk. that has some probability of occurrence. For exam-
ple, something like “Godzilla rises from the sea and
● Risk category: It is common practice to group risks into
destroys the job site” probably isn’t very realistic. At
specific categories. For example, risks for a construction
least, let’s hope not!
project might label the groups as environmental, real es-
tate, design, construction, utilities, and geotechnical. ○ Timely. A risk should be grounded within a time frame.
Without assigning a duration of time to a risk, no sense
● Risk type: Is the risk a threat (negative) or an opportunity
of urgency is communicated. When in the project’s life
(positive)?
cycle might the event occur`? During design? During
● Risk description: A detailed description concerning the environmental review? During construction?
nature of the risk, its trigger, and whether it may be a
● Probability: Define the probability that the risk event (re-
recurring event. Use the acronym SMART, which stands
gardless of its degree of impact) will occur.
for “Specific, Measurable, Attainable, Relevant, and Time-
bound,” to develop the risk event description. ● Impact: Identify the degree of impact to the subject.
$5,000,000 100%
Value Study Focus
$4,500,000 90%
80% of Cost
$4,000,000 80%
$3,500,000 70%
% Total cost
$3,000,000 60%
Cost
$2,500,000 50%
$2,000,000 40%
$1,500,000 30%
$1,000,000 20%
$500,000 10%
$– 0%
er
C
er
ar n
Ex Fitm on
s
ls
Su er lls
ec ruc rs
La erv s
Fo W sca s
g
St Ce & hes
w g F ing
ra es
en le ge
& rs
ta Col es
In lu ns
te al ng
Fl Sc rs
in s
in s
w ip s
Ex Dr ent
al ge
W irc s
Su s
ly
Si Pro Roo
rn ent
al ta or
l S ure
r F en
W he
Se qu w
er se
n
ep tio
A
pp
rn al
Sp st loo
al oo
w
t
a
nd ic
er ish
ry um
a
a
ot all pi
In ern bi
i
al l E do
ht HV
v
at
a
ce vat
o
er m
a
te W
Up l W
in
te ain
th nis
oo re
is
Po
Po
Pr ec
or ilin Pa
m
t
D
b F
at in
In al
t
pa Fi
d
&
D
an
P
E
rn
p
S
at
te
ia
rn
ig
ht
re
rn ia
te
lL
ig
Fi
te ec
ni
,F
na
lL
rn
Sa
Ex Sp
ls
na
te
te
al
r
Ex
s,
Ex
W
te
ad
al
In
rn
Ro
te
Ex
Figure 5.9 – Pareto Cost Model.
48
ID Category Type Title Description Probability Impact

Lack of land availability for wetlands or habitat
restoration. The environmental review has not yet
Wetlands been completed and it is possible that the extent
1 Environmental Threat Medium High
Mitigation and quality of the impacted wetlands has been
underestimated. This could affect the mitigation
ratios.
Lack of good soils data could result in incorrect
assumptions about the foundation systems required
2 Geotechnical Threat Poor Soils High Medium
for the building. This could affect the design, cost and
schedule of the foundation system.
Figure 5.10 – Example risk register for a construction project.
The basic information included in a risk register is an excellent the analysis. This resulting risk score can then be used to rank
way of organizing risk information. A risk model may be devel- and prioritize the risks. A VM study can provide an excellent ve-
oped using information from a risk register. The probability hicle for improving value by minimizing risk.
and impact of each risk requires some level of analysis. At its
simplest form, qualitative risk analysis seeks to characterize the 5.4.9 Work breakdown structure
overall criticality of the risk using descriptive terms such as high, A method of defining all the work involved in delivering a proj-
medium, and low. The two values for probability and impact are ect, product, or process using a hierarchical structure. The
often represented using a simple matrix or risk heat map. Project Management Body of Knowledge® defines a WBS as
"a hierarchical decomposition of the total scope of work to
Probability Threat / Opportunity be carried out by the project team to accomplish the project
objectives and create the required deliverables." A good WBS
Very High focuses on the final outcome which appears at the top. Deliv-
5 5 10 15 20 25
95%
erables are organized into work packages which usually focus
on major achievements or milestones. The process for building
High a WBS is as follows:
4 4 8 12 16 20
75%
1. Identify the major deliverables.
Medium
3 3 6 9 12 15 2. Identify the major supporting activities and
50%
minor deliverables.
Low
2 2 4 6 8 10 3. Organize and structure the deliverables into work packages.
25%
4. Assign responsibility for deliverables.

Very Low
1 1 2 3 4 5
5% 5. Verify the WBS is correct
1 2 3 4 5
Impact Very Very

Low Medium High
Low High
Figure 5.11 – Example of a risk heat map.
The example risk heat map in Figure 5.11 assigns numerical

values to the impacts and probabilities. These can be multiplied
to produce a risk score. For example, a risk with a medium prob-
ability and a high impact would be scored a 12. It is recom-
mended that some thought be given to establishing the meaning
of these qualitative terms. For example, a “medium” probability
means a 50 percent chance of the risk occurring, while a “high”
cost risk might have a range of $100,000 to $200,000. This will
help the participants involved in the risk analysis develop a
clearer idea of what these qualitative terms mean and improve
49
VM Guide®
It is important that the VM facilitator understands work break-

down structures and how to read them. Work breakdown struc- 1. New Product
tures are commonly used in many applications and often form
1.1. Market Research
the basis of schedules (see Gantt charts above). They are
sometimes used to structure cost estimates and bills of mate- 1.1.1. Focus Groups
rials. A WBS follows a standard coding system as illustrated in
1.1.2. Surveys
Figure 5.12 .
1.1.3. Research
1.1.4. Market Research Findings
1.2. Product Design
1.2.1. Design
1.2.1.1. Research Evaluation
1.2.1.2. Design Document
1.2.2. Concept Models
1.2.3. Design Selection
1.3. Product Development
1.3.1. Bill of Materials
1.3.2. Initial Prototype
1.3.3. Prototype Testing
1.3.4. Production Development Sign-Off
1.4. Production Planning

1.4.1. Production Design
1.4.2. Production Testing
1.4.3. Production QA Design
1.4.4. Production Plan Sign-Off
1.5. Marketing
1.5.1. Marketing Strategy
1.5.2. Marketing Plan
1.5.3. Marketing Collateral
1.5.3.1. Brochures
1.5.3.2. Advertising
1.5.3.3. Commercials
1.6. Project Management
Figure 5.12 – Example of a work breakdown structure (WBS)

describing a new product development process
In the example above, it is easy to see how the WBS could be

easily converted into a schedule by assigning durations for
each work package.
50
5.5 Informative References

● O’Brien, J. J. Value Analysis in Design and Construction,
New York: McGraw-Hill, 1976.
● Project Management Institute. A Guide to the Project

Management Body of Knowledge, 6th Edition (PMBoK
Guide®), 2017.
● Cretu, Ovidiu; Stewart, Robert; and Berends, Terry. Risk

Management for Design & Construction, R.S. Means (2012)
51
VM Guide®
52
6. Function Analysis Phase
6
Function Analysis Phase
6.0 Introduction ○ Organize functions. To ensure that all functions have

been identified, FAST diagrams are commonly used
Function analysis embodies a group of techniques within the
and highly recommended.
Value Methodology that sets it apart from traditional cost re-
duction and problem-solving efforts. A function is the specific 2. Allocate resources and performance. This activity correlates
purpose or intended use for any product, process, service, resources (i.e., time, money, etc.) to functions. The most
organization, or project that makes it work or sell. In short, it common technique used is the development of a function-re-
is the reason why the owner, customer, or user needs a thing. source matrix. Project resources may then be distributed
among the functions appearing on a FAST diagram.
The Function Analysis Phase encompasses the following activities:
3. Prioritize functions. The outcome of completing the above
1. Define Functions. This activity is focused on identifying, activities is identification of the functions presenting the
classifying, and organizing functions. The following three best opportunity to improve value..
supporting activities may be performed together or in
sequence, based upon the various techniques used. These activities are tied together into a process known as
function analysis Figure 6.1 . This process is perhaps the sin-
○ Identify functions. The most used technique is gle most important and useful technique in Value Methodology;
random function identification. Random function however, it is the most difficult to explain and the most difficult
identification is just that, randomly listing functions to grasp and put into practice. For further reference, readers
of the overall subject being studied. are encouraged to consult the Function Analysis Guide pre-
pared by SAVE International® and the Miles Value Foundation.
○ Classify functions. The key techniques of classifi-
This excellent resource is dedicated solely to the practice and
cation are the same as the first step. Each function
application of function analysis.
identified is classified as basic and secondary.
$ $$$ $ $$$
$$ $ $ $$ $ $
$$$ $$$
Define Functions Allocate Performance/Resources Prioritize Functions
Figure 6.1 – Steps of Function Analysis
53
VM Guide®
6.1 Terms and definitions 6.1.9 Function, lower-order

Functions that are not part of the scope of the VM study and are
6.1.1 Activity inputs for a project, product, process, service, or organization.
A specific task, action, or operation that describes how a
6.1.10 Function, one-time
function is performed. For example, the activity “pour coffee”
describes how the function “dispense liquid” is performed. Ac- A function that occurs only once relative to the project, prod-
tivities are the means leading to the attainment of a function. uct, process, service, or organization.
6.1.2 FAST 6.1.11 Function performance specification (FPS) matrix

The Function Analysis System Technique (FAST) is a group A technique whereby the quality or performance criteria related
process that creates a diagrammatic representation of the to the subject functions are correlated along with related spec-
HOW-WHY logic of functions, and their interrelationships, of a ification units of measure, parameters, targets, and flexibility.
project, product, process, service, or organization under study.
6.1.12 Function resource matrix
6.1.3 Function A technique whereby the functions of a project, product, pro-
A non-specific, two-word abstraction, consisting of a verb and cess, service, or organization are correlated to its attributes,
noun, that describes what an element of a project, product, such as space, weight, cost, time, performance, risk, etc. The
process, service, or organization does. purpose of a function resource matrix is to develop insight into
how functions contribute to value and to aid in prioritizing which
6.1.4 Function, all-the-time functions offer the greatest potential for value improvement.
Functions that happen continuously or occur on a repetitive,
6.1.13 Function, secondary
ongoing basis, relative to the project, product, process, ser-
vice, or organization. A function that supports the basic function(s) and results from
the approach to achieve the purpose or intent of a project,
6.1.5 Function analysis product, process, service, or organization.
A detailed examination of a project, process, product, service,
6.1.14 Function, unwanted
or organization to identify, classify, and organize its functions;
allocate performance and resources; and prioritize functions A function identified by the customer, user or stakeholder as
for value improvement. undesirable that is caused by the approach used to achieve
the purpose or intent of a project, product, process, service,
6.1.6 Function, basic or organization.
The essential function(s) that fulfill the purpose or intent for
6.1.15 Random function identification
which a project, product, process, service, or organization
exists and answers the question, “What must it do?” There can A technique that lists the elements, components, or parts of
be more than one basic function. a project, product, process, service, or organization and then
identifies the various functions related to them. Once the func-
6.1.7 Function, higher-order tions have been identified using this technique, they may be
The specific goals or needs that the basic function(s) fulfills classified and organized for subsequent analysis.
and beyond the scope of the VM study subject.
6.1.16 Subject objectives
6.1.8 Function logic path Functions that express specific, compulsory requirements, or
All functions on a FAST diagram that are connected to each articulate broader goals, of the subject, whether it is a project,
other in the HOW-WHY logic direction. product, process, service, or organization.
54
6.2 Process and key concepts We can also think about functions from a different perspective
by first starting with an object and then identifying its functions.
6.2.1 The function concept For example, if we were to consider the function of a teacup,
we might say “contain liquid.” This describes the essential
Larry Miles’ great insight was that people were not interested so
function that a cup must provide if it is to fulfill its intended
much in things, but rather, what things do, which he described as
purpose. It would also be equally valid to state that the func-
“functions.” Once he understood what the functions of a thing
tion is “hold fluid.” Because there are often many words that
were, he realized he could usually find a different way to perform
have similar meanings, there may also be many ways in which a
them. This is a very liberating way of thinking, as it releases the
function could be defined.
mind from the limitations of objects and allows the mind to open
itself up to alternative ways of satisfying the functions.
Within the context of the Value Methodology, functions are
defined using two words: a verb and a noun.
Consider the following function:
Enclose Space
The verb “enclose” answers the question, “What does it do?”
This question focuses attention on the function rather than Figure 6.3 – The function of a teacup could be defined in
the object and leads straight to the heart of the functional ap- more than one way. For example, “contain liquid” or “hold
proach. This is a radical departure from typical problem-solv- fluid” would both be valid
ing efforts for which the first question is, “What is it?”
Another important aspect in thinking about functions is to
The noun “space” answers the question, “What does it do
make a distinction between two-word abridgements that de-
this to?” This simple phrasing convention is known as the “two-
fine functions and activities. For example, another two-word
word abridgment.” Describing a function using only two words
abridgment for a teacup could be “contain tea.” While the
forces us to focus our thinking in a very concise way. At the
phrase “contain tea” is articulated as a verb and a noun, this
same time, the two-word abridgement is abstract. Limiting
statement is not a function, but rather, an activity.
oneself to only a single verb and noun results in a very impre-
An activity describes how a function is performed. Activities
cise statement. The function “enclose space” could be deliv-
typically are more specific in nature, whereas functions are
ered through a variety of objects and/or actions in the absence
non-specific. The way to tell the difference is to consider the
of any additional context. One way to “enclose space” could be
word choice for the noun component of the two-word abridg-
to use a cardboard box. Another could be a glass jar. Yet anoth-
ment. The noun “liquid” (as well as the noun “fluid”) is non-spe-
er way could be to simply cup one’s hands Figure 6.2 .
cific in that it could be a reference to any liquid (e.g., coffee, tea,
water, soda, acid, alcohol, etc.). Conversely, the noun “tea” is
very specific. The statement “contain tea” will likely trigger a
specific image in the mind’s eye, most likely the object “tea-
cup” or possibly “teapot.” The function “contain liquid” is more
ambiguous and may cause one to think of a swimming pool, a
bowl, or a bucket just as likely as it would a teacup. Section
7, Creative Phase elaborates further upon this subtle, but im-
portant, difference. The proper definition of functions will be
Figure 6.2 – Examples of things that could deliver the further explored in Section 6.4.1, Define Functions.
function “enclose space”
55
VM Guide®
Figure 6.4 illustrates the degree of abstraction based on Create understanding.After participating in function analysis,
the conceptualization of a plastic water bottle. Beginning with even experienced team members who have worked on the
objective reality, the process begins with a physical object. same project for years may discover a new understanding
Emanating from this, the physical object is represented in pro- of the project for which they are responsible. The wonderful
gressively more abstract constructs ranging from symbolic to aspect of this “new” understanding is that it is a common
metaphysical representations. The intent of function framing understanding among all team members. When a team
is to define reality in a way that describes what things do and, in works together to develop a random function list and a FAST
the case of higher-order functions, why they do them. This al- diagram, they create something as a team. Thus, no matter
lows the maximum potential for divergent, or creative, thinking the technical background of the participants, each person
about possible solutions while still maintaining an understand- can describe the product in function terms. The use of ge-
ing of what function must be satisfied. In this sense, it does not neric, non-technical functions creates a level playing field.
fixate on existing solutions, but the underlying premise upon In addition, because the entire team participated in creating
which the current solution is founded. the FAST diagram, there is buy-in or agreement from all team
members regarding what the project under study performs.
6.2.2 Why function analysis?
Function analysis is a unique way of thinking and solving problems. Expand knowledgeis a critical component of function analy-
If applied correctly, Function analysis can aid a VM study team to: sis, as it is in other phases of the VM Job Plan. The VM study
team gains new knowledge of the project under study
● Identify opportunities. through the presentation materials, team discussions, and
the application of the function analysis process. In most
● Create understanding.
cases, the majority of team members are unfamiliar with
● Expand knowledge. function-focused thinking. Just becoming familiar with
● Stimulate communication. functional thinking is a significant learning opportunity
which can produce advances in the project, both technical
● Change viewpoint. and non-technical. Finally, this new knowledge leaves par-
ticipants with tools that they can leverage to benefit both
Identify opportunitiesis one of the primary reasons to perform their professional and personal lives.
function analysis. Per SAVE International®, the objective
of the Function Analysis Phase is to identify the functions Stimulate communication.It is wonderful to see a team grow
of the project that offer the best opportunity for the im- together with every team member involved in the function
provement of value. Remember that value improvement analysis phase. No matter one’s background and experi-
can be a combination of improving performance and/or ence, each person has a role to play during this process.
reducing cost. Performance can increase at a greater rate The most interesting team communication or interaction
than the increase in cost to create a value improvement. occurs at the beginning of the team’s effort to create the
Construct Information Mode Form

Physical Objective reality Physical object
Greater Abstraction
Object Physical, 3-D model of object Model, prototype

Image capturing physical reality Photograph
Symbolic 2- or 3-D representation Drawing, map, digital rendering
Image
Analogous, representative image Pictogram
"A plastic bottle approximately 8

inches tall and 3 inches in diameter Expansive description of reality Specification, manual, code, book
that holds 12 ounces of liquid."
"Hold Drinking Water" or

Activity or object A concise description of what it is
"Water Bottle"
Metaphysical
Language "Contain Liquid" Basic function A concise description of what it does
"Maintain Hydration" Higher-order function A concise description of why it does it
"The sun sets

Artistic, poetical, philosophical, or
An oblong vessel glistens Abstract interpretation of reality
abstract representation
Floating in endless seas"
Figure 6.4 – Level of abstraction relative to function thinking.
56
FAST diagram. For example, as a facilitator, direct the team 6.2.3 Process inputs and outputs
members to get out of their chairs and start to place the
Post-It® Notes to create a FAST diagram. This interaction 6.2.3.1 Inputs
continues through the remainder of the function analysis ‒ Subject scope information (e.g., drawings, sample
phase and helps create a collaborative team environment. parts, basis of design, specifications, etc.)
When this natural team bonding occurs, superior results in
the remaining phases of the VM Job Plan also occur. This is, ‒ Voice of the customer information
by far, the greatest intangible benefit of using VM. ‒ The project’s resource model(s) (e.g., cost model,
costed bill of materials, schedule, etc.)
Change viewpoint. A primary role of the VM study facilitator
is to encourage change. If radical change is to occur, then ‒ All the other information and inputs gathered during
changes in behavior, attitude, and mental thinking must also the Preparation and Information Phases
happen. Otherwise, no lasting change will occur. The team
must alter their customary thought patterns to move into a
6.2.3.2 Activities
new direction. We all know that our thought patterns have de-
veloped over a very long time; in fact, some patterns formed ‒ Define functions
before we were born. As we continue to grow and learn, we ‒ Identify functions
become creatures of habit and tend to follow along the same
paths, right or wrong. Thus, to say that we need to change a ‒ Classify functions
person’s viewpoint, we mean that we are trying to alter the ‒ Organize functions
way a person thinks and behaves. Function analysis helps
bring about such change, because it depersonalizes the con- ‒ Allocate performance and resources
versation. This is very difficult; but for successful VM results, ‒ Prioritize functions
it must occur in the minds of the participants.
VM study facilitators must allow ample time in the agenda to 6.2.3.3 Outputs
perform function analysis. When a team skips function analysis
‒ List of classified functions
or takes shortcuts, the study outcome will suffer. Even if the
time needed exceeds the time allotted on the agenda, it is still ‒ Understanding of function logic
necessary to complete all the steps of function analysis.
‒ Understanding of function-resource relationships
‒ List of functions targeted for value improvement.
Voice of the Customer Define Functions
Subject Elements Identify Functions
Subject Scope Information Classify Functions List of classified functions
Organize Functions Understanding of function logic
Performance, Quality, Understanding of function

Allocate Performance & Resources
& Resource Models and value relationships
List of functions targeted

Prioritize Functions
for value improvement
Figure 6.5 – Function analysis phase flowchart.
57
VM Guide®
6.3 Activities After answering the question—“What does it do?”—with a verb

that defines the item’s required action (it may, for instance, gen-
6.3.1 Define functions erate, control, pump, enclose, protect, or transmit), the second
question—“What does it do this to?”—must be answered with
Preliminary attempts to define the function(s) of the VM study
a noun that tells what it acts upon (electricity, temperature,
subject will usually result in it being broken down into many
liquids, light, surfaces, space, sound, and so on). If possible, it
concepts and described in multiple sentences. While this
is always preferable to define functions first using a measurable
method could conceivably describe an individual function
(i.e., quantitative) noun together with an active verb (e.g., insu-
satisfactorily, it is neither concise nor workable enough for the
late heat, support load, transfer force, and so on).
function approach. The Value Methodology determines func-
The following are examples of work functions for several
tion by considering the user’s actual need. The traits or perfor-
types of VM studies:
mance characteristics that justify a product’s existence with
respect to a particular owner, client, or user, are determined. ● In product design studies, electric motors “produce
As stated earlier in this chapter, the first principle in defining torque,” light bulbs “emit light,” fuel tanks “contain
a function is that it be accomplished by using only two words: liquid,” and heating elements “produce heat.”
a verb and a noun.
The verb portion of this should answer the question, “What ● In design and construction studies, structural columns
does it do?” This question focuses attention on the function, “transfer load,” interior walls “separate space,” doors
rather than the product or its design, and leads straight to the “control access,” clerestory windows “admit light,” and
heart of the function approach. This is a radical departure from ceiling tiles “attenuate sound.”
typical cost reduction efforts where the first question is, “What ● In manufacturing process studies, a machining or casting
is it?” followed by “How do we make it cheaper?” The traditional process is designed to “shape material,” while a material
emphasis on making the same things less expensive gives little handling procedure is designed to “deliver material,” and
thought to vital considerations such as the functions of the proj- a QA/QC process is to “verify quality.”
ect’s components or the user’s need and purpose Figure 6.6 .
● In business process studies, a payroll system is designed
to “distribute money,” an inspection report procedure
“What is it?” “What does it do?” is designed to “identify condition,” and a change order
approval procedure is designed to “authorize change.”
Design Function
Simple statements such as these ensure clarity of thought and
communicate the work function without confusion.
It must be recognized that it is not always possible to use
measurable or quantitative nouns. This is perfectly acceptable
COST REDUCTION VALUE METHODOLOGY and, in fact, necessary when considering functions that are
subjective or intangible in nature. In such cases, qualitative or
Figure 6.6 – Focus of cost reduction versus Value Methodology. non-measurable nouns can be used instead. Figure 6.7 pro-
Active Verbs Quantitative Nouns Qualitative Nouns

Actuate Impede Acceleration Liquid Aesthetics Happiness
Amplify Interrupt Air Load Acceptance Identity
Apply Limit Contamination Object Appearance Pleasure
Change Locate Current Particles Approval Prestige
Collect Modulate Data Polarity Beauty Satisfaction
Conduct Move Density Protection Color Sound
Contain Prevent Energy Radiation Comfort Status
Control Protect Flow Solids Convenience Style
Emit Reduce Fluid Sound Effect Symmetry
Enclose Rotate Force Space Features Taste
Fasten Secure Friction Speed Emotions Texture
Filter Store Insulation Torque Form Touch
Ignite Transfer Light Voltage Gratitude Worth
Figure 6.7 – Verbs and Nouns for Functions
58
vides a sample list of active verbs and nouns (both quantitative 6.3.1.1 Identify functions
and qualitative) for functions. Identifying functions is the first and most important step of the
It is important for the VM study team to concentrate their function analysis phase. There are essentially two techniques
efforts on precisely what it is they are trying to articulate with that can be used to do this: random function identification
the function statement. Care must be exercised to provide the and Function Analysis System Technique (FAST). These are
correct level of function definition. For example: The function described in greater detail later in this chapter.
of a water service line to a building could be defined as “provide In this step, the team determines all possible verb-
service.” In this example, “provide” does not give us any useful noun combinations that describe the functions of the
information on the manner in which water is being provided, subject under study. Performing this step incorrectly
and “service” is not readily measurable and does not enable us or incompletely biases the rest of the VM Job Plan on
to intelligently seek alternatives. On the other hand, if we de- incorrect or poorly articulated functions, which leads to
fine the function of the water line as “convey fluid,” the noun in misguided thinking and inferior results.
the definition is measurable, and acceptable alternatives, de- Some people argue that any verb-noun combination
pendent upon the quantity of water being transported, can be is a function; however, this sentiment is incorrect. Many
more easily determined. When the noun used is a measurable verb-noun combinations are simply actions or activities,
noun (i.e., the water volume in terms of “Q” factor in the fluid rather than functions. The difference is that an action or
flow equation), we are a step closer to being able to establish a activity is not generic and, thus, does nothing to change
cost-to-function relationship. the viewpoint of a team member. For example, think
Let us expand on this point further. As the reader will see in about “charge battery.” Is this an activity or a function?
the chapters that follow, function statements serve as the focus It is an activity. Hearing the words “charge battery,” one
for the Creativity Phase. If one is handed the statement “provide might immediately think about hooking up a battery to a
service” on a scrap of paper and asked to brainstorm as many charging machine or using battery cables and nothing else.
different ways to provide service as possible, without knowing Thus, those two words did nothing to change a person’s
what the words referred, the ideas generated would differ radi- viewpoint to divert their mind away from an action
cally from the ideas a similar scrap of paper with the statement performed by a person.
“convey fluid” written on it, might inspire. It is therefore import- In his book, FAST Creativity & Innovation, Charles
ant to consider words very carefully when defining functions. Bytheway states, “Active verbs motivate, stimulate, and
The system of defining functions in two words, a verb and a energize your thinking; and at the same time arouse
noun, is known as a two-word abridgement. Advantages of this within you your creative and inventive abilities” (p. 12).
system include: For example, active verbs to use instead of “charge”
might include “deliver,” “store,” “transfer,” or “transmit.”
● It forces conciseness by defining a function in two words.
Similarly, the name of an element or component, such as
If, with two words, the functional component is still too large
“battery,” is not a measurable noun, and places the focus
to be defined or understood by the team, this is a sign to drill
on the part instead of the function. Focusing on specific
deeper and develop a more detailed two-word definition.
elements or components leads to a cost-cutting approach
● It avoids combining functions and defining more than rather than value improvement through function-oriented
one simple function at a time. By using only two words, thinking. Appropriate nouns to describe the battery include
the VM study team is forced to break the problem into “energy” and “power.” From the list of verbs and nouns, the
its simple elements. team selects the best combination, such as “store energy.”
When the team brainstorms the function “store energy,” it
● It aids in achieving the broadest level of dissociation from broadens the perspective and leads to significantly more
specifics. When only two words are used, the possibility of ideas than using the action “charge battery.”
faulty communication and misunderstandings is minimized. Another example is “cook food.” Is this an activity or a
function? It is an activity. Hearing the words “cook food,”
one might immediately think about a stove or microwave
and not much else. Those two words do not change a
person’s viewpoint to divert their mind away from the
performance of the activity. In fact, one could argue that
a stove does not cook food. What does it do? Generic
functions that more aptly describe the functions of a stove
include “generate heat,” “distribute heat,” “control heat,”
and “conduct electricity” (or gas).
59
VM Guide®
6.3.1.2 Classify functions Secondary functions

Once the functions have been identified, they can be Secondary functions answer the question, “What else does
classified. Functions are classified into the following types: it do?” and usually result from the design, configuration,
or approach selected to perform the basic function(s).
‒ Basic functions Generally, secondary functions contribute greatly to cost
and may or may not be essential to the performance of the
‒ Secondary functions basic function. Secondary functions that lead to esteem
value (convenience, user satisfaction, and appearance) are
‒ Unwanted functions
permissible only insofar as they are necessary to permit
‒ Higher-order functions, and the item to be bought or sold. Therefore, while secondary
functions may have zero “use” value, they may sometimes
‒ Lower-order functions play an important part in the marketing and acceptance
of a design or product. In fact, this could be said of many
In addition, there are three additional types of functions high-end designer products where the esteem or “badge”
that must be considered when using FAST diagrams. These value is of far greater importance than its use value. Value
are listed below and will be discussed further in section Methodology attempts to separate the costs required
6.4.2 of this chapter. for basic function performance from those incurred for
nonessential secondary functions. Once identified, it
‒ Subject objectives, becomes easier to reduce the cost of secondary functions,
while still providing the appeal necessary to permit the
‒ One-time functions, and
design to sell or otherwise appeal to customers or users. By
‒ All the time functions. concentrating on only what is essential to the subject’s need
and purpose, Value Methodology can successfully eliminate
many unnecessary secondary functions.
Basic functions
Basic functions define the specific purpose for which a Unwanted functions
subject exists. The basic function answers the question, Unwanted functions occur as a byproduct, or unintended
“What must it do?” Basic functions deliver essential value. consequence, of the way another function(s) is performed.
A subject may possess more than one basic function, which Unwanted secondary functions often degrade performance
is determined by considering the customer’s needs. A and increase costs to mitigate them. For example,
non-load-bearing exterior wall might be initially defined as extended use of a carpentry hammer often leads to fatigue,
“enclose space.” However, further analysis could determine and possibly injury, due to the unwanted secondary
that, for this wall, the two basic functions “secure area” and function defined as “transmit vibration.” The presence of
“restrict view” are more definitive than the function above; this unwanted secondary function is partially mitigated by
and, both answer the question, “What must it do?” the material selected for the handle; for example, hickory
wood, which is a very hard, stiff, dense, and shock resistant
Four rules govern the selection of basic functions: material. Note that hickory is also more expensive.
1. The basic function describes the primary purpose Higher-order functions

and intent of the subject. Higher-order functions represent the specific need(s) or
overarching goal(s) that the basic function(s) exists to
2. If a function can be eliminated with the subject
satisfy and are beyond the scope of the study. Higher-order
continuing to achieve its primary purpose, then the
functions represent the customer’s big-picture need and
function in question is not a basic function.
describe the output of the basic function(s). Recall that the
3. Losing a basic function will cause a loss in value. basic function must answer the question, “What does it do?”
which, in the case of a carpentry hammer, is “deliver force.”
4. The customer must be willing to pay for it. The higher-order function(s), on the other hand, answers
the question “Why do we ‘deliver force?’” The answer would
be to “connect materials” or “separate materials.”
60
Lower-order functions be used for purposes other than driving nails, such as
those suggested in Figure 6.8 ?
Lower-order functions describe functions that lie beyond
the scope of the study. They are generally not part of the
function analysis process unless the level of abstraction
changes the scope of the problem. For example, a carpentry
hammer is designed based on the assumption that there
will be a user with a hand to wield it. The user will apply
force to the hammer. The function “apply force” is a lower-
order function and lies outside the scope of the product.
Another way to think about lower-order functions is that Figure 6.8 – Uses of a hammer.
they are required inputs. This chapter will discuss levels of
The hammer doesn’t actually drive the nail, but rather
abstraction will be discussed in greater detail later.
transmits force from a person’s hand and arm, through the
hammer, to the head of the nail. It doesn’t matter to the
Examples of basic and secondary functions include:
hammer whether it strikes a chisel or a cobbler’s tack.
“Deliver Force” is simply a more accurate definition of a
‒ Multimedia projector. Its basic function is to
carpentry hammer’s basic function, especially because
“project image.” In addition, the projector has many
force can be quantified. But wait! Aren’t there still other
secondary functions, such as “convert energy,”
common uses for hammers, as suggested in Figure 6.9 ?
“generate light,” “focus image,” “enlarge image,”
“receive current,” “transmit current,” “support
weight,” and so on. Unwanted functions such as
“generate heat” and “generate noise” also exist.
‒ Shopping center. Its basic function is to “attract

customers.” In addition, the shopping center has many
secondary functions such as “enhance convenience,”
“enclose space,” “maintain environment,” “control Figure 6.9 – More uses of a hammer.
access,” “store vehicles,” and so on.
The function of a judge’s gavel could be to “convey
‒ HVAC system. The basic function of the HVAC system is authority.” The function of a croquet player’s mallet could
to “condition air.” The other functions such as “heat air,” be described as “move ball.” The function of a doctor’s
“cool air,” “move air,” “control humidity,” “distribute air,” hammer might be to “test reflexes.” Aren’t these also basic
and so on, are secondary functions. Unwanted functions functions? A simple way to check is by asking the question
such as “generate noise” also exist. “If the hammer were unable to deliver force, would it still
fulfill its purpose or reason for being?” For each of the
‒ Manufacturing process. Its basic function is to six uses of a hammer displayed in Figures 6.8 and 6.9, all
“assemble product.” In addition, the manufacturing must deliver force to fulfill the associated higher-order
process has many secondary functions, such as “form functions. Here are the answers to the questions posed
shape,” “move material,” “attach components,” “inspect above for each use of the hammer:
product,” and so on. “Generate waste” is an unwanted
function that plagues most manufacturing processes. ‒ A carpenter’s hammer must “deliver force” to drive a
nail into a board.
‒ Hiring procedure. Its basic function is to “fill
position.” In addition, the hiring procedure has ‒ A sculptor’s hammer must “deliver force” to strike the
many secondary functions, such as “define chisel which chips the stone.
responsibilities,” “identify benefits,” “review
qualifications,” “communicate responsibilities,” ‒ A cobbler’s hammer must “deliver force” to drive the
“evaluate qualifications,” and so on. tack into the sole of the shoe.
‒ A judge’s gavel must “deliver force” to create noise

Levels of abstraction and convey their authority to the courtroom.
Determining the basic function(s) is not always an easy
‒ A croquet player’s mallet must “deliver force” to
process. For instance, the two-word abridgement most
move the ball through the wickets.
often volunteered by people who are asked to describe the
basic function of a hammer is “drive nails.” This definition, ‒ A doctor’s hammer must “deliver force” to the
however, immediately stumbles over the obvious question: patient’s knee to test their reflexes.
“What about the other uses of a hammer?” Can’t hammers
61
VM Guide®
It appears that “deliver force” is indeed the correct basic hammer performing its purpose. This statement seems to
function, and in each case the desired effect is quantifiable. conform to the rules of defining a function:
The hammer, depending upon its application, may have a
radically different higher-order function associated with it, ‒ It is two words, a verb and a noun.
but its basic function is the same. This process of forcing
thinking to higher or lower levels of abstraction helps to ‒ The verb is active.
develop a multiplicity of two-word abridgements from which
the primary function to be studied can be determined. This
‒ The noun is seemingly measurable (you can count the
number of nails).
technique is referred to as the ladder of abstraction and is
very useful during the Function Analysis Phase. Yet, the statement “drive nails” is not a function. To
determine the function, we must get to the core concept, or
6.3.1.3 Organize functions
function, that lies behind the activity description “drive
The next step in defining functions is the process of organizing nails.” We do this by asking the questions WHY and HOW
functions. Once the functions have been identified, and Why does a hammer drive nails? The answer might be to
perhaps classified, it is usually necessary to review, connect materials. We drive nails to connect two pieces of
organize, and edit them. If random function identification is wood together, an activity description that can be defined
used, then it is highly probable that the VM study team will by the function “connect materials.” That answers the WHY
have stated functions in a number of different ways that have But now we must answer HOW How do we drive nails? This
approximately the same meaning. In the carpentry hammer question leads to a different answer — “deliver force.” Both
example (Table 9), the following functions were stated as “connect materials” and “deliver force” are function
potential candidates for the basic function: statements. Now, let’s replace the function statements with
activity statements (disguised as functions using verbs and
‒ Deliver force, nouns): Why do we drive nails? To build a wall. How do we
drive nails? The laborer swings their arm. Let’s compare
‒ Transfer force,
these verb-noun abridgements in a table Figure 6.10 .
‒ Transmit force.
Activity Function
The VM study team should discuss all the functions Swing Arm Apply Force
and arrive at a consensus about which functions to
carry forward, which are redundant, and which should Drive Nail Deliver Force
be eliminated. In the example above, “deliver force” is Build Wall Connect Materials
ultimately selected as the basic function, because the
verb “deliver” conveys two concepts:
Figure 6.10 – Comparing Activities and Functions
1. The hammer delivers force from the hand through the Note that the choice of noun is very important. We must
hammer to the nail. strive to select nouns that are not specific and that will
anchor us to current solutions. One of the most powerful
2. The hammer delivers the force in a specific manner.
aspects of function analysis is that it forces us to think
Next, the VM study team considers the secondary function, laterally by virtue of the abstraction involved. For example,
“transfer force.” The VM study team agrees that “transfer different ways to deliver force could include those
force” is a secondary function and that it supports the identified in Figure 6.11 .
hammer’s basic function, “deliver force.” Next, the VM study
team discusses the function “transmit force.” The VM study Ways to Deliver Force
team decides that this function has approximately the same Hydraulics Pound with a rock
meaning as “transfer force,” but decides this two-word Pneumatics Screwdriver
abridgement doesn’t articulate the concept as clearly as
Particle accelerator Stapler
“transfer force.” Based on this, the VM study team decides
to remove “transmit force” from further consideration and Gravity Drill
instead retain “transfer force” and “deliver force.” This Brute strength Auger
process is an example of organizing functions. Knife Magnetism
Another key concept that often causes confusion when
Thumbtack Gunpowder
defining functions is understanding the difference between
an activity and a function, as discussed in Section 6.2.1. Pushpin Pistol
An activity is a description of a real-world observation. Brass knuckles Throw stones
For example, “drive nails” is an observation of a carpentry Use a board Pendulum
Figure 6.11 – Ways to Deliver Force
62
If the same exercise was performed using the activity 6.3.3 fPrioritize functions
statement “drive nails,” the focus would have likely been The purpose of this step is to select the functions that have
on solutions fixated on the use of nails. Alternatively, the the greatest opportunity for value improvement. Assuming the
higher-order function of “connect materials” could have VM study team has allocated whatever relevant resources to
been considered, which would lead to different solutions the functions in the previous step, the opportunities for value
that might include ideas like glue, dovetail joints, screws, improvement should become clear. The VM study team should
and cast-in-place concrete to name just a few — none of consider those functions that have the greatest correlation
which involve nails. to critical resources that are consistent with the objectives
of the VM study and identify those that merit focus during the
6.3.2 Allocate resources Creativity Phase.
This step allocates resources to functions. Resources may be As discussed in Section 6.4.2 above, there may be numerous
cost, life-cycle cost, time, energy, space, failure points, risk, resources that have been allocated to the functions using one
etc. Common techniques of allocating resources to functions of the applicable techniques. It is possible that many functions
include: 1) the random function identification method; 2) func- could be attractive candidates for value improvement. The VM
tion-resource matrix; and, 3) FAST diagrams. These techniques study team must consider how much time is available in the
are presented in Section 6.5. VM study for the Creativity Phase. This may force the team to
The term “resources” speaks to a wide array of information limit the functions they select to a smaller number based on
related to the subject of the VM study and could include inputs the constraints of the VM study schedule. The customer/client
(e.g., cost and time), outputs (e.g., performance, quality), risk, may have concerns or problems with certain functions and
or physical characteristics (e.g., area, weight, volume, etc.). may request the team to prioritize those functions for further
The purpose of allocating resources to functions is to develop study. Finally, the VM study team may have a “hunch” that cer-
a better understanding of where the opportunities exist for tain functions offer a good opportunity for value improvement.
value improvement. For example:
● In a VM study focusing on reducing the mass of an aircraft 6.4 Basic Techniques

to improve its fuel efficiency, the VM study team would
want to identify the weight of each component and asso- 6.4.1 Random function identification
ciate it to the related functions. The result of this analysis The basic technique for identifying functions is called random
would help the VM study team identify which functions function identification. It is recommended to begin by starting
contribute most to the aircraft’s total weight. with the project’s purpose and need, and then working toward
identifying the primary project elements, and next toward
● In a VM study focusing on reducing the risk related to a specific details as necessary. After preparing a reasonable
medical procedure, the VM study team could take the risks list of functions, the next step is to begin considering function
identified related to the various activities involved in the classification. A basic example is provided in Figure 6.12 which
procedure during the Information Phase and then link these examines the functions of a hammer. This approach to function
to the related functions. Those functions having the greatest classification was the one originally developed by Miles, which
degree of risk would be prime candidates for focusing the he referred to as random function identification. The steps of
VM study team’s efforts during the Creativity Phase. the process are outlined as follows:
● In a VM study seeking a primary objective to identify cost 1. Review information, such as a bill of materials, construc-
reduction opportunities in order to bring a project back tion cost estimate, or work breakdown structure. This
within budget, the VM study team would want to develop information should serve as a starting point for detailing
a better appreciation of which functions contribute the the individual elements of a product, project, service,
most to cost. They would therefore evaluate the project’s organization, or process.
cost estimate and allocate costs to the various project
functions. This effort would reveal which functions offer 2. Create a simple matrix or table that includes columns for
the greatest opportunity for cost improvement. elements or components and functions (i.e., verbs and nouns).
It is important to note that multiple resources could be incor- 3. List the elements or components from the appropriate
porated into this step, as many are likely to be important to document identified in Step 1 on the matrix.
customers and stakeholders. For example, most customers
4. The team should next identify the basic function(s). Start
who purchase a consumer product typically consider both
by asking the question, “What does it do?”
cost and performance in their buying decisions, and the VM
study team would likely gain valuable insight by considering 5. As a team, brainstorm all the possible functions for each
both during this step. element or component by asking the same question,
“What does it do?” There could potentially be numerous
functions for each.
63
VM Guide®
This process can be performed by using flipcharts or a white- ● Test the validity of the functions under study.
board as well.
● Help identify missing functions.
6.4.2 FAST Diagrams
● Broaden the knowledge of all team members with respect
The Function Analysis System Technique, commonly referred
to the project.
to by the acronym FAST, is one of the most effective techniques
for classifying and organizing functions. FAST is a powerful FAST was developed by Charles W. Bytheway of the Sperry
diagramming technique for analyzing the relationship of func- Rand Corporation and was first introduced in a paper present-
tions. FAST diagrams have the following uses: ed at the 1965 National Conference of SAVE International®
(then known as the Society of American Value Engineers).
● Show the specific relationships of all functions with re-
Subsequently, FAST has been widely used by governmental
spect to one another.
agencies, private firms, and value consultants.
№ Component Verb Noun Function Type

1 Head (machined, steel casting) Connect Materials Higher-order
Separate Materials Higher-order
Transfer Force Secondary
Transmit Force Secondary
Deliver Force Basic
Apply Force Lower-order
Locate Components Secondary
Precipitate Oxidation Unwanted
Increase Force Secondary
Increase Mass Secondary
Increase Leverage Secondary
Improve Durability Secondary
Focus Force Secondary
Deflect Force Unwanted
Enhance Appearance Secondary
Reduce Deflection Secondary
1 Handle (hickory) Transfer Force Basic
Increase Leverage Secondary
Increase Friction Secondary
Transmit Vibration Unwanted
Reduce Vibration Secondary
Reduce Fatigue Secondary
2 Wedge (hickory) Connect Components Secondary
1 Wedge (steel) Connect Components Secondary
1 Sealant (epoxy) Connect Components Secondary
Ensure Durability Secondary
1 Label (paper, adhesive) Identify Brand Secondary
1 Assembly (labor) Connect Components Secondary
1 Shellac (spray applied) Resist Oxidation Secondary
Enhance Appearance Secondary
Figure 6.12 – Random function identification.
64
FAST builds on the verb-noun rules described earlier in this Continuing in the HOW direction, the question is asked,
chapter. It is an excellent communication technique in that it “How do we transfer force?” The answer could be “receive
allows VM study team members to contribute equally and com- force.” ( Figure 6.14 )
municate with one another while addressing the problem ob-
jectively and without bias or preconceived conclusions. FAST HOW?
has also proven to be a useful tool for project planning and a
good way to present complex concepts to decision makers. Deliver Force Transfer Force Receive Force
FAST distinguishes between the four main groups of func-
tions covered earlier, making it a natural choice for classifying Figure 6.14 – HOW logic continued.
functions. It accomplishes this by illustrating the intuitive logic To test the logic of the example above, the functions can
used to determine and test function dependencies through read in the reverse WHY direction: “Why do we transfer
the development of a diagram that, at first glance, appears to force?” “To deliver force.” Why do we deliver force?” “To
resemble a flowchart or network diagram. connect materials.” If the team agrees with the answers,
The major difference between the random function identifi- they can continue to expand the FAST model, either in the
cation process first described by Miles and the FAST process WHY or HOW direction. In the WHY direction the question
invented by Bytheway is FAST’s ability to analyze entire systems is asked, “Why does the hammer connect materials?” This
rather than simply individual parts within a system. It is evident is answered by “to create structure.” Switching to the HOW
when studying systems that functions do not operate in a question in the opposite direction, the question is asked,
random fashion. A system exists because functions form de- “How do we create structure?” It’s answered by “connect
pendencies with other functions, just as individual parts form materials.” Examining the function inputs thus far, the
dependency links with other parts to ensure the system works. FAST model would look as follows Figure 6.15 .
It is important to understand that there is no “correct” FAST
diagram. In other words, there is no perfect FAST diagram HOW? WHY?
against which all others can be measured. There is, however, a
“valid” FAST model that serves as a guide to follow when build- Deliver Force Transfer Force Receive Force
ing FAST diagrams. The degree of validity of a FAST diagram
depends directly upon the capability of the VM study team Figure 6.15 – How-why logic.
members building it and upon the team’s adherence to the rules
The example was constructed with the intent of describing
of function-logic as defined in the remainder of this chapter.
the function relationships of a carpentry hammer; however,
The FAST diagram must be constructed using team consensus,
the same function model could have been applied to any
because the discussion involved in creating a FAST diagram is
other aspect of a building or construction process. This
just as important the diagram itself. A FAST diagram is “com-
shouldn’t be too surprising, because all these things
plete” only when its creators reach a point of consensus.
perform the functions described in the same dependency
6.4.2.1 “How” and “Why” logic order. Differences occur when additional secondary
functions are added and when the model is dimensioned in
In a previous section dealing with levels of abstraction, the
terms of time, performance, or other measurements that
concept of HOW and WHY logic was introduced. It happens
reflect the problem under study.
that this intuitive logic is foundational when constructing
Many people, when first introduced to FAST diagrams,
FAST diagrams. The directional references of the “How”
find it counterintuitive, especially those accustomed
and “Why” questions remain the same. “How’ is read from
to flowcharts and network diagrams. They appear to be
left to right and “Why” is read from right to left. Using the
backwards! This is one of the most important aspects of
examples below, if the function were addressed and the
FAST and it is what forces those involved in constructing
question asked, “How do we deliver force?” the answer, in
FAST diagrams to think about a project differently. Unlike
the form of a function could be “transfer force” (see
more common diagramming techniques, FAST appears to
Figure 6.13 ).
read from finish to start if viewed from left to right. There
are a number of reasons for this difference:
HOW?
Deliver Force Transfer Force
Figure 6.13 – HOW logic.
65
VM Guide®
‒ The FAST diagram begins with the goal or objective, 6.4.2.2 “When” logic
which focuses our attention where it should be. When The “When” direction is not part of the intuitive logic process,
beginning any endeavor, we usually know what we but it supplements intuitive thinking. In terms of FAST logic,
want to achieve, so why not begin there? By addressing “When” is not necessarily time related, but indicates cause
functions on the FAST diagram with the question and effect. Referring to Figure 6.16 , “When you deliver
WHY the function to its left expresses the goal of force, you focus force.” “Focus force” is a secondary function
that function. The question HOW is answered by the that supports the function “deliver force.” As a secondary
function on the right, and describes the approach function, it can be expanded in the how-why directions to
being utilized to perform the function to the left. create a minor logic path and build a subsystem FAST diagram.
Since the independent function is not on the major logic path,
‒ Changing a function on the HOW-WHY path affects
changing the function would not significantly affect the basic
all the functions to the right of that function. This is
function. Another helpful way to think of a “When” function is
a domino effect that only goes one way, from left to
to add the qualifying statement “caused by.” For example,
right. Starting with any place on the FAST diagram,
“focus force” is also caused by the need to “deliver force.” In
if a function is changed the goals are still valid
other words, there would be no need to “focus force” if the
(functions to the left), but the method to accomplish
hammer did not “deliver force.”
that function, and all other functions on the right, are
affected. Functions to the right of another function are
called “dependent functions,” because the way that a Deliver Force
function performs depends on the function to its left.
WHEN?
‒ Reading from the goal, on the left side of the
diagram, to the beginning, on the right end (in the Focus Force
HOW direction), goes against our system paradigm.
Because it seems strange, building the model in the Figure 6.16 – WHEN logic.
HOW direction, or via function justification, will focus
the team’s attention on each function element of the
6.4.2.3 Structure of the FAST diagram
model. On the other hand, reversing the FAST model
and building it in its system orientation would cause The FAST diagram is built upon the left-right logic of HOW and
the team to leap over individual functions and focus WHY and the up-down logic of WHEN.” Ideally, construction of
on the system, leaving function “gaps” in the system. the diagram should begin with the basic function and work
towards the right in the HOW direction. There are several
Another way of thinking about building FAST diagrams is additional elements that are necessary to further
that they are built in the HOW direction and the logic is communicate the functional relationships. The basic
tested in the WHY direction. elements of the FAST diagram are illustrated in Figure 6.17 .
Subject Objectives One-Time Functions All-the-Time Functions
Subject One-Time All-the-Time

HOW? WHY?
Objective Function Function
Higher-Order Basic Secondary Secondary Secondary Lower-Order

Function Function Function Function Function Function
Secondary Secondary Secondary

Function Function Function
WHEN?
Unwanted
Secondary Secondary
Secondary
Function Function
Function
SCOPE OF STUDY
Figure 6.17 – Structure of a FAST diagram.
66
Scope lines proposed approach (to be). Which approach to use (current
or proposed) in creating the FAST model is determined by the
Scope lines represent the limits of the VM study and are
VM study team and the definition of the subject under study.
shown as the two dashed vertical lines on a FAST diagram.
Conceptually, all functions to the right of the basic function(s)
The scope lines demarcate the “scope of the study,” or
are treated as secondary functions and are subject to change.
the subject with which the VM study team is concerned.
Unwanted secondary functions can optionally be highlighted
The basic function(s) will always be the first function to
by using a dashed line around the box.
the immediate right of the left scope line. The function to
VM studies focused on improving a design or concept that
the immediate left of the left scope line is the higher-order
is currently in progress should first begin by constructing a
function, or output. The right scope line identifies the
FAST diagram based on this initial concept. Doing so will
beginning of the subject, and separates the lower-order
reveal potential problems or areas for study. Constructing
function, or input, from the scope of the study.
a FAST diagram based on a design in progress will also be
Higher-order function(s) useful for the next step in the functional approach, which
involves correlating cost and performance to the identified
The higher-order function(s) represent the need(s) of the
functions. Once this is accomplished, it may be useful,
project and is located to the left of the basic function(s)
time permitting, to construct a FAST diagram based upon
and outside of the left scope line. Any function to the left
how the VM study team believes the solution should look.
of another function is a higher-order function relative to
If the VM study is focused on a project that has not begun
that function. However, when considering higher-order
design or formal planning, then the FAST diagram should be
functions, the reference is generally directed to the
constructed based on what the solution could or should be.
reasons for why the project exists.
Lower-order function(s) Subject objective

Subject objectives are functions that express specific,
The function(s) to the right and outside of the right scope
compulsory requirements or articulate broader goals of the
line represents the input side that initiate the subject
subject, whether it is a project, product, process, service,
under study and are known as lower-order functions.
or organization. For example, one of the objectives for a
Functions that lie to the right of the rightmost scope line
hammer (a product) might be to “improve durability.” Such a
are also sometimes referred to as “assumed” functions.
statement is global in nature and could apply to all the func-
This is because these functions are generally left up to the
tions that appear on the diagram. The term “subject” can be
customer or user to determine, so an assumption is made
replaced by one of the terms that speaks to the nature of
as to what those are.
the subject: project, product, process, service, or organiza-
It is important to note that the terms “higher” or “lower”
tion. So, if the subject of the study were a project, one could
order functions should not be interpreted as meaning
refer to the subject objectives as “project” objectives.
relative importance, but rather as the input and output
side of the process. As an example, if we were analyzing One-time functions
a purchase order processing procedure, the function
One-time functions are those secondary functions that
“receive order” could be the lowest order function, with
only happen once. For example, the carpentry hammer
the function “receive product” being the highest order
is manufactured once, thus the function “assemble
function. How to accomplish the highest order function,
components” is considered to be a one-time function.
“receive product,” describes the need for the procedure
and helps prioritize our thinking to address the purpose of All-the-time functions
the procedure, or basic function, such as “ship product.”
All-the-time functions are secondary functions that
Basic function(s) happen continuously. For example, the carpentry hammer
has many different parts that have the function “connect
Basic functions, which represent the purpose of the project
components.” While it might be possible to try and locate
under study, are located to the immediate right of the leftmost
this function on the diagram somewhere, it would likely
scope line and are directly connected via the function logic
be both challenging and confusing to do so. That is why
path to the higher-order function. Once determined, the
placing such functions above the diagram and labeling
basic function(s) will not change. If the basic function(s) is
them as “all-the-time” functions solves this problem, while
not performed, then the project loses its value.
making the diagram cleaner and easier to understand.
Secondary functions
Function logic path
All functions to the right of the basic function portray the
Any function on the HOW or WHY logic path between the
conceptual approach (i.e., design) selected to satisfy the
higher-order and lower-order functions is considered to
basic function(s). The concept describes the method being
be a critical logic path function. Changing a function on
considered, or elected, to achieve the basic function(s). The
concept can represent either the current conditions (as is) or the critical logic path will fundamentally alter the way the
basic function is performed.
67
VM Guide®
6.4.2.4 AND/OR logic before the logic checks out in all directions. It is important
It’s often helpful to differentiate how functions are to be patient and invite the full participation of the team
connected. One way to do this is through AND/OR logic. throughout the process. Once the team is satisfied that
The AND connection is represented by showing a split or the FAST diagram adequately describes the scope of
fork between functions (see Figure 6.18 ) and indicates the study, the team can move on to the next step in the
that both paths must be followed. The AND lines can also function analysis process, which is to allocate resources
indicate that the connecting functions are of equal or to the functions.
lesser importance, depending on how they are drawn.
6.4.2.5 FAST diagrams versus flowcharts
Record
Information Some believe that VM studies of processes and
procedures do not require the application of FAST
Transfer Request
diagramming because a process flowchart essentially
Product Product
represents the same thing. The fact is, however, that there
Transfer are several critical differences between FAST diagrams
Funds and flowcharts (or network diagrams).
The functions of a process or procedure represent
Figure 6.18 – AND logic. intended objectives, whereas the activities of a process
or procedure are the physical means of achieving those
The OR connection is represented by lines emanating from
objectives. A FAST diagram arranges functions in a logical
the root function at different locations (see Figure 6.19 )
manner to answer the questions HOW and WHY with the
and indicate a choice in the function path. The OR lines
aim of defining the purposes for which the process or
may also indicate function paths of equal or lesser
procedure exists. A process flowchart, on the other hand,
importance, similar to AND lines. The AND/OR lines may
specifies what actions occur by people and/or equipment
also be drawn in the vertical, or WHEN direction.
to accomplish the intended functions. It is simply the
graphical representation of a sequence of activities.
Guarantee
Quality
Another way to think about these two graphic
techniques is that a FAST diagram describes the intent of
Satisfy the system, and a flowchart describes the actual activities
Customer involved in implementing the system. FAST is also a
Reduce good method for identifying flaws in a system, because
Price it enables the team to determine where unneeded or
unwanted functions are included and/or where needed or
Figure 6.19 – Or logic. wanted functions are missing.
Charles Bytheway used the system to stimulate
Following is a completed example of a FAST diagram of a creativity. He emphasized the use of what he called
carpentry hammer ( Figure 6.20 ). To create a FAST “thought-provoking questions” as opposed to focusing
diagram, start with a whiteboard or tape several flip charts on completing the FAST diagram, believing that success
to the wall. Use Post-It® notes of different colors for the was defined by developing creative alternatives (solutions)
functions. Draw the left scope line and add the HOW, WHY based on the functions derived from answering the leading
and WHEN arrows for clarity. As stated previously, after questions. This approach highlights a very big difference
completing random function identification, the VM study between a FAST diagram and a flowchart: although it is
team should begin construction of the FAST diagram by not imperative for the FAST diagram to be complete, a
selecting the basic function and then begin to build the flowchart must be completed to represent the entire
critical function logic path in the HOW direction. Identify process being defined.
the higher-order function(s) by asking WHY while focusing FAST diagramming is arguably the most powerful
on the basic function(s). Once the critical function logic technique used in the Value Methodology; and, it is
path is defined, the VM study team should then begin effective for getting a multidisciplinary team to reach
adding secondary functions that support the functions on consensus on the scope of the subject being analyzed. At
the path. Once complete, identify the lower-order the same time, a FAST diagram must not be misinterpreted
function(s) and draw the right scope line. Finally, consider to represent activities on a flowchart. FAST reflects the
the functions above the diagram (project objectives, one- divergent opinions and perspectives of people. It is a
time, and all-the-time functions). subjective, albeit collective, representation of a project’s
The use of Post-It® notes allows the VM study team to scope. A flowchart, on the other hand, is the objective
move the functions around as they test the logic. It is normal representation of what actually happens to accomplish
for FAST diagrams to go through many transformations the required functions.
68
Enhance
Improve Assemble
HOW? Appearance WHY?
Durability Components
Identify
Brand
Improve
Comfort
Resist
Oxidation
Meet
Standards Connect
Higher-Order Components
Functions
Lower-Order
Connect Basic Function Secondary Functions Functions
Materials
Deliver Transfer Receive Apply
Force Force Force Force
Separate Reduce
Materials Fatigue
Improve
Ergonomics
Increase
Friction
Create
Leverage
LEGEND
Focus Increase
Force Force
Increase “Function”
Mass Verb + Noun
“Function”
Logic Path
WHEN? Transmit
Deflect Force Unwanted
Vibration Function
Reduce Reduce
Vibration Deflection
SCOPE OF STUDY
Figure 6.20 – FAST diagram of a carpentry hammer.
6.4.3 Function resource allocation (matrix) ● Space (area);

The next step of function analysis is to allocate project re-
● Volume or weight; or,
sources to the functions so that the VM study team can identify
opportunities for value improvement. Any project characteris- ● Personnel (such as full-time employees (FTE)).
tic can be correlated with functions. Common ones include:
A technique commonly used is called the function resource
● Performance/quality; matrix. The functions within scope are listed across the top of
the matrix. Then, for example, major cost groups are listed
● Cost;
down the left-hand side of the form with the associated incre-
● Time; mental costs placed in the total cost column. The VM study
team will need to use their best judgment in splitting up the
● Risk;` cost of a single element or component among multiple func-
tions. Costs should be extracted from existing project data,
69
VM Guide®
where available, such as a construction cost estimate, bills of
2.55%
$0.26
Enhance
50%
5%
material, or labor/time estimates. Next, the function impacted Appearance
by each project element is identified. Once this is done, the
team must estimate how much of the cost of each element
%0.02
0.20%
Resist
50%
belongs to each function. This need not be a precise estimate. Oxidation
Finally, all columns are added vertically to determine how
0.50%
100%
$0.05
much cost is allocated to each function. For the hammer exam- Identity
Brand
ple, please refer to Figure 6.21 .
In either method, the cost of each function is recorded
20.36%
100%
$2.04
Connect
50%
20%
80%
above and to the right of it on the FAST diagram. Costs for the Components
supporting secondary functions can be rolled up to the level
of basic functions or to secondary functions that constitute
2.46%
$0.25
Reduce
10%
major project elements or assemblies. Fatigue
FUNCTION — Active Verb/Measurable Noun
2.46%
$0.25
Recude
10%
Vibration
2.46%
$0.25
Increase
10%
Friction
2.36%
$0.24
Reduce
5%
Deflection
4.68%
$0.47
Improve
20%
Comfort
7.06%
$0.71
Improve
10%
50%
80%
Durability
11.99%
$1.20
Create
15%
20%
Leverage
6.15%
$0.62
Receive
25%
Force
13.22%
$1.33
Transfer
15%
25%
Force
Direct Costs EXCLUDE all Fixed burden & Overhead, S, G, & A, Margin
23.56%
$2.37
Deliver
50%
Force
$10.040
$4.730
$2.470
$0.060
$0.120
$0.220
$0.050
$2.350
$0.040
100%
COST
$4.730
$2.470
$0.060
$0.120
$0.220
$0.050
$2.350
$0.040
COST
UNIT
U/M
ea
ea
ea
ea
ea
ea
ea
ls
FUNCTION – PERCENTAGE
QTY
1
(paper, adhesive)
Handle (hickory)
Wedge (hickory)
Wedge (hickory)
COMPONENT
Sealant (epoxy)
(spray applied)
steel casting)
(machined,
Assembly
TOTALS
Shellac
(labor)
Label
Head
Figure 6.21 – Function resource matrix for the costs

of a carpentry hammer.
70
6.4.4 Function performance specification matrix

A variation of the resource-function allocation matrix is known
as function performance specification (FPS) which is a method
for associating functions with their performance and/or quali-
ty-based criteria and parameters. FPS associates functions
with performance or quality criteria (what is being measured),
the unit of measurement, and the parameters such as mini-
mum/maximum/target values and relative flexibility.
FPS is useful for communicating customer and/or stake-
holder performance wants and needs in a non-technical
environment, as well as for specifying requirements in an engi-
neering environment. It helps participants to discover hidden
assumptions and develop better information. The Min/Max/
Flex help to define the freedom the designer has for alterna-
tives and stimulate creativity.
In Figure 6.23 , the performance criteria and parameters
for the performance of the functions of a hammer are shown
using an FPS matrix:
Note that the term “flexibility” refers to the flexibility of the

requirement. A simple convention is used in FPS to denote this:
● 0 = The specification is an absolute requirement and is

not flexible.
● 1 = The specification is somewhat flexible.
● 2 = The specification is flexible.
● 3 = The specification is very flexible.
Need Function Specific Requirement Product
A specific need fulfilled by a Requirements specific to

A unique solution provided
A user’s needs product, process, or product each function expressed as
to the user to satisfy
or desire. expressed in a verb-noun an assessment criteria,
the needs as defined.
combination. level, and flexibility
Figure 6.22 – Process flow for function performance specification.
Function Performance Criteria Units Min Max Target Flexibility

Deliver Force Momentum kg*m/s 0.05 0.25 0.10 F2
Increase Mass Weight of hammer head kg 0.2 1.0 0.3 F1
Deliver Force Opening of claw mm 2 6 3 to 5 F1
Identify brand Readable label on handle or head mm 20x10 40x30 20x10 F3
Enhance Appearance Appearance of wooden handle Panel judgement Poor Very nice Nice F2
Figure 6.23 – Example FPS matrix for a hammer
71
VM Guide®
6.4.5 FAST dimensioning Other information can be added to a FAST diagram from a
An alternative technique, which is less rigorous but faster, can function resource matrix or from a function performance spec-
be used if a FAST diagram has been prepared. In this method, ification matrix. Further, information related to RACI matrices,
first write the data directly in or above the function boxes, as work breakdown structures, etc. can also be considered. The
was done in Figure 6.24 which includes information relative purpose of adding this information is to help the VM study team
to cost and percent of total cost. This is a simple and effective prioritize which functions have the greatest opportunity for
approach. When dimensioning cost data for construction or value improvement.
product studies, it is fairly easy to use the project cost estimate
to begin allocating costs to the functions on the FAST diagram
from right to left. The functions on the right-hand side of the
diagram are typically far more specific and finite in nature than
those on the left (a feature of the previously discussed ladder
of abstraction).

Enhance
Improve Assemble Appearance
HOW?
Durability Components $0.26 2.55%
$1.18 11.74% Identify
Brand
Improve $0.50 0.50%
Comfort
Resist
Oxidation
$0.02 0.20%
Meet Connect
Standards
Higher-Order Components
Functions $2.04 20.36%
Lower-Order
Connect Basic Functions Secondary Functions Functions
Materials
Deliver Transfer Receive Apply
Force Force Force Force
Separate $3.53 33.40% Reduce
Materials Fatigue
Improve $0.25 2.46%
Ergonomics
Increase
Friction
Create $0.50 4.92%
Leverage
LEGEND
Focus Increase $1.20 11.99%
Force Force
Increase “Function”
Mass Verb + Noun
“Function”
$0.71 7.07%
Logic Path
WHEN? Transmit
Deflect Force Func. % of Unwanted
Vibration Cost Cost Function
Reduce Reduce
Vibration Deflection
$0.25 2.46% $0.24 2.36%
SCOPE OF STUDY
Figure 6.24 – FAST diagram of carpentry hammer dimensioned with cost.
72
6.5 References
● Function Analysis Guide. SAVE International®, Interspiral
Press, 2016.
● Bytheway, Charles W. FAST Creativity and Innovation, J.

Ross Publishing, 2007.
● Kaufman, J.Jerry and Woodhead, Roy. Stimulating Innova-

tion in Products and Services, Wiley Interscience, 2006.
● EN16271, French Standard, Value Management - Func-

tional expression of the need and functional performance
specification - Requirements for expressing and validating
the need to be satisfied within the process of purchasing
or obtaining a product (detailed reference for Functional
Performance Specification).
● Reference for Functional Performance Specification,

Value Analysis Canada, retrieved from; www.valueanaly-
sis.ca/fps.php
73
VM Guide®
74
7. Creativity Phase
7
Creativity Phase
7.0 Introduction 7.1.2 Creativity

The purpose of the Creativity Phase is to generate a large A phenomenon whereby something new and somehow valu-
quantity of ideas that can perform the functions prioritized for able is formed. It is the ability to produce original and unique
value improvement during the Function Analysis Phase. The ideas or to make something new or imaginative. Creativity
following questions are answered during this phase: can be supported and enhanced by the utilization of creativity
methods and techniques. Creativity in VM leverages divergent
● What other ways will perform the function? thinking with a focus on functions.
● What else will do the job? 7.1.3 Creativity techniques

Methods that promote creativity and the generation of new
● Does the job need to be done at all?
ideas for developing visions or to solve problems.
Therefore, the VM study team is required to use their creativity
7.1.4 Divergent thinking
in order to generate ideas (as referred to as alternatives). The
use of a multidisciplinary VM-team enhances the Creativity A process or method used to generate ideas by exploring many
Phase. This is the phase where the VM study team unleashes possible solutions. Divergent thinking typically occurs in a
the power of their collected technical knowledge and practical spontaneous, freely flowing, "non-linear" manner, such that
experience to generate ideas or alternatives to meet the func- many ideas are generated in an emergent, cognitive fashion.
tional requirements of the project, product, process, service, Divergent thinking requires a judgment-free environment and
or organization. aims to elicit ideas that may be unconventional.
It is essential that the VM study facilitator creates an atmo-
7.1.5 Freewheeling
sphere in which the VM study team members are able to think
creatively and reframe the problem by using function-focused A state of unrestrained, divergent thinking not bound by formal
thinking. The Creativity Phase should encourage a free flow of rules, procedures, or guidelines.
ideas, a session where no idea is a bad idea, and only enough of
7.1.6 Hitchhiking
an explanation for the VM study team members to understand
the idea is required. During this phase, the VM study team looks The process of taking one idea and building on it to create a
for quantity and association of ideas that would improve the different idea.
value of the project, product, process, service, or organization.
The more ideas or alternatives they generate, the more likely 7.2 Process and key Concepts
that a “breakthrough” idea will be identified.
7.2.1 The importance of functions in the creative process
7.1 Terms and definitions Creative problem-solving lies at the heart of the Value Meth-
odology. The VM Job Plan provides a structured sequence of
7.1.1 Convergent thinking phases designed to leverage both divergent and convergent
A mental process that focuses on coming up with the single, thinking. From the first phase, where the problem(s) is defined,
well-established answer to a problem. It is synonymous with through the last phase, where the solution is implemented, the
the term “critical” thinking. VM Job Plan draws upon both types of thinking — both conver-
gent and divergent — while shifting the dominance of each as
the VM study team move through the process.
75
VM Guide®
During the Function Analysis Phase, the VM study team will are not useless in the sense that they provide a vehicle for
have spent a significant amount of time defining and analyzing our minds to associate different concepts in unexpected
functions, allocating resources to them, and selecting those ways that may indeed lead us to a breakthrough.
functions that have the greatest opportunity for value im- The book Stimulating Innovation in Products and
provement. The basis for the Value Methodology is that these Services (Kaufman & Woodhead, 2006) has an excellent
functions are required to be carried forward into the Creativity discussion on defining problem statements they refer
Phase to serve as the primary focal point for creative tech- to as the “Fuzzy Problem Technique.” The authors walk
niques. There are two key concepts related to the use of func- the reader through a series of questions that center on
tions that support this requirement: framing and ambiguity. the concept of problem framing using function logic. The
questions provide a natural progression that ultimately
7.2.1.1 Framing problems using functions refocus the problem statement using different levels of
In the social sciences, framing comprises a set of abstraction. Q: If we want to design a better mousetrap,
concepts and theoretical perspectives on how individuals, why do we want to trap mice? A: To eliminate mice. Q: Why
groups, and societies organize, perceive, and communicate do we want to eliminate mice? A: To prevent disease.
reality. Problem framing is the process of describing and Using this technique, we make the problem progressively
interpreting a problem to arrive at a problem statement. fuzzier and identify three problem solving frames: “Trap
It is considered an important step in problem solving, as Animals”; “Eliminate Animals”; and “Prevent Disease.” Note
slight changes in framing may lead to a vastly different that by shifting the noun ‘mice’ to ‘animals,’ we have further
problem-solving process and resulting solutions. altered the frame of the problem statement. One could take
The word “hammer,” or witnessing someone use it a step further and replace “animals” with “creatures” or
a hammer to drive a nail, are examples of real-world “entities” and make the problem even fuzzier. Fuzziness
observations. The phrase “invent a better mousetrap” will get us more ideas, which is the goal of creative thinking,
could be used as a problem statement in that it implies because it broadens the net we cast if we think of ideas
that there is an element of inadequacy (or problem) in the as fish. We can begin to see how framing and ambiguity
current approach. This phrasing forces us to think about (fuzziness) are interrelated in function analysis.
the object and current operations. Function analysis requires us to reframe the object as
Within the context of Function Analysis, framing is the a statement of purpose or intent. It is not the hammer that
process whereby we transform the problem statement interests us, but what the hammer does and, perhaps, why
from the familiar perspective of the directly observable it does it. This change in framing problems is essential in
world to that of the ontological (i.e., the examination of changing the way in which we think about possible solutions.
what is meant by a word like “hammer” and all it entails).
The use of function statements changes the problem 7.2.1.2 Leveraging the ambiguity of functions
context, called framing, and creates ambiguity through its Ambiguity is alternatively defined as: 1) doubtfulness
use of word structures. or uncertainty of meaning or intention: to speak with
ambiguity; an ambiguity of manner; or 2) an unclear,
“Hammer” “Drive Nails” Deliver Force”
indefinite, or equivocal word, expression, meaning, etc.
Note that the concept of ambiguity has many applications
beyond language and is a meaningful construct in the fields
of visual arts, music, computer science, computational
linguistics, and mathematics. However, this section
Object Activity Function
concerns the concept of ambiguity relative to language.
Clearly, functions, as defined in Chapter 6, reframe
“Explosion” “Ball” “Vise” objects and activities according to what they do rather than
what they are. This transformation results in ambiguity,
partly because it forces us to articulate function statements
concisely and excludes the use of qualifying words such as
adjectives, partly because words have different meanings
Ideas/Solutions and partly because objects and activities can have multiple
functions. But most of all, Function Analysis creates
Figure 7.1 – Comparison of objects, activities,
functions, and ideas. ambiguity because it reframes context.
The ambiguous nature of function statements inherently
In the example above, reframing the context of the object contributes to divergent thinking. It opens our minds to
“hammer” as a function “Deliver Force” yields ideas and alternative possibilities beyond current, known solutions.
solutions that we would likely not have considered had
we focused exclusively on the object. Obviously, many of
these ideas will appear “useless” at face value, but they
76
7. Creativity Phase
7.2.2 Creative process ● Do not allow judgment, not even a snicker, of any idea or
Creativity, being a key part of the Value Methodology, is very im- alternative. This is referred to as the “principal of deferred
portant; yet, many adults tend to believe that they are not creative judgement.” Encourage a wide variety of ideas from many
in the traditional sense. Creativity, however, is about producing angles and/or points of view.
an idea or alternative that is new, useful, and/or surprising.
● Establish an ambitious (stretch or reach) goal for the num-
● A new idea or alternative may not be new within an indus- ber of ideas or alternatives to be generated. For example,
try, but may be new to the client, organization, and/or VM if the VM study team generates 24 ideas or alternatives,
study team. For example, having VM study team members encourage them to generate 40 ideas.
from different states and/or countries allows them to
● Encourage the VM study team to watch for opportunities
bring their knowledge and experience of how things are
to combine or improve ideas or alternatives as they are
done in their locales that may not have been considered
generated (e.g., “free-wheeling”).
for the subject under study.
● Encourage the VM study team to focus on the prioritized
● A useful idea is an idea or alternative that is imple-
functions they identified VM study team during the Func-
mentable and has value.
tion Analysis Phase. Following the Pareto Principle, this
● A surprising idea is an idea or alternative that is unexpect- often results in focusing on a smaller number of functions
ed in terms of its elegance, simplicity, cleverness, and/or that are most attractive for value improvement.
usefulness in meeting the functional requirements of the
project, product, process, service, or organization
7.2.3 Process inputs and outputs
During the Creativity Phase, there are several ground rules
7.2.3.1 Inputs
(see also Chapter 12) that must be established by the VM study
facilitator to ensure that all VM study team members feel com- ‒ Functions selected for value improvement,
fortable participating in the Creativity Phase.
‒ Open minded participants,
● Establish an atmosphere conducive to creativity that
allows for all VM study team members to openly provide ‒ An environment conducive to creativity.
ideas or alternatives.
7.2.3.2 Activities
● Record all ideas or alternatives. Any idea may spark new
ideas or alternatives, be combined with another idea or ‒ Generate ideas.
alternative, or benefit from incubation in the mind of a VM
study team member. The emphasis during the creativity
‒ Record all ideas.
phase is on the quantity of ideas rather than the quality.
7.2.3.3 Outputs
‒ A list of ideas organized by function.
Prioritized Functions
Open Minded People Generate Ideas
Creative Environment Record ideas List of Ideas Organized by Functions
77
VM Guide®
7.3 Activities There are many ways in which to record the ideas or alternatives
generated by the VM study team, such as a flipchart, whiteboard,
7.3.1 Generate ideas and/or via a laptop using a multimedia projector or monitor. The
key is to record all the ideas or alternatives generated.
The basic function of the Creativity Phase is to generate ideas.
The emphasis should be placed on quantity, and the success
of this phase will hinge on the participation of the VM study 7.4 Creativity techniques
team, strong facilitation from the VM facilitator, and thorough Creativity techniques are methods that promote creativity and
leveraging of creativity techniques. Refer to Chapter 12 for the generation of new ideas for developing visions or to solve
additional guidance on facilitation techniques. problems. While using creativity techniques, it must be known
The VM facilitator can use numerous creativity techniques that creativity is a complex interaction of talent, knowledge,
during the Creativity Phase. Regardless of the techniques motivation, and individual characteristics. According to re-
used, the Creativity Phase should always first focus on gener- search published by William C. Miller (Innovation Styles, 2007),
ating ideas based on the functions prioritized at the end of the the two dimensions that govern creative thought are:
Function Analysis Phase. This ensures that the VM study team
focuses on the functions that will meet the goals and objectives ● Approach: This dimension responds to what stimulates
of the VM Study and provide the best return for their efforts. and inspires innovation, which could be facts (details and
Creativity techniques can be divided into intuitive and dis- analysis) or intuition (insights and images).
cursive methods (or use a combination of both).
● Procedure: This dimension responds to the approaching
● Intuitive creativity methods: The approach of the style of the innovation process, which can be focused
intuitive creativity method is based on consideration of (well-planned and outcome oriented) or broad (perceptive
the overall problem. Brainstorming by function is a prime and learning oriented).
example of an intuitive creativity method.
Understanding these ensures the right mix of innovation traits
● Discursive creativity methods: A discursive method de- in the team. The four main approaches are:
velops a solution path through a deliberate and structured
● Envisioning by imagining the ideal future by focusing on
procedure, step by step. A problem is often decomposed
long-term goals for maximizing future potential.
into sub-problems, which are solved in individual solution
steps separately and finally matched. Overall, this results ● Exploring by discovering new possibilities using ideas
in fewer, more focused, and rational solutions. Techniques from other areas and disciplines.
such as cause-and-effect diagrams, mind-mapping, and
morphological analysis are examples of discursive methods. ● Experimenting by combining and testing new combinations.
Other approaches to creativity are similar to intuitive and ● Modifying by refining and optimizing what currently exists
discursive methods. An example is intuitive, and data driven. to build on proven ideas.
Either an intuitive and visionary approach (working towards
an ideal result) or a data-driven and experimental approach Awareness and understanding of these two dimensions will
(improving and testing the present solution) is chosen for the help the team to propose and appreciate ideas in the Creativ-
identified function. ity Phase. Also, it helps the team to deploy the right creativity
Once the VM study team has exhausted ideas for one func- tools according to the problem at hand and the target given.
tion, they should move onto the next, repeating the creative
techniques as appropriate.
7.3.2 Record ideas

The VM facilitator should follow the guidelines below for captur-
ing ideas from the participants involved in the creativity session:
● Write down what the participants says — try not to edit or

paraphrase their words.
● If the facilitator or team does not understand the idea, pro-

bative questions may be asked, but avoid the temptation
to get into great detail.
● Don’t be dismissive of wild or unconventional ideas. Write

everything down!
● Make sure all the ideas are visible.
78
7. Creativity Phase
7.4.1 Brainstorming
The most used creative technique in the Creativity Phase is
visioning brainstorming. Steps for brainstorming include:
1. Determine and which function(s) and/or element(s) of

Fo
on
the project, product, process, service, or organization to
cu
i ti
tu
si
be brainstormed and present them on a flip chart, white

n
In
g
board, or other visual medium so that the entire VM study

modifying
exploring
team can observe the process.
2. Review the rules of brainstorming, which include but are

not limited to:
a. All VM study team members are required to partici-

pate in brainstorming.
b. Defer all judgment of ideas or alternatives to the

Br
s
ct
oa
Evaluation Phase.
Fa
experimenting c. Seek quantity of ideas or alternatives rather than

quality. The more ideas or alternatives the team
generates, the greater potential for a “breakthrough”
idea that will result in significant benefits for the
Figure 7.3 – Innovation styles model project, product, process, service, or organization.
(adapted from Miller, 2007).
d. Encourage freewheeling, combining, or hitchhiking on
Examples of creativity tools for each creativity type include: ideas. Allow for the free flow of ideas
● Visioning — Visualization9, reverse brainstorming. e. Avoid any discussion of the ideas or alternatives
generated, as it interrupts the flow of ideas or alterna-
● Modifying — The technique of “hitchhiking” is a classic tives. If VM study team members do not understand
example of this type of creativity. Mind mapping, and an idea or alternative, allow the team member who
fishbone diagrams are other examples of this modality. generated the idea to briefly explain or, if necessary,
provide a sketch of the idea or alternative.
● Exploring — Incorporating functions into brainstorming
sessions is an example of this type of creativity which
stimulates free association. Another example is a 7.4.2 Brainwriting
technique called “Brutethink,” whereby a random word is Brainwriting (also called trigger sessions) is a useful way to
selected and then participants seek to create new ideas get numerous ideas from untrained or reluctant participants.
to solve a problem using that word in the solution. Here’s how it works:
● Experimenting — Examples of this type of creativity include ● Identify the function under focus.
techniques such as morphological analysis and TRIZ.
● Each member of the group writes down their ideas using
The two basic creativity techniques that all VM facilitators brief statements (short periods only; e.g., five minutes).
must know are brainstorming and brainwriting. The VM facil-
itator should be aware of other creativity techniques and is ● One member reads out their list; others cross out the
encouraged to try them when appropriate. ideas duplicated on their own lists and write down new
“hitchhiked” ideas.
● A second member reads out their list of ideas not already

covered, and the process is repeated until everyone has
shared their list.
● The last member reads out their original list and “hitch-
hiked” list, and the procedure repeats in reverse.
A good group of participants can manage at least a half dozen

passes. Everyone’s paper is then collected and combined into
79
VM Guide®
a single list of ideas—all duplicates should have been crossed

out during the process. The VM facilitator may want to write
down the “surviving” ideas on a flipchart or whiteboard as the
brainwriting session evolves.
In a variation on this technique, everyone writes down their
ideas on Post-It® notes or small index cards and places them
in the center of the table. Everyone is then free to pull out one
or more of those ideas for inspiration. Team members can cre-
ate new ideas, variations, or piggyback on existing ideas.
7.5 References
● Kaufman, J. Jerry and Roy Woodhead. Stimulating Innova-
tion and Products and Services, Wiley Interscience, 2006.
● Innovation Styles Mode. “Innovation Styles”, 2007,

retrieved from innovate.vci.global/
● “How to Be Creative: Advice from Nobel Laureates,”

retrieved from www.youtube.com/playlist?list=PLc8JX-
9rbkV0ug140fvx8ebrZyUTx6uK8i
● Buzan, Tony. The Mind Map Book: How to Use Radiant

Thinking to Maximize Your Brain's Untapped Potential,
Plume; reprint edition, 1996.
● Ishikawa, Kaoru. Guide to Quality Control, Tokyo: JUSE, 1968.
● Michalko, Michael. Thinkertoys: A Handbook of Business

Creativity, Ten Speed Press; 2nd edition, 2006.
● Zwicky, Fritz and Page, T. "Discovery, Invention, Research,

through the Morphological Approach," Sciencevol. 163
(3873), pp. 1317–1318, New York, Macmillan,1969.
Retrieved from:10.1126/science.163.3873.1317. ISSN
0036-8075.
● Altshuller, Genrich, The Innovation Algorithm: TRIZ,

Systematic Innovation and Technical Creativity, Technical
Innovation Center, 1999.
● Visualization is visioning the ideal result and then focus-

ing towards practically achieving it. Example can be of
Josephine Cochran who invented Washing machine. She
wanted to create a machine which would not break dishes
when washed. Retrieve from www.uspto.gov/about-us/
news-updates/woman-invented-dishwasher
● Flip method is also called as reverse brainstorming. Refer to

www.mindtools.com/pages/article/newCT_96.htm.
● Online functions databases:
○ www.productioninspiration.com
○ wbam2244.dns-systems.net/EDB/index.php
80
8. Evaluation Phase
8
Evaluation Phase

The purpose of the Evaluation Phase is to systematically re-
duce the large number of ideas generated during the Creativity 8.1.1 Criteria
Phase to those that best enhance the value of the subject un- Standards for evaluation upon which a decision or a judgment
der study and appear the most promising for development. The is based.
evaluation processes used in this phase generally involve two
stages. For example, an evaluation process to choose a meet- 8.1.2 Evaluation
ing room shown among competing options is illustrated in To determine the significance, value, or condition through
Figure 8.1 . The first stage of the process concerns structuring careful appraisal and study.
the evaluation, while the second stage concerns making judg-
ments relative to the options. 8.1.3 Grading
Evaluations are used to prepare decisions within the context To classify ideas on a scale, such as by quality, size, color, etc.
of solving selected problems. Therefore, evaluations are only
needed and can only be carried out if alternatives are available. 8.1.4 Ranking
In this sense, doing nothing is also an alternative. To arrange ideas by priority or importance relative to other
ideas being considered.
8.1.5 Weighting
To give something (here, especially, the criteria) a specific
meaning. Therefore, different criteria can be differentiated, and
the importance will becomes obvious.
Selection process Task: Choose a meeting room
STAGE 1 STAGE 1
ordering • Define criteria: number of seats, equipment, accessibility, costs ...

defining • Define criteria weighting
structuring • Define the property: number of participants, is a projector available? (yes/no),
distance to airport, is parking available? (yes/no)
setting priorities
STAGE 2 STAGE 2
make distinctions • Make a choice (evaluation result: a value, spider chart)

make choice
Figure 8.1 – Two evaluation stages using the selection of a meeting room.
81
VM Guide®
8.2 Process and key concepts nique (such as evaluating by a simple yes/no rating) to quickly
eliminate ideas that are clearly impractical), and by then mov-
Evaluation is based on a comparison of options (in this case,
ing to a “medium” filter (such as by applying nominal group
ideas that address a function) on the basis of a measure of
technique), and then taking only the handful of best ideas and
value. The measure of value can be monetary. It can be quan-
subject them to a “fine” filter (such as by applying an evaluation
titative or qualitative. Evaluations should be made using a
matrix). Each level of filtering produces progressively higher
systematic approach.
levels of fidelity while also taking more time. This chapter will
Evaluations should seek to be objective and the underlying
further explore these essential concepts.
facts must be documented to permit traceability. Objectivity
The expertise of the VM facilitator carrying out the evalua-
is enhanced by involving the whole VM study team, and in
tion and their competence in applying appropriate techniques,
some cases stakeholders, representing various areas of re-
as well as the quality of the data on which the evaluation is
sponsibility in the evaluation process. The criteria on which an
based, determine the rigor of the evaluation. Increasing the
evaluation is based and their importance describe the point of
level of filter applied during the Evaluation Phase also increas-
view from which the evaluation has been carried out. In order
es the level of information considered.
to gain an objective view of the results, it is advisable that the
entire VM study team perform evaluations together.
8.2.1 Process inputs and outputs
Effective evaluations require a clear definition of all relevant
criteria. Any evaluation criterion identified should support 8.2.1.1 Inputs
achieving the VM study objectives and consider value holisti-
cally and relative to the context of the VM Study subject. This ‒ Value study goals,
ensures that all team members involved in the evaluation pro-
‒ Subject context,
cess make judgments based on the same clearly defined crite-
ria with accurately described characteristics, thus creating a ‒ List of creative ideas.
common understanding. Adhering to a methodical approach is
crucial to ensure the VM study team’s evaluation can be under-
stood even by persons not involved in the process. 8.2.1.2 Activities
Another important concept in this phase is the number and ‒ Establish framework.
type of “filters” used to discriminate ideas relative to the time
available in the VM study for evaluation and the quantity of ‒ Establish criteria.
ideas. Figure 8.2 illustrates this concept. Imagine that you
‒ Evaluate ideas.
had 200 ideas, but only four hours to evaluate them. How would
you select the best ones? By applying three levels of filters, it ‒ Select ideas.
would be possible to begin with a “coarse” idea filtering tech-
Maturity of Development Process

Search
for
Ideas
Best
All Ideas
Ideas
Fine filter
calculate/determine
value, numerical values,
Medium filter shares/percentage, factorise
order, define hierarchy,
arrangement, assign/allocate
Coarse filter network/link, chain
order, define hierarchy,
arrangement, assign/allocate
network/link, chain
Figure 8.2 – Evaluation process flowchart.
82
8. Evaluation Phase
8.2.1.3 Outputs Following the application of these techniques, additional

‒ Evaluation criteria, operations may be performed to further make sense of the
evaluation results. These include:
‒ Evaluation results/rationales,
● Organizing ideas,
‒ List of prioritized ideas selected for development.
● Excluding redundant ideas,
8.2.1.4 Process flowchart Figure 8.3 ● Summarizing similar ideas,
● Rough sketches or visualizations, and,

8.3 Activities
● Possible use of forms or templates.
8.3.1 Establish evaluation framework
The decision as to what level of, and how many, filters are ap-
In VM, evaluation can be performed by applying the idea filter
plied during the evaluation process largely depends on the time
concept described previously:
available, the number and expertise of the participants, and
● Coarse, or simple, evaluation techniques applied the number of ideas. The VM facilitator will need to apply their
according to a basic grading system relative to all of the judgment in making these decisions. For example, if there were
evaluation criteria. 100 ideas to evaluate and only two hours to do it, then perhaps
there would only be time to perform a coarse evaluation. With
● Medium, or intermediate, evaluation techniques applied an additional hour, it might be possible to add a medium filter.
with via comparison of evaluation criteria compared And with perhaps another hour, the very best ideas could be
to each other or baseline conditions (e.g., status quo, further scrutinized under a fine filter.
current design, existing product, etc.). Whatever techniques are applied, based on the degree of fil-
tering selected, should also involve capturing key discussions,
● Fine, or detailed, evaluation techniques which discretely judgments, ratings, and rating information. This is of critical
grade or score the evaluation criteria relative to a range importance. It is essential to have this recorded information
or scale. This may include a variety of different weighting, available in order to conduct the final activity in the Evaluation
rating, or numerically scored ideas in a systematic way. Phase, which is to prioritize and select the ideas after com-
pleting the evaluation. This is especially true as the number of
ideas increases. The VM study team will quickly forget key dis-
cussions and rationales as the evaluation progresses, unless
they are dutifully captured and documented.
Establish Evaluation Framework
Value Study Goals Establish Evaluation Criteria Evaluation Criteria
Subject Context
Evaluation Results/
Creative Ideas Evaluate Ideas
Rationale
Select Ideas Prioritized Ideas
83
VM Guide®
8.3.2 Establishing evaluation criteria ‒ Step 2. Define the criteria based on the subject’s
environment. For instance, the following criteria for
8.3.2.1 Understanding the current state the construction of a new hospital might consider:
Identifying appropriate criteria is an essential element of
‒ Program compatibility: the capacity of the
the evaluation process. The fact that different customers,
facility to meet the number and type of medical
users, and stakeholders can have different demands
needs of patients.
regarding a subject must be taken into consideration.
Accordingly, the VM study team must be sufficiently familiar ‒ Future flexibility: the capacity of the facility to be
with the stakeholders and their requirements in order to expanded or modified to meet future demands.
carry out an evaluation that takes them into account.
Evaluation criteria can be specified by the VM study ‒ OPEX: the cost to maintain and operate the
sponsor or key stakeholders, VM study team, or some facility (e.g., life-cycle cost).
combination. The criteria and their relative importance
(e.g., weighting and/or ranking) must be discussed and ‒ CAPEX: the cost to design and construct the
agreed upon by the team in order to create a common facility.
understanding and, therefore, achieve acceptance.
‒ Schedule: the time from inception to beneficial
8.3.2.2 Guide for establishing evaluation criteria use of the facility.
Evaluations may be carried out holistically or with a ‒ Project risk: the potential for the project to run
specific focus, such as technical, economic, social, and/or over budget or encounter delays.
market-related requirements. The evaluation criteria
should be defined in accordance with the field being The number of evaluation criteria selected for each
examined. The general process for establishing evaluation category may emphasize the dominant aspects of the
criteria is illustrated in Figure 8.4 . evaluation. If, for example, three technical criteria are
defined as opposed to only one criterion from each
of the other fields, the technical aspect will dominate
Identify Define Determine Determine
the result, unless, of course, weighting the criteria
Context Criteria Range/Scale Importance
influences that ratio.
Figure 8.4 – Steps in establishing evaluation criteria. ‒ Step 3. Transform the criteria for evaluation by
identifying the range of acceptability for the criteria.
It is essential to include the whole spectrum of categories This means identifying what is acceptable or
from the object's environment in the evaluation criteria: unacceptable. Further, consideration must be given
as to whether a criterion is quantitative or qualitative.
‒ Step 1. Consider the context of the subject under Doing so provides the individuals involved in the
evaluation. Either a more generic evaluation or one evaluation some means of gauging how well an
that focuses on more specific spheres of influence can idea or potential solution will satisfy the evaluation
be considered. Relative to the context of VM, which is criteria. This could be a numeric score (e.g., 1 to
focused holistically on improving value, the elements 10), a letter grade (e.g., A to F), or descriptive (e.g.,
of performance/quality, cost, time, and risk provide the excellent to poor). Once a range is established, it is
broadest set of potential evaluation criteria. Another important to associate either a quantitative measure
approach is to consider relative spheres of influence. or a qualitative description to help those making the
For example, an evaluation involved in identifying new evaluation do so in a consistent manner. Evaluation
product development opportunities might consider criteria are supposed to model the extent to which
the suitability of ideas relative to technical, economic, requirements/demands are met. Accordingly, they
social and/or market-related domains. must be described in a precisely defined manner
in order to create a common understanding of the
measure and scale. It is important to include the
initial conditions in the evaluation. Particular attention
is to be paid when defining non-monetary criteria or a
criterion which, at first glance, cannot be represented
by numerical values, in order to make it measurable.
In this case, it is important to find as comprehensive a
description as possible, which can be set in relation to
something that is familiar or comparable.
84
8. Evaluation Phase
‒ Step 4. Consider the relative importance, or priority, 8.3.2.3 Examples of evaluation criteria
of each criterion. This step must look at the total set Depending upon the subject of the study, the evaluation
of criteria under consideration and determine their criteria may vary greatly. The sponsor of the VM study may
priority. Are all the criteria equally important? Is one have criteria that differ from those of customers or end-
more dominant than the others? These questions users. Additional stakeholders may also come to the table
must be answered to ensure that those involved in with widely differing demands.
the evaluation process share a similar understanding Evaluation criteria should always originate in the VM
of the importance of the criteria. There are different study subject’s environment and relate to the goals of the
techniques for weighting and prioritizing. VM study. Figure 8.5 provides a small sample of possible
evaluation criteria for different applications.
Defining and representing evaluation criteria as accurately
Looking at the “generic” evaluation criteria related to
as possible is the essential basis for efficient and correct
the elements of value (performance, cost, time, and risk),
evaluation: efficient, since discussions concerning matters
these could be further expanded upon for nearly any
of understanding can be reduced to a minimum; and,
situation to better respond to the subject’s context and
correct, since everyone involved in the evaluation gains
goals of the VM study. Figure 8.6 provides an example of
a clear understanding and clear representation of the
this, focusing on a manufactured product.
criteria measurements. A common understanding can only
be achieved if the evaluation criteria grading is discussed
and defined by the entire team.
Generic Project Product Process
● Performance ● Reliability ● Customer Satisfaction ● Efficiency
● Cost ● Maintainability ● Market Suitability ● Quality
● Time ● Program Compatibility ● Strategic Alignment ● Cycle Time
● Risk ● Environmental Impact ● Technological ● Scalability
Figure 8.5 – Examples of evaluation criteria.
Performance Cost Time Risk
● reliability ● cost of tools ● time to design ● risk of technical feasibility
● durability ● cost of molds ● time to manufacture ● risk of unexpected

implementation costs
● maintainability ● cost of appliances ● time to assemble
● risk of supply chain
● efficiency ● cost of machines ● time to test disruptions
● effectiveness ● cost of equipment ● time to approve or ● risk of material cost
certify variability
● attractiveness ● cost of labor
● time to deliver ● risk of difficult
● build quality ● cost of facilities
or impossible
● time to market
● user acceptance ● cost of defects commissioning
Figure 8.6 – Examples of evaluation criteria for products.
85
VM Guide®
8.3.3 Evaluating ideas Newly generated ideas might be rejected too quickly
because too little is known about them, which risks losing
8.3.3.1 Evaluation in the context of human behavior good ideas. In this context, it is important to ensure that
The VM study team bears the primary responsibility an idea is always evaluated favorably, not unfavorably.
for evaluating ideas. If required, additional experts or Particular attention must be paid to this aspect, especially
stakeholders may augment the team (e.g., individuals during the rough evaluation phase.
representing the subject team, customers, key external Experience, too, can have both positive and negative
stakeholders, etc.) during the evaluation process to ensure effects on an evaluation. Creation of something new always
that the required expertise is introduced. involves departing from established patterns and allowing
The VM study team can only be successful if the team the formation of new relationships. The positive effect of
not only has the necessary expertise and experience but is experience is that very experienced persons can resort to
also familiar with the methods and tools. The VM facilitator a large pool of possible relationships and, therefore, have
should be familiar with evaluation techniques to be applied. a lot of options for determining new combinations. The
The required environmental factors also must be in place, negative effect is that some people may have great difficulty
as well as a corresponding management style which takes departing from rigidly established thought patterns. In this
the team members’ behavior into consideration as well. sense, evaluations can provide an opportunity to achieve
This means meetings must be chaired and managed. The objectivity. In order to reap the benefits of different levels
dynamics resulting from individual behavior within a group of experience, special attention must be paid to the
is an important factor for the successful organization of a formulation and grading of the evaluation criteria.
VM study. An evaluation can never be completely objective.
In VM, evaluation must also take the interpersonal Systematic procedures, joint evaluations made as a team
relationships involved in working together as a team into on the basis of clearly defined and agreed criteria, as well
consideration. Special consideration should be given to as tenacity in the pursuit of ideas will increase objectivity
the following points. and, in practice, lead to extremely good results.
8.3.3.2 Establishing the scope of evaluation

‒ Encouragement of cooperation within
interdisciplinary teams in order to find solutions that Since VM is an application-neutral method, the ideas
find a consensus; evaluated may cover a broad variety of topics relevant
to the context of the subject. Some of these ideas
‒ Praise and recognition of the team's achievements; could lay outside of the scope of the evaluation. Careful
consideration should be given to identify critical
‒ Improvement of interpersonal communications to constraints beforehand to better manage the scope of
promote common understanding; evaluation. For example, ideas focusing on a project could
lead to challenging external processes that lay outside
‒ Maintaining a skeptical view of the status quo in order
the initial VM study scope. Depending on the context and
to drive beneficial changes;
critical constraints, it is possible that such ideas could
‒ Support for decision-making in the team; and, be either inside or outside the scope of the evaluation.
Establishing such parameters can quickly discount or
‒ Responsibility for decision-making to lie with the dismiss large numbers of ideas. This can be a benefit by
team which developed the solutions. avoiding wasting the VM study team’s time on evaluating
ideas that have no opportunity of success; or, conversely,
it could result in lost opportunities for value improvement
if the evaluation scope is not fully understood. When
in doubt, the VM study sponsor should be consulted to
ensure the scope of the evaluation is clearly defined and
to avoid wasting effort unnecessarily.
86
8. Evaluation Phase
8.3.4 Selecting ideas 8.4 Techniques

After the VM study team has evaluated the ideas, decisions
must be made relative to which ideas will be selected 8.4.1 Coarse filter – simple evaluation techniques
and advanced into the Development Phase. Regardless A relatively quick way to evaluate ideas, which is commonly
of the techniques employed to evaluate the ideas, the used by VM practitioners, is to identify a set of evaluation cri-
evaluation process should have narrowed down the list of teria, discuss the merits of the idea relative to the evaluation
ideas considerably. The remaining ideas identified by the criteria, and then assign the idea a rating based on how well it
team for further investigation in the Development Phase addresses the evaluation criteria. If time is limited and/or there
should be listed by priority, based upon the outcome of are many ideas to evaluate, care should be given to selecting a
the evaluation. smaller set of criteria to consider.
In some cases, further evaluation may be necessary, Each idea should then be discussed relative to the evalua-
especially if it appears that the list of surviving ideas appears tion criteria. An overall rating can then be assigned using any
to be larger than what the VM study team can adequately numeric scale preferred (1 to 3, 1 to 5, and 1 to 10 are most
develop in the time allotted. In cases such as this, it may be common). Even a simple binary evaluation can be applied (e.g.,
advisable to attempt to make a quick estimate of costs in yes or no; thumbs up or thumbs down; develop or dismiss).
order to develop a better understanding of the magnitude Numeric scales, if used, should reflect overall acceptability
of savings (or cost increase) involved. Alternatively, the of the idea. Each number on the scale should be defined:,. for
nominal group technique can be employed to help rank the example, a 1 to 3 scale might consist of numbers with corre-
remaining alternatives in order of importance. sponding values such as:
Once the ideas have been listed according to their
priority, they will need to be assigned to the VM study team 1. Unacceptable. This idea should be dropped from further
members for development. It is important to emphasize consideration.
that the entire team may be involved in the development of
an idea into an alternative; however, it is best to assign one 2. Shows potential. This idea should be considered only
individual on the team the responsibility to ensure the idea after all the ideas rated “3” have been developed.
is fully developed and does not fall through the cracks.
3. Acceptable. The idea should be developed into a value
alternative.
The example in Figure 8.7 shows a simple evaluation of sever-

al ideas for the forklift project’s hydraulic system, described by
the function statement “transfer energy.” In this case, the
ideas were organized by function and discussed by the VM
study team relative to the evaluation criteria. In order to con-
serve time, the ideas are just given a simple rating.
Function: TRANSFER ENERGY

Idea # Idea Rating
TE-1 Hand-operated reciprocating pump 1
TE-2 Radial piston pump 2
TE-3 Gerotor (generated rotor) pump 3
TE-4 Use a gear pump from a different manufacturer 3
Eliminate hydraulic system completely and
TE-5 2
use an electric motor
TE-6 Rotary vane pump 1
TE-7 Axial piston pump 2
Figure 8.7 – Example of an evaluation by simple rating.
87
VM Guide®
Increasing the size of the rating scales or categories used in- Another technique that falls within this category is the nom-
creases the granularity or fidelity of the analysis, allowing for a inal group technique originally developed as an organizational
higher level of discernment between ideas. Idea codes can be planning method by Delbecq, Van de Ven, and Gustafson in
used to help identify and track ideas by function (e.g., Transfer 1971. This technique, with a few minor modifications, provides
Energy = TE-1) as they move through the evaluation and devel- an effective means of prioritizing ideas through group consen-
opment process. This method is fast but tends not to be as thor- sus. This process includes the following steps:
ough as the other techniques described below for intermediate
and detailed evaluations. In the example above, the rationale 1. After the ideas have been captured following a creativity
for the rating isn’t recorded. That may handicap the team later session, the VM facilitator asks each participant to read and
as the reasons for the rating given may be forgotten or become elaborate on their ideas to ensure everyone understands
unclear; however, it may have been the only reasonable way to the concept. Duplicate ideas can be crossed out and the
evaluate the ideas given time constraints. The preference is to remaining ideas are numbered or assigned an idea code.
always record the highlights of key discussions in order to help
2. The VM facilitator asks each person to write down, within
the team recall the rationale behind the ratings.
a few minutes, the idea numbers or codes that seem
8.4.2 Medium filter – intermediate evaluation techniques especially important. Some people may feel only a few
items are important; others may feel all items are import-
This approach builds upon the previous technique and com-
ant. The VM facilitator then goes down the list and records
pares the advantages and disadvantages of an idea relative to
the number of people who consider each item a priority.
the subject’s baseline state. The VM facilitator should facilitate
the discussion of each idea and record the benefits and chal- 3. Session participants are then asked to choose up to 10
lenges (or advantages and disadvantages) based on the evalu- ideas that they feel are the most important and rank them
ation criteria. From this discussion, the VM study team should according to their relative importance. The idea each
be able to make conclusions as to which ideas merit further feels is most important should get at “1” down to their
exploration in the Development Phase, and which ideas should least important which would get a “10.” These rankings
be eliminated from further consideration (see Figure 8.8 ). The are collected from all participants and aggregated (see
ideas can be rated based on a rating scale as described previ- Figure 8.9 ). The lower the score, the higher the idea is
ously. This approach provides better documentation on the ranked. Time permitting, participants should be asked
team’s reasoning; however, it also requires more time. why they ranked ideas the way they did.
Function: CONTROL SPEED

Idea # Idea Benefits Challenges Rating
CS-1 Electronic ● Allows for “on the fly” shifting ● Increases costs 10
shift control
● Improves fuel efficiency
CS-2 Hydrostatic ● Allows greater sensitivity in controlling speed ● Increases costs 7

hand paddles
● Allows for visual feedback ● Adds complexity
● Concept not intuitive for most

operators
CS-4 Joystick ● Provides a unique solution ● Increases costs 8

control
● May lend itself to a new marketing approach ● Concept may not be intuitive
for most operators
● Could provide for increased control if
combined with an electronic shift control
CS-5 Manual shift ● Reduces costs ● Requires clutch maintenance 3

with clutch
● Allows more operator control ● Less convenient
Figure 8.8 – Evaluation by comparison.
88
8. Evaluation Phase
Sometimes, these results are given back to the participants stakeholders want to know why an idea was not further de-
in order to stimulate further discussion or to allow for the veloped into a proposal. This conscientious approach should
readjustment in the overall rankings assigned to the various satisfy that inquiry.
responses. This is done only when group consensus regarding Unfortunately, many promising ideas are discarded based
the prioritization of issues is important to the overall research on unfounded statements with respect to only one evaluation
or planning project. As its name suggests, the nominal group criterion. The process described above forces participants to
technique is composed of values provided on an individual articulate their criticism in an organized way that addresses
basis but grouped together to form a single ranking. all the key evaluation criteria, not just those that immediately
Another variation of this approach works particularly well if come to mind. Additional in-depth discussion is often required
ideas have been recorded on flip chart paper and posted on the before potential benefits are revealed.
walls. It involves handing out a set number of colored stickers Use of an evaluation matrix should consider performance,
(or using colored markers to write stars) to the participants and cost, schedule, and risk. When these criteria have been consid-
then asking them to place stickers next to the ideas that they ered, a final rating is assigned to the idea. This can be handled
feel are the best. This forces participants to engage with the using several methods.
ideas and makes them accountable for identifying their pref- The simplest approach is to identify if the idea results in an
erences. Once the participants identify their preferred ideas, improvement or degradation relative to each of the evaluation
the total number of stickers or marks can be added up and the criteria. This can be indicated with a symbol (e.g., plus or minus
highest scoring ideas circled. These ideas can then be further symbol, or an up or down arrow). Once the criteria have been
discussed or advanced into a fine filter stage of evaluation. This evaluated in this manner, and the rationale for the rating record-
approach can be further augmented by passing out a different ed, the idea can then receive a final score. This could be a 1 to
colored sticker, or marker, to indicate ideas to which they ob- 10, 1 to 7, 1 to 100, or whatever scale is preferred. It is always
ject. Doing both can lead to robust discussions concerning why helpful to include some kind of qualitative description to the
people support or oppose ideas. Ideally, the highlights of these scale. For example, a 1 to 7 scale might be described as follows.
discussions are recorded to document the evaluation process.
1. Major value degradation
8.4.3 Fine filter – detailed evaluation techniques
2. Moderate value degradation
The use of a more detailed evaluation matrix offers a way to
more finely filter and consider ideas. This approach seeks to 3. Design consideration (No cost data developed)
consider discrete evaluation criteria and score them individ-
4. Possible value improvement
ually. During the ensuing discussions, the rationale for each
idea relative to the evaluation criteria is documented. This 5. Minor value improvement
documentation can prove very valuable to project stakehold-
ers, even for those ideas ultimately rejected, as it provides a 6. Moderate value improvement
concise, but thorough, discussion of key issues. Many times, 7. Major value improvement.
Function: GENERATE TORQUE
Idea Code Bill John Fred Sally Jamal Total Votes Ranking
GT-1 7 8 10 10 8 43 9
GT-5 8 5 4 6 3 26 5
GT-11 1 2 1 3 2 9 1
GT-16 6 9 8 7 10 40 8
GT-18 10 10 7 9 9 45 10
GT-23 2 3 3 2 1 11 2
GT-26 5 6 9 8 6 34 6
GT-29 3 1 2 1 4 11 2
GT-32 9 7 6 5 7 34 6
GT-34 4 4 5 4 5 22 4
Figure 8.9 – Example of an evaluation using the nominal group technique.
89
90
VM Guide®
evaluation process.
assigned to the criteria.
to complex. Basic methods include:
a criterion is relative to its peers, the higher the score.
● AHP pairwise comparison. This method, developed by

● Scaled pairwise comparisons. This method compares
a weight of 1 to 9 to the dominant criterion. Scores are

all criteria against each other in pairs, and then assigns
● Direct weighting. Distribute 100 points between the evalua-
trix to assign relative ratio measures to evaluation criteria.

of scaled pairwise comparisons. It uses a scaled eigenma-
tion criteria based on group discussion. The more important
then added together and normalized with resulting scores
Thomas Saaty (1926-2017), is a more sophisticated version
then multiplied by the importance, or weight, of the criterion,

Using this quantitative method, each idea can be assigned
criteria. There are many ways to do this that range from simple
to first assign weights (relative importance) to the evaluation
More sophisticated variations of the evaluation matrix seek
can be time consuming, but it provides additional rigor to the

then be added together to calculate a total score. This method
a numeric rating (such as a 1 to 10) for each criterion that is
to derive an adjusted score. The scores for each criterion can

Performance Attributes Legend
7 = Major Value Improvement

6 = Moderate Value Improvement
5 = Minor Value Improvement
+ = Improved
4 = Possible Value Improvement
0 = No Change
Risk
Cost
3 = Design Consideration
Rating
– = Degraded
Schedule
(No cost data developed)

2 = Moderate Value Degradation
Maintainability
Traffic Operation
1 = Major Value Degradation
Operational Reliability
Environmental Impacts
Function Idea # Idea Advantages Disadvantages
Enlarge channel to Will likely require supplemental EIR/EIS
Maintain increase conveyance Less Bridge and more less expensive earth and additional permits. Increase risk of
1 0 0 – – + + – 3
Conveyance under the bridge, dredge work. Improves hydraulic flow. obtaining permits and public outcry. Might
the river require O&M funds to maintain channel.
Construct box culverts Greater impacts to floodway and habitat. This
Maintain
2 under roadway in lieu of 0 0 – – Reduces cost and time alternative would require improvements to + + – 2
Conveyance
bridge structure the channel that would make it not feasible
construction project.
Develop a letter of map This action will have to be considered with
Maintain
3 revision to submit to FEMA 0 0 0 0 any alternative (including the baseline 0 0 0 4
Conveyance
to modify the floodplain design) that modifies the floodway.
Have farmers remove their Requires political action that will be
Maintain Improves hydraulic flow and would allow
4 unpermitted fills to open 0 0 + – difficult to enforce and likely result in + + – 3
Conveyance bridge to be shortened in length
up the floodplain again litigation
This needs to be done in order to get
Maintain Identify acceptable
5 0 0 0 0 all stakeholders in alignment and avoid 0 0 0 5
Figure 8.10 – Example of a simple evaluation matrix for a

Conveyance annual closure risk
confusion
8. Evaluation Phase
8.5 References
● VDI Guideline 2808 Part 1: Evaluation in value analysis -
method and tools; Düsseldorf, VDI 2018
● VDI-Gesellschaft Produkt- und Prozessgestaltung:

Wertanalyse das Tool im Value Management. 6. Auflage.
Berlin, Heidelberg: Springer Verlag, 9. 116 ff, 2011.
● Bronstein, I. N.; Semendjajew, K.A.; Musiol, G.; Mühling,

H. Taschenbuch der Mathematik. 4. Auflage. Frankfurt am
Main, Thun: Verlag Harri Deutsch, 1999
● Breiing, A. and Knosala, R. Bewerten technischer Systeme,

Berlin, Heidelberg: Springer Verlag, S. 195 ff, 1997.
● Zangemeister, C. Nutzwertanalyse in der Systemtechnik

– Eine Methodik zur multidimensionalen Bewertung und
Auswahl von Projektalternativen. 4. Auflage. München:
Wittemannsche Buchhandlung, S. 289 ff, 1976.
● Meindl, S. “How to Deal with a Multitude of Ideas of the

Evaluation Phase in a VE Project.” SAVE Value Summit
Proceedings, Oak Brook IL, USA, 22.-26, 2014.
● Delbecq, A. L.; VandeVen, A. H.; and Gustafson, D. H.

Group Techniques for Program Planners, Glenview,
Illinois: Scott Foresman and Company, 1975.
● Saaty, Thomas L. Decision Making for Leaders, RWS

Publications, 2008.
● Saaty, Thomas L. and Peniwati, Kirti. Group Decision

Making: Drawing Out & and Reconciling Differences, RWS
Publications, 2008 .
● Aguwa, C.; Etu, E. E.; Egeonu, D.; and Monplaisir, L. “Appli-

cation of Data Analytics and AHP on Value Methodology.”
SAVE Value Summit Conference Proceedings, pp. 4-8, 2017.
91
VM Guide®
92
9. Development Phase
9
Development Phase
9.0 Introduction do not usually drive changes in cost, and escalation tends to be
less sustained. Note that escalation is different than inflation
The Function Analysis, Creativity, and Evaluation Phases of the
(see 9.1.5).
VM Job Plan comprise the core of a VM study. Upon completion
of the Evaluation Phase, the VM study team will have identified
9.1.4 Future value
numerous ideas that to be developed into VM proposals.
The value of a current asset at a specified date in the future
The VM study team members are responsible for preparing
based on an assumed rate of growth. Examples of factors that
the VM proposals, which are often based upon a comparison to
are often expressed as a future value (FV) in a life-cycle cost
the VM study subject’s baseline or status quo. All VM proposals
analysis include major periodic maintenance, equipment or
are ultimately documented with written descriptions, narra-
building system replacements, salvage or demolition costs, etc.
tives providing justification, sketches, performance and risk
assessments, calculations, and cost comparisons (both initial
9.1.5 Inflation
costs and life-cycle costs, if needed).
A quantitative measure of the rate at which the average price
level of an array of selected goods and services in an economy
There are three activities in the Development Phase:
increases over a period of time. Inflation is often expressed as
● Assign ideas to the VM study team members. a percentage and indicates a decrease in the purchasing power
of a nation’s currency.
● Develop VM proposals.
9.1.6 Interest rate
● Review and revise VM proposals. The amount of money charged, expressed as a percentage
of principal, by a lender to a borrower for the use of assets.
In terms of borrowed money, the interest rate is typically ap-
9.1 Terms and definitions plied to the principal, which is the amount of money loaned.
The interest rate is the cost of debt for the borrower and the
9.1.1 Annuity rate of return for the lender. It should be noted that the term
A series of payments made at equal intervals. Examples of an- “discount rate” refers to the interest rate that Federal Reserve
nuities used in the Development Phase and relative to life-cycle Banks charge commercial lenders, and that is frequently used
cost analysis include yearly insurance premiums, monthly mort- by public sector agencies in LCC analysis. The VM study spon-
gage payments, annual energy costs, insurance, licenses, etc. sor may define a preferred discount rate to be applied to their
specific cash flow analysis.
9.1.2 Break-even point
The sales amount—in either unit (quantity) or revenue (sales) 9.1.7 Life-cycle cost (LCC) analysis
terms—required to cover total costs, consisting of both fixed The sum of all recurring and one-time (non-recurring) costs
and variable costs to the organization. over the full life span or a specified period of a project, prod-
uct, process, service, or organization. It includes the initial
9.1.3 Escalation costs, operating costs, maintenance and upgrade costs, and
Changes in the cost or price of specific goods or services in a remaining (residual or salvage) value at the end of ownership or
given economy over a period. This is similar to the concept of its useful life. The VM study sponsor should ultimately provide
inflation, except that escalation is specific to an item or class of direction on the appropriate methods and factors they wish to
items (not as general in nature). Changes in the money supply be applied.
93
VM Guide®
9.1.8 Life-cycle period 9.1.12 Time value of money

The length of time considered in a life-cycle cost analysis. For The time value of money is the concept that money available
example, a life-cycle cost analysis performed for the useful at the present time is worth more than the identical sum in the
life of a highway bridge might assume a life-cycle period of 75 future, due to its potential earning capacity. This core principle
years, which is a typical period used to define the “useful life” of finance holds that, provided money can earn interest, any
of the structure. amount of money is worth more the sooner it is received.
9.1.9 Present value

9.2 Process
The current value of an asset. In life-cycle cost analysis, pres-
Chapter 3 described how the process followed within the VM
ent value (PV) is the current value of a future sum of money or
Job Plan starts with a focus on divergent thinking. The use of
stream of cash flows (an annuity) given a specified rate of return.
non-specific language in the Function Analysis Phase empow-
ers this divergent thinking, and the Creativity Phase takes
9.1.10 Return on investment (ROI)
advantage of it. Nevertheless, implementing change in any or-
A performance measure used to evaluate the efficiency of an
ganization implies planning for specific, non-generic tasks. The
investment or to compare the efficiency of a number of differ-
Evaluation Phase started focusing the team members’ minds
ent investments. ROI tries to directly measure the amount of
back into convergent thinking, and now is the time to prepare
return on a particular investment, relative to the investment’s
specific descriptions.
cost. To calculate ROI, the benefit (or return) of an investment
is divided by the cost of the investment. The result is expressed 9.2.1 The development process
as a percentage or a ratio.
Even though every project is different in nature, the process
of developing VM proposals in this phase should be almost
9.1.11 Simple payback
identical in every VM study, although the type of information
In capital budgeting, the period of time required to recoup the
and assumptions used in this process may vary from industry
purchasing power of the funds expended in an investment or to
to industry. In the end, all can be simply classified as technical,
reach the break-even point. For example, a $1,000 investment
social, and economical, common to all organizations’ inter-
made at the start of Year 1 which returned $500 at the end of
ests. With this in mind, all VM studies will follow the same three
Year 1 and Year 2, respectively, would have a 2-year payback pe-
simple steps in the Development Phase: 1) assign ideas to VM
riod. This method does not recognize the time value of money.
study team members; 2) develop VM proposals; and, 3) review
VM proposals. Only the nature of inputs and outputs used in
this phase (described in 9.2.2) may be industry specific.
Operating
Cost
Investment
Cost
Replacement Replacement
Cost Cost
First Cost
Residual
Value
STUDY PERIOD
Figure 9.1 – Examples of a future sum of money or stream of cash flows converted to present value.
94
9.2.2 Inputs and outputs ‒ Operations costs
9.2.2.1 Inputs ‒ Maintenance costs
‒ Selection of evaluated and prioritized ideas ‒ Salvage costs
‒ Scope information (may vary by industry) ‒ Disposal, demolition, or reuse costs
‒ Scope statements ‒ Economic data (e.g., inflation, escalation,

financing, cost indices, etc.)
‒ VM study’s goals or objectives
‒ Applicable discount rates
‒ Project management plan
‒ Sales and marketing data
‒ Supply and/or value chain information
‒ Risk information
‒ Work breakdown structure (WBS)
‒ Risk management plan
‒ Process diagrams
‒ Risk register.
‒ Time and motion studies
‒ Drawings 9.2.2.2 Outputs
‒ Part or component lists ‒ VM proposals
‒ Technical reports ‒ Proposal narratives, of existing (baseline)

condition and proposed change(s) thereto
‒ Stakeholder information
‒ Sketches
‒ Performance and quality information (may vary by
industry) ‒ Calculation sheets (technical and costs)
‒ Specifications and/or requirements ‒ Advantages and disadvantages
‒ Quality management plan ‒ Discussion and/or justification as to why the

VM proposal idea should be implemented
‒ Warranty and/or defect information
‒ Initial and life-cycle cost estimates
‒ Voice of the customer information
‒ Performance and/or quality assessments, if
‒ Surveys and/or interviews applicable
‒ Marketing data ‒ Risk assessment, if applicable
‒ Balanced scorecard ‒ Recommended implementation action plan.
‒ Time information (may vary by industry)

9.2.2.3 Activities
‒ Major milestones
‒ Assign Ideas to the VM team
‒ Schedules
‒ Develop VM proposals
‒ Project’s critical path
‒ Review and revise VM proposals.
‒ Process throughput
‒ Gantt charts
‒ Cost information (may vary by industry)
‒ Initial cost estimates, bill of materials, labor

costs, etc.
95
VM Guide®
Prioritize Creative Ideas Assign Ideas Team Assignments
Scope Information Proposal Narratives
Initial & Life Cycle

Cost Information
Cost Estimates
Performance / Quality Information Develop VM Proposals Performance / Quality Assessment
Time Information Time / Schedule Estimate
Risk Information Risk Assessment
Review and Revise Reviewed and Revised

VM Proposals VM Proposals
Figure 9.2 – Development Phase flowchart.
9.2.2.4 Process flowchart Figure 9.2 9.3.2 Develop VM proposals

The development of the VM proposals is the essential activity
9.3 Activities of the Development Phase. The following sequence of related
tasks are included in this activity:
9.3.1 Assigning ideas to the VM team
● Ensure technical viability.
Responsibility for the development of each idea should be
related to the VM team members’ knowledge and skills and the ● Determine costs.
time available. The VM proposals can be developed by one VM
study team member or a group. However, one VM study team ● Assess time or schedule impacts.
member must be responsible to ensure that the VM proposals
● Assess performance and quality impacts.
are developed. The VM study team should use the entire team
as a resource, as well as any other resource (e.g., internet, ● Assess risk.
previous projects, discussions with colleagues, etc.) in the
development of the VM proposals. The VM proposals are devel- ● Develop narratives.
oped as far as time and resources allow during the workshop.
The VM study team allow for time to gather and review all their ● Develop proposal titles.
developed VM proposals before preparing the VM study results
It must be emphasized that there are many different ways to
presentation in order to allow all team members to review and
organize and present information for VM proposals. If the pro-
comment on the VM proposals.
cedures identified here are followed, the VM study team should
be successful in developing VM proposals that thoroughly
communicate the concepts to the project team and to the
decision makers. This information should be presented clearly
and concisely by the VM study team to make the decision-mak-
ing process an easy one.
96
9.3.2.1 Ensure technical viability In manufacturing or product-oriented studies, the

Assuming that all the short-listed ideas were assigned investment required to implement any change may be
at the end of the Evaluation Phase, the VM study team significant. An example could be redesigning a plastic
members will be ready to begin documenting the component for which implementing the idea will require
information to be developed for each VM proposal. The a new tool. The cost of that tool may offset the idea’s
first step in this process is to ensure the technical viability benefits and make the proposal economically unfeasible.
of the VM proposal. In other words, will it work? Many other non-manufacturing proposals may have the
Depending on the nature of the concept, technical following implementation costs, normally classified as
viability may or may not be obvious. If not, the VM study follows:
team must consider this first, before expending any
additional time on the concept. ‒ Capital expenses (the cost to acquire new equipment,
It is important to note that the VM study team need only building, construction, etc.);
develop the concept to the level of the baseline concept.
‒ Tooling expenses (the cost to retool existing
In some cases, especially for projects involving facilities,
equipment); or,
it may only be necessary to develop the concept at a
preliminary level to ensure that it is fundamentally sound. ‒ Engineering expenses (testing costs, validation
In other words, it is not necessary to develop the design of costs, etc.).
a new forklift component in AutoCAD, as this is an activity
that may take far more time than available to the VM study
team. Both the VM study team and project team must keep 9.3.2.3 Assess time or schedule impacts
in mind that the project team will have to integrate any VM The VM study team should assess the impact of the VM
proposal ultimately accepted VM proposal. proposal to time or schedule. Will the proposal reduce
As the VM study team verifies the alternative’s technical or increase time? Will the critical path of the subject
feasibility, any calculations or assumptions should be schedule be affected? These important questions must be
documented. Include these, along with any sketches, diagrams, considered, as they influence total value.
or other graphical information, as part of VM proposal’s The VM study team may wish to develop a Gantt or
documentation. Should the concept not be technically viable, swimlane chart if the VM proposal will have a significant
then the reason(s) why should be documented and the concept impact on the sequence and/or duration of activities
dropped from further consideration. involved in actualizing the subject, be it a product or
process. In some cases, it may be appropriate to limit the
9.3.2.2 Determine costs discussion on time relative to how it impacts key milestones.
Once the VM study team feels confident that the concept The interrelationship between schedule and cost should be
will work, they assess its financial impacts. This baseline considered, as time savings usually have cost implications
cost data provided to the VM study team should be used associated with them. For example, a VM proposal that
as a basis for developing the costs for the VM proposals. In results in a construction schedule savings of six months
some cases, the concept behind a VM proposal may be so will also enjoy a reduction in project costs relative to time-
radically different from the subject’s baseline or status quo related overhead and construction cost escalation.
that it will be necessary to develop a completely new cost
estimate from scratch. In such cases, the VM study team 9.3.2.4 Assess performance and quality impacts
must be careful to document where they obtain the cost Once the technical feasibility and costs have been
information supporting the VM proposal. Any assumptions determined, the VM study team should have a fairly good
should be well documented and justified. idea whether the VM proposals will provide an improvement
If life-cycle costs will be affected by the VM proposal, a in value. The next step is to assess the anticipated impacts
life-cycle cost analysis should be included as part of the that the VM proposal will have on project performance
VM proposal documentation. Information pertaining to and/or quality.
life-cycle periods and discount rates should be obtained The VM study team should consider the basic and
from the project team or project sponsor. secondary functions for the project and the related
In developing cost estimates, it is always advisable performance measures. For example, if a structural
to make a side-by-side comparison of baseline and column is being changed—let us assume the function is
alternative costs to show which areas differ in cost. In “transfer load”—the related performance measures should
developing the costs of the alternative concept, it is not be considered. In this example, will the VM proposal
always necessary to provide an estimate of the complete increase or decrease the amount of dead load the column
project. Usually, it’s only necessary to include the project can effectively transfer? What about seismic resistance?
costs that will change as a result of implementation of the The VM study team should consider key aspects of
VM proposal.
97
VM Guide®
performance that the alternative will impact and clearly VM proposals may serve as risk response strategies,
state them in the development of the VM proposals. intentionally or unintentionally, by design or as a by-
Similarly, consideration should be given to the potential product. It is worth considering what kind of response
impact on quality. Will the change have a positive or strategy a VM proposal falls into. Generally speaking, there
negative impact on the quality of the VM study subject? are four types of strategies that apply to threats (negative
Will there be a potential increase or decrease in defects? risks) and three that apply to opportunities (positive risks).
The VM proposal should capture and communicate the Thought should be given on how the VM proposal can be
rationale for any anticipated impact to quality VM proposal. employed along these lines.
The actions available to address risks are based on the
9.3.2.5 Assess risk following risk response strategies to deal with threats:
Consideration should be given concerning the uncertainty
of the VM proposal and/or its effect on uncertainty ‒ Avoid. The surest way to deal with a risk is to avoid
inherent in the project. For each VM proposal, risk can it completely. There are several different ways to do
be considered either qualitatively or quantitatively, this. One is to modify the project scope.
depending upon the level of information and time available
to the VM study team. For example, assume that a retaining wall possesses a
cost risk related to unknown geological conditions. If
Key considerations concerning risk may include: the retaining wall were eliminated, then the risk could
be avoided completely. However, project costs may
‒ Risks associated with implementing the VM proposal. need to be increased to acquire additional real estate
The VM study team should give some thought to in order to replace the wall with an embankment.
the uncertainties facing the implementation of The question then is: “Will the cost to avoid this risk
the VM proposals. For example, if a VM proposal be less than its expected impact?” If the answer is
incorporates a new technical innovation that has yes, then this may be a good strategy to adopt. Many
never been tested, there may be a risk that the risks identified early on in a project’s life cycle can be
concept will not work. This could result in a loss of avoided once additional information is developed.
time and/or money and would negatively affect the
‒ Transfer. Transferring a risk is a euphemism for
product. In this case, the VM study team would be
“passing the buck.” In other words, a risk can be
wise to articulate their opinion on the probability of
passed on to another party, perhaps one that is more
success and the related impacts for both success
adept at dealing with a specific risk. This usually
and failure. If decision makers are unaware of the
incurs a price to be paid to do this. It is common
risks involved with a VM proposal, they may be more
to pass on some risks to a third party, such as a
prone to making poor decisions.
contractor or consultant. The success of this strategy
‒ The probability that the VM proposal will be largely depends on the third party’s ability to assume
implemented. In some cases, the decisions related and reduce the risk.
to accepting or rejecting a VM proposal may involve
For example, an agency charged with the construction
several participants. The VM study team may want to
of a subway project determines it will supply to the
consider articulating their opinion of the probability
contractor the heavy machinery needed to construct
of a VM proposal’s acceptance, given the process and
the tunnels. The VM study team felt that there was a
environment in which the decision will be made. Often,
great deal of risk associated with this approach, as
the probability of acceptance decreases inversely
the contractor could blame any productivity problems
to the number of parties involved in the decision
on the owner-supplied equipment and file a lawsuit.
process. Therefore, a proposal that involves only one
One strategy to deal with this risk was to transfer it
“gatekeeper” may be less risky than one with three.
to the contractor by requiring him to furnish his own
This is useful information to provide along with the
tunneling machinery. Of course, this risk transference
proposal and may also help the VM study team develop
came at a price, but the VM study team’s analysis
strategies to improve the chances of acceptance.
indicated that the cost to do so was less than the
‒ The impact to existing risks. A VM proposal might expected impact of not doing so.
either increase or decrease the probability or
impact of existing risks. In fact, some proposals
may be developed specifically to minimize threats or
maximize opportunities. The VM study team should
discuss what effect a VM proposal will have on these
risks as part of the narrative.
98
‒ Mitigate. Risk mitigation is a strategy that does not included in the VM study, but which are within the
prevent a risk, but rather reduces its probability and same organization. This increases the likelihood of
the severity of its impact. The appropriateness of risk the proposal being implemented, while significantly
mitigation is often related to the time in the project’s reducing the idea’s simple payback. For example, a car
lifespan when it is considered. Often it is easier to manufacturer has developed a new welding procedure
mitigate for risks early on and more costly to do so for a radiator. Even though the idea was developed for
later in the project’s life cycle. a specific car, this new welding method can be applied
to all other radiator models manufactured by the
For instance, assume that a highway project will company. This will increase the chances of investing
require an extended period of heavy construction in the new technology.
within 10 feet of several residences. If nothing is
done to deal with this risk, it is likely that the affected ‒ Share. Sometimes an opportunity can be capitalized
residents will file a lawsuit, increase project costs, on if the benefits are shared with others, creating
and, more significantly, delay construction indefinitely. a “win-win” situation. Most projects have many
A mitigation response strategy for this risk would be stakeholders with different objectives in mind. Often
to begin negotiations with the residents to temporarily a little collaboration goes a long way to maximize
relocate them for a period, thereby eliminating the opportunities.
chance for lengthy and expensive project delays.
This mitigation strategy would increase project costs; One way to employ the “share” strategy is through a
however, it allows for the risk by reducing its severity, VECP. (Refer to 13.1.1 and 13.4.2.4 for more information
especially in terms of schedule impacts. on VECP.) Basically, this contract clause establishes
a profit-sharing mechanism between an owner and a
‒ Accept. The last strategy is to simply accept the risk. contractor, whereby the contractor is encouraged to
This viable strategy is appropriate for small risks develop cost saving modifications to the design. Cost
that are very unlikely or very difficult to respond to savings are typically split, sometimes with the owner
in using one of the previously mentioned strategies. receiving the smaller share. The U.S. Department of
Examples of risks where acceptance might be a good Defense has used this strategy for decades, resulting
option include inclement weather and other naturally in hundreds of millions of dollars in cost savings.
occurring incidents such as earthquakes and floods.
‒ Enhance. This strategy seeks to increase the
The following is a list of risk response strategies that apply probability of an opportunity occurring and/or the
to opportunities: degree of the resulting benefits. Enhancement is
not always a sure thing, but often proves to be a
‒ Exploit. Opportunities possessing very strong worthwhile approach.
potential benefits should be actively exploited.
This is done by enhancing the probability that the For instance, assume the VM study identifies an
opportunity will happen, or better yet, ensuring that opportunity that indicates that a chance that the
it will happen. Often, adopting this strategy requires type of environmental document required for a major
some investment of project time and money to infrastructure project can be changed. If the type
achieve; but if the return on investment is there, it will of review can be reduced from an environmental
probably be worth it. assessment (EA) to a negative declaration (ND), then
the schedule can be accelerated by three months.
For example, assume that an office building project This opportunity can be enhanced if the impacts to
can receive additional funding if it meets certain a certain area on the project are avoided. This may
energy efficiency requirements. This opportunity can require a modification to the project scope or perhaps
be exploited by making improvements to the building’s additional analysis. Regardless, the chances of this
heating, ventilation, and air conditioning (HVAC) and opportunity occurring can be enhanced if specific
insulation systems. The VM study team should analyze actions are taken to do so.
the costs required to meet the requirements versus
the additional funding it can receive. If the return on It is worth evaluating multiple response strategies in
investment is there, the chances of getting the funding dealing with risks, especially those risks that have a high
can be enhanced by spending the additional funds on expected impact. Often, the appropriate response is fairly
the improvements. self-evident. For larger projects, it is worth conducting a
more comprehensive approach to developing risk response
It is also very common that an opportunity found strategies by holding a VM study. The combination of risk
to improve a manufactured component may be analysis and VM provides an effective means of reducing
also applied to more components or products not
99
VM Guide®
project risk. Creative solutions exist for dealing with many to convey the general nature of the proposed change.
risks; however, time must be devoted to finding them. Framing the title properly may help sell the underlying
If qualitative risk analysis techniques have been applied concept and avoid misunderstandings. As each VM
on the project, then it may be worthwhile to consider proposal is finalized, the VM study team should discuss the
extending those same techniques to the development title and consider the following:
of the VM proposals. For example, if a probability and
impact matrix has been utilized for the project as the ‒ Craft the title with the audience in mind.
primary risk analysis technique, then the VM study team
should consider applying the same techniques to the VM ‒ Use simple, concise language and avoid jargon.
proposals. Providing a commensurate level of analysis
in line with the rest of the project adds validity to the VM
‒ Be specific when possible, especially if there are
competing VM proposals that offer differing, mutually
proposals and provides the project team with a greater
exclusive solutions.
level of confidence in considering their acceptance.
In any event, risk should be considered at some level ‒ Avoid superlatives.
during the Development Phase. The level of detail depends
on the nature of the VM study subject, information
available, time available during the VM study, and the stage 9.3.3 Review and revise VM proposals
of the subject’s development. The VM facilitator and all VM study team members should review
the completed VM proposals. This important internal review
9.3.2.6 Develop narratives allows each team member to check for errors, ensure narratives
The last step in finalizing the documentation for a VM are complete, and confirm performance has been assessed
proposal is preparing the narratives and any additional properly, especially with respect to their respective disciplines.
graphical information, such as sketches or diagrams. The VM study team should identify any errors and/or note
Having developed the technical concept, identified any suggested revisions based on their review. These edits
costs, and assessed performance, the VM study team should be incorporated into the written report when the VM
members should now have a thorough understanding of proposals are submitted for review.
the alternative concept. This information should now be It is also advisable to have key stakeholders (such as
summarized by developing a thorough narrative of the VM members of the project team or other designated technical
proposal, which should include: reviewers) to review the VM proposals midway through the
Development Phase. This opens the opportunity for a “reality
‒ A brief description of the subject baseline or existing check” to ensure the VM study team’s assumptions are correct
condition; and that there are no fatal flaws based on a cursory review.
Providing the opportunity for this midpoint review helps
‒ A brief description of the alternative or proposed provide stakeholder “buy-in” prior to the exit briefing typically
concept; held on the final day of the VM study. It also reduces the poten-
tial of developing VM proposal technically flawed or otherwise
‒ A list of benefits and challenges of the alternative
unacceptable VM proposals, thereby minimizing wasted effort
concept as compared to the baseline concept;
and maximizing the VM study team’s credibility.
‒ A discussion of the alternative, including a thorough The VM practitioner must be careful to avoid the tempta-
description of the technical details and any further tion to throw out valid proposals simply because they may be
language that will provide the rationale for why the unpopular. At this stage of the process, the reviewers must
change is justified; and, present a credible reason to the VM study team for excluding a
VM proposal, as the team will usually be pressed for time. This
‒ A summary of the alternative’s financial impacts. review should be more of a “reality check” review rather than a
formal meeting.
This information should be documented on a series of If reviewers are present, their comments should be docu-
forms that allow the project team and the decision makers mented and included as part of the VM proposal in the written
to review it in an organized manner. report. This valuable feedback helps with the future imple-
The writing should be prepared to allow management mentation of the concept, should it be accepted during the
personnel, who may be of a nontechnical background, to Implementation Phase.
understand the basic concepts involved in the VM proposal.
Detailed technical information should be included to
supplement this discussion so the project team can review
and verify the technical details of the VM proposal.
A final consideration is the title of the VM proposal.
Ideally, the title should be concise, but descriptive enough
100
Also during the review process, the VM study team should In addition to this basic information, several additional pieces
consider a number of additional strategies to facilitate the of information may be considered for inclusion:
acceptance of proposed changes within an organization:
● Management considerations,
● Develop an implementation overview plan to identify
key individuals or groups involved in the implementation ● Redesign and/or implementation costs,
effort.
● Technical reviewer or stakeholder comments, and/or
● Review specific proposals with key managers of affected
● VM study team member review comments.
departments and solicit their support.
Figure 9.3 presents a suggested format of content to be in-
● Seek input regarding implementation tasks and estimated
cluded in the VM proposals, as well as the organization of that
timetables.
information. This format is intended to capture the information
● Highlight the overall advantages of the proposed changes developed for the VM proposals through the following steps in
to various levels of supervision before the final recom- the development process:
mendations are presented to the executive group.
Life Cycle Cost Estimates
● Identify risks and concerns so that they may be included Initial Cost Estimates
in the final presentation to the executive group.
Assumptions & Calculations
Above all, be patient and thorough in such discussions. Re- Performance Assessment
member to consider that the proposed changes sometimes Sketches
require additional effort to achieve implementation.
Discussion & Justification
Summary Page
9.4 Basic techniques
9.4.1 VM proposal development forms
The VM proposals should be organized using a standardized
format. VM programs and practitioners utilize a wide variety
of formats for VM proposals based upon the type of informa- VM Proposal Format
tion decision makers of an organization require to determine
its acceptability. The VM facilitator should, therefore, ensure
that whatever format will be used contains all the information
needed by the VM study sponsor and/or decision makers and
adjust the format of the VM proposals accordingly.
Regardless of the VM study subject, there are certain pieces
of information that any decision maker must have. Figure 9.3 – VM proposal forms.
A complete set of forms containing this basic information
( Figure 9.2 ) should include: 9.4.2 Calculate a return on investment
● Descriptions of baseline and alternative concepts; Return on investment (ROI) is a concept used to measure the
efficiency of an investment. Within a VM context, ROI is often
● Benefits and challenges of the proposed change com- used to express the benefit of performing a VM study. The ROI
pared to the base case; of a VM study is calculated as follows:
● Discussion and justification of the alternative concept; ● Value Study Cost Savings ÷ Cost of VM Effort = ROI
● Financial information (initial cost and life-cycle costs, as ● $1,000,000 Cost Savings ÷ $50,000 VM Study Cost = 20:1
applicable);
In other words, the above example shows that for every dollar
● Performance and/or quality assessments; spent on VM, it yielded a return of $20.00 in cost benefit. Many
public VM programs use ROI as a way of communicating its
● Time and schedule information; performance.
Another way to articulate ROI is to consider both the net pres-
● Risk information (related risks, probabilities, impacts, and
ent benefits and net present costs expressed as a percentage.
contingencies); and,
● (Net Present Benefits - Life-Cycle Cost) ÷ Life-Cycle Cost
● Graphical information (flowcharts, diagrams, sketches, etc.).
101
VM Guide®
ROI may also be used to express the relationship between the Life-cycle cost is the total economic cost of owning and
cost benefits yielded by a VM proposal relative to the cost of operating a facility, manufactured process, or a product. A
implementing it. For example, assume that a VM proposal re- life-cycle cost analysis reflects present and future costs of the
quires a $100,000 implementation cost but will result in a $15 subject over the useful life of the subject. It allows an assess-
million cost benefit. The ROI would be calculated as: ment of a given solution and is a tool for making comparisons.
Life-cycle cost serves as a universal tool to express the mul-
● $15,000,000 Cost Benefit ÷ $100,000 Implementation tifaceted elements of cost and time in a uniform criterion of
Cost = 150:1. equivalent monetary units.
The life-cycle cost technique has a broad range of appli-
It is important to ensure that the implementation cost is not
cations. In the analysis of facilities, it may be applied during
included in the value identified as part of the benefit as this
the conceptual, planning, design, construction, and operating
would not accurately communicate the ROI .
stages. Its application as a tool for analyzing economical al-
9.4.3 Calculate a simple payback ternatives to purchases at home and in the marketplace, has
benefited everyone. Given the rise in the interest rates and
Simple payback is the amount of time needed to recover the
inflation, the use of life-cycle cost has been expanded. The
investment made in the project. This technique does not con-
impacts are astounding, as will be seen later in this chapter.
sider the time value of money. Simple payback is calculated by
Before explaining the applications of life-cycle costing, facts
dividing the cost of the investment by its periodic cost benefit.
about its application must first be addressed.
For example, a manufacturing company is considering the
Most investors or owners want to know what the total own-
purchase of a piece of cutting equipment that costs $50,000 and
ership and/or operating costs will be for a given asset. Both the
which will generate $10,000 per year of net cash flow. The pay-
public and private sectors are observing an increasing interest in
back period for this capital investment is calculated as $50,000
knowing, to the greatest extent possible, what a project will cost
cost ÷ $10,000 cost benefit per year = 5-year payback period.
throughout its entire lifetime. This involves both an estimate of
Assume the same company is also considering the purchase of
construction or production costs and a forecast of the probable
a conveyor system for $36,000, which will reduce transport costs
costs of energy, maintenance, taxes, and borrowed money.
by $12,000 per year. The payback period for this capital invest-
If, for example, we consider a typical office building in the
ment is calculated as $36,000 ÷ $12,000 = 3-year payback period.
United States, operating expenses (i.e., electricity, water,
If the company could only afford to purchase the cutting
maintenance, etc.) make up the largest cost of owning a build-
equipment or the conveyor system, which would be the wiser
ing. First costs typically account for less than 10 percent of the
investment? Based on the simple payback calculations, the
money that must be spent on a facility over its life; as much as
conveyor system would be the more prudent investment due
85 percent of the building’s real cost is related to operating the
to the shorter payback period and higher cost benefit.
facility. Other costs include land acquisition, conceptual plan-
9.4.4 Life-cycle cost analysis ning, renewal or revitalization, and disposal. An LCC analysis
performed for a typical building would normally consider all
As was established in Chapter 2, The Value Concept, value
these factors, as they represent the owner’s total costs.
ultimately must be considered from the perspective of the
The costs to the end user, however, are usually not consid-
customer or user. To do this, the VM study team must consider
ered. Personnel costs (i.e., salaries and benefits) make up 78
the total cost of ownership from this same perspective. Anoth-
percent of the total business expenses for tenants, according
er way to think about the total cost of ownership is using the
to a study conducted for the General Services Administration,
term “life-cycle cost.” While it is important to consider the total
while costs associated with the building itself account for only
cost of ownership, it must be recognized that not all VM efforts
9 percent (see Figure 9.4 ).
calculate life-cycle costs for a variety of reasons.
Costs to the end user is a very important consideration to keep
Life-cycle cost (LCC) describes the total cost of producing,
in mind and difficult, if not impossible, to put a dollar value on.
operating, and maintaining a thing. There are many definitions
These hidden life-cycle costs have a major impact on the user
of life-cycle costing in use. The U.S. General Services Admin-
that we may not be able to effectively measure. While an owner
istration (which manages office buildings and other facilities)
of a rented commercial building may or may not be interested in
defines “life-cycle costing” as follows:
the costs incurred by their tenants, owners of public buildings
Life-cycle costing is the development of all the significant
(i.e., taxpayers) should be. Individuals and organizations are
costs of acquiring, owning, and using an item, system or ser-
becoming increasingly aware of sustainable design, and even
vice over a specified length of time.
landlords are beginning to think along these lines to ensure
that their properties remain marketable and attractive to fu-
ture prospective tenants.
Figure 9.5 depicts a generalized curve that shows when de-
cisions have the greatest impact on the total cost of ownership. If
the area under each segment of the curve represents an impact
on cost, it is evident that those involved in planning have, by
102
O&M, 2%
Other costs,
Churn, 1%
8.5%
Rent, 6%
First Costs,
6.5% Technology,
13%
Salaries
54%
Operating Costs
85% Benefits
24%
owner lcc owner & user lcc
Figure 9.4 – Example of the total life-cycle costs of an office building.
far, the greatest role to play. Those executing the subject (i.e., and maintaining the subject are far greater than money spent
contractor or manufacturer) can only perform within the care- during planning and design. This figure illustrates that the best
fully defined limits of the subject’s scope and specifications. place to save money is during the planning and design phase.
Once the design is completed, there is little opportunity to af- In short, good planning and project management is worth every
fect total costs. Those involved in the operation of the subject cent it costs.
have even less influence, although the total cost of operating
Impacts and costs during operations
Possibility to influence
impacts and costs
IMPACTS AND COSTS
Cumulated impacts
and costs
Impacts and costs

of executing
Impacts and costs

of planning
PLANNING EXECUTING OPERATING Time
Figure 9.5 – Impact of major decision makers on life-cycle cost.
103
VM Guide®
Life-cycle analyses are not limited to use only during the Cost categories used in LCC analysis vary widely. Funds for a
planning stage; they can be used at any time during the useful project may be spent over a long timeframe, from the years lead-
life of the facility. As an example, owners of processing plants ing up to its completion to the time when the facility, product,
that manufacture competitive products must know every ele- or process has outlived its usefulness. The following types of
ment of cost, from obtaining and processing raw materials to costs might factor into a total project’s life. This does not mean
marketing, sales, and distribution of the final products. A cor- that these are all the costs involved; but, rather, they serve as a
porate owner of a sports complex uses life-cycle cost analysis reminder of the major cost factors to look for when performing
to account for building amortization, operating and advertising life-cycle comparisons. LCC considerations may include:
costs, and other expenses so that it is easier to determine the
amount the facility must earn to break even. The use of life-cy- ● Investment costs. The amount of money expended for the
cle cost analysis affects all facets of our economic livelihood. assessment of market potential, the time and expenses
Final analysis should account for non-economic criteria involved in analyzing site alternatives, and the expenses in-
that have intrinsic benefits which do not lend themselves to curred for development of a financial plan. Investment costs
finite cost evaluations. Factors such as safety, reliability, oper- may also include expenses for obtaining a line of credit and
ability, and environmental factors may be more important than other financing alternatives. The preparation of stock and
monetary savings. bond sales may be another type of investment cost.
While LCC analysis provides an excellent tool for decision
● Land acquisition costs. Costs for real estate fees, title
making, its application should be well understood to avoid
searches, legal fees, deed filing fees, insurance, cost of
possible pitfalls in its use. Fiscal managers especially should
land, and the interest on borrowed money for the purchase
appreciate that LCC dollars may not be the same as budget
or leasing of land for use for a facility. In addition, the cost
dollars. One problem is that cost estimates may not be ap-
of environmental mitigation may need to be considered,
plicable as budget estimates, because they are expressed in
depending upon regulatory requirements.
constant dollars (excluding inflation); and, all cash-flow dollars
are converted to equivalent moneys at a common point in ○ Property costs.
time. LCC estimates do not necessarily equate the obligated
amounts for each funding year. ○ Real estate fees.
With this in mind for most VM studies, development of the
economical assessment of a VM proposal must include its ○ Environmental mitigation costs.
life-cycle cost analysis to help decision makers face a more
● Project development costs. Costs associated with the plan-
realistic estimation of the future expenditures and benefits if
ning, design, bidding, construction, inspection, and initial
the proposal is implemented.
start-up of a facility, product, or process. Any anticipated fu-
The total cost of ownership requires the application of en-
ture costs for design modifications should also be included.
gineering economics to understand the relationship of time,
interest and money. The primary technique used to achieve ● Project management.
this is life-cycle cost analysis.
● Planning.
● Design and engineering.
● Project support (i.e., purchasing, marketing, accounting, etc.).
● Redesign costs.
● Construction and manufacturing costs. The cost of

constructing, manufacturing, or implementing a facility,
product, or service.
● Replacement costs. The future costs to modify or replace

a portion of the project. Usually, specific pieces of equip-
ment or parts are the major source of replacement costs.
Based on the expected life of the components, several
replacements may occur during the total project life.
104
● Salvage costs. The value of the project or product at some 9.4.4.1 The time value of money
future time. Usually salvage value is the amount received As money can produce earnings at a certain rate of interest
from the sale at the end of the life-cycle period. Converse- through investment over a period of time, it is important to
ly, it could reflect the costs for demolition and/or environ- know that one unit of money received at some future date
mental remediation. does not produce as much earnings as the same unit of
money received in the present. This relationship between
● Operating costs. The costs required to operate the facility,
interest and time forms the basis for the concept known as
product, or process. These costs include the day-to-day
the “time value of money.”
costs of staffing; energy costs to create and maintain a
Money also has a time value, as the buying power of any
working environment and to operate equipment; costs
currency varies with time. For convenience, this manual
of outside services such as waste disposal, water and
defaults to dollars. The relationships between $1 in hand,
sewage costs; chemicals and other resources needed to
$1 promised in the future, or a series of payments at
manufacture or to process a product; and, the costs of
specified times in the future are difficult concepts for many
transportation from the raw material source to the final
of us to grasp.
delivery point. These costs are often periodic costs falling
During periods of inflation, the quantity of goods and
at scheduled intervals.
services that can be bought with a certain amount of
● Maintenance costs. Factors included in maintenance costs money decreases as the purchase date moves into the
are labor, cost of parts, materials, cleaning materials and future. Although this change in the buying power of money
equipment, and preventive maintenance as well as normal is important, the concept of the time value of money is
maintenance and repair of equipment, painting, and so on. even more so, in that it has earning power. It is necessary
to know the different methods for computing interest in
● Durability of products. order to calculate the actual effect of the time value of
money in the comparison of alternative solutions.
● Taxes. The following considerations must be kept in mind for
application in calculations of investment alternatives:
● Insurance.
● Depreciation. ‒ Present value (P) is produced at the beginning of a

time period, expressed in today’s value.
● Inflation.
‒ Future value (F) occurs at the end of a future point in
● Time value of money. Time has a high price tag when eval- time (for example, 20 years from today).
uating alternatives. The longevity of a project and the lifes-
pan of individual components must be considered in the ‒ Annuity amount (A) is a single payment within a
decision-making process. The cost of money is the interest series of equal payments made at the end of each
that is charged on borrowed money for the project. period under consideration. This is akin to a monthly
mortgage payment.
Elements of cost in a life-cycle cost analysis pertain to the total
life of the product. Some costs are one-time expenditures that ‒ Interest rate (i) is the cost of money established by
occur before the project is completed. Others are single expen- the organization or lending institution. The federal
ditures amortized for periods up to and beyond its useful life. government’s Office of Management and Budget
frequently updates interest rates per OMB Circular
A-94.6. The interest rate is also referred to as a
discount rate.
‒ Life-cycle period (n) is the total number of periods,

usually expressed in years.
105
VM Guide®
A =$1 Spread over Time
An
su
y
uit
An
nu
t
en
nn
ity
nu
es
nA
ity
of
Pr
fa
a
of
a
Fu
eo
of
tu
Fu
lu
ity
re
tu
va
nu
s
re
t
um
An
en
ums
es
Pr Future value of a Present sum
$1 Today = P Present value of a Future sum

F =$1 Tomorrow
Figure 9.6 – Time value of money.
It is useful to think of the relationship of money at different the general level or average of prices. Deflation has the
points in time as a triangle where P equals a single present exact opposite effect, or “negative inflation.” Inflation
amount of money; F equals a future single sum of money; reduces the purchasing power of money over time.
and A is an annuity which is a series of equal amounts (like Differential escalation refers to the annual change in the
the monthly mortgage payments). Figure 9.6 illustrates price of a specific commodity or service in addition to the
this interrelationship and includes the names of the financial general inflation rate. Perhaps the best examples of this
equations involved in calculating the time value of money. phenomenon are the prices of oil and steel, which tend
These financial equations are provided in Figure 9.7 . to follow independent price fluctuations and cycles apart
from the macroeconomic forces of more general inflation
9.4.4.2 Inflation and escalation or deflation.
The terms “inflation” and “escalation” are often confused. Since it is very difficult, if not impossible, to accurately
Inflation refers to the persistent and appreciable rise in predict inflation rates very far into the future, it is generally
Find Given Formula
Future value (F) Present Value (P) F = P ⋅ (1 + i)ⁿ
Present Value (P) Future value (F) P = F ⋅ (1 + i)ˉⁿ
i
Repeating Payment (A) Future value (F) A=F⋅
(1 + i)ⁿ − 1
i (1 + i)ⁿ
Repeating Payment (A) Present Value (P) A=P⋅
(1 + i)ⁿ − 1
(1 + i)ⁿ − 1
Future value (F) Repeating Payment (A) F=A⋅
i
(1 + i)ⁿ − 1
Present Value (P) Repeating Payment (A) P=A⋅
i (1 + i)ⁿ
Figure 9.7 – Time value of money, financial formulae.
106
best not to consider the effect of future inflation when time, as the data will form the criteria for life-cycle cost
performing life-cycle calculations unless the VM study inputs and the guidelines for analyzing the results.
sponsor requests it. Similarly, it is not recommended that
differential annual escalation be considered unless there ‒ Establish the parameters. Time, cost, and the cost
are very good reasons to do so. of money impact life-cycle cost analyses. Time
Inflation can be calculated by amending the preceding factors include the project planning life, sometimes
financial formulae where “j” equals the general rate of called the useful life of the project; equipment
inflation. For example, calculate a future single sum “F” using life; the owner’s planning schedule; foreseeable
the single payment compound amount factor as follows: major expansions; and deletions or changes to the
total program. Project life estimates, especially
for equipment replacement, are hard to predict, as
F = P ⋅ (1 + i)ⁿ ⋅ (1 + j)ⁿ the life of the equipment depends on the quality of
the equipment and the maintenance performed to
This is the measure of the currency amount in the future. This keep it in operating condition. The useful life is the
equation can be expanded by considering differential annual time that the facility will be used. Often a facility will
escalation where “e” equals the differential rate of inflation: have several major renovations during its useful life.
Costs for additional renovation expenditures are
planned by the owner and are usually included in
F = P ⋅ (1 + i)ⁿ ⋅ (1 + j)ⁿ ⋅ (1 + ej)ⁿ life-cycle comparisons. Cost parameters have been
outlined previously. Owners feel major impacts from
If constant dollars are used (i.e., inflation is not considered), escalating energy, labor, and maintenance costs
then (1+j)n would be eliminated if we were to consider only above normal inflation rates. The use of escalation
the effect of differential escalation. rates accounts for these fluctuations. Setting
interest, inflation, and escalation rates accounts for
9.4.4.3 Life-cycle cost methods the cost of money. Monetary loans for financing and
Using life-cycle cost aids the decision-making process tax benefits are part of the analysis.
and increases the sensitivity to cost for operating and
The easiest way to model life-cycle costs is to convert all
maintaining facilities, products, and processes. Life-cycle
costs to a present worth amount. The present worth
cost is derived from a series of computations applying
method can be set up using spreadsheet software like
economic factors to monetary expenditures as identified
Microsoft® Excel, most of which include macros for the
in the previous section. The validity of the comparison, like
financial equations identified in Figure 9.9 (p. 111).
all estimates, depends on the quality of the cost estimates
The present worth method requires that all costs for
used in the analysis. There is no good substitute for sound
the life-cycle cost analysis—present, annual, and future
cost figures. Therefore, before proceeding with a life-cycle
expenditures—be brought back to today’s baseline costs.
cost analysis, be certain of the quality and the validity of
Initial costs are already expressed in present worth
cost parameters to ensure accurate results. The following
amounts. Operations and maintenance costs usually
steps outline the process for developing an LCC analysis:
estimate annual costs based on stated conditions of use.
The interest rate and life-cycle period (useful life) should
‒ State the problem. Given that LCC analysis can be
be established by the owner and/or user.
used as a decision-making tool, its first step involves
The following is a step-by-step walkthrough of the
identifying the problem to be solved. A problem
present worth method. This example compares two
statement enables direct focus upon the basis of the
possible options for the purchase of a new automobile.
comparison. A description of the physical facilities
and the alternatives to be compared should be defined
State the problem:
thoroughly. Before going further into the analysis,
check to see if the objectives will be met by the You are an environmentally conscious consumer interested
comparisons and the cost parameters in the analysis. in purchasing a new automobile. You have narrowed your
potential choices down to two prospective vehicles. Your
‒ Establish the alternatives. Next, the alternative final buying decision will be based upon which of the two
concepts to be analyzed are documented by vehicles has the lowest total cost of ownership.
listing background information about the physical
components of alternatives and their corresponding
differences. It is essential to determine the basic cost
and budgeting data of the owner’s program at this
107
VM Guide®
Establish the alternatives: Year Factor

1 0.9524
2 0.9070
3 0.8638
Hybrid Car Subcompact Car
4 0.8227
Purchase Price $24,069 $17,154
Taxes & Fees $1,748 $1,342 5 0.7835
Transmission Automatic Automatic 6 0.7462
Mileage (City/Highway) 54 mpg / 50 mpg 31 mpg / 39 mpg
Fuel Costs $2.91 (reg. gas) $2.91 (reg. gas)
Calculate the Life-cycle Costs:
Cost for Oil Change $35 $35
1. Input the life-cycle period (i.e., total length of time in
20,000-mile
$430 $576 years) and discount rate (i.e., cost of money). In this
Service (yr. 2)
example, five years was the period established by the
40,000-mile owner at an interest rate of 5 percent.
$388 $449
Service (yr. 3)
60,000-mile 2. Input the initial capital costs to purchase the
$863 $858
Service (yr. 4) vehicles. This would include the purchase price plus
75,000-mile
taxes and fees.
$1,607 $1,327
Service (yr. 5)
3. Input the annually recurring costs. In this case, we
Monthly Insurance $126 $115 must consider the annual maintenance costs (i.e.,
Trade-In Value $11,694 $7,140 fuel costs and oil changes) to run the vehicle, plus
additional monthly costs such as car insurance.
Figure 9.8 – Alternatives and related information These costs are expressed in present worth dollars
considered for an automobile purchase.
and do not consider inflation. Note that to determine
the annual costs for fuel, one must consider the fuel
efficiency for city and highway driving and factor in
Establish the parameters:
the total miles estimated for each vehicle. These
The following assumptions apply: annual costs (A) must be converted to present worth
costs (P) by applying the appropriate equation.
‒ You will drive an average of 15,000 miles per year. Fifty
percent of this mileage will be “city” driving, while the (1 + i)ⁿ − 1
remaining 50 percent will be “highway” driving. P=A⋅
i (1 + i)ⁿ
‒ Oil changes will occur every 5,000 miles. 4. Input the single future costs. In this example, both
vehicles will need periodic maintenance identified by
‒ You typically own your vehicles for about six years.
the manufacturer. The cost to do this (which is based
‒ You are paying cash for your new vehicle, which on the cost to do so in today’s dollars) is identified
includes the trade-in value of your existing automobile. for both the alternatives. Note that these periodic
maintenance costs are for different amounts and
‒ The interest rate will be 5 percent, which is the return occur at different periods. The appropriate equation
you would make if you invested your money in a high- is used to convert these future single amounts (F) to
yield bond. present worth costs (P).
‒ Present worth factor (PWF): 6 years at 5% interest =

5.075. Use this factor to convert annual costs (e.g., P = F ⋅ (1 + i)ˉⁿ
O&M costs) to present worth costs.
5. Input the salvage costs. Salvage costs represent the
‒ Present worth factor (PWF) at 5% interest = Use table residual value of the system at the end of the life-
below. Use these factors to convert future single cycle period (which, in this example, is year 5). In this
costs (i.e., replacement costs and salvage costs) into case, the salvage costs are the trade-in (residual)
present worth costs. value of the vehicles depreciated over time. However,
since they typically represent money back to the
108
LIFE-CYCLE COST ANALYSIS

Life-Cycle Period 6 Years Real Discount Rate 5.00% HYBRID SUBCOMPACT
A. INITIAL COST $ 25,817 $ 18,496
Service Life – Baseline 20 Years
INITIAL COST SAVINGS: $ 7,321
Service Life – Alternative 20 Years
B. SUBSEQUENT ANNUAL COSTS
1. Maintenance $ 105 $ 105
2. Insurance $ 1,512 $ 1,380
3. Fuel $ 841 $ 1,264
Total Subsequent Annual Costs: $ 2,458 $ 2,749

Present Value Factor (P/A): $ 5.076 $ 5.076
PRESENT VALUE OF SUBSEQUENT ANNUAL COSTS (Rounded): $ 12,474 $ 13,951
C. SUBSEQUENT SINGLE COSTS Year Amount PV Factor (P/F) Present Value Present Value
Periodic Maintenance 2 $430 0.90703 $ 390
Periodic Maintenance 5 $1,607 0.78353 $ 1,259
Periodic Maintenance 5 $1,327 0.78353 $ 1,040
Trade-in Value 6 –$11,694 0.74622 $ (8,726)
Trade-in Value 6 –$7,140 0.74622 $ (5,328)
PRESENT VALUE OFSUBSEQUENT SINGLE COSTS (Rounded): $ (6,032) $ (2,672)
D. TOTAL SUBSEQUENT ANNUAL AND SINGLE COSTS (B+C) $ 6,442 $ 11,279
E. TOTAL SUBSEQUENT COSTS SAVINGS: $ (4,837)
F. TOTAL PRESENT VALUE COST (A+D) $ 32,259 $ 29,775
TOTAL LIFE-CYCLE SAVINGS $ 2,484
Figure 9.9 – Life-cycle cost analysis using the present worth method.
owner, they are expressed as a negative number (in The conventional subcompact, though more expensive
other words, a negative cost). Since salvage costs to operate on an annual basis, ended up being the most
are also a single future sum, and we want to find economical option for the owner when considering the
their present worth, we apply the same equation as total cost of ownership over the life of the equipment. The
identified in Step 4. VM facilitator must always consider life-cycle costs in the
search for improved value.
6. Calculate the present worth value of all costs. This
step simply adds all the present, future, and annual
costs that have been converted into present worth
9.5 References
dollars and expresses them as a single total. The total
● Dhillon, B.S.. Life Cycle Costing for Engineers, CRC Press,
alternative costs are subtracted from the total original
2017.
costs to give us the total life-cycle cost savings.
● www.nist.gov/services-resources/software/bridgelcc
109
VM Guide®
110
10
Presentation Phase

The purpose of every VM study is to generate proposals that
will increase the value of a given project, product, process, or- 10.1.1 Handout
ganization, or service. When the Development Phase has been A document that summarizing the key information needed by
completed, the VM proposals developed should now be richer both the VM study team and the stakeholders attending the pre-
in information regarding their power to improve the value of sentation. It is not intended to include specifics about the Job
the subject under study. It is now time to introduce those VM Plan phases nor all details of each VM proposal, but to share
proposals to stakeholders and decision makers who were not some basic information to make the presentation run easily. In
part of the VM study. most cases, these documents will be two to five pages in length.
The Presentation Phase is the last step of the six workshop In some cases, a PDF copy of the slideshow used by the team
phases within the VM study, but it is not the end of the VM Job is distributed. Handouts generally become obsolete after the
Plan for either the team members or the project stakeholders. presentation ends, since the VM study team, facilitators, and
This phase includes not only the presentation, but also any re- other stakeholders will focus their efforts on the formal report.
port deliverables. So far, valuable ideas have been developed
into VM proposals, which is all they are now: proposals. In the 10.1.2 Visual presentation
next steps, part of the Implementation Phase’s activities will For the sake of clarity among the diverse VM community mem-
deepen the analysis of those VM proposals the team recom- bers, we are differentiating “presentation” and “visual presenta-
mends for implementation. That may require a more thorough tion.” In this text, we define the presentation as the overall effort
analysis, validation, market and technical testing, a formal to compile and communicate the VM study results to stakehold-
quotation from suppliers, a program or a formal action plan to ers, including preparation and the meeting held to communicate
implement each proposal, etc. With this in mind, it is important those results and data. Visual presentations, as used herein,
for the team to understand that the expected outcome of the refer to a specific type of common presentation tool used by
Presentation Phase is not for stakeholders to make immediate many practitioners. They are often created in Microsoft® Pow-
implementation decisions, but for them to understand each of erPoint and other similar software packages and are displayed
the presented VM proposals, their advantages and disadvan- on projection screens, large monitors, or in print-outs.
tages, and the potential obstacles to implementation.
The purpose of this phase is, in simple words, to sell the team’s 10.1.3 VM study report
ideas to stakeholders. Therefore, like all phases of the VM Job A document containing all the information developed at the
Plan, using the right communication skills and tools is paramount. time of the study, needed for stakeholders to make informed
Presentations are normally given at the conclusion of the decisions about which VM proposals to implement. It is recom-
workshop and can vary in format and duration. The function of mended that the executive summary be developed in such a way
the presentation is to convince the stakeholders to consider that it could be a standalone document for broader circulation.
and further investigate the proposals. Typically, the stakehold- Reports should include the background and description of the
ers are not asked to make decisions on the determination of project under study; a complete listing of VM proposals; com-
each proposal. Not all proposals are necessarily presented, plete VM proposals containing all relevant data; complete anal-
but all are included in the report. ysis conducted by the team; a comprehensive listing of all ideas
Another key output of the Presentation Phase is often a writ- generated and evaluated, along with their evaluation rationale; a
ten VM study report. The scope and breadth of such reports brief description of the VM process; agendas; and, a listing of all
vary by organization; however, they are an important consider- participants with their contact information. Audiovisual materi-
ation in documenting the VM study effort. als may be added to VM study report when prudent.
111
VM Guide®
10.2 Process 10.2.1.2 Outputs

The use of visual and oral presentations is so common now- ‒ A list of all VM proposals. It is recommended to sort
adays that we often overlook the importance of preparing these in an intuitive sequence that maximizes clarity
for them. Remember that “the presentation” and “the visual and impact on the stakeholders.
presentation” are two different things. Sometimes, we spend
excessive time working on a very impressive slideshow, but not ‒ A document used to assist the team to better
enough on the actual content that effectively communicates describe their VM proposals to the stakeholders
and sells the ideas contained in them. Below is a listing of the (usually a slideshow, handout, or both). This may
most common inputs, outputs, and activities required for a include a summary of all the VM proposals presented,
successful presentation. Figure 10.1 shows the Presentation showing their impact to improve the value of the
Phase flowchart. subject under study.

‒ A visual presentation of the VM study results.
‒ A written VM study report documenting the

10.2.1.1 Inputs
proceedings, findings, and recommendations.
‒ A list of invited guests to the presentation and their roles.
‒ The VM presentation’s date, time, agenda, and 10.2.2 Activities

location (including internet and/or teleconference ‒ Schedule VM presentation.
information for remote participants).
‒ Select VM proposals to present.
‒ VM Proposals including descriptions, sketches, initial
and life-cycle cost estimates, Return on Investment, ‒ Prepare visual presentation and handouts.
and other exhibits, etc.
‒ Deliver the VM presentation.
‒ VM study subject information such as a description
of the current situation, goals, objectives, scope,
‒ Develop VM study report.
schedule, cost, risk, and performance information.
10.2.3 Process flowchart Figure 10.1
‒ VM study process information such as Function
Analysis, ideas, evaluation, etc.
‒ Audio / visual equipment and materials
List of Participants Schedule VM Presentation
Time, Date, Location

of VM Presentation
VM Proposals Select VM Proposals to Present List of VM Proposals and Results
Prepate Visual
VM Study Subject Information Visual Presentation
Presentation & Handouts
VM Study Information Knowledge Transfer &

Deliver VM Presentation
(functions, ideas, etc.) Participant Discussion
Audio/Visual Equipment
Develop VM Study Report VM Study Report
and Materials
112
10. Presentation Phase
10.3 Activities practices. First, the VM facilitator welcomes all attendees and
introduces the team. In this introduction, it is always important
As noted above, the primary purpose of the Presentation
to publicly acknowledge and thank all team members for their
Phase is to sell ideas. To that end, it’s important to tailor the
work during the workshop. Second, introduce the presentation
presentation to the audience. Work to ensure the right people
outline and content. Although every institution is different, it is
are available to participate: align the schedule with their avail-
always a good idea is to ask all guests to hold their questions
ability and organize the information appropriately based on
until the end of the presentation in order to better control the
their needs. For instance, executive level briefings tend to be
meeting time.
significantly shorter than presentations to technical reviewers.
There is no hard and fast rule about who should be the
10.3.1 Schedule the VM presentation presenter, but it is customary that the VM facilitator be the one
who introduces the Value Methodology followed by the team.
Part of the Preparation Phase activities is to plan for a formal
Then every team member presents those VM proposals they
presentation at the end of the workshop stage of the study.
developed. This is the most important moment of truth for the
This seemingly obvious phase of the VM Job Plan may be over-
audience, when VM proposals are either sold or not. Therefore,
looked by team members, stakeholders, or even the facilitator.
care must be taken regarding body language, voice, effective
The VM study has several stakeholders who made the study
use of the visual presentation, etc. Some pitfalls and best prac-
happen in the first place, so they will be interested in learning
tices are listed at the end of this chapter.
the outcome of such an enterprise.
Time is one of the most critical resources in every institu-
A typical outline of a VM presentation is as follows:
tion. Managers, clients, and stakeholders in general have very
tight agendas. They may not be available for the team if the pre- 1. Identify the VM team
sentation is not formally scheduled in advance. Ultimately, the
way the presentation is developed is depends on the context. ○ Introduce the team
10.3.2 Select the VM proposals to present ○ Acknowledge stakeholders, owners, and other
There are numerous ways to select and sort the VM proposals contributors
for the presentation. Not all proposals should necessarily be
2. Identify the subject
included in the VM presentation; however, all written propos-
als should be included in the report. When deciding on which ○ Review the VM study subject and/or problem statement
proposals to include in the presentation, consider those ideas
with greater risk or controversy for which presenting could en- ○ Outline the scope of the study
hance the potential acceptance. Some teams may dictate that
VM proposals fall in a certain sequence, while others receive ○ Review VM study goals, objectives, and/or success
greater freedom. Ultimately, the sequence should be intuitive criteria as agreed on in the contract
and logical, based on both the audience and the study’s goals.
3. Identify functions studied
10.3.3 Prepare the visual presentation and handouts
○ Use an abbreviated FAST diagram
Preparing your presentation using visual media or a handout
compels you think it out in advance and ensures you cover all ○ Identify the basic functions
the material needed to generate interest about the team’s VM
proposals and, finally, selling them. Time permitting, it may be 4. Present costs of functions
desirable to distribute presentation materials before the presen-
○ Indicate the cost of the item
tation to afford participants an opportunity to review content.
The eight elements listed within the typical presentation ○ Relate cost to function
outline described in this chapter’s introduction could be mis-
leading if the team forgets the purpose of the Presentation 5. Explain the methodology used
Phase: selling ideas. Avoid spending a significant part of the
presentation describing the Value Methodology or its elements ○ Relate how many ideas were generated/considered
to the stakeholders. The presentation is not about VM, but about
○ Explain weight evaluation attributes
the ideas it triggered. Unfortunately, it is not uncommon to find
teams spending almost half the time of the presentation ex- ○ Relate the performance criteria required
plaining function analysis or the VM Job Plan to their audience.
○ Give specific recommendations
10.3.4 Starting the presentation
Every presenter has different styles to open their presentation; ○ Recommend specific changes
nevertheless, most VM study teams follow some standard best
113
VM Guide®
6. Discuss the expected benefits ● Idea evaluation. List of all the ideas generated by the VM
study team during the Creative Phase and annotated with
○ Review life-cycle costs information concerning their evaluation.
○ Review break-even analysis ● Value Methodology process. Summary of the VM Job Plan,
study agenda, and participants.
○ Review return on investment
Preparing a thorough VM study report is essential to clearly
○ Explain intangible benefits
communicate the results of the VM study to the project team
7. Discuss specific implementation plan and decision makers as the first step in the implementation of
the VM proposals. The report must focus upon the audience,
○ Propose a plan to implement typically stakeholders and project managers. The report
should be a standalone document prepared with the under-
○ Indicate implementation cost and timing standing that its readers and users did not necessarily attend
the workshop. Report users may not be experts in the focus of
○ Indicate the consequences of delay
the study and, therefore, common language should be used in
○ Identify implementation risks lieu of jargon.
In some cases, it may be desirable to have two iterations of
8. Ask for action the written report—a draft and a final version. In this case, the
draft version need only include the executive summary and VM
○ Be prepared to answer questions proposals sections. Following the implementation meeting, a
final report is prepared that includes the remaining sections
Time is important, but other people’s time should be consid- of the overall report, plus an implementation section that doc-
ered even more important when the team delivers the presen- uments the final status of the VM proposals and outlines the
tation. Finish the presentation on time. Managers may have implementation plan, schedule, and responsibilities for each.
other meetings, guests or team members may have flights to
catch later that day, and many more possible reasons exist for
the team not to make the presentation longer than planned.
Take care to leave enough time for attendees to ask questions. The best ideas in the world remain unrealized unless they
can be communicated clearly and convincingly to those in a
10.3.5 Develop VM study Report position to act on them. Those with experience in marketing,
Following the presentation and the conclusion of the formal sales, and advertising no doubt understand the importance of
VM study, the VM study facilitator prepares a written VM study selling new ideas and concepts. Those employed in technical
report for submission to the project’s decision makers and positions, or even those in project management, may not un-
stakeholders. The VM study facilitator is primarily responsible derstand the value of selling change.
for gathering the documentation generated during the study Many people avoid change for a multitude of reasons. The
and compiling it systematically into a report. VM facilitator will probably need to help some members of the
Some agencies and organizations have their own require- VM study team to sell change. The following techniques and
ments for VM study reports. Typically, the VM study report strategies may be employed to sell change.
should be organized in sections, preceded by a cover, a distri-
10.4.1 Share the credit
bution list, and a table of contents. The VM study report typi-
cally includes: Often the project team has vested an enormous amount of
effort in developing the project’s baseline concept. Recognize
● Executive summary. A brief and concise overview of the VM that not only has time and effort been invested, but pride has,
study subject, goals and objectives, process, participants, too. Pride may be a major obstacle in overcoming change. If
findings, and recommendations. the VM study team has developed a concept that is particularly
strong, it may be wise to demonstrate how the stakeholders
● VM proposals. Documentation of the individual VM pro- and/or project team members have contributed to the devel-
posals as discussed in Chapter 9, Development Phase. opment of the VM proposal. If others outside the VM study
team can feel some pride in ownership of a new concept, they
● Subject analysis. Summary of the analysis performed as
will be less apt to resist it.
part of the VM study, such as function analysis, FAST dia-
gram, resource models, and other information developed 10.4.2 Find champions of change
using VM techniques.
The sponsoring organization most likely has members who will
● Subject description. A narrative of the subject’s baseline be advocates of change. Ideally, the VM facilitator will have iden-
scope, schedule, cost, and risk that formed the basis for tified these individuals early in the process. The VM study team
the VM study. must seek to include these individuals in group meetings and
114
10. Presentation Phase
seek their input, especially in the exit briefing, as they can provide 10.4.7 Create excitement
valuable leverage in motivating change within an organization. Visible enthusiasm on the part of the VM study team will in and
of itself help sell their ideas. If the VM study team is obviously
10.4.3 Sell the concept of change early indifferent about their work, then you can bet everyone else
The earlier people can get involved with the VM process, the will be as well. An enthusiastic attitude is infectious and will be
more time there will be to prepare them for change. The VM fa- difficult to resist if it is genuine.
cilitator should work with the study sponsor and project team
to prepare for change. Everyone involved in the process must 10.4.8 Overcome visual bias
understand that the VM study team is simply an extension of Another important consideration in presenting graphics, espe-
the project team. The VM study team exists to help develop a cially sketches of design concepts, is to present the baseline
better project, not to embarrass or criticize anyone, especially and alternative concepts in a manner that is balanced. Usually,
since they will have the advantage of hindsight that the project the level of graphic development for an alternative will be sig-
team did not have. The decision makers should be made to nificantly less sophisticated (e.g., a hand-drawn sketch) than
view the process as a collaborative effort. for the baseline concept (which may be presented in a detailed
technical format such as AutoCAD). Presenting graphic data
10.4.4 Use language to communicate ideas together using these two formats is a surefire way to bias the
with enthusiasm audience toward the concept that has been presented in a more
The VM study team should consider brainstorming ways of detailed fashion (e.g., the baseline concept). People assume that
selling their most important, and potentially most valuable, the more detailed technical graphic has been more thoroughly
concepts. Developing key catch phrases and sound bites vetted and tend to gravitate toward certainty over uncertainty.
can really help sell big ideas by creating links between words One way to overcome this bias is to present all concepts
and concepts. The objective of selling an idea is to persuade at the level of the lowest graphic level. For example, if the
others to think it’s a good idea and worthy of further attention. baseline has been computer-drafted and an alternative has
The presentation should reflect both benefits and any risks been hand-sketched, then a hand-drawn representation of
or challenges. The proposal should address ways to mitigate the baseline concept should be prepared and both sketches
the challenges, reflecting a well-thought-out, thoughtful idea. presented together. This has been found to be an extremely
The use of a few choice words can help make ideas stick in the effective strategy based on the experience of hundreds of
minds of decision makers and will encourage them to explore technical presentations. The key consideration here is to pres-
the VM proposals developed by the VM study team. ent information in a way that will not create bias against the
new concept.
10.4.5 Sell value improvement
Keep in mind that the objective of the Value Methodology is to 10.4.9 Be wary of PowerPoint
improve total project value, not just reduce costs. This means Microsoft® PowerPoint is the dominant presentation devel-
communicating to the project team and decision makers that opment software in the world today. Originally developed
the VM study team focused on all aspects of the value equation, in 1987, it has been responsible for the design and delivery
which include performance, time, risk, and cost. Assuming of billions of presentations. One might argue that the vast
performance metrics were utilized as part of the VM process, majority of these presentations have been awful. A growing
the VM study team will be able to show in detail how project per- body of evidence supports the theory that the very nature of
formance will be affected by the VM proposals they developed. PowerPoint is counterproductive to both presenters and the
Selling value improvement will be much easier than merely recipients of presentations. In his landmark book on the pre-
selling cost reductions. In some cases, increasing the cost for sentation of visual data, Beautiful Evidence, Edward R. Tufte
portions of the VM study subject will increase overall value. devotes an entire chapter to the discussion and analyzes the
cognitive structure and style of PowerPoint presentations.
10.4.6 Be prepared Tufte provides a number of compelling examples that explain
All of the blood, sweat, and tears that went into developing the how the delivery of technical information through PowerPoint
technical aspects of the VM proposals will pay off when the VM actually undermines the presentation of data. Further, the
study team is hit with tough-minded technical questions from use of the “AutoContent Wizard,” “chartjunk,” and overuse of
the project team. One of the best ways to sell ideas to technical bullet structures often serves to confuse the message that the
reviewers is to have developed all the facts. If a question arises data tries to make. Another noted author, Seth Godin, takes a
concerning an issue that the VM study team has not addressed slightly different approach to the shortcomings of PowerPoint
during the Development Phase, let everyone know that the VM presentations from a marketing perspective.
study team will research the question and find the answer. In The lesson to be learned from these authors is that the
the zeal to sell ideas, avoid the temptation to gloss over disad- structure of PowerPoint should never dictate the presenta-
vantages or potential problems. The project team and decision tion—the content should. Use PowerPoint to sell the ideas (as
makers will appreciate the forthrightness and honesty, which recommended by Seth Godin) and use informational handouts
will in turn foster trust and respect. as “leave-behinds” to present data (as recommended by Ed-
115
VM Guide®
ward Tufte). The handout could be a 1- to 4-page summary of 10.4.15 Remote presentations
important data, or it could be a full written repo Nowadays, it is extremely common to have some audience
Think outside the AutoContent Wizard and pre-generated tem- members attend the presentation remotely by phone, web
plates and focus on the most effective way to deliver the content. conferencing platforms, or social media tools. Prepare in
Ultimately, when considering presentation format, evaluate advance for remote participation. Have a steady, high-speed
the audience and the message of the presentation. Sometimes, internet connection and a good speaker on the telephone or
simpler is better and better reflects the level of development of the right software installed on the computer that shares the
the proposals and project. slideshow. Some organizations may have restricted access to
cloud-based files or the use of USB drives to share files. Some
10.4.10 Recognize others for their efforts countries or institutions restrict access to products such as
Recognition may be more important than pay for many. The VM Google and all its related tools. Some platforms work with spe-
facilitator should take time to recognize and thank the project cific web browsers and fail with others when sharing a screen.
team and other contributors for their efforts. The exit briefing The team may take access and compatibility for granted and
offers an excellent opportunity to do this directly. A gracious then be surprised when trying to start the presentation. This in-
expression of appreciation demonstrates respect for the hard formation should be discussed during the Preparation Phase.
work of others and will not go unnoticed. Observe some important good practices while delivering a
presentation to remote attendees. First, take care not to rely
10.4.11 Communicate concisely too much on body language, laser pointers, or any tool that
Time is a valuable commodity, especially for executive level remote attendees cannot see. In a best-case scenario, they
management. Avoid getting into minutiae when presenting can see the same computer screen as the local attendees, but
value alternatives during the exit briefing. Focus on the facts not the presenter. It is also common for remote participants
and present the concepts as concisely as possible. to connect to the presentation using only a telephone line and
not be able to see the screen. The team should also consider
10.4.12 Effective Q&A leveraging technology as appropriate. For example, using
It is always a good idea to ask the audience to hold their virtual and/or augmented reality technology can enhance the
questions until the end of the presentation. The team focuses way we sell an idea and merge remote meeting rooms to the
their presentation on the most innovative ideas which usually VM presentation room. The team should always validate what
raise the most interest which elicits questions from both the each remote participant can see or hear when the meeting
technical and business audience in the meeting. Engaging in starts and adjust their language and description of VM propos-
discussions for every idea puts the presentation’s agenda in als accordingly. Since it is common that more than one team
danger, achieving deep discussion about the ideas listed first, member presents, it is always a good idea for team members to
and overlooking the ideas at the end of the presentation. Intro- introduce themselves to the remote audience, so the audience
duce this guideline when the presentation begins, before any knows who is presenting each idea.
question is raised.
10.4.13 Use of graphics, sketches, and charts instead of words

10.5 References
As the saying goes, a picture is worth a thousand words. For ● Lawrence D Miles Value Foundation. Value Methodology
succinct communication, use the least amount of text nec- Pocket Guide, Goal/QPC, 2008.
essary and maximize the use of graphics and visuals in slide-
shows. Use the notes section of presentation software or a set ● Tufte, Edward R.. Beautiful Evidence, Graphics Press LLC,
of printed notes if needed but take care not to read every word 2006. The chapter on PowerPoint, “The Cognitive Style of
presented. Perhaps use “7x7” rule (seven lines of text, each PowerPoint: Pitching Out Corrupts Within,” is also avail-
with seven words) to minimize clutter. It is also recommended able for purchase separately from the author’s website:
to include baseline concept and VM concept graphics to depict www.edwardtufte.com.
the “before” and “after.” When doing so, eliminate potential
bias by ensuring both images use the same style of depiction ● Godin, Seth. Really Bad PowerPoint (and How to Avoid
(i.e., use hand drawings for both versus a CAD image for one It), 2001. This e-book is a companion to the author’s
and hand drawing of the other). book The Big Red Fez and is available from the author’s
website: www.sethgodin.com
10.4.14 Have a presentation moderator
● Pease, Allan & Barbara. The Definitive Book of Body
While presenting, the presenter should focus on actively sell-
Language: The Hidden Meaning Behind People's Gestures
ing ideas. This makes most presenters overlook the time spent
and Expressions, Bantam, 2006.
delivering their message; therefore, preparation of a timed
agenda and a team member monitoring the flow of the presen-
tation keeps the schedule on track.
116
11
Implementation Phase
11.0 Introduction 11.1.3 Implementation plan

The Implementation Phase focuses on determining the dis- An overall schedule for all activities necessary to implement
position of the VM proposals and validating their effect on the the results of the VM study. It typically contains detailed action
value of the subject. Once the decision makers have had a plans including schedules, milestones, tasks, resources and
chance to review the VM study report and may have provided level of effort required, and identification of the parties respon-
their preliminary feedback toward each VM proposal to the VM sible for completion of the implementation actions. Schedules
program manager and/or VM facilitator, an implementation (e.g. Gantt charts) and other project management applications
meeting should be scheduled to agree upon the disposition usually support the implementation plan.
of each VM proposal. The Implementation Phase features the
11.1.4 Resistance to change
following steps:
Action taken by individuals and groups to hinder change relat-
● Review VM proposals, ed activities when they perceive a change as a threat to them.
Keywords here are “perceived” and “threat.” The threat need
● Resolve VM proposals, not be real for resistance to occur. The usual description refers
to change within organizations, although it is found elsewhere.
● Develop implementation plan, and
Resistance is the equivalent of objections in sales and dis-
● Document, track and audit results. agreement in general discussions. Resistance may take many
forms, including active or passive, overt or covert, individual or
It is important to note that in most cases, the Implementation organized, aggressive or timid.
Phase activities occur outside of the actual VM study.
11.1.5 Status reports
11.1 Terms and definitions A status report is a document describing the situation of
something, such as a project at a specific point in time during
11.1.1 Change management the Implementation Phase or at the end of the phase. It may
utilize a variety of presentation techniques, whether in writing
A collective term for all approaches to prepare and support
or verbally supported by graphics, charts, diagrams, tables, or
individuals, teams, and organizations in implementing change.
any other forms of visualization.
The most common change drivers include technological evolu-
tion, process reviews, crises, and changes in consumer habits,
pressure from new business entrants, acquisitions, mergers,
and organizational restructuring. It includes methods that
redirect or redefine the use of resources, business processes,
budget allocations, or other modes of operation that signifi-
cantly alter a company or organization.
11.1.2 Implementation meeting

A key activity of the Implementation Phase, also called a resolution
meeting. The purpose of this meeting is to resolve the disposition
(usually acceptance or rejection) of the VM proposals developed
and presented in the previous two phases of the VM Job Plan.
117
VM Guide®
11.2 Process Coping strategy: Render assistance by identifying what

those individuals resisting change are holding on to; provide
The Implementation Phase concentrates on driving change
insight on how to modify old behaviors in the context of the
throughout the subject under study. Once the VM proposals
new situation; or, simply shed the old ways altogether if they
have been accepted by the decision makers, those responsible
are now inappropriate or obsolete. Identify areas of stability
for the subject under study need to integrate the associated
(i.e., things that are not changing). Provide information con-
changes into the existing current state. This typically requires
tinually and consistently. Ask, “What is risky?” and provide
systemic and/or hierarchical changes within the organization
safety in response to the discomfort felt with risk taking. In
to achieve success. The key to dealing with the changes that
some cases, acceptance of the change may be compulsory
occur as a result of a VM study, big or small, is to competently
based on management decisions or external factors.
manage them. This requires developing a basic understanding
of the nature of change itself and of the people responsible for
Stage 3: Acknowledgment.This stage may include a sense of
the implementation of the change.
grief and sadness over what has been lost. This aspect of
11.2.1 Managing change change may be pronounced in those that have had a major
hand in the creative and/or technical development of the
The capacity of individuals and organizations to cope with
project’s baseline concept. For these individuals, it is im-
change varies dramatically, depending on the size and nature
portant to start accepting the change, so they can see the
of the change as well as an awareness of the risks associated
value of what is coming, and to look for ways to make the
with not accepting the change. This section discusses the ba-
changes successful. The project team must begin taking
sic mechanics and psychological principles involved in how
risks again in order to implement the change. This process
people process and respond to change. Depending on the na-
requires additional creativity and a sense of discovery that
ture of an organization’s approach to implementation, the VM
can lead to positive team energy if well managed.
facilitator and/or VM program manager may need to assist
others in adjusting to the changes resulting from VM proposals.
Coping strategy: Involve people by working with them
There are essentially four stages of change ( Figure 11.1 ):
to explore options and by planning through the use of an
implementation plan and schedule. The VM facilitator or
Defensive Adaption & project manager should encourage and support risk tak-
Shock Acknowlegment
Retreat Change ing at this stage by pointing out how the organization will
support them. Emphasize that everyone is facing the same
Figure 11.1 – Stages of change. learning curve.
Stage 1: Shock.Many people interpret impending change as Stage 4: Adaptation and change. At this stage, the transfor-
a threat. Much like physiological shock, the tendency is to mation is in full motion. Individuals are now prepared to
shut down thinking, and as many other systems as possi- establish new procedures and to help others. Risk taking
ble, in order to cope with the attendant fear. Just as people comes into fruition at this stage, relative to changing meth-
need warmth and rest when in physical shock in order to ods, products, or whatever is called for by the change.
initiate recovery, they need emotional support, informa-
tion, and an opportunity to gather with others in order to Coping strategy: Stick to the implementation plan. En-
begin recovering from the shock of change. courage and support risk taking using the process and
structures developed in Stage 3. Establish feedback loops
Coping strategy:The shock and stress of change can be so that information travels in all directions, new learning
minimized by building a support network in the form of a occurs, and mid-course corrections can be made if and
detailed implementation plan and by providing as much when necessary.
information as possible with respect to the change. Upper
management should provide support and, more impor- 11.2.2 The forces of change
tantly, maintain a visible level of involvement in seeing the The next step in managing change is developing an understand-
changes through. Clear communication of organizational ing of the positive and negative forces involved in individual
expectations and proper allocation of time and resources and organizational change. Positive and negative forces work
to implement the change provide a sense of safety. toward cross-purposes.
Stage 2: Defensive retreat.Many times, those are most direct- Positive forces (catalysts of change)
ly affected by a change will attempt to cling to or maintain ‒ Changes in an organization’s environment, such
old, familiar ways. Individuals and organizations can get as the introduction of new policies, procedures,
stuck here or suffer from shock (return to Stage 1) as each standards, or regulations, rapidly increasing
element of the change is introduced. competition, or unpredictable changes in the
economy may affect personnel.
118
11. Implementation Phase
‒ The development of new products or services or of success, it does not guarantee success. Implementation
product selection resulting from improvements requires an ongoing assessment of the reactions of the project
in technology, changes to the competition or the team to the change. Strategies for the successful implementa-
industry, or unusual requirements of a new client may tion of change include:
impact the organization.
● The appointment of a steering or oversight committee to
‒ Changes in the workplace to employee monitor the change, provide leadership, and resolve conflicts.
demographics, organizational structure, management
style, or employee demographics related to ● Contingency plans to overcome unanticipated costs,
acquisitions or mergers, may call for new forms of delays, risks, or unforeseen resistance to change. The
communication and chains of decision making. dynamic nature of organizational systems requires this
level of flexibility in implementation plans.
‒ Changes in productivity, product quality, customer
satisfaction, commitment, or an increase in employee ● A strong commitment to the implementation plan on
turnover or absenteeism may call for changes in the part of the top management to buffer the effort from
internal relations (i.e., the relationship between internal and external challenges and to ensure that
different departments within an organization). needed resources are made available to see the change
through to completion.
Negative forces (resistance to change) ● Encouragement of those on the receiving end of the VM
‒ Resistance to change occurs when a change ignores study to participate early and often. Ensuring that key
the needs, attitudes, or beliefs of the members of an stakeholders are involved throughout provides oppor-
organization. tunities for them to contribute to the process, improve
ideas, and offer their insights on improving the value of
‒ Individuals resist change when they lack specific the VM study subject. Providing avenues for stakeholders
information about it. This ignorance hinders them to build-on the VM study team’s ideas is one of the best
from developing an understanding of when, how, or times to do this. Having a “midpoint” review meeting after
why the change is occurring. the Evaluation Phase is a good time to facilitate this input.
Preparing the stakeholders for change is very important
‒ Individuals may not perceive a need for change; they to maximize the chances for VM proposals to be imple-
may feel that their organization or project is currently mented. With this in mind, Japanese practitioners widely
operating effectively and/or profitably. In such a use a good practice called "nemawashi.” Nemawashi is an
case, change may not be voluntary or requested by informal activity in Japanese culture that offers prepa-
organizational members. ratory opportunities by leaking information in advance
to people or organizations that are expected to have a
‒ Members of an organization may suffer from an “us
significant impact on change.
versus them” mentality that causes them to view the
change agent as their enemy.
‒ Members of an organization may view the change as
a threat to the prestige and security of their manager. 11.2.4.1 Inputs
They may perceive the change in procedures or
policies as an indication that their manager’s
‒ VM study report
performance is inadequate. ‒ VM study presentation
‒ Members of an organization may perceive the change

as threats to their ego, expertise, status, or security. 11.2.4.2 Outputs
For controlled, managed, and effective change to occur, the VM

‒ Feedback on VM proposals
facilitator and/or project manager must confront each of these ‒ VM Proposal disposition
negative forces and strive to overcome them.
‒ Implementation plan
11.2.3 Implementing change
The successful implementation of the changes related to VM ‒ Status reports
proposals requires that the strategies outlined in the imple-
mentation plan succeed. Although careful preparation for
‒ Value improvement
change, including the proper documentation of the VM propos-
als and a sound implementation plan, increases the chances
119
VM Guide®
11.2.4.3 Activities Once all reviewer feedback has been received, it should be
‒ Review and assess VM proposals reviewed by the VM facilitator, VM program manager, and/or
the possibly the VM study team. It may be desirable for the VM
‒ Resolve VM proposals study team to meet as a group to perform this review. Alterna-
tives that appear to have deficiencies or are found to be unac-
‒ Conduct implementation meeting ceptable for one reason or another should be discussed. It may
be possible for the VM study team to develop workarounds or
‒ Develop implementation plan
enhancements to overcome the deficiencies.
‒ Track and audit results
11.3.2 Resolve VM proposals
‒ Take corrective actions (if necessary). An implementation meeting should be scheduled to develop
consensus and resolve the implementation dispositions of the
VM proposals. The meeting includes pertinent VM study team
members and the individuals with the authority to determine
the alternatives’ implementation decisions, such as the sub-
11.3 Activities ject manager, key subject team members, relevant technical
reviewers, and any appropriate external project stakeholders.
11.3.1 Review and assess VM proposals The meeting should be an informal working meeting to en-
The project team and decision makers face the task of re- courage the positive exchange of opinions, supporting data,
viewing and assessing the VM proposals once the VM study and discussion. The implementation disposition for each pro-
report has been submitted. This assessment provides project posal is discussed with the project manager, relevant project
stakeholders and the VM study team with the assurance that team members, and other project stakeholder representatives.
the alternatives contain accurate information and that the The meeting should result in the resolution of the dispositions
assessments are based on their merits with the current infor every proposal, categorized by one of the following: “ac-
formation. During the assessment of alternatives, the project cepted,” “conditionally or partially accepted,” or “rejected.” If
manager, key project team members, technical reviewers, and a modification could facilitate acceptance of a reject proposal
external project stakeholders review the VM study report and and overcome its deficiencies, then the VM study team should
document their comments and recommendations on all VM accept the challenge to modify it.
proposals. It is not uncommon for the various reviewers of Any proposals noted as “conditionally accepted” should
the VM study report to have different positions regarding the include the action required, responsibilities, and timing of the
acceptability of the VM proposals. For this reason, these com- final decision. The VM facilitator, project manager, or value
ments should be collected and submitted to the VM facilitator, program manager (if one exists within the organization) will
so that proper preparation for the implementation meeting can review the resolution of the conditionally accepted proposals
be accomplished. at a later date to complete the report on the VM study.
The structure of this form is self-explanatory. It is an ex- The VM facilitator documents all relevant comments and dis-
pedient way to capture comments on many alternatives and positions during this activity and includes that documentation
highlight issues that will affect their implementation. in the final VM study report if it is included as one of the VM study
VM Study Report Review & Assess VM Proposals Stakeholder Feedback
VM Study Presentation Resolve VM Proposals VM Proposal Disposition
Develop Implementaiton Plan Implementation Plan
Track & Audit Results Status Reports
Take Corrective Results

VALUE IMPROVEMENT!
(if necessary)
120
deliverables in the VM study scope established in the Prepara- ○ Whom will they report to?
tion Phase. A “master” implementation action form should be
prepared that summarizes the comments from the reviewers. ○ What resources will be assigned to them to assist in
In an ideal scenario, the VM facilitator and VM study team implementing the change?
participate in the implementation meeting to: address ques-
● Design/system integration
tions regarding the VM proposals and the technical feasibility
of the proposals; to validate the cost impact; and/or, validate ○ How will the changes be integrated into the project?
the level of effort required to implement the VM proposals
within the subject or organization. However, if the VM facil- ○ What approvals, clearances, or testing will be neces-
itator and VM study team are not present, the clarity of the sary to implement the change?
material generated during the Development and Presentation
Phases (i.e., the VM study proposals and VM report) becomes ○ Will the changes necessitate modifications to other
critically important. When participation of the VM study team aspects of the system or design?
representatives is not possible, considerations to increase
● Schedule
the rate of implementation of the VM proposals include: con-
cise yet specific titles for each alternative which describe the ● How will the project schedule be impacted by implement-
proposed change (i.e., updating the title generated during the ing the change?
Creativity Phase to accurately represent the alternative); the
documentation of assumptions made during the Development ○ What other projects or processes will be affected by
Phase; detailed cost impacts developed for each alternative any anticipated delays?
(i.e., avoid using lump sum figures where appropriate); and
illustrations (i.e., sketches) which are clearly understood by ○ Will critical budgeting or funding milestones be affected?
project stakeholders.
● Implementation costs
11.3.3 Develop the implementation plan
○ What will it cost the project to implement the changes?
The VM proposals selected for implementation require a plan
to ensure proper integration of the changes. An implementa- ○ Will there be redesign or testing costs?
tion plan should be developed for each VM proposal identified
as “accepted.” The implementation plan needs to identify im- ○ Will there be impacts to existing suppliers or other
plementation responsibilities, action dates, modifications to contracts already in place?
the project schedule, and any additional project development
11.3.4 Track and audit results
activities that may be required.
The team, or individual, responsible for managing the VM It is generally the project manager’s or value program man-
study subject must take the lead in developing the implemen- ager’s responsibility to track and audit the results of the VM
tation plan, assisted by the VM facilitator and/or VM program proposals. In some cases, the VM proposal runs into problems
manager as necessary. Modifications to the work breakdown during the implementation process. Perhaps unanticipated
structure and/or development schedule for the VM study sub- technical problems arise, or maybe an external stakeholder
ject should be developed and circulated to the stakeholders in refuses to approve the change. Regardless, problems will be
a timely fashion. encountered and need to be addressed. It is incumbent upon
Some organizations, especially those with established those monitoring the implementation process to respond pro-
value programs administered by a value program manager, will actively to resolve these issues.
have already established procedures for developing imple- In many cases, numerous alternatives will have been select-
mentation plans. In such cases, the subject manager’s efforts ed for implementation. In such a situation, develop a database
are greatly reduced. that identifies the alternatives’ information, responsible par-
Implementation plans vary widely and depend upon the ties, latest status, and action dates. Depending upon the com-
unique nature of the changes themselves, as well as the orga- pany’s or agency’s organizational structure, the database may
nization involved in implementing the changes. There are, how- be an essential tool in ensuring that implementation is carried
ever, common elements that usually need to be considered in successfully through to completion.
implementing the change. These considerations include:
● Responsibility
11.4.1 Implementation forms
○ Who will be responsible for managing the changes
called for in the VM proposal? Organizations conducting VM studies are advised to develop a
standardized approach, or form, for documenting implementa-
○ What authority do they have? tion actions. The form should be tailored to meet the needs of
121
VM Guide®
the organization. It is recommended that the following infor- Implementation forms should be modified to meet the specific
mation be considered: needs of the VM study subject and those of the organization.
Figure 11.3 shows an example of an implementation form.
● Title. The title of the alternative as shown on the VM pro-
posal form. 11.4.2 Implementation status reports
Status reports formally document and track the implementa-
● Proposal number. Proposal number as shown on the VM
tion status of a VM proposal. Each VM proposal likely requires
proposal form.
one. This is an important means for VM program managers to
● Responses. A summary of the final disposition of the al- follow implementation progress. Status reports related to the
ternative prepared by the project manager, value program tracking of changes emanating from VM proposals generally
manager, or VM facilitator. include the following information:
● Prepared by. Identity of the person preparing the response ● Tracking identification number. A code used to track the
and date. change within the organization.
● Rationale for disposition. A discussion justifying the ● Report number. A serial number for the status reports
grounds for acceptance or rejection and a brief statement issued for the VM proposal under implementation.
of technical feasibility.
● Title. The title of the change.
● Implementation disposition. Choose one of the following
● Date of update. Current date.
dispositions:
● Person responsible. The individual responsible for
○ Accept. Acceptance of the proposal denotes the intent
implementing the change within the organization.
to implement in the given project development phase.
● Implementation status. A description of the current
○ Reject. Proposal is not acceptable as presented and
state of the change, including any issues or actions
will be dropped from further consideration.
required. Identify any corrective action required for the
○ Conditionally Accept. Proposal is desired but implementation plan or the manner in which it is being
requires added technical analysis and/or stakeholder implemented.
agreement before final disposition can be made.
● Next update. The date of the next implementation status
Another way to state this is “Further Study Required.”
update.
● Performance impacts. A discussion of the proposal’s
The VM program manager should work with the individuals
performance impacts. Elaborate on any deviations in the
responsible to implement the changes and work within the
performance assessment from that presented by the VM
organization to support these efforts and advocate for change.
study team.
● Cost impacts. A discussion of the proposal’s cost impacts. 11.5 References

Identify any changes or differences from the VM study
team’s concept that affect cost. ● Scire, P. Applying Grief Stages to Organizational Change,
2007.
● Cost change. Validation of initial cost savings (or increase)
in dollars. ● Kubler-Ross, E. On Death and Dying, Routledge, 1973.
● Schedule/delivery impacts. A discussion of how the pro-

posal will affect the schedule (re: project delivery, produc-
tion time, process time, etc.).
● Schedule change. Identification of any change in project

schedule.
● Risk impacts. A discussion of how the proposal impacts

risk. This may include the risks related to implementation,
the effect of the proposal on existing project risks, or both.
● Other comments. Comments on other issues relating to

the alternative. Note any concerns or controversial items.
Identify suspense dates or action items here.
122
VALUE PROPOSAL IMPLEMENTATION ACTION VM PROPOSAL № 8.3
Lower grade of highway and retain existing overcrossing
Response prepared by: Ashraf Malek, PM Date: September 24, 2019
Disposition: Conditionally Accept

Validated Initial Cost Savings: $17,060,000
Validated LCC Savings: $0
Project Development Support Cost Savings: $0
Validated Schedule Savings: 12-month decrease
Validated Change in Performance No change
Technical Feasibility: This proposal is technically feasible and will be studied further. The exist-
ing drainage system is low enough to handle the reduction in grade, however, a more extensive
drainage survey is required to validate this assumption. It is believed that replacement of the
pavement can occur through a series of four 55-hour closures (two-per-side) if either long-life
HMA or pre-cast slabs are installed.
Validated Performance: This proposal would retain the existing overcrossing structure which is
in good condition. This proposal would provide equivalent performance to the current design
concept.
Implementable Portions: the project team believes that this proposal can be fully implemented
as proposed pending the additional analysis.
Project Development Delivery Impacts: Check back with PM in December 2019 for the final
disposition. The potential cost benefit will be validated at this time.
Figure 11.3 – Example of a VM implementation form for a project.
123
VM Guide®
124
12. VM Facilitation and Team Dynamics
12
VM Facilitation and Team Dynamics
12.0 Introduction ● Maintain a base of knowledge in management, organiza-

tional systems and development, group development,
Facilitation is one of the nine core competencies in which an
psychology, and conflict resolution.
individual must be proficient to achieve and maintain certifica-
tion as a Certified Value Specialist®. In the context of the Value ● Understand the dynamics of change.
Methodology, successful execution of a VM study requires
good facilitation skills. ● Know a range of facilitation methods:
The International Association of Facilitators (IAF), a partic-
ipatory organization with members in more than 65 countries, ○ Understand problem solving and decision-making
sets internationally accepted industry standards, provides models;
accreditation, supports a community of practice, advocates
○ Understand a variety of group methods and techniques;
and educates on the power of facilitation, and embraces the
diversity of facilitators. Much of the content in this chapter is ○ Know consequences of misuse of group methods;
based on the core competencies required for certification as
a professional facilitator, and how those competencies relate ○ Distinguish process from task and content;
specifically to facilitating the VM Job Plan.
For example, one of the IAF competencies is to “plan ap- ○ Learn new processes, methods, and models in
propriate group processes.” In the context of a VM study, the support of clients’ changing/emerging needs.
process is the VM Job Plan. The VM facilitator’s role is to enable
the team to complete all the steps in the VM Job Plan, within As the VM facilitator, with whom rests the eventual result of the
the allotted time, using the structure and time management facilitated session, remember to demonstrate a belief in the
techniques to generate useful outcomes. group and its possibilities.
Some general rules for facilitation include:

12.1 Terms and definitions
● Observe body language and respond appropriately.
12.1.1 Consultant
● Play “traffic cop.” Use hand signals, physical position, ver- One who gives professional advice or services.
bal interruptions to prevent or stop disruptive behaviors.
12.1.2 Facilitator
● Recognize that disruptive behavior usually comes with a
One who is substantively neutral, has no significant deci-
cause of which you are not likely aware—it’s not personal.
sion-making authority, enables a group to improve how it
● Bring the following to the event you’re facilitating: identifies and solves problems, and increases the group’s
effectiveness. In the context of VM, one who leads the group
○ Knowledge – working familiarity with concepts and through the VM Job Plan.
methods of facilitation;
12.1.3 Neutral
○ Skills – practiced ability to act on and carry out the Not engaged on either side.
appropriate actions;
○ Self – beliefs, values, life experiences all help deter-

mine our ability to use our knowledge and skills.
125
VM Guide®
12.2 General facilitation skills As one author has said, “Hearing is with the ears. Listening is
with the mind.” There are 10 essential rules for active listening:
Facilitation is an interesting word that is often misunderstood.
Facilitation means “to make easier.” Therefore, facilitators 1. Stop talking. Obvious, but not always easy for some.
make things easier for people to do or to understand. In the
context of a VM study, VM facilitators make communication, 2. Put the speaker at ease. Create a permissive, supportive
change, and the various techniques involved easier. Facili- climate in which the speaker feels free to express himself
tation is generally more passive than leadership and not as or herself.
participatory in nature.
3. Show a desire to listen. Act interested and mean it.
The following is an excellent definition of a facilitator (Kaner 2014):
4. Remove distractions. External preoccupation is less likely
“ A facilitator is an individual who enables groups and organi-

zations to work more effectively, to collaborate and achieve
synergy. She or he is a “content-neutral” party who by both
if nothing external is present to preoccupy you.
5. Empathize. Try to experience, to some degree, the

feelings which the speaker experiences.
taking sides or expressing or advocating a point of view
during the meeting, can advocate fair, open and inclusive 6. Be patient. Give the speaker time to finish; don’t interrupt.
procedures to accomplish the group’s work. A facilitator
can also be a learning or dialogue guide to assist a group in 7. Hold your temper. Don’t let your emotions obstruct your
thinking deeply about its assumptions, beliefs, and values thoughts.
about its systemic processes and context.”
8. Go easy on argument and criticism. Suspend judgment.
The VM facilitator wears the hat of facilitator on many of the ac-
tivities during a VM study. This important role has many facets 9. Ask questions. If things are still unclear when a speaker
which include: has finished, ask questions that serve to clarify the
intended meanings.
● Using the power of objectivity and credibility to help
groups address issues. 10. Stop talking.
● Surfacing difficult issues and help others to do so.

12.2.2 Questioning
● Clarifying communication and the exchange of information The enormously important skill of questioning is central to
between participants. the process of eliciting information from others. The form of
questioning best suited to the techniques presented in this
● Supporting and counselling others. book is the Socratic method, attributed to the famous Greek
philosopher Socrates. Socrates originally used this approach
● Instilling a sense of calm during times of discord and conflict.
as a means of examining ambiguous and/or abstract concepts
● Mobilizing a group’s energy and keeping it on task. such as morals and virtues. The Socratic method is a negative
method of hypotheses elimination in that steadily identifying
● Conveying empathy to all participants to help build an and eliminating those hypotheses that lead to contradictions
environment of trust and mutual understanding. develops better hypotheses. Although the Socratic method
is difficult and time consuming to apply directly, the general
● Helping participants cope with uncertainty. theme of using questioning to elicit information and to examine
assumptions remains valid. One form of the Socratic method is
To accomplish these objectives, a VM facilitator must apply
known as Socratic questioning.
and develop the following basic skills.
Socratic questioning is a systematic and disciplined ap-
12.2.1 Active listening proach to questioning that focuses on core issues and con-
cepts. The purpose of Socratic questioning is to delve into the
This may at first appear obvious; however, our listening skills
heart of an issue and uncover deeper meaning by encouraging
are often less than stellar. Active listening differs from pas-
rational discourse. It encourages participants to thoroughly
sive listening: it requires us to be engaged with the speaker.
articulate their thoughts in a manner that forces a deeper anal-
ysis of issues and fosters a shared understanding.
In their excellent book A Thinker's Guide to the Art of Socratic
Questioning, Paul and Elder (2006) provide a list of questions
that are based on this approach. Below is an adapted list from
that publication.
126
● Clarity The application of this method of questioning is extremely

effective within the context of VM studies. It frames group
○ Could you elaborate further?
interaction in a rational, professional manner that forces peo-
○ Could you give me an example? ple to think critically rather than emotionally. This excellent
approach separates facts from bias and uncovers any hidden
○ Could you illustrate what you mean?
agendas or meaning.
● Accuracy
12.2.3 Using feedback
○ How could we check on that? The VM facilitator should use feedback throughout the VM
○ How could we find out if that is true? study to make course corrections and maintain efficiency.
He or she should frequently ask participants for feedback by
○ How could we verify or test that? asking questions like:
● Precision ● How are we doing?

○ Could you be more specific?
● Are we on track?
○ Could you give more details?
● Do you have any concerns about the process?
○ Could you be more exact?
● What can we do better?
● Relevance
● Are we thoroughly addressing the issues?
○ How does that relate to the problem?
○ How does that bear on the question? The VM facilitator and the team both should evaluate the infor-
mation received in response to these questions and incorpo-
○ How does that help us with the issue? rate it in an appropriate manner.
● Depth 12.2.4 Handling conflict

○ What factors make this a difficult problem? Inevitably, conflicts arise during VM studies, just as they do
anywhere else. The VM facilitator must do their best to address
○ What are some of the complexities of this question?
conflicts as they arise and deal with them appropriately.
○ What are some of the difficulties we need to deal with? It is best to avoid conflicts before they occur. Consider-
ations that can be applied during a VM study toward preventing
● Breadth or avoiding conflict include:
○ How would other perspectives look at this?
● Identify points of agreement.
○ What are other points of view?
● Reformulate contributions to highlight common ideas.
○ What are other ways to look at this?
● Encourage people to build on others’ ideas.
● Logic
● Test for false consensus.
○ Does all this make sense together?
○ Does your first paragraph fit in with your last? ● Test consensus for relevance/motivation.
○ Does what you say follow from evidence? The VM facilitator should try to maintain objectivity and remain
neutral in the face of conflict. The best role to assume is gener-
● Significance ally that of a referee.
○ Is this the most important problem to consider?
12.2.5 Consulting or facilitating?
○ Is this the central idea to focus on? It may be unclear as which role the VM facilitator should play
○ Which of these facts is most important? during a VM study, because many different activities and inter-
actions take place throughout the VM Job Plan. When should
● Fairness the VM facilitator lead and when should they facilitate? This
question has no definitive answer, as the context of the situ-
○ Do I have any vested interest in this issue?
ation influences which role is appropriate. Following are some
○ Am I sympathetically representing the viewpoints of general guidelines worth considering.
others?
127
VM Guide®
Facilitation – Impartial or neutral, VM facilitators guide a team Virtually everything the VM facilitator does involves aspects
through the VM Job Plan and ask provocative questions to of leadership and facilitation; it is more a question of degree.
stimulate rich discussion and brainstorming. They do not Passive groups require a higher level of leadership and direc-
typically impose their own ideas, but instead rely on the tion, while active and motivated groups require a greater degree
subject matter expert team members for idea generation. of facilitation. The VM facilitator must gauge the personality of
the group and tailor their interaction with them in a manner that
Consulting– Typically, consultants are subject matter experts will best accomplish the objectives of the VM study.
who bring their specific expertise to a workshop to evalu-
ate the project under study and make recommendations
on how to improve its value through different alternatives.
12.3 Group dynamics
They are not neutral parties. Substantial literature examining group and team dynamics
exists. For the purposes of brevity, this section discusses sev-
It's worth noting that it is acceptable to have a consultant eral theories and their implications for practice which directly
subject matter expert fulfill the role of VM facilitator, when apply to VM and temporary teams, as are often formed for the
appropriate; however, the VM facilitator need not also be a purposes of completing a VM study.
consultant subject matter expert.
Figure 12.1 provides a facilitation gauge for VM facilitator. 12.3.1 Tuckman’s group development model
The horizontal axis represents the VM facilitator’s relative con- Bruce Tuckman first published his article “Developmental Se-
tribution to content. The vertical axis indicates the suggested quence in Small Groups” in Psychological Bulletin in 1965, based
level of interaction with the group. The various types of activi- on analysis of 50 small group studies. Tuckman’s focus was to
ties in which the VM facilitator is likely to engage are arrayed identify a “developmental sequence that would fit the findings of
along the sweep of the dial. For example, the act of eliciting in- a majority of the studies” (2001, p 67). In doing so, he identified
“
formation during a paired comparison of performance attri-
butes would involve a high level of interaction (mainly in the four stages going from (1) orientation/testing/depen-
form of Socratic questioning) and a moderate contribution to dence, to (2) conflict, to (3) group cohesion, to (4) functional
content (by demonstrating how the technique works and guid- role-relatedness. For these [the author] coined the terms:
ing participants through the process). Another example might forming, storming, norming, and performing – terms that
be during the presentation of the results of the VM study. In would come to be used to describe developing groups for
this case, the level of interaction would be low (as communica- the next 20 [plus] years and which probably account for the
tion is primarily one-way) and the contribution to content paper's popularity” (2001, p 67).
would be very high (as the content emanates solely from the
He collaborated with Mary Ann Jensen in 1977, publishing a
VM facilitator).
paper titled “Stages of Small-Group Development Revisited.”
HIGH Eliciting
Information
Brainstorming
& Evaluating Teaching
Facilitating
Discussions Demonstrating
INTERACTION
Monitoring Presenting
Processes
LOW HIGH
LOW Contribution to Content
Figure 12.1 – Facilitation gauge for a VM facilitator.
128
In it, they refined and further developed the model to include the group’s type, purpose, and goals. Not all groups progress
a fifth stage—aptly labeled adjourning—based on research that through all stages; many stall in Stages 2 and 3, storming and
positively indicated that it was a distinctly separate phase in norming. Group development can also regress and undergo
the development process. The model’s basis in research of de-forming, de-storming, and de-norming phases if the group
small groups and its self-defined fluidity make it an appealing structure changes, goals are modified or not fully understood,
target for drawing parallels to VM study team building and the group members leave or join, conflicts arise that cannot be re-
overall VM Job Plan. solved, etc. Understanding that VM studies follow a prescribed
path of steps to create a valuable product, the group develop-
Stage 1. Forming:This begins with the commencement of a ment model can be compared to the VM Job Plan to show in
group process. Considered an “ice-breaking” stage, group what stage a group would exist for each of the phases in the VM
members gain an understanding of where they fit and dis- Job Plan ( Figure 12.2 ).
cover group norms.
12.3.2 Other group dynamics
Stage 2. Storming: After group members better understand
the group norms, the non-confrontational information 12.3.2.1 Groupthink
gathering from Stage 1 transitions into a less comfortable
Kreitner and Kinicki (2007) note “highly cohesive groups
stage marked with confrontation, direct or passive aggres-
victimized by groupthink make the poorest decisions,
sion, and discord.
despite high confidence in those decisions” (p 328).
Stage 3. Norming:Norming happens when the group achieves Throughout every VM facilitator’s career, there will
some agreement, tacit or otherwise, of the group norms invariably be a team or two that develops a dynamic
and each group member’s role. Group tasks and scope are that creates blind trust and confidence in all their ideas.
defined and accepted. Cohesion of the group begins in this In these cases, it’s important for the VM facilitator to
stage as respect builds among its members. recognize what’s happening and introduce healthy and
productive testing and evaluation of brainstormed ideas.
Stage 4. Performing: This stage is realized when trust builds One method of doing this is to have different people
among the group members, and they believe that the tasks play the role of “devil’s advocate.” This can be done in a
at hand cannot be completed without each group member’s respectful, good-natured way to maintain team cohesion
effort. Members see each other as interdependent. Conflicts while introducing a more balanced perspective. Ultimately,
that may arise are addressed quickly in a collaborative and the most productive teams test their assumptions and
constructive manner. The group matures into a team and create more robust solutions.
creates the much sought-after synergy during this stage.
12.3.2.2 Small versus large groups
Stage 5. Adjourning:Twelve years after the original model was
Smaller groups tend to be more comfortable, and
proposed, Tuckman and Jensen added this stage based
members are more likely to share their opinions in a “safe”
on numerous studies that documented teams having
environment. Larger groups can be less comfortable, or
progressed through Stage 4 frequently demonstrated a
even anxiety-provoking for some, resulting in hesitation
sense of loss when the team completed their tasks and
or refusal to share opinions in front of everyone. This
was disbanded.
dynamic means that the VM facilitator must work to create
Tuckman does not identify how long each of the five stages a safe environment to generate the richest discussion
lasts; conversely, the length of each stage depends greatly on and soundest decision making. Numerous techniques
ensure all participants are engaged and include breaking
Tuckman's Group Development Model
Forming Storming Norming Performing Adjourning
VM Job Plan
Information Function Analysis Creativity Evaluation Development Presentation
Figure 12.2 – Tuckman’s group development model compared to the VM Job Plan.
129
VM Guide®
larger groups into smaller “breakout” groups to discuss ‒ Confirmation. Confirmation bias describes the
certain topics and with one member from each group tendency for people to seek evidence that supports
reporting their findings to the larger team. Another is rather than challenges their current beliefs. It
nominal group technique in which all participants answer occurs when people selectively notice or focus
a question on paper and the VM facilitator calls on each upon evidence that tends to support the things they
one in succession to ensure all voices are heard. If the already believe or want to be true, while ignoring
participants are reluctant to read their written ideas aloud, that evidence that would disprove those beliefs or
the VM facilitator could collect them all and, during a short ideas. Confirmation bias plays a stronger role when
break, add them to the list in a random order. it comes to beliefs based upon prejudice, faith, or
tradition rather than on empirical evidence. For
12.3.2.3 Social loafing example, if we already believe or want to believe that
This dynamic describes the behavior in which some group someone can tell us what are pets our thinking, then
members “coast” or contribute less, relying on others to we will notice when they say things that are accurate
perform the majority of work. This is often more prevalent or pleasant and tend to forget things said that are
as group sizes grow for the reasons noted above. Methods simply incorrect. Another good example would be
to alleviate this issue are identical to the ones noted above. how people notice when they get a phone call from
a person they were just thinking about, but don’t
12.3.2.4 The fallacy of silence meaning concurrence remember how often they didn’t get such a call when
As discussed below in Jo Nelson’s “Working Assumptions,” thinking about that person.
it is essential that all team members can contribute. In most
Western cultures, it is often assumed that if someone has
‒ Representativeness. The representativeness heuristic
often occurs when we estimate the likelihood of
an issue, that person will speak up. Not all cultures make
an event by comparing it to a situation that already
that same assumption. Whether it’s a cultural difference
exists in our minds. When we make decisions based
or whether an individual does not feel comfortable for
on representativeness, we may be likely to make
another reason, it is not safe to assume silence equates
more errors by overestimating the likelihood that
to concurrence. Doing quick check-ins with team
something will occur. Just because an event or object
members, voting with raised hands, etc. can ensure each
is representative does not mean its occurrence is
person’s opinion is considered. Not checking for true
more probable. For example, if two salespeople
concurrence may result in team members going rogue, VM
from a large company both displayed aggressive
documentation not representing team discussion, or any
behavior, the assumption may be that the company
other form of overt or covert resistance.
has established a policy of aggressive selling, and
12.3.2.5 Heuristics that most other salespeople from that firm will also
engage in aggressive techniques. Another example of
Loosely defined, heuristics are “mental shortcuts,”
this heuristic is the belief in runs of good and bad luck
and they often result in faulty analysis and lead to poor
in games of chance. This particular incarnation is also
decision making. The official definition (www.merriam-
known as the gambler’s fallacy.
webster.com/dictionary/heuristic) states “of or relating to
exploratory problem-solving techniques that utilize self-
educating techniques (such as the evaluation of feedback)
to improve performance.” For example:
12.4 Forming teams
There are three major teaming models used for VM. This sec-
‒ Anchoring. This shortcut describes the tendency for tion explores various approaches, along with their advantages
an initial idea or concept to bias subsequent ideas. and disadvantages. Note, the below summaries are generaliza-
In practice, when presented with an initial estimate, tions. There will always be exceptions. Each VM facilitator must
the team or client could “anchor” to that number review the options and select the best method to achieve the
even if it was unsubstantiated. Therefore, VM project’s goals. Regardless of the approach taken, it is best to
facilitators should be cautious about what numbers select team members who are naturally curious, strong com-
are printed or presented. municators, proactive, collaborative, and respectful.
‒ Availability. This shortcut accesses information and 12.4.1 Team composition approaches
events that are highly memorable and places undue
value or probability on them. The result is the belief that 12.4.1.1 100% Independent
things that quickly come to mind are more common or Purely independent teams, who have no stake in the
probable than data supports. A common example is a project and who are not involved with the design, tend to
fear of shark attacks versus vehicle collisions. approach a study with the greatest amount of curiosity
and openness. Independent team members who bring
130
specific subject matter expertise are then able to look at create a more comfortable environment, engage each
the project with fresh eyes and are less likely to be biased. participant, and prevent social loafing.
However, independent team members, by definition, have Occasionally, VM studies involve very large groups.
less project knowledge, may not appreciate the complexity Whether it’s an idea-generating think tank or a large party
of past decisions, and usually need more pre-study time of stakeholders, VM facilitator needs to keep the full group
to review documents to familiarize themselves with the engaged and productive. Such situations make structure and
project under study. clear direction imperative. For ideas on facilitating very large
groups, see Sam Kaner’s Facilitator's Guide to Participatory
12.4.1.2 100% Design team and stakeholder Decision-Making, Barbara Bunker and Billie Alban’s Large
VM study teams composed of design team members and Group Interventions: Engaging the Whole System for Rapid
stakeholders typically have an intimate knowledge of the Change, and www.liberatingstructures.com.
project, are familiar with how and why past decisions were To learn more about team size, please refer to Chapter 4
made and understand the complexities of the project – Preparation Phase, section 4.3.2.
and its evolution to the concept under study. Typically,
the ideas developed and presented have a significantly 12.5 Facilitation of Preparation Phase
higher likelihood of implementation as the team often also
techniques
includes decision makers. However, as with any strength,
The success of a VM study depends upon the quality of in-
overuse can become a weakness. In this case, some (but
formation used by the VM study team during execution of
not all) design team members and stakeholders may be
the study. The primary goals of the Preparation Phase are to
biased against changes and, by their very definition, have
gather an abundance of credible information and to obtain a
a “stake” in the project, which could negatively influence
clear definition of the client’s goals and expected outcomes of
the creative ideas generated, evaluated, etc., thus limiting
the VM study. Refer to Chapter 4, Preparation Phase, for more
the total number of options explored and possibly missing
specific information about activities included.
opportunities to improve value.
Facilitating the Preparation Phase requires interaction and
12.4.1.3 Hybrid – Blend of independent and subject team/stakeholder collaboration with multiple stakeholders: the VM study spon-
sors, the project owner, project designer/manufacturer, oper-
Hybrid approaches to team composition capitalize on
ations and maintenance groups, interested third parties who
the deep project knowledge of design team members
may be affected by the outcome(s) of the VM study, the work-
and/or stakeholders and the “fresh eyes” of independent
shop host, and the subject matter experts (VM study team).
team members. When the right balance is struck,
Preparation Phase initiates the process of thinking forward
these teams often engage in rich discussion and highly
to implementation. Understanding the customer’s needs,
creative problem solving. It is important to ensure all
wants, and priorities can help the VM facilitator structure the
team members approach the project with an inclusive,
workshop in such a way that it gets the VM study team thinking
respectful mindset to reduce potential defensiveness of
from the beginning about implementation factors. Creating a
design team members and generally avoid an “us versus
collaborative client relationship helps to:
them” mentality.
● Clarify mutual commitment;
12.4.2 Team size
In addition to composition, group size contributes ● Develop consensus on tasks, deliverables, roles, and
to successful VM studies. It is crucial that resources responsibilities;
are available to ensure the team members represent
the expertise needed to analyze the project. Because ● Analyze organizational involvement;
budget limitations sometimes hinder that representation
● Diagnose client need, and create appropriate Job Plan
of skills and knowledge, identify team members who
elements to achieve intended outcomes; and,
can contribute outside their own fields of expertise or
who have a wide spectrum of experience. If the budget ● Predefine a quality product and outcomes with the client.
cannot accommodate the appropriate personnel, discuss
options with the client to solicit the participation needed.
Conversely, considerable research shows “as group size
increases, group members’ liking for the group decreases,
and group members’ performance decreases” (Mullen
and Copper, 1994). Mullen and Copper’s research findings
pose a strong argument for not overloading the group with
excess members simply because the budget allows it. If a
large group is warranted, consider facilitation techniques
that utilize small sub-groups for different activities to
131
VM Guide®
The importance of preparation cannot be overemphasized. 12.6 Facilitation of information phase

Some specific tasks include:
techniques
● Define the study objectives and goals. The Preparation Phase overlaps the Information Phase (de-
scribed more fully in Chapter 5), because part of the Prepara-
● Prepare a compilation of information gathered for the tion Phase includes gathering information relevant to the VM
Information Phase for distribution to participants in study subject for everyone to review prior to the workshop. The
advance of the workshop. Information Phase formally continues the first day of the work-
shop, and it’s the VM facilitator’s role to keep the discussion
● Develop a high-level agenda to review with the client and
focused to accomplish the necessary tasks in a timely manner.
obtain their approval.
Continue the participatory environment that started during
● Develop a detailed facilitator’s agenda to include specific Preparation Phase by incorporating some or all of the following
activities and timing. tips and tools:
● Check your agenda and approach with a colleague. ● Describe the process to be followed; for example, relate
the agenda to the VM Job Plan.
● Learn the client’s terminology.
● Obtain group buy-in of goals and objectives.
● Try to ascertain whether there are hidden agendas or
special personalities who will be involved. ● Foster open participation with respect for client culture,
norms, and participant diversity.
● Ask lots of questions.
● Manage group conflict by helping individuals identify and
● Pay attention to the room layout and logistics; consider review underlying assumptions, providing a safe environ-
providing the study host with a diagram of preferred room ment for conflict to surface, and recognizing its role within
layout and a list of equipment needs. group learning/maturity.
Remember the five Ps of Preparation (Wilkinson: The Secrets ● Manage disruptive behavior by controlling sidebar
of Facilitation): conversations and making sure whoever has the floor at
the moment is allowed to be heard, uninterrupted
● Purpose. Why are we holding this session? What are the
key objectives? ● Draw out all participants.
● Participants. Who needs to be involved, and what are their One keys to effective communication, especially during the
perspectives? Information Phase, is making sure everyone in the room has
the opportunity to hear what each and every participant has
● Product. What do we want to have produced once we are to say. The participants in the room are at the table for varying
done? How will we know whether we have been successful? reasons: intimate knowledge of the study subject, awareness
of outside influences that could affect the VM study, specific
● Process. What steps should we take during the meeting
technical expertise. They represent a part of a team. What
to achieve the purpose, given the product desired, the
one team member contributes all team members should hear.
participants, and the probable issues we will face?
That’s how participation and collaboration begin.
● Probable issues. What are the concerns that will likely Some facilitators establish “ground rules” with the group
arise? What are the “gotchas” that could prevent us from at the beginning of a workshop. An alternative approach,
creating the product and achieving the purpose? developed for ICA Associates, Inc. by Jo Nelson, Certified
Professional Facilitator and ICA Certified ToP™ Facilitator, is
Once the project materials are in hand, the VM facilitator should “working assumptions” (used with permission):
set about the task of creating and sustaining a participatory
environment. Distribute relevant materials to all VM study team ● Everyone has wisdom. (This doesn’t mean everything that
members. Schedule a meeting, in-person or virtual (telephone everyone says is wise. It means that behind what they say
and/or computer), with the VM study team, client, and stake- is wisdom, and we will listen for it.)
holders, to discuss project documents, VM study goals, and
● We need everyone’s wisdom for the wisest result. (In the
what is expected of each team member during the workshop.
same way that a diamond is more valuable when it is cut
Confirm the agenda and workshop logistics and clarify any
with more facets, what we come up with will be more valu-
open questions with the VM study team and stakeholders.
able when we have illuminated more facets of what we are
working with.)
132
● There are no wrong answers. (See number 1—behind what 12.7.1 Working with people unfamiliar with function analysis
may seem on the surface as a wrong answer – and I have Some of the biggest challenges to getting “novices” to under-
heard some that were positively evil on the surface—there stand the function analysis process include:
is wisdom, and that is what we will listen for. The corollary,
of course, is that there are no right answers, only the best ● Getting them to think abstractly; i.e., overcoming their
we can come up with given our limitations.) specialized, “technical” familiarity with the product,
project, process, service, or organization under study.
● The whole is greater than the sum of its parts. (Trite, yes,
but points to consensus as creating a larger answer that ● Helping them to understand how to express “active
is not identical to any one view but includes the wisdom verbs” and “measurable nouns.”
of many. Diamond image again. I think of compromise as
smaller than the sum of its parts, consensus as larger. Like ● Distinguishing clearly the difference between functions
a puzzle picture, which is the sum of the puzzle pieces and and activities.
their relationships. All puzzle pieces are included, or there
Multiple methods can help a team identify the functions of what-
is a hole.)
ever project, product, process, service, or organization is under
● Everyone will hear others and be heard. (This doesn’t mean study. The first challenge is helping them to understand how to
that everyone has to talk all the time—then nobody would express functions. You can provide them with a list of examples
be heard. It means listening to others as well as making of active verbs, measurable nouns, and non-measurable nouns.
sure your wisdom is on the table.) You can show them a FAST diagram from a prior project
and talk through the logic to demonstrate how the functions
If the Information Phase includes a visit to a project site or an interrelate. If you choose to do this, use a FAST diagram from
office or manufacturing floor where the process under study is a project completely different type than what you’re working
performed, keep the group together so everyone can hear what on to minimize any temptation to “adopt” functions from the
the host/guide explains, and everyone can hear questions and example diagram.
answers. It is important to manage time wisely during the site vis- You can ask questions about the function(s) of different
it, which can be challenging when subject matter experts wander things around the meeting room (a chair, a projector) or com-
off in search of areas or conversations specific to their discipline. pletely unrelated objects (a tire jack, for example) to get the
Finally, explain to the group that the Information Phase never conversation moving to a function-based dialogue.
truly stops during a VM study. The formal part of it concludes on Next, you want the team to generate functions applicable to
the first day of the workshop. As you continue facilitating the VM the project at hand. Begin by having the team randomly identify
Job Plan, the team will continue to uncover additional informa- functions (similar to a brainstorming session), writing each on
tion, whether that comes from identifying functions, question- a Post-It® note, put them on a flip chart in no particular order,
ing creative ideas, or delving into the details of a VM proposal. and kept for later use. You may also list the functions into a form
(displayed electronically or, perhaps, drawn on a flip chart) for
12.7 Facilitation of Function Analysis Phase later use in classifying the functions; but, the functions should
still be put on Post-It® notes at the same time.
techniques A team should identify functions, classify them, then—if time
Function analysis is the very heart of the Value Methodology. It is permits—develop a FAST diagram. Having the team arrange the
the unique tool that differentiates the Value Methodology from random functions into a FAST diagram helps to accomplish
all other improvement processes. It is the very thought process and/or refine the “classify” activity. As they work through and
that inspired the development of the VM Job Plan. And, it is the reach consensus on the function logic, the classification of
most challenging part of the VM process for practitioners to functions naturally occurs.
learn and master. Once mastered, it opens a whole new world
of opportunity for more open creativity, less opinionated/more 12.7.2 Facilitating development of a FAST diagram
objective judgment, and, above all, clearer communication. Developing a Function Analysis System Technique (FAST)
Chapter 6 goes into detail about how to perform function diagram can be challenging for the most experienced of VM
analysis and FAST diagramming. That chapter focuses on how facilitators. The subtle nuances of a particular project, the cli-
to facilitate those activities. So … you’ve learned how to per- ent’s terminology, and the potential language barriers among
form function analysis. And you’ve constructed a few Function participants in a VM study all combine to make the logic flow of
Analysis System Technique (FAST) diagrams. You might even a FAST diagram somewhat difficult to define.
be a Certified Value Specialist or on your way to achieving
that goal. Now, you’re about to lead a VM study with a team of
subject matter experts who’ve never had any VM training or
experience. How do you facilitate them through the function
analysis portion of the VM Job Plan?
133
VM Guide®
One approach to coaching a novice team through develop- sequence of steps to build the project instead of how
ing a FAST diagram is: the project meets the higher-order functions.
1. Put a flip chart page (or two together) on the wall. e. Watch for placement of functions that belong in the
category of “same time as” or “caused by”––this
2. Draw the HOW, WHY, and WHEN descriptors and the left tricky area takes coaching for novices to understand.
scope line.
f. Watch for “and/or” connection possibilities––anoth-
3. Label the spaces where the higher-order and basic er, sometimes confusing area for new folks.
functions are placed.
g. Make sure all team members are engaged and
4. Label the space where subject objectives, all-the-time participating.
functions, and one-time functions are to be placed.
h. Emphasize that not all the functions that were
5. Place the flip chart containing the randomly generated randomly generated will necessarily be used in the
functions (on Post-It® notes) next to the blank pages on function diagram. (There may be redundant functions,
the wall. for example, where only one should be used. There
are functions that are actually activities as opposed
6. If you did not previously show an example of a FAST
to functions). Note: Teams will attempt to force fit all
diagram, do so now and walk the team through the logic of
their randomly generated functions. This wastes time,
the diagram to help them understand its construction.
and you, the VM facilitator, should step in and coach.
7. Have all members of the team stand next to the flip chart
i. When the logic quits working, remind the team that a
pages and Post-It® notes with functions written on them
function may be missing, or one or more functions are
and coach them––don’t do it for them!––through develop-
in use that shouldn’t be (either don’t apply or are in
ing their FAST diagram.
the wrong place).
a. Have them start with identifying the basic function(s)
j. Have the team test the logic of their completed FAST
first, then working their way to the right asking the
diagram in both the HOW and WHY directions.
HOW questions.
8. Once the team is satisfied with the FAST diagram, draw
b. Once they have some portion of the diagram working
the connector lines.
logically to answer HOW, have them work from right
to left by asking the WHY questions to test and verify If the team gets stuck––debating placement of functions or
their logic. meanings of functions (words mean different things to different
people)––step in and help them clarify their intent by asking
c. Remind the team that the further to the right they
questions. Try rearranging the functions and talking team
progress, the lower the level of abstraction the
members through the logic to get to the bottom of their issue
functions become. They may even be moving into
and remove the roadblock.
activities and/or design details (i.e., “getting into
Facilitate—don’t manipulate! It’s especially important that
the weeds”). The function diagram is intended to
the FAST diagram represent the VM team’s consensus, not the
represent a high level of abstraction, metaphorically
VM facilitator’s or the client’s perspective or opinion. The team
speaking, a “30,000-foot-level” representation of the
needs to feel ownership of the product they created.
project scope.
Once function analysis is complete, whether or not a FAST
d. Listen carefully for words like “before” and “after” diagram is constructed, the team should allocate resources
and “next,” and constantly remind the team this is (cost, time, space, as applicable) to the functions to better
not a flowchart; there is no “before” and “after,” only determine where value opportunities exist. Refer to Chapter 6.
“how” and “why.” Similarly, be sure team members
do not confuse function logic with project delivery 12.8 Facilitation of Creative Phase techniques
logic, particularly for capital or manufacturing During the Creative Phase (see Chapter 7), it is important to
projects. Ultimately the FAST answers “what must it continue with and build on the participatory environment you
do” and “how does it do it.” The HOW question may created. Various techniques can draw out creative ideas and
lead participants down the path of discussing the reaping the benefit of all the participants in the room is crucial.
This is when some participants may be reluctant to speak out,
because they’re shy by nature, they fear being criticized, or
they don’t want to potentially contradict a boss, colleague,
or client representative. Sometimes cultural reasons explain
134
why individuals won’t contribute, for example, reticence out of Following are some tips for how to keep the conversations
deference to someone else in the room. It is the VM facilitator’s focused on evaluation of ideas:
role to evoke the group’s creativity, and there are multiple ways
to do so: ● Establish clear context for the session. Describe the
process(es) to be used, the time allotted, and the ultimate
● Encourage creative thinking, perhaps by giving the outcomes expected.
participants an example of a truly creative idea that came
out of a VM study on past project. ● Consider applying different evaluation techniques,
depending on the number of ideas generated in the
● Accept all ideas, bearing in mind that even if an idea is Creative Phase, the nature of the VM study subject, and
obviously not possible, it may trigger a really good idea in the VM study team’s dynamics
someone else’s mind (piggy-back effect).
● Actively listen, question, and summarize to elicit the
● Suggest visualization to stimulate ideas: “Imagine the last sense of the group. Don’t accept only one person’s
time you …” followed by “What did you wish could have evaluation of an idea.
happened or been done differently?”
● Recognize tangents (e.g., discussion of development
● Leverage past successes and challenges: “What lessons details) and redirect to the task.
learned inform how we might approach this?”
● Vary the pace of activities according to the needs
● Open up possibilities. Ask the group, “If you, individually, of the group. Recognize that different ideas require
could do anything at all to this project, without con- more or less time.
straints, what would that be?”
● Identify information the group needs and draw out data and
Take care to record every idea, whether on flip charts or elec- insight from the group. This may include questions directed
tronically, exactly as it stated by the participant. If the thought to the client, designer, user, or other stakeholder(s) that
isn’t clear, obtain clarification before writing it down. Do not must be answered before a true judgment may be made.
assume you know what the participant means or intends.
Make sure each idea is one complete, coherent thought, ● Help the group synthesize patterns, trends, root causes,
remembering that people who were not in the room will read and frameworks for action.
this list later and must be able to understand the concept as a
● Use a variety of approaches to achieve consensus.
standalone idea.
Reading body language during the Creative Phase becomes ● Adapt processes to changing situations and needs of the
somewhat challenging if you’re writing on a flip chart, which group.
puts your back to the room, or typing into a computer, which
takes your eyes off the room. Make sure you don’t lose the con- ● Assess and communicate group progress.
nection you’ve worked hard to establish with the participants,
because it will help them be more comfortable about offering ● Foster task completion.
ideas and will keep you more comfortable about interacting
Before proceeding to the Development Phase, the VM facilita-
with each one of them.
tor should have a “short list” of concepts to be developed into
VM proposals, and the participants should be comfortable with
12.9 Facilitation of Evaluation Phase the concepts on that list.
techniques
One of the IAF’s core competencies is “guide the group to 12.10 Facilitation of Development Phase
appropriate and useful outcomes.” While this competency techniques
might be interpreted to mean “use the VM Job Plan to guide
Once again, begin by establishing clear context for the session.
the group,” it seems to have a more specific application to the
Describe the process(es) to be used, the time allotted, and
facilitation of the Evaluation Phase. The goal of the Evaluation
the ultimate outcomes expected. As the team works through
Phase (described in detail in Chapter 8) is to pare down the list
of creative ideas and select those concepts that appear feasi-
ble for development into specific VM proposals.
135
VM Guide®
developing their value improving proposals, make yourself for example, “alternative” may not be appropriate in some envi-
available to: ronments, so consider using “proposal” or “VM concept.”
Keep the presentation focused on the informational aspect
● Answer questions. of its nature; i.e., remind participants that this is not a meeting
during which to make decisions. Consider framing the presen-
● Perform research on their behalf.
tation as a “preview” of what will follow in the VM study report.
● Review and guide how they complete their forms, watch-
ing for consistency in how information is presented and 12.12 Facilitation of Implementation Phase
for clarity of concept. techniques
As the facilitator, it is not your role to write up the VM propos- More specific guidance related to the Implementation Phase is
als. You are responsible for coaching and guiding the team contained in Chapter 11. In many cases, the VM study team and
members. Make sure to gauge how the team is progressing, facilitator are not involved in implementation activities. When
reminding them as appropriate of targeted completion times. they are, it is usually in the form of facilitating a meeting for the
Once the Development Phase (see Chapter 9) is complete, purpose of documenting decisions (accept, partially accept,
work with the group to either: accept modified, reject, or further study) related to the VM pro-
posals that were generated by the VM study team. This meeting
● Have them review and comment on each other’s work, or may occur in person with only a few of the VM study team mem-
bers. Select participants from the VM study based on the major
● Project each VM proposal on screen and conduct a group proposals put forth by the VM study team and/or the feedback
review and editing process. received from the client and decision makers. In other cases, the
meeting may happen via telephone or web conference. Regard-
Remember, the developed VM proposals should represent
less, it helps if the VM facilitator includes a description of what’s
team consensus.
expected from the owner(s), stakeholder(s), study sponsor(s),
etc.––the decision makers––in a letter accompanying the VM
12.11 Facilitation of Presentation Phase study report. Detailed descriptions as to what kinds of respons-
techniques es the decision makers are supposed to deliver go a long way
More specific guidance related to the Presentation Phase is toward improving the flow and outcome of the Implementation
contained in Chapter 10. A VM study typically concludes with a Meeting and bringing closure to the VM study.
presentation of the VM study results, or highlights thereof, to the Because some of those on the decision-making side may
study sponsor(s), client(s), and stakeholders. The presentation not have read the details of all the VM proposals and may at-
may take a variety of forms. Facilitation of this phase requires: tempt to make their decisions based solely on proposal titles,
the presence of the VM study team members’ presence serves
● Identification of information to be presented. a purpose. It is up to the VM facilitator and appropriate team
members to re-educate the owners/designers/stakeholders
● Assignment(s) to various individuals as to who will about the ideas. This may include a facilitated discussion
present what. among various stakeholders to help them come to consensus.
The VM facilitator documents decisions, he or she does not
● Clear definition of expectations, such as:
participate in the execution thereof. Including details of how
○ Purpose of the meeting, implementation may occur is helpful as well. For example, in
a manufacturing scenario or an in-house business process
○ How long everyone has to speak, improvement study, a clear implementation plan with assigned
tasks and schedules might be completed at the implementa-
○ What will happen if audience discussion digresses to tion meeting.
the topic of implementation issues, and Finally, based on client/customer preferences, a modified VM
study report (or an addendum to the original report) may be pro-
○ How long the overall meeting will last.
duced to reflect the outcomes of the implementation meeting.
Limiting team members’ presentations to their allotted times
sometimes poses a challenge, even though that was discussed
during preparation. Be prepared to signal and/or gently inter-
rupt the presentation or associated discussion to keep the
meeting on track.
Always be ready to deal with surprises, especially now that
the team, sponsor/client, and stakeholders have some familiar-
ity with one another. Clarify misunderstandings of process and
raise participants’ comfort level. Modify terminology, if needed;
136
12.13 References
● Bunker, B and Alban, B. Large Group Interventions:
Engaging the Whole System for Rapid Change, 1996.
● International Association of Facilitators: http://www.

iaf-world.org
● Kaner, Sam. Facilitator's Guide to Participatory Deci-

sion-Making. Jossey-bass Business & Management Series,
2014.
● Kreitner, R. and Kinicki, A. Organizational Behavior, 7th

edition, New York, NY: McGraw-Hill Publishing, 2007.
● www.liberatingstructures.com.
● Mullen, B. and Copper, C. “The Relation Between Group

Cohesiveness and Performance: An Integration.”
Psychological Bulletin, 115(2), 210, 1994. Retrieved from
Academic Search Complete database December 8, 2009.
● Tuckman, Bruce W. “Developmental sequence in small

groups.” Psychological Bulletin, 63, pp 384-399, 1965.
The article was reprinted in Group Facilitation: A Research
and Applications Journal, No. 3, Spring 2001, and is
available as a Word document: http://dennislearningcen-
ter.osu.edu/references/GROUP%20DEV%20ARTICLE.
doc. Accessed December 5, 2009.
● Tuckman, Bruce W. and Jensen, Mary Ann C. “Stages of

Small Group Development Revisited.” Group and Orga-
nizational Studies, 2, pp 419- 427, 1977. Retrieved from
http://gom.sagepub.com by guest on December 5, 2009.
● Wilkinson, Michael. The Secrets of Facilitation, The

S.M.A.R.T. Guide to Getting Results with Groups, Jossey-
Bass, 2004
● R. Paul and L. Elder. A Thinker’s Guide to the Art of

Socratic Questioning, Dillon Beach, CA: Foundation for
Critical Thinking, Dillon Beach, 2006.
137
VM Guide®
138
13
VM Programs
13.0 Introduction 13.2.1 VM program manager

Within an organization, a Value Methodology (VM) program VM programs normally have at least one person designated as
involves the establishment and maintenance of processes and the VM program manager. Sometimes this is a dedicated posi-
procedures; planning and execution of VM studies and related tion, but it can also be accomplished as part of another role.
VM activities; records management; education and training; For example, a quality manager, cost manager, plant manager,
advocacy; continuous improvement; and reporting. The VM product manager, etc., might all be VM program managers as
program also monitors and tracks the “lessons learned” of part of their described roles and responsibilities. The VM pro-
each VM study, each VM proposal, and each VM study team. gram manager is responsible for ensuring that all VM studies
The VM program manager drafts, implements, and maintains are properly performed, tracked, evaluated, implemented, and
the policies, procedures, and standards for the value program. monitored. The VM program manager creates and implements
This chapter provides an overview and recommended ele- organizational policy, standard operating procedures, and
ments to maintain an effective VM program. processes related to the VM program. This person answers the
following questions:
13.1 Terms and definitions ● What type of project, product, system, or process is
required to have a VM study?
13.1.1 Value engineering change proposal (VECP)
A change submitted by a contractor, pursuant to a contract ● What type of VM study team is required? (In-house or consul-
provision, to improve the value of the project or product under tant? Types of team members? Full week, or other duration?)
contract. VECPs are a vehicle to incentivize contractor innova-
● What materials are required for the VM study? Where are
tion and are commonly used in public sector contracts.
the materials?
13.1.2 VM program
● Where will the VM study take place?
A program within an organization that manages, implements,
tracks, educates, trains, and advocates for the Value Method- ● When will the VM study take place?
ology within the organization.
● Who in the project, process, product, etc., management team
13.1.3 VM program manager will attend the VM study, and when will they be required?
The individual responsible for directing, leading, and managing
● How will the results of the VM study be reviewed/imple-
an organization’s VM program.
mented?
13.2 VM program elements ● What are the VM study results and how well did the study
The components to a VM program. These are described and meet organizational goals?
defined in this section. The most successful VM programs use
most, if not all, these aspects. However, even programs that ● What are the results of the VM program as a whole – is it
only use a few aspects can be effective and advantageous to successful, does it meet the organizational goals? Where
the organization. This section outlines the major program ele- are the issues related to the VM program, and who can
ments that must be considered. help resolve these issues?
139
VM Guide®
Key attributes required for the VM program manager are: 13.2.2 Policies, standards, and procedures
Every VM program should have some formally written mission,
● An ability to foster and encourage innovative thinking.
goals, standard operating procedures, guidelines, or descrip-
● Respect within the organization as being fair, technically tion of what and how the VM program will be performed in the
competent, and a strong team player, and leader. organization. Organizational policies can be as simple as a
single sentence directing VM to be used as part of its standard
● A strong ability to influence and communicate effectively. operating procedures to detailed and extensive sets of stan-
● The ability to see the organizational big picture without get- dards and procedures. The VM program manager should be
ting lost in the weeds of an issue or specific subject details. review and update them a periodic basis.
● Knowledge of where to go in the organization to find The VM policy should identify:

information or answers to questions.
● Rationale for initiating the VM program;
The VM program manager faces many challenges, which include:
● Goals and objectives of the VM program;
● Reluctant managers who see the VM study as an impedi- ● Organizational position and funding sources for the VM
ment to doing their jobs. program;
● Fear among the “owners” of the subject of the VM study, ● Authority and reporting structure related to the VM
who believe that the VM study team and/or VM process program; and,
is designed to make them look bad or as not performing
their jobs correctly. ● VM program manager and contact information.
● Management who do not understand how the VM program Professional VM standards should be clearly established. SAVE
can assist or improve a study subject. International® strongly recommends that this VM Guide® be
identified as the standard for all organizations. This sets the
● Lack of organizational support for the program. bar for accepted standards of practice and identifies effective
● Resistance to change, on many if not all levels within the practices and techniques. Standard operating procedures
organization. should be identified for the VM program and consider:
● “Competition” with VM from other value improving programs, ● A process for identifying subjects for VM studies (see
methods, and techniques (e.g., Lean, 6-Sigma, TRIZ, etc.). Section 13.4.1).
Regardless of sector, some key strategies, if implemented, ● A process for identifying appropriate timing for VM
can make a VM program manager extremely successful. These studies (see Section 13.4.2).
strategies include: ● VM study coordination procedures.
● A strong VM program champion or sponsor at the highest ● VM study subject information requirements and collec-
levels of the organization. Sometimes, this must be “grown” tion procedures.
by educating a likely champion on what the program can
● VM study communications procedures.
be and what can be accomplished. Some successful VM
program managers use an invitation to speak about the ● VM study performance procedures.
value program at a conference or seminar to educate se-
● VM study reporting procedures.
nior level manages about the program.
● VM proposal implementation procedures.
● Using every opportunity (including, staff meetings, internal
company newsletters, correspondence with senior and ● VM study auditing and performance reporting procedures.
subordinate peers, awards, etc.) to promote the value pro- ● VM program continuous improvement efforts.
gram and highlight the benefits and great results.
● Communicating the benefits of the VM program and articulating 13.2.3 VM program champion
how they achieve the goals and objectives of the organization. The VM program champion is a senior level manager near the
● Incorporating the use and results of a VM program as an top of the organizational hierarchy who supports, sponsors,
expectation to achieve the organization’s key performance and actively engages with the VM program manager and en-
indicators (KPIs). sures that there is organizational support for the VM program.
The champion may support the VM program through one or
● Using the VM program to complement other processes, more of the following actions:
like continuous improvement, Lean, product and process
development, etc.
140
13. VM Programs
● Encouraging value-focused innovation and the use of VM in ▸ Names and contact information of key personnel
problem-solving. related to the subject
● Actively engaging in the VM program (e.g., attends presen- ▸ Identification of delivery or contracting methods (if
tations related to VM studies). applicable)
○ Information on the cost of the subject
● Making the VM program a priority and insisting that it is used.
▸ Budget
● Arbitrating and generally supporting the VM program man-
▸ Estimated costs (broken down as appropriate to
ager if there are any in-house disagreements over the need
the subject)
for the VM program or a study.
○ Information on when the VM study is performed
● Providing and/or advocating for the resources needed for
▸ The stage of the subject within its life cycle
the VM program.
▸ Other schedule information (previous or subse-
● Assisting in marketing the need for the VM program. quent activities or milestones)
● Promoting the benefits of VM in achieving the organiza- ○ Information on the VM study
tion’s goals and supporting KPIs. ▸ Facilitation of VM study (in-house or external)
● Recognizing the VM study team’s accomplishments and ▸ VM study team (in-house or external)
that of the VM program. ▸ VM study team participants
▸ VM study budget
13.2.4 VM program information tracking and key ▸ Duration of VM study
performance indicators ▸ Name and contact information of VM study facilitator
Every VM study should be tracked to determine the effective- ▸ Anticipated VM study costs
ness (or lack thereof) of the VM study. Key performance indica- ▸ Anticipated internal organization support costs
tors (KPIs) measure the benefits of the VM program and aid in ▸ Total VM study costs
showing why the VM program is beneficial for the organization.
▸ Date of VM study
KPIs can track the performance of VM study facilitators, VM
study teams, and contractors or in-house performers of the VM ○ Results of the VM study
studies. This helps the VM program manager determine if any ▸ Number of creative ideas
changes to the program are needed. For example, if one par- ▸ Number of VM proposals
ticular VM study team or facilitator fails to achieve acceptable
▸ Proposed VM proposal KPIs (could be any or all of
results in their studies, then the VM program manager can see
these)
this via the metrics and determine if the team should be used
in future studies or if maybe there are internal issues that need ● Proposed initial cost savings
to be resolved before any future studies.
● Proposed life-cycle cost savings
The list below includes some of the information and KPIs
that can be tracked to help achieve a successful VM program. ● Total proposed savings
This is not a complete list. Each VM program manager should
● Proposed time/schedule savings
add to or subtract from this list to reflect the critical metrics of
their organization and the items contained in their specific VM ● Proposed performance or quality benefits
program studies.
● Proposed risk reduction
● Summary information for each VM study performed vby
○ VM proposal implementation information
the organization
▸ Names and contact information of individuals
○ Identifiers of VM study subject:
responsible for the implementation of accepted VM
▸ Subject identifier number proposals
▸ Location of the subject ▸ Number of accepted VM proposals
▸ Title of subject ▸ Accepted VM proposal KPIs (same as proposed)
○ General identification for future sorting information ▸ Rationale for rejection of VM proposals
on the subject ▸ Implementation schedule
▸ Name of the manager in charge of the subject ▸ Implementation status
▸ Subject type: project, product, process, service, or ▸ Implementation costs
organization
▸ Final validation of KPIs.
141
VM Guide®
13.2.5 Qualified VM facilitator and team members ● Establish clear lines of accountability and authority. As
One of the most critical aspects of managing a successful VM a catalyst for change, care must be given to establishing
program is determining who should be on the VM study team lines of authority between the VM program and upper
and who will lead the team. A Certified Value Specialist® can management. Recommended changes that emanate from
lead any VM study and get good results. That said, it is up to the a VM program will require direct support from upper man-
VM program manager to make the study successful by select- agement who have the authority to make decisions related
ing the right VM facilitator (i.e., CVS) along with the right team. to implementation and the expenditure of organizational
If team members or the organization’s senior managers per- resources to see them through. Decision makers should
ceive the selected VM facilitator to not have the appropriate be held accountable for decisions to accept or reject rec-
background or to not have a clear, basic understanding of the ommendations. This transparency is important in building
subject being studied, then the facilitator will have an extreme- trust within the organization.
ly difficult time convincing them that the results of the study
● Seek a location that supports customers and stakeholder
are worth listening to or considering. Diversity or a variety of
interests. VM programs are better positioned for success
opinions is critical to the success of the VM study.
when they align with customer and stakeholder interests.
A key question to ask when considering the participants on
After all, VM should be focused on the voice of the custom-
a VM study is: Should in-house resources be used? Should out-
er; therefore, isolation is dangerous.
side subject matter experts be hired to conduct the VM study?
Would a mix of in-house and outside resources be a better
option? Regardless of who participates in the VM study, it is 13.3.2 Integration with other programs
important to avoid potential conflicts of interest. Consideration should be given relative to how a VM program
Using in-house resources is critical, particularly in manu- should interface with other value enhancing methods and
facturing or production applications—especially since the or- related programs. VM shares many characteristics of other
ganization will not want to lose a competitive advantage. Also value enhancing methods and can work quite well with such
when a VM study is used to find a different (innovative) solution, programs. For example:
in-house resources can be especially effective in creating sup-
port in public organizations. In these cases, the VM program ● Some organizations locate their VM program at a higher,
manager should determine if the existing internal product executive level in conjunction with other strategic
team can work through the VM study, or if an internal team not management activities.
assigned to the product should perform the study. This is not
an all-or-nothing scenario: many effective VM studies are per- ● Public agencies that deliver capital projects often locate
formed by a mix of internal team members with a few outside VM with related activities such as risk analysis, construc-
the product team experts to “challenge” the status quo. tability review, and project controls. These activities
and programs are generally concerned with managing
quality, schedule, cost, and risk; and, all tie nicely into
13.3 VM program development
the VM concept. Many organizations use VM as a project
control activity and embed these types of activities into
13.3.1 Location within the organization
VM studies.
The placement of the VM program within an organization
requires careful consideration. VM, by its nature, precipitates ● Private sector organizations sometimes co-locate VM with
change. The cultures of all organizations, to some degree, internal entities that perform other improvement process-
resist change. Therefore, if a VM program is to be successful es, such as Lean, Six-Sigma, and quality practices.
in its goal of improving value, then it must be positioned within
the organization in such a manner that it succeeds in ensuring
effective implementation of the necessary changes. 13.3.3 Authority and reporting structures
Locating a VM program within an organization requires con- Levels of authority relative to the VM program need to be clearly es-
sideration of the following factors: tablished to reduce the potential for internal resistance to change.
Typically, the following levels of authority should be defined:
● Avoid “departmentalization.” The VM program should not be
pigeon-holed as being “owned” by any function or depart- ● VM study planning authority. Define how VM studies are
ment. For example, if a VM program is located within a man- planned and programmed within the organization for the
ufacturing company’s “engineering” department, then other fiscal year. This should include how the VM studies will be
departments will likely view it as an engineering endeavor. funded by the organization.
Because value is holistic, care must be taken to avoid cre-
ating the perception of VM as the tool or service of a specific ● VM study initiation authority. Define who within the
entity within the organization. That undesired perception organization can initiate a VM study. The decision to
engenders mistrust by other facets of the organization and conduct a study requires the expenditure of staff time
creates internal roadblocks to implementation.
142
13. VM Programs
and resources. Consider how personnel are assigned to ● All personnel. Consideration should be given to developing
studies and how their time is accounted for. a brief overview of the VM program, including information
on the process, goals and objectives, key personnel, and
● VM proposal decision authority. Define who has the deci- anticipated levels of employee participation. This general
sion-making authority to approve or reject VM proposals training could be delivered in a variety of formats, includ-
emanating from VM study efforts. Consider how the costs ing presentations, videos, webinars, or other such meth-
to implement changes are accounted for and how they ods. Consideration should be given to introducing new
are funded. employees to innovative practices and thinking through
VM training.
● In addition to determining levels of authority, the VM
program should also clearly define how VM study efforts ● VM study subject sponsor. Those who intend to serve as the
are reported and to what level. The level of documenta- champions of the VM program should be provided with an
tion required is important, and the VM program should executive overview of VM, the structure of the VM program,
coordinate with the various internal stakeholders on what organizational roles and responsibilities, and their roles in
information is needed to support the decision-making communicating the importance of the VM program. Further,
process. This includes documentation of Preparation upper management should be asked to commit to time for
Phase activities; VM study reports; VM proposal imple- key activities, specifically related to establishing policy and
mentation activities; and tracking and monitoring VM removing organizational roadblocks.
proposal implementation.
● VM study team members. Individuals within the organiza-
tion who may be involved as team members on a VM study
13.3.4 Organizational awareness and training
should receive some basic training relative to the VM Job
Building organizational awareness relative to a VM program plan and major supporting techniques. This training could
requires effort and is essential to its long-term success. The be in the form of a Value Methodology Fundamentals
presence and purpose of a VM program should be clearly com- course accredited by SAVE International®.
municated throughout the organization. The organization’s
decision to make an investment in VM provides a significant ● VM study subject managers (management). Those respon-
opportunity for the entire organization to both participate in sible for managing the projects, products, processes,
and benefit from it. Several activities are recommended along organizations, or services that will be subjected to a VM
these lines: study should be provided specialized training to help them
better understand the Value Methodology and their roles
● Upper management should champion the creation and and responsibilities, and to communicate the potential
continued advocacy of the program and communicate benefits that can be derived from VM studies. Education
it throughout the organization. The organization should helps reduce the potential for resistance to change and
understand the purpose and objectives of the program, remove uncertainty and fear related to the changes ema-
an overview of how it functions, and what it means for its nating from VM.
employees and customers.
● VM program managers. Those involved in managing the
● VM program activities and performance should be regular- VM program should complete both Value Methodology
ly communicated. This can be through newsletters, emails, Fundamentals courses and supplement them with active
blogs, or other internal and external communications. participation in professional value societies such as SAVE
International®. One of the best forms of education is net-
● Share applications and experiences by supporting related
working with VM program managers in other organizations
communities of practice to advocate the use of VM.
to discuss issues, challenges, and effective management
● Awards and recognition should be considered to acknowl- strategies with their colleagues.
edge outstanding efforts and achievements made through
the VM program to encourage continued success.
13.4 VM program management
● Innovation emanating from a VM program should be
communicated to customers and stakeholders. This is 13.4.1 Selecting subjects for VM studies
an excellent opportunity to market value being added Identifying the right subject or parts of a subject (if it is of sub-
through VM. stantial size, cost, or complexity) is the first challenge in pre-
paring for a VM study. In most cases, the need for a VM study on
Training and education are another key consideration. The fol-
a specific project will be obvious.
lowing information outlines the level of training and education
In large organizations where there are either limited funds
that should be considered for people within the organization.
to conduct VM studies or simply too many potential projects
143
VM Guide®
to choose from, it may be necessary to select projects that will ● Design-to-cost targeting. A cost model that establishes
offer the greatest return on investment. cost targets for each element of a project readily shows
In the situations described above, a program to stimulate which elements exceed the budget. This information can
the generation of items for VM studies is essential, particularly be determined at any stage of design and serve as a warn-
during the early stages of a VM program. As personnel become ing to the VM program manager to concentrate effort on
more familiar with VM and its benefits, generation of good those elements.
study areas becomes automatic, making formal methods of
generation less essential. ● Pareto analysis. As described earlier in this Guide, Pareto
analysis can be applied to an organization’s portfolio.
The following techniques may be used: Projects, programs and other initiatives that possess 80
percent of the total portfolio value may be attractive sub-
● Thresholds. Many organizations adopt a simple threshold, jects for VM studies.
usually based on cost, to determine which subjects are se-
lected for VM studies. This is particularly common within ● Spatial cost analysis. This method assumes that area or
public agencies. For example, an agency could state that volumetric costs (e.g., square feet, cubic meters) are a di-
any project over $10 million in estimated costs requires a rect index of design efficiency. This method is particularly
VM study be performed on it. useful in construction applications. A design having a high
cost per square foot is assumed to be less efficient than
● Cost models. Cost data is an excellent source of informa- one with a lower unit cost. The assumption is not neces-
tion available to most organizations. This can take the form sarily true. For example, a poorly designed building with an
of historical or parametric cost data on past construction excessive amount of wasted space may spread the cost
projects, bills of materials for product lines, or resource of expensive items (e.g, plumbing fixtures, kitchens, me-
reports for business processes. Summaries of such cost chanical, and electrical spaces) over a larger area, thereby
data are frequently available and often continuously lowering the per-square-foot cost. On the other hand, in
updated, based on information obtained on an organiza- an efficiently planned building with a minimum of wasted
tion-wide reporting system. Cost data gleaned from this space, the cost per square foot will be higher, although the
information can be organized in the form of cost models. overall cost of the building will be less. Similarly, the enclo-
When applied to a meaningful population of comparative sure method of estimating compares the cost per square
costs, a cost model can enable management to identify foot of the original design with unit costs of alternatives
the high cost areas within a project. These areas may be based on total surfaces enclosed. “Enclosure,” as used
earmarked for VM study. here, means any surfaces such as floors, walls, partitions,
roof systems, columns, piers, stairs, railings, and similar
● Publicizing the need. The VM program manager should items. Thus, the cost of the alternative design, which has,
explain to the organization what types of studies are want- let us say, 25 percent less surface area in the form of fewer
ed and the criteria used for selection. An invitation to all partitions and so on, would be assumed to cost 25 percent
personnel to submit suggested projects and items to the less. This method can be used to quickly determine the
VM program manager usually provides strong results. probable cost of alternatives early in the VM process.
● Quotas and project generation teams. Periodically issuing ● FAST diagrams. As discussed earlier in this Guide, FAST
instructions to internal departments or divisions within the diagrams provide a graphic portrayal of the interrelation-
organization to submit a given number of projects for study ship of the functions of any project. On massively scaled
by a specific date can result in a healthy number of items. projects, such as a mass transit system or a complex man-
Appointing a team of roughly four people to brainstorm an ufactured item such as a vehicle, FAST diagrams are useful
assigned design for high VM study potential usually results for revealing key functional areas on which VM studies can
in numerous worthwhile projects for study. focus. They permit the analyst to see where simplifications
can be achieved. The process for using FAST diagrams to
● Standing VM committee. A committee of top personnel
aid in identifying candidates for value analysis is covered
who meets periodically to select items or areas for study is
in detail in Chapter 6 – Function Analysis Phase.
likely to produce a good list of candidate studies. Studies
originating from these sources have a better than average ● Some U.S. federal and state regulatory agencies require
chance of implementation because they will have been se- VM regardless of project cost.
lected by the individuals who are also the decision makers.
144
13. VM Programs
Each system and subsystem must be examined to identify program manager or face one-off projects. It is the VM program
high-cost elements which then become prime candidates for manager’s responsibility to ensure that all projects are consid-
study. For each such item, the following questions provide ered for a share of the available VM effort.
further guidance: When should VM be applied to a project? Theoretically,
VM can be applied at any time during a subject’s life cycle,
● Is the item expensive? from conception to completion and eventual replacement.
More practically, VM should be applied at specific phases of a
● Is it complex?
subject’s development in order to achieve maximum results.
● Is it a high-volume item? Can a simple change in one item The discussion below applies broadly to projects, products,
produce large savings within the total project? processes, services, and organizations; however, it is most
relevant for projects.
● Does it use critical materials? Some VM studies are intended to help the organization in a
different way. Sometimes, a VM study does not have the objec-
● Is it a long-lead item? tive to change the design or reduce cost, but may be used to
explain or validate the design to a new team of stakeholders
● Is it difficult to construct or does it require specialized
that has not yet been involved in the project or development of
skills to create?
the subject. In this case, the Creativity Phase may be used to
● Does it have high maintenance and/or operations costs? find small improvements but not big changes in design. If the
main purpose of a study is to have people engaged and con-
● Does it use obsolete materials and methods? nected to the subject, timing is important, too: too early and
people can’t yet fully work on the project; too late and com-
● Are costs simply “out of line?” plaints about the design are so many that the VM study turns
into a negative atmosphere of endeavor.
● Was the design rushed?
● Is there a high degree of risk or uncertainty related to

performance, cost, or time?
● Would the consequences of failure be catastrophic?
● Does it suffer from performance problems?
● Is it a state-of-the-art component with a low level of

proven acceptance?
● Are life-cycle costs unacceptable?
● Does it contain redundant features?
● Does it create an unwanted function of high future cost?
● Does it use traditional design?
● Is the competition producing the item at a lower cost?
● Does top management want improvement?
13.4.2 Timing of VM studies

It is often the responsibility of the VM program manager to
ensure that VM studies are performed at the right times.
This requires awareness of the benefits that can be achieved
through the VM process and the necessity to incorporate them
at optimal times. For example, oftentimes projects are too far
along in their development when a VM study is performed. A VM
study performed for a project that is 95 percent designed, and
nearly ready for construction will not fully realize the benefits
of VM had the VM study been performed at the 10 – 15% design
level. This failure results when organizations do not have a VM
145
VM Guide®
13.4.2.1 Planning phase accounts for design effort at about 5 percent of the total
The first application of the VM effort should be made during cost, but the impact of design accounts for about 70
the subject’s planning or inception phase. This is the point percent or more of the product cost. That is, typically, 70
in the subject’s life cycle where maximum flexibility exists percent of costs are committed by the time the design is
to make changes without incurring undue expenses for “frozen.” So, the earlier in the design cycle VM is used, the
redesign. For projects, as development progresses, the greater the opportunity to reduce or avoid costs. Thus, it is
cost to make changes increases until a point-of-no-return apparent that a VM analysis made during the planning
is reached and the cost of redesigning, reordering, and stage has a tremendous potential for improving value.
rescheduling overwhelm the potential benefits. This is At this stage, the VM effort can help the owner establish their
shown in Figure 13.1 . Early in the concept phase, a true requirements. This requires a complete understanding of
budgetary estimate is produced, which defines goals, the basic function to be performed by the project. Dialogue
requirements, and applicable criteria. The project’s owner between the VM facilitator, the VM study sponsor, the
establishes most of this input and makes it available to the financer, main organization, and the subject team must be
project development team. The project team, in turn, systematic and thorough. When applying VM, take nothing for
establishes broad objectives and a cost framework, which granted, question everything, and insist on the justification
become the budgetary estimate. of all requirements. The project team should welcome this
Studies show that the project team has, by far, the process, as it helps them understand the owner’s and user’s
largest impact on the total life-cycle cost of a project. The true requirements and minimizes ambiguity.
owner, too, has a significant impact on costs by establishing
13.4.2.2 Design phases
requirements which become the basis for the project
development team’s efforts. Between them, the owner and As subject development advances from the planning
the project team establish roughly 70 percent of the total stages to the final development stages, the VM effort
life-cycle cost of the project by the end of the project should keep pace. Preferably, the VM facilitator should
planning stage. The automotive industry uses the picture accompany each project milestone in order to provide
in Figure 13.2 to describe how traditional costing continuous guidance to the project team and ensure
HIGH
Potential Benefits
Value
Break Even Point
Cost of Changes
Planning Design Acquisition

LOW
Project Life Cycle
Figure 13.1 – Potential for cost savings over project life cycle.
146
13. VM Programs
Cost
5% 50% 15% 30%
Product Design Materials Labor Overhead
70% 20% 5% 5%
Influence
Figure 13.2 – Comparing the design team’s influence versus traditional accounting
that value judgments are brought to the attention of the requirement clauses provide a means for sharing cost
owner for decision. At a minimum, VM studies should be savings between contractors and owners.
performed early in the design stages and accompany The application of VM during the construction of new
the preliminary milestones. At this point, development facilities is standard practice among major public agencies,
decisions have been made that permit a reasonable degree such as the U.S. Army Corps of Engineers. Contractors receive
of exactitude in determining initial costs. Additional VM incentives to identify and develop proposals to reduce costs
studies can profitably be performed as late as the final and/or improve performance after the construction contract
development phase, although the elements that can be has been awarded. This can also be used in manufacturing
changed without inordinate delays and costly redesign applications where components of an assembly are
expenses are limited. subcontracted for production. In this case, vendors
and subcontractors receive a cash incentive to develop
13.4.2.3 Acquisition phase innovations that reduce cost and/or increase performance.
The VM effort can also be applied during the acquisition A great many variations of VM contract provisions are
phase (production, construction, or implementation) of in current use, but there are only two basic types. They
the subject. This arises from two possible situations: are commonly known as the value engineering incentive
when an item has been identified by an earlier VM study clause and the value program requirements clause.
and needs further investigation before a decision can be
made; and, when the contractor, manufacturer, or vendor 13.4.2.4 Value engineering incentive clause
identifies areas that they believe can be improved. The The method normally used for soliciting contractor or
first situation may arise when, for example, an item has vendor input is the value engineering incentive clause.
been identified for improvement by the VM effort during This general provision to construction and production
the preliminary project development phase, but the item contracts solicits the contractor’s or vendor’s proposals
requires testing or research before a decision can be for change through an instrument known as a value
made. Even afterward, due to the delays inherent in such engineering change proposal (VECP). It calls for the owner
a process, it may be profitable to pursue a VM effort when and contractor to share the savings that result from any
the potential savings and performance improvements are approved and implemented VECP. The usual savings
of significant magnitude. Value incentive and program sharing rate is 50:50; however, this may be varied in the
147
VM Guide®
contract provisions as desired. An acceptable VECP must Several key features cause VM programs to fail. Some of
meet two tests: it must require a change in some contract these have been discussed previously:
provision, and it must reduce the contract price. A
complete VECP should contain information similar to a VM ● Failure to adhere to the VM Job Plan;
proposal, as discussed in Chapter 9 – Development Phase.
● Failure to apply VM techniques properly, especially
13.4.2.5 VM program requirements clause function analysis;
A VM program requirement clause requires the contractor ● Failure to locate the VM program in the right place within
to perform VM studies to a specified level, paid by the the organization;
owner as a separate item of work under the contract.
Clauses with program requirement provisions may also ● Failure to assign a VM program manager and provide support;
permit incentive sharing for individual proposals, but the
contractor’s proportion of the savings is considerably ● Lack of a strong implementation and change management
smaller than under an incentive provision. process;
The principal reason for the program requirement
● Lack of a strong reporting process;
approach is to ensure continuous consideration of
potential innovations, beginning with the initial project ● Failure of the organization to communicate the benefits of
development stages. Construction contracts do not use VM and educate the appropriate people and ensure that it
this type of clause to any significant degree. It is more is aligned with the organization’s KPIs.;
appropriate for research and development and supply
contracts, and it has been very successful in these ● Failure to ensure that the designer and consulting
applications. In a comparatively recent construction- community maintain the proper VM training, certification,
related innovation; however, agencies such as the U.S. and professional standards;
Army Corps of Engineers, the Environmental Protection
Agency, and the General Services Administration have ● Failure to understand that implementing potential alterna-
established modified value program requirements for tives into design will generally require additional funding;
architect-engineer and construction manager contracts
● Lack of emphasis on total value or overemphasis on cost
for major facilities.
reduction;
13.4.3 Sustaining a VM program ● Failure to account for life-cycle costs and total cost of
One of the key components of a successful VM program is the ownership;
need for a strong implementation process that is both trans-
parent and assigns accountability. Many programs succeed ● Failure to integrate risk as a key component of value
in the performance of VM studies and identification of good management;
potential alternatives, but they fail to successfully implement
the recommended changes. ● Internal resistance to change; and,
● Lack of executive management support and involvement.
The long-term success of any VM program depends upon effec-

tive succession planning, internal training and retention, and
appropriate transfer of institutional knowledge.
148
Appendix A. Glossary of Terms
Appendix
A
Glossary of Terms
Activity –
A specific task, action, or operation that describes Consultant –
One who gives professional advice or services.
how a function is performed. For example, the activity
“pour coffee” describes how the function “dispense liq- Convergent thinking – A mental process that focuses on
uid” is performed. Activities are the means leading to the coming up with the single, well-established answer to a
attainment of a function. problem. It is synonymous with the term “critical” thinking.
Annuity – A series of payments made at equal intervals. Ex- Cost-benefit analysis (CBA) – A method used to ascertain the
amples of annuities used in the Development Phase and soundness of any investment opportunity and provide a
relative to life-cycle cost analysis include yearly insurance basis for making comparisons with other such proposals.
premiums, monthly mortgage payments, annual energy All the positives and negatives of the VM study subject are
costs, insurance, licenses, etc. first quantified in monetary terms and then adjusted for their
time-value to obtain correct estimates for conducting a CBA.
Balanced scorecard – A technique used to document and
communicate the objectives, related key performance Cost, initial –
The expenditure of all the resources needed to
indicators and targets, and anticipated outcomes of an design, deliver, produce, or establish a project, product,
organization (and/or its projects, products, and services). process, service, or organization. Cost has different di-
mensions that can be measured by factors such as mate-
Break-even point – The sales amount—in either unit (quantity) or rials, labor, equipment, time, risk, etc. and be quantified in
revenue (sales) terms—that is required to cover total costs, currency. Cost should not be confused with “price,” which
consisting of both fixed and variable costs to the organization. is the amount of money exchanged or set as consideration
for the sale of something. Initial cost is also frequently
Change management – A collective term for all approaches referred to as “capital cost.”
to prepare and support individuals, teams, and organiza-
tions in implementing change. The most common change Cost, life-cycle (LCC) –
The sum of all recurring and one-time
drivers include: technological evolution, process reviews, (non-recurring) costs over the full lifespan or a specified
crises, changes in consumer habits, pressure from new period of a project, product, process, service, or orga-
business entrants, acquisitions, mergers, and organiza- nization. It includes the initial costs, operating costs,
tional restructuring. It includes methods that redirect or maintenance and upgrade costs, and remaining (residual
redefine the use of resources, business processes, budget or salvage) value at the end of ownership or its useful life,
allocations, or other modes of operation that significantly including salvage or decommissioning costs.
change a company or organization.
Cost model – A resource model used to graphically depict the
Constraints – The state of being checked, restricted, or com- relationship of elements relative to their cost. For exam-
pelled to avoid or to perform some action. For most VM ple, a cost model of a building might show the relative cost
studies, there are restrictions on some parameters of a of each of the major systems (foundation, superstructure,
solution (e.g., laws, standards, market demand, policies, exterior enclosure, etc.), sorted from high to low, on a bar
resources, commitments made, etc.). These restrictions chart. Cost models are often augmented with a Pareto
are called constraints and can be real or perceived. VM distribution (see Pareto model below).
may be an effective tool for turning perceived constraints
into opportunities for value improvement.
149
VM Guide®
Creativity
– A phenomenon whereby something new and Freewheeling – A state of unrestrained, divergent thinking not
somehow valuable is formed. It is the ability to produce bound by formal rules, procedures, or guidelines.
original and unique ideas or to make something new or
imaginative. Creativity can be supported and enhanced Function – A non-specific, two-word abstraction, consisting
by the utilization of creativity methods and techniques. of a verb and noun, that describes what an element of a
Creativity in VM leverages divergent thinking with a focus project, product, process, service, or organization does.
on functions.
Function, all-the-time –
Functions that happen continuously
Creativity techniques –
Methods that promote creativity and or occur on a repetitive, ongoing basis, relative to the proj-
the generation of new ideas for developing visions or to ect, product, process, service, or organization.
solve problems.
Function analysis – A detailed examination of a project, pro-
Criteria – Standards for evaluation upon which a decision or a cess, product, service, or organization to identify, classify,
judgment is based. and organize its functions; allocate performance and
resources; and prioritize functions for value improvement.
Customer – A person or an organization that purchases a prod-
uct or service. The customer plays a critical role, if not the Function, basic –
The essential function(s) that fulfill the pur-
most important in determining value. In some cases, the pose or intent for which a project, product, process, service,
customer may also be a user. or organization exists and answers the question, “What
must it do?” There can be more than one basic function.
Divergent thinking – A process or method used to generate
ideas by exploring many possible solutions. Divergent Function, higher-order – The specific goals or needs that the
thinking typically occurs in a spontaneous, freely flowing, basic function(s) fulfills and are beyond the scope of the
"non-linear" manner, such that many ideas are generated VM study subject.
in an emergent, cognitive fashion. Divergent thinking
Function logic path – All functions on a FAST diagram that are
requires a judgment-free environment and aims to elicit
connected to each other in the HOW-WHY logic direction.
ideas that may be unconventional.
Function, lower-order – Functions that are not part of the
Efficiency – The ratio of useful output to total input. Efficiency
scope of the VM study and are inputs for a project, prod-
refers to very different inputs and outputs depending on
uct, process, service, or organization.
specific fields and industries.
Function, one-time – A function that occurs only once relative
Escalation – Changes in the cost or price of specific goods or
to the project, product, process, service, or organization.
services in a given economy over a period. This is similar
to the concept of inflation, except that escalation is spe- Function performance specification (FPS) matrix – A tech-
cific to an item or class of items (not as general in nature). nique whereby the quality or performance criteria related
Changes in the money supply do not usually drive changes to the subject functions are correlated along with related
in cost, and escalation tends to be less sustained. Note specification units of measure, parameters, targets, and
that escalation is different than inflation (see 9.1.5). flexibility.
Evaluation – To determine the significance, value, or condition Function resource matrix – A technique whereby the functions
through careful appraisal and study. of a project, product, process, service, or organization are
correlated to its attributes, such as space, weight, cost,
Expected value – A quantitative measure of value expressed
time, performance, risk, etc. The purpose of a function
by multiplying an anticipated outcome by the probability
resource matrix is to develop insight into how functions
of its occurrence.
contribute to value and to aid in prioritizing which func-
Facilitator – One who is substantively neutral, has no signifi- tions offer the greatest potential for value improvement.
cant decision-making authority, enables a group to im-
Function, secondary – A function that supports the basic
prove how it identifies and solves problems, and increases
function(s) and results from the approach to achieve the
the group’s effectiveness. In the context of VM, one who
purpose or intent of a project, product, process, service,
leads the group through the VM Job Plan.
or organization.
FAST –
The Function Analysis System Technique (FAST) is a
Function, unwanted – A function identified by the customer,
group process that creates a diagrammatic representation
user, or stakeholder as undesirable that is caused by the
of the HOW-WHY logic of functions, and their interrelation-
approach used to achieve the purpose or intent of a proj-
ships, of a project, product, process, service, or organiza-
ect, product, process, service, or organization.
tion under study.
150
Future value – The value of a current asset at a specified date in Interest rate – The amount of money charged, expressed as
the future based on an assumed rate of growth. Examples a percentage of principal, by a lender to a borrower for
of factors that are often expressed as a future value (FV) the use of assets. In terms of borrowed money, the inter-
in a life-cycle cost analysis include major periodic main- est rate is typically applied to the principal, which is the
tenance, equipment or building system replacements, amount of money loaned. The interest rate is the cost of
salvage or demolition costs, etc. debt for the borrower and the rate of return for the lender.
It should be noted that the term “discount rate” refers
Gantt chart –
A Gantt chart is a type of bar chart that illustrates to the interest rate that Federal Reserve Banks charge
the relationship of activities to a schedule. Articulations commercial lenders, and that is frequently used by public
of Gantt charts may show interdependencies of activities sector agencies in LCC analysis. The VM study sponsor
and define the “critical path” (the longest series of required may define a preferred discount rate to be applied to their
sequential activities) of a project or process. specific cash flow analysis.
Grading –
To classify ideas on a scale, such as by quality, size, Life-cycle cost (LCC) analysis – The sum of all recurring and
color, etc. one-time (non-recurring) costs over the full life span or a
specified period of a project, product, process, service, or
Handout – A document summarizing the key information
organization. It includes the initial costs, operating costs,
needed by both the VM study team and the stakeholders
maintenance and upgrade costs, and remaining (residual
attending the presentation. It is not intended to include
or salvage) value at the end of ownership or its useful life.
specifics about the Job Plan phases nor all details of each
The VM study sponsor should ultimately provide direction
VM proposal, but to share some basic information to make
on the appropriate methods and factors they wish to be
the presentation run easily. In most cases, these docu-
applied.
ments will be two to five pages in length. In some cases, a
PDF copy of the slideshow used by the team is distributed. Life-cycle period –
The length of time considered in a life-cycle
Handouts generally become obsolete after the presenta- cost analysis. For example, a life-cycle cost analysis per-
tion ends, since the VM study team, facilitators, and other formed for the useful life of a highway bridge might assume
stakeholders will focus their efforts on the formal report. a life-cycle period of 75 years, which is a typical period
used to define the “useful life” of the structure.
Hitchhiking –
The process of taking one idea and building on it
to create a different idea. Neutral – Not engaged on either side.
Implementation meeting – A key activity of the Implementa- Present value – The current value of an asset. In life-cycle cost
tion Phase, also called a resolution meeting. The purpose analysis, present value (PV) is the current value of a future
of this meeting is to resolve the disposition (usually ac- sum of money or stream of cash flows (an annuity) given a
ceptance or rejection) of the VM proposals developed and specified rate of return.
presented in the previous two phases of the VM Job Plan.
Pareto model – A further articulation of any resource model
Implementation plan – An overall schedule for all activities that graphically illustrates the cumulative distribution of
necessary to implement the results of the VM study. It typ- values. For example, a Pareto distribution curve overlay a
ically contains detailed action plans including schedules, bar chart that shows the cumulative contribution of each
milestones, tasks, resources and level of effort required, element of cost. The basis of the Pareto model is the so-
and identification of the parties responsible for comple- called 80/20 rule, which means that 80 percent of the
tion of the implementation actions. Schedules (e.g. Gantt total cost of a system can be linked to 20 percent of its
charts) and other project management applications usual- elements. Pareto analysis is used to select important el-
ly support the implementation plan. ements, to prioritize problems, and to highlight important
issues. It also helps to see the small number of important
Inflation – A quantitative measure of the rate at which the aver-
issues as well as their relative importance to each other.
age price level of an array of selected goods and services
in an economy increases over a period of time. Inflation is Performance – The extent to which a project, product, process,
often expressed as a percentage and indicates a decrease service, or organization achieves its intended function(s).
in the purchasing power of a nation’s currency. Performance can be measured quantitatively or qualita-
tively, the measurement of which answers the question of
how well the function(s) is(are) being performed.
Productivity –
The rate of output per unit of input; usually for a
production process, however it is used also for construc-
tion activities.
151
VM Guide®
Process flowchart – Process flowcharts are tools for visualiz- Random function identification – A technique that lists the
ing manufacturing, business, administration, etc. process- elements, components, or parts of a project, product,
es. Process flowcharts usually have two sides, and the process, service, or organization and then identifies the
processes are placed horizontally on it. All the processes various functions related to them. Once the functions have
in the organization are placed between customer expec- been identified using this technique, they may be classified
tations (left side, input) and customer satisfaction (right and organized for subsequent analysis.
side, output). Organizational processes include manage-
ment processes, value-creating processes, and support- Ranking – To arrange ideas by priority or importance relative to
ing processes. There are many international standards for other ideas being considered.
displaying process maps, such as UML (Unified Modeling
Resistance to change – Action taken by individuals and groups
Language), Event-driven Process Chain (EPC), Business
to hinder change related activities when they perceive a
Process Modeling Notation (BPMN) (ISO/IEC 19763-5:
change as a threat to them. Keywords here are “perceived”
2015), and VSM (Value Stream Map).
and “threat.” The threat need not be real for resistance
Project management plan – A project management plan is a to occur. The usual description refers to change within
tool for planning and managing a project. The document organizations, although it is found elsewhere. Resistance
continuously evolves with the project and is always up- is the equivalent of objections in sales and disagreement
dated with the latest relevant information. The project in general discussions. Resistance may take many forms,
management plan should be accessible to all project including active or passive, overt or covert, individual or
members, as it is one of the most important documents of organized, aggressive or timid.
communication.
Resource model – A graphic and/or numerical representation
Quality – A subjective term for which each person or sector has (such as a spreadsheet, pie chart, cost model, Gantt chart,
its own definition. In technical usage, quality can have two etc.) indicating resources such as cost, space, time, and
meanings: 1) the characteristics of a product or service energy and associated performance or risk allocated to
that bear on its ability to satisfy stated or implied needs; each component of a project, product, process, service,
2) a product or service free of deficiencies. According to or organization.
Joseph Juran, quality means “fitness for use”; according
Resource – All inputs of cost, time, energy, space, materials,
to Philip Crosby, it means “conformance to requirements.”
labor, etc. required to accomplish a function.
Quality management plan – A document defining the accept-
Return on investment (ROI) – A performance measure used to
able level of quality, which is typically defined by the cus-
evaluate the efficiency of an investment or to compare the
tomer, and describes how the project, product, or process
efficiency of a number of different investments. ROI tries
will ensure the specified level of quality. Quality control ac-
to directly measure the amount of return on a particular
tivities monitor and verify that deliverables meet defined
investment, relative to the investment’s cost. To calculate
quality standards. Quality assurance activities monitor
ROI, the benefit (or return) of an investment is divided by
and verify that the processes used to manage and create
the cost of the investment. The result is expressed as a
the deliverables are followed and are effective.
percentage or a ratio.
Quality model – A model that illustrates the relationship
Risk – An uncertain event that could have an impact on the
between customer satisfaction and the degree of quality
cost, schedule, or performance of a project, product, pro-
provided by a project, product, process or service. One
cess, service, or organization. Risks can either be positive
such example is quality function deployment (QFD) which
(opportunities) or negative (threats). The Value Methodolo-
is a method to transform qualitative user demands into
gy must consider the impact of risks to value.
quantitative parameters, to deploy the functions forming
quality, and to deploy methods for achieving the design Risk model – A resource model that represents the probabili-
quality into subsystems and component parts and, ulti- ties and impacts of threats and opportunities. Risk models
mately, to specific elements of the manufacturing process. can be qualitative or quantitative in nature. They include
tornado charts (a graphic form of risk rankings), HEAT
RACI matrix – RACI is an acronym for “responsible, account-
maps, histograms, and probability density curves.
able, consulted and informed.” A RACI matrix is typically
used to cross reference activities and deliverables with Risk register – A matrix used to record information concerning
stakeholders to define the level of involvement. For ex- subject risks. Risk registers usually include a description
ample, a public agency might be identified as “consulted” of the risk, type of risk (threat or opportunity), probabili-
for the review of a project document. The information on ties, impacts, triggers, and possible response strategies.
a RACI matrix is used in supporting communication and
managing stakeholders.
152
Schedule – A procedural plan indicating the time, duration Time value of money – The time value of money is the concept
and sequence of activities or operations. Schedule may that money available at the present time is worth more
be considered as an input (a resource) or an aspect of than the identical sum in the future, due to its potential
performance, depending upon the context of the project, earning capacity. This core principle of finance holds that,
product, process, service, or organization. provided money can earn interest, any amount of money is
worth more the sooner it is received.
Scope –
The defined parameters of the subject under study.
The subject scope is often supported by various forms of User – An individual, group, or organization who may affect, be
information that include narratives (or a scope statement), affected by, or perceive itself to be affected by a decision,
specifications, drawings, schedules, plans, estimates, and activity, or outcome of the project (i.e., VM study).
other supporting analysis.
Utility – An economic concept that is used to quantify the useful-
Simple payback – In capital budgeting, the period of time ness of, or level of, satisfaction derived from a thing. Utility is
required to recoup the purchasing power of the funds closely related to the concepts of performance and quality.
expended in an investment or to reach the break-even
point. For example, a $1,000 investment made at the start Value – An expression of the relationship between the perfor-
of Year 1 which returned $500 at the end of Year 1 and Year mance of functions relative to the resources required to
2, respectively, would have a 2-year payback period. This realize them. -This can be expressed as Value = (Function
method does not recognize the time value of money. Performance)/Resources.
Specifications – A specification often refers to a set of docu- Value engineering change proposal (VECP) – A change sub-
mented requirements to be satisfied by a material, design, mitted by a contractor, pursuant to a contract provision, to
product, or service. The characteristics of quality and improve the value of the project or product under contract.
performance are usually defined by specifications for proj- VECPs are a vehicle to incentivize contractor innovation
ects, products, processes, and services. Different types of and are commonly used in public sector contracts.
specifications have different meanings. Examples include
Value Methodology – A systematic process used by a multidis-
functional, technical (i.e., design and engineering), opera-
ciplinary team, led by a qualified VM facilitator, to improve
tions, and maintenance specifications.
the value of a project, product, process, service or organi-
Stakeholder – An individual, group, or organization who may zation through the analysis of functions.
affect, be affected by, or perceive itself to be affected by a
Visual presentation – For the sake of clarity among the diverse
decision, activity, or outcome of the project (i.e. VM study).”
VM community members, we differentiate “presentation”
Status reports – A status report is a document describing the and “visual presentation.” In this text, we define the pre-
situation of something, such as a project at a specific point sentation as the overall effort to compile and communicate
in time during the Implementation Phase or at the end of the the VM study results to stakeholders, including preparation
phase. It may utilize a variety of presentation techniques, and the meeting held to communicate those results and
whether in writing or verbally supported by graphics, charts, data. Visual presentations, as used herein, refer to a spe-
diagrams, tables, or any other forms of visualization. cific type of common presentation tool used by many prac-
titioners. They are often created in Microsoft PowerPoint
Subject matter expert (SME) – A person who is an authority in and other similar software packages and are displayed on
a particular area, discipline, or topic. projection screens, large monitors, or in print-outs.
Subject objectives – Functions that express specific, com- VM facilitator –

One who is substantively neutral, has no sig-
pulsory requirements, or articulate broader goals, of the nificant decision-making authority, enables a group to im-
subject, whether it is a project, product, process, service prove how it defines and solves problems, and increases a
or organization. group’s effectiveness. In the context of VM, one who leads
the group through the VM Job Plan.
Time – The measured or measurable period during which an
action, process, or condition happens. Time, as an element VM Job Plan – A sequential approach for applying the Value
of value, may be considered as an input (resources) as well Methodology, consisting of the following eight phases: 1)
as an output. For example, time may be considered as an Preparation, 2) Information, 3) Function Analysis, 4) Cre-
input when considering the delivery of a project and as an ativity, 5) Evaluation, 6) Development, 7) Presentation, 8)
output when experiencing a service such as a massage. Implementation.
153
VM Guide®
VM pre-study meeting – A formal exchange of information that VM study subject – The subject of the VM study can be anything
identifies, clarifies, and communicates the conditions of for which there is a desire to explore opportunities for im-
a VM study, including its subject, objectives, participants, provement. The Value Methodology is commonly applied
schedule, and logistics. to define new, or enhance existing, products, processes,
projects, services, or organizations.
VM program – A program within an organization that manages,
implements, tracks, educates, trains, and advocates for VM team – A multi-disciplined group of participants, led by a
the Value Methodology within the organization. trained facilitator, who apply the Value Methodology to the
subject of a VM study.
VM program elements – The components to a VM program.
These are described and defined in this section. The most Voice of the customer – A process and/or method of eliciting
successful VM programs use most, if not all, these aspects. the preferences and requirements of customers and users
However, even programs that only use a few aspects can relative to value.
be effective and advantageous to the organization. This
section outlines the major program elements that must be Weighting – To give something (here, especially, the criteria)
considered. a specific meaning. Therefore, different criteria can be
differentiated, and the importance becomes obvious.
VM program manager – The individual responsible for direct-
ing, leading, and managing an organization’s VM program. Work breakdown structure (WBS) – A tool that splits a project
into components. It identifies all the project’s tasks and
VM proposal – A developed idea resulting from the application deliverables and breaks them down into many small, mean-
of the Value Methodology during a VM study to increase ingful, manageable parts (work packages). A WBS helps
the value of a project, product, process, service, or orga- to show the scope of the project, regulate progress, set
nization. VM proposals may alternately be described as accurate costs and timetables, and shape project teams.
alternatives or recommendations. Once a WBS has been created, it may be transformed into
a schedule.
VM study – A structured effort to improve the value of a proj-
ect, product, process, service, or organization through
the application of the Value Methodology by a multidis-
ciplinary team facilitated by one who is competent in VM
techniques, ideally a Certified Value Specialist® (CVS®).
VM study decision maker – A person involved in determining

the acceptance or rejection of VM proposals.
VM study report – A document containing all the information

developed at the time of the study, needed for stakehold-
ers to make informed decisions about which VM proposals
to implement. It is recommended that the executive sum-
mary be developed in such a way that it could be a stand-
alone document for broader circulation. Reports should
include the background and description of the project
under study; a complete listing of VM proposals; complete
VM proposals containing all relevant data; complete anal-
ysis conducted by the team; a comprehensive listing of all
ideas generated and evaluated, along with their evaluation
rationale; a brief description of the VM process; agendas;
and, a listing of all participants with their contact infor-
mation. Audiovisual materials may be added to VM study
report when prudent.
VM study sponsor – The person, or organization, responsible

for defining the specific objectives of the VM study and the
stakeholders’ needs.
154
Appendix B. Historical and Cultural Perspectives on Value
Appendix
B
Historical and Cultural Perspectives on Value
The value concept’s long history begins in the Classical period. held to be the primary considerations in determining value
Through the ages, the idea of value has engaged scholars, phi- during this time, and economics was not regarded as an inde-
losophers, mathematicians, economists, and psychologists. pendent discipline, but merely as an integral part of ethical and
This section is intended to provide some historical context to moral philosophy.
the thinking behind the value concept, while illustrating the At the end of the seventeenth century, the discipline of
importance of concepts such as utility, cost, performance, economics began to take shape and introduced the idea of the
time, uncertainty, and human perception in considering value. cost of production. Early economists, such as William Petty
Included are historical perspectives representing different (1623–1687), abandoned the subjective theory of value and
philosophical and cultural perspectives. instead focused on the importance of land and labor in deter-
mining value.
Historical evolution of the value concept The publication of Adam Smith's (1723–1790) Wealth of
Nations, in 1776, heralded the rise of the classical school of
A Western perspective economics which championed the labor theory of value. The
labor theory of value holds that the value of a good or service
In his dialogue Protagoras, Plato (428–347 B.C.E.) explored the
is determined by the labor required to produce it, rather than
dichotomy of pain and pleasure, concluding that pleasure is in-
by the use or pleasure the owner gets from it (demand) and its
trinsically good and pain intrinsically bad. The idea of intrinsic,
scarcity value (supply). Smith also popularized the “paradox of
or inherent, value formed the philosophical basis for subsequent
value,” known as the diamond–water paradox which describes
philosophers. Indeed, “intrinsic value” forms the foundation of
the contradiction that diamonds have a higher market value,
moral and ethical philosophy based on the idea that a thing may
even though water is more useful and necessary for human sur-
be inherently good or bad. Love, truth, beauty, and knowledge
vival. Smith did not have an adequate solution to this problem.
are commonly cited as examples of intrinsic value.
Swiss mathematician Daniel Bernoulli (1700–1782) con-
It is generally accepted that Aristotle (384–322 B.C.E.) first
tributed to the study of uncertainty on economic value. He
wrote about the concept of “extrinsic value.” Extrinsic value
observed that in addition to the concept of a utility function,
is derivative in nature, meaning that an individual may ascribe
there is also an expected utility function (which articulates
value to a thing. Aristotle argued that value was based on an
how uncertainty influences perceived, or “expected,” utility).
external need. The concept of “need” is closely related to the
He was one of the first to write about the notion of diminishing
concept of “function” which is explored in Chapter 6. Aristotle
marginal utility (that utility is an increasing function of money,
made a distinction between “use” and “exchange” value, which
but at a diminishing rate). He famously wrote: “The determina-
is made evident by his observation ‘'Of everything which we
tion of the value of an item must not be based on the price, but
possess, there are two uses; For example, a shoe is used for
rather on the utility it yields…. There is no doubt that a gain of
wear and it is used for exchange.” The notion of intrinsic and
one thousand ducats is more significant to the pauper than to a
extrinsic value is a fundamental concept, and it is important
rich man, though both gain the same amount.”
to remember that most things possess both, whether it is an
Carl Menger's (1840–1921) Principles of Economics further
object, person, or even an idea. Further, Aristotle originally
developed the concept of marginal utility, in 1871, as a means
identified seven types of value: political, social, economic,
of understanding value. Marginal utility is the change in the
religious, ethical, aesthetic and judicial.
utility of a good or service that occurs with an increase in the
The concept of “utility” was introduced during the Middle
consumption of that good or service. Marginal utility theory
Ages. In its earliest form, utility was regarded as a subjective
postulates that value depends entirely on utility. Neoclassical
assessment of value. Utility, along with scarcity, were widely
economists such as Menger believed that the consumer deter-
155
VM Guide®
mines the value of a good or service based on the utility they Social value has merged with the concepts of Western and
expect to receive, regardless of the cost to produce it. Japanese philosophy based on the concept of bushidō in Ja-
Menger used this line of thinking to explain the diamond– pan. Bushidō is a Japanese original spirit that spread around
water paradox: the value of diamonds was greater than that of the sixteenth century. It is the source of loyalty and morality
water because marginal utility, not total utility, determines con- that characterizes the Japanese, and the attitude or values,
sumer choice and, hence, value. It follows then that the cost pursuing them. It produced the precision and quality of Jap-
of production determines supply, supply determines the final anese manufacturing and created a heart, wa, that respected
degree of utility, and the final degree of utility determines value. the other party. It is expressed in the words gi, yu, jin, rei,
Mathematician John Von Neumann (1903–1957) and econo- makoto, meiyo, and chugi, meaning righteousness, courage,
mist Oskar Morgenstern (1902–1977) published the Theory of benevolence, politeness, truthfulness, honor, and loyalty. Val-
Games and Economic Behavior in 1944. In this book, they laid ue is assigned to offering their allegiance to others and helping
out a mathematical approach to modeling economic decisions others, rather than to the value of things.
in uncertainty by expanding on the expected utility hypothesis. Economic value has merged with Western behavioral phi-
One of the key assumptions of this work was that decision losophy, based on Japanese behavioral philosophy: “Merchant
makers are rational regarding value judgments. Culture.” Omi Shonin” represents Japanese merchant culture,
Behavioral psychologists Daniel Kahneman (1934–pres- and its famous philosophy is called Sanpou Yoshi. It is said that
ent) and Amos Tversky (1937–1996) observed that people three targets—seller, buyer, and social—all should gain value at
frequently behave in irrational ways with respect to economic the same time: “seller good,” “buyer good,” and “social good.”
decision making. Through empirical research, they identified It is a behavioral philosophy of co-existence and co-prosperity
several phenomena that distort the way people perceive value. to not only do business for the benefit of sellers. Buyers must
These phenomena, referred to as cognitive bias and heuristics, also be satisfied, and the transaction must contribute to the
provide evidence and explain why people behave irrationally development and welfare of society. In Japan, based on the
under certain decision-making conditions. One such bias, fusion with Western behavioral philosophy, and economic val-
known as prospect theory, published in 1979, explains how ue has evolved to value concepts such as use value, exchange
value judgments are influenced by the way a prospect (the value, labor value theory, and value paradox.
likelihood of an uncertain event occurring) is framed as either
a gain (positive) or a loss (negative). In 2002, the two men were An Indian perspective
awarded the Nobel Prize in economics. Centuries ago, during the Vedic period (1500 - 500 B.C.E.), In-
dian philosophy outlined in epics and ancient literature, a phi-
A Japanese perspective losophy to live life in alignment with the following four values:
The concept of value in Japan is classified into the following
three categories: ● Dharma (righteousness, the right way of living, perform
intended duties),
● Spiritual value,
● Artha (economic value, wealth and power, means for living),
● Social value, and
● Kama (desire for pleasure, intimacy, passion, emotion,
● Economic value. love), and
Each has a historical context and has evolved to present. ● Moksha (state of liberation, salvation).
Spiritual value has been cultivated by merging Japanese
philosophy with Oriental philosophy. The representative of These are also known as purus.ārthas, the inherent values of
Japanese philosophy is “Shinto,” which has been established the universe. These values were taught and inculcated in fam-
since the seventh century BC. A Japanese faith inherited by ilies through education systems and social systems. Besides
the imperial family and the emperor system up to the present, these, spiritual (which relates to Moksha), psychological, and
Shinto recognizes nature and god as one. It has no scripture moral values were highly recognized, taught, and respected.
or specific teaching and no founder. And it is one of animistic The foundation of all these values still holds true today and is
and spiritual worship, folk beliefs based on myths, Yaoyorozu prevalent throughout Indian culture.
no kami (8 million gods), nature, and natural phenomena. In Today, India’s fast-growing economy spans diverse reli-
Shinto has no concept of owning things or dominating people: gions, castes, sub-castes, and languages. The current period
everything is grace and given. Shinto practitioners see all of economic growth has come with an increasing consumerism
blessings as arigatai, meaning thankful, or “itadaku,” meaning fueled by the influence of mass media and social media, sup-
acceptance of something gratefully. Value is assigned to ac- ported by low-cost internet service. All these factors influence
cepting the situation, not to the value of things. the personal and social behavior of individuals and and their
156
buying decisions. The seven Indian values at the root of all aircraft, and so forth. In this environment, it was not possible
these could be listed as shown below: to stop short of achieving the essential results.
Frequently, suppliers, already overextended, said no to
● Religious value, increased schedules or new, necessary products. In this des-
perate situation, Miles was forced to basics. “If I can’t get the
● Caste/sub-caste value,
product, I’ve got to get the function. How can you provide the
● Family value, function by using some machine or labor or material that you
can get?” Time and again, there was a way to do it. Engineering
● Cultural value, tests and approvals were rushed, and schedules met. Thus
“function” grew in vitality and was to later mature into the de-
● Social value, velopment of the VM techniques.
To assure materials for these and other vital programs,
● Political value, and
Miles usually worked two days in the vendors’ plants, one to
● National value. two days in GE plants, one day in the Pentagon keeping priori-
ties suitable, and Saturdays and Sundays in his own office. One
Of the seven values listed above, three of these (religious, particular incident illustrates how an emphasis on function
social and political) were specified by Aristotle, but are not pressed itself upon him.
generally considered within the context of the Value Methodol- A production manager gave Miles a schedule calling for
ogy. In the present Indian context, all seven of these values are thousands of a few dozen types of resistors and capacitors
important, because many behavioral and purchasing decisions to be delivered weekly starting in one week. Manufacturing
are associated with or influenced by one or more of them. schedules at the time were nine months out, with six months
Purchasing decisions may be related to family events, like firm. He was told it was an absolute requirement. Miles asked,
marriage, or cultural and religious events. Both religious and “Who agrees with you that this must be secured regardless?”
family events may further be influenced by caste or sub-castes. The manager replied, “Tom Garahan, overall production man-
Cultural events include the celebration of Diwali (festival of ager of GE.” Miles asked, “Does Harry Erlicher (vice president
lights and lamps), Pongal in southern India, or Baisakhi in of purchasing) agree?” The manager said yes.
northern India, to name a few. National events are generally the The resistors and capacitors were secured for Oak Ridge,
Independence Day and Republic Day celebrations. Political Tennessee. Much later, it was learned they were for atomic
value strongly influences society and the nation at large and is bomb research and development. Their priority overrode
self-explanatory. All these values are important when consid- everything; still, the others were vital, too. Miles went to ven-
ering value within the Indian context. dors and made schedule changes, but told each he would find
some way to provide the essential functions of resistance and
capacitance through a different shape or type or material or
The origin and equipment, which would keep other vital electronic equipment
development on schedule for the military. The function approach proved so
of Value effective that he would never abandon it.
Methodology Critical years passed. In 1944, Erlicher asked Miles to be-
come the purchasing agent of a GE plant. Miles continued to
The genesis of the Value
experience benefits from the functional approach in buying.
Methodology occurred during
In March 1944, he was transferred to Locke Insulator in
World War II, from 1938 to
Baltimore, Maryland, a subsidiary of GE, as manager of pur-
1945. Lawrence Delos Miles
chasing. He took line responsibility for the delivery and cost of
(Figure 1), regarded as the
millions of dollars of materials and products per year. During
“Father of the Value Method-
the next four years, he developed patterns of engineering, lab-
ology,” was an engineer for
oratory, and purchasing teamwork that controlled costs and
General Electric Company.
improved products. He learned firsthand both the productive
During this time, every facility was at full capacity. Steel of all
and the destructive force of human attitudes and practices,
types was entirely scheduled. All vital products and materials,
and their effect on appropriate designs and appropriate costs.
including copper, bronze, tin, nickel, ball bearings, roller bear-
His thinking became increasingly focused on “What function
ings, electrical resistors, and capacitors, were heavily con-
am I buying?” rather than “What material am I buying?”
trolled. Miles was assigned the task of “finding, negotiating for,
In 1947, Miles wrote a letter to Erlicher saying that he be-
and getting” a number of these vital materials, such as materi-
lieved that much good could come to GE if he were relieved
als to expand production of turbo-superchargers from 50 per
of line operation responsibilities and assigned full-time to
week to 1,000 per week for B-24 Liberator aircraft, capacitors
cost reduction work in the central purchasing office. Erlicher
and resistors for skyrocketing military electronic needs, ar-
bought the idea and moved him back to Schenectady, New
mament parts for expanding production of B-29 Superfortress
157
VM Guide®
York in late 1947, where his activity was named the Purchasing This highest GE award, at that time, went to fewer than one
Department Cost Reduction Section (PDCRS). in 10,000 employees. Larry Miles was the first and only pur-
In late 1947, back on Erlicher’s staff, his schedule was chasing person to ever receive it. The citation was:
“
cleared so that he could research and develop workable tech-
niques which would secure more cost-effective results by the In recognition of his outstanding accomplishment through
decision-making employees in a plant or business. the establishment, organization, and development of a
Value Analysis Program, which has resulted in substantial
Larry Miles described the early technique: cost reductions.”
“ To an exceptional degree it focuses on what is import-

ant, develops knowledge about it, and then causes great
creativity in that area. You select from the creative ap-
In 1954, the U.S. Navy Bureau of Ships implemented the first
federal government program with the assistance of Miles
and his staff. There followed a period of gradual growth in
proaches, answers that may not have come in years with federal agencies until 1963, when the Department of Defense
other thinking methods. When the system was put to work established specific requirements for a formal program with-
the first time, it resulted in replacing a bronze clip holding in the three military services. This involved the design and
a cover on a refrigerator control (that could flex millions of construction activities, as well as suppliers, and mandated
times without breaking) with a lower cost brass clip (that incentive-sharing clauses in construction contracts. Contrac-
would flex thousands of times). Quality was not sacrificed tors were permitted to propose “value engineering” changes
because the clip would be flexed only about six times in and share in net savings. It also introduced full-time “value
the lifetime of the refrigerator. The $7,000 per year savings engineers” within agency staffs to promote and administer the
may seem like nothing, but when the same technique was program. The high level of success achieved by the Department
applied to everything in the control box, the yearly savings of Defense led to further recognition in civil agencies. Great
jumped to $1.25 million.” expansion followed in the next 15 years.
Today, every federal agency with a significant construction
The new functional approach was introduced to Mr. Winne, vice or purchasing program employs VM in some form: the Depart-
president of engineering. Mr. Winne listened, understood, and ment of Defense, the General Services Administration, the
said, “This is the best method I have seen to get competitive costs Environmental Protection Agency, the U.S. Forest Service, the
and retain quality. What are you going to call it? Proper quality at U.S. State Department’s Overseas Building Operations, the
proper costs equals value. Why not call it value analysis?” Veteran’s Administration, the Federal Highway Administration,
and the Department of the Interior. Use of VM further expanded
Thus, the new method received its original name.
during the 1980s, by order of the executive branch with the
Then he said, “The vice president of manufacturing, Mr. support of Congress, to include requirements for the applica-
DuChemin, will be most interested in this.” Mr. DuChemin set tion of “value engineering” to all agencies within the federal
up a 20-minute appointment with Miles. After two hours of government. In addition, many state and city governments have
listening and learning, he said “Train one thousand people per directed, through legislative action, that some form of Value
year.” With the support of these people, Miles set up training Methodology be applied to all capital expenditures. Thus, the
programs made available to GE’s plants. He accepted people Value Methodology, born of necessity in a single company, has
and products from different plants, applied the techniques, and become a widely used, technical method for effective utiliza-
showed other employees how they could increase earnings tion of resources throughout the public and private sectors.
and maintain competitive positions. Miles learned that great
benefits were derived when technical people used what would
eventually grow to become VM, and geared training to them.
Concept of worth
For the next three years, Larry continued training personnel Carlos Fallon (1909-1989) was another early contemporary of
and doing work for the plants. He did this using a revolving team Miles who contributed greatly to the development of the Value
of six to eight people. Training was moved to plant locations Methodology. In his book Value Analysis to Improve Productiv-
with a goal of training 1,000 people per year. Later, GE often ity (1971), Fallon wrote extensively about the concept of worth.
“
exceeded that number. Larry and his training team learned
WORTH. An appraisal of the properties rendering a product
that the greatest benefits came when customers and vendors
useful or esteemed in the eyes of a person; a measure of
also knew and used his functional and methodical thinking
such usefulness or esteem; the monetary equivalent of util-
approaches. On his advice, GE agreed to provide value analysis
ity. From the West Germanic ‘werte’ through the Anglo-Sax-
training to other industries as well. From 1948 to 1952, GE re-
on worth, this very English word reflects the direct approach
ported $10 million in benefits arising from value analysis.
to economic goods of Anglo-Saxon warriors, hunters, and
In 1950, GE gave Larry Miles its highest accolade: The Coffin
farmers. By extension it has come to mean an appraisal of
Award. This was given in honor of their first president for ben-
the effectiveness with which a product performs its func-
efits to the company resulting from the creation and use of the
tion or a system accomplishes its mission. Either appraisal
value analysis system.
can yield a monetary figure that represents the customer's
158
regard for the capability of a product to satisfy his wants.

Closely related terms are merit and system effectiveness.
The monetary connotation of the term worth makes it possi-
ble to quantify utility in the same units as cost.”
Fallon goes on to discuss the importance of the uniquely

English concept of worth:
“ THE MERIT OF WORTH. As noted earlier, in English worth

can be used to measure the supposedly unmeasurable
utility. The objection to measuring utility is that it is subjec-
tive on the part of the customer. You cannot even estimate
utility unless the customer is before you; yet, that's exactly
where you want him or her, before you, in front of your cash
register. All the economics of product value hinges on this
confrontation. That is what market research and market
analysis are all about, finding out what a product is worth
to a particular set of customers. In English, worth is not
value. If it is worth to me less than it costs it is not a good
value. Worth more than it costs? A good value. We owe this
extraordinarily useful word to the melding of English and
Norman French where both value and worth endured, each
in its own sense. Alas! in the Germanic languages, the only
word for value is ‘werte’ or ‘varde’. In French, Italian and
Spanish the word is ‘valoir’, ‘valore’ and ‘valor’. No worth!”
The semantics of the concept of worth, as described by Fallon,

speak to the subjective nature of utility. Everyone may possess
a different view of the worth of a handful of diamonds or a
bucket of water. Unfortunately, since the time of Fallon’s use of
the word “worth” within the practice of the Value Methodology,
the original meaning has essentially been lost. A technique of
early value analysis, referred to as “function worth,” focused
on identifying the “least cost way to deliver a function” as part
of a VM study. This method (called the value index), while being
useful in having value as a way of stimulating the opportunity
for cost improvement, tended to overlook the essential con-
cept of understanding the customer’s perspective of what they
value, and it is no longer recommended.
The fundamental challenge with the concept of worth is
that, aside from not existing in most other languages, it is used
interchangeably with the word “value.” The Merriam-Webster
Dictionary defines value as “the monetary worth of something”
and worth as “monetary value.” It is not hard to understand
why the use of these terms has led to confusion. Therefore, the
word “value” is the preferred term. When referring to worth, the
term “customer value” or “user value” adequately conveys the
same concept.
References
● O’Brien, James J. Lawrence D. Miles Recollections, Miles
Value Foundation—Excerpts Relating to the Historical
Development of Value Analysis, 1987, included by
permission of the Miles Value Foundation.
159
VM Guide®
160
Appendix C. VM Standard Reference
Appendix
C
VM Standard Reference
The Value Methodology (VM) Standard Reference is intended Function Analysis Phase – The VM study team defines the
to provide the basic guidance required for applying VM as rec- project functions using a two-word abridgement. The VM
ognized by SAVE International®. VM can be applied to a wide study team reviews and analyzes these functions, using
variety of subjects, including industrial or consumer products, recognized techniques such as random function identifi-
construction projects, manufacturing processes, business cation, FAST diagrams, function resource allocation, and
procedures, services, and organizations. VM is commonly function performance specification to define functions,
referred to by the terms value analysis, value engineering, and allocate performance and resources, and select functions
value management. These terms may be used interchangeably for value improvement.
with Value Methodology throughout this standard.
The VM Standard Reference will assist managers, value Creativity Phase – T
he VM study team employs creativity tech-
program managers, practitioners, and trainers in applying VM niques to generate ideas to perform the subject’s function(s).
in their organizations in a consistent, standard manner. It may
Evaluation Phase – The VM study team follows a structured
also assist those who procure VM services to develop proposal
evaluation process to select those ideas that offer the
requests that ensure they receive good results conducted in a
greatest potential for value improvement while delivering
professional manner. Key terms include:
the project’s function(s) considering performance, quality,
Value – An expression of the relationship between the perfor- schedule, cost, and risk.
mance of functions relative to the resources required to
Development Phase – The VM study team develops the selected
realize them. This can be expressed as
ideas into VM proposals with enough documentation to allow
Function Performance decision makers to determine if they should be implemented.
Value = .
Resources
Presentation Phase – The VM facilitator develops a report
Value Methodology (VM) – A systematic process used by a and/or presentation that documents and conveys the
multidisciplinary team, led by a qualified VM facilitator, to conclusions and results of the VM study.
improve the value of a project, product, process, service
or organization through the analysis of functions. Implementation Phase – The sponsoring organization reviews
the results of the VM study and decides which VM propos-
VM Job Plan – A sequential approach for applying the Value als to implement. An implementation plan is developed
Methodology, consisting of the following eight phases: and executed in order to actualize the value improvements.
Preparation Phase – A pre-study meeting is held to identify VM study – A structured effort to improve the value of a proj-
the VM study subject, goals and objectives, participants, ect, product, process, service, or organization through
schedule, information, and logistics. the application of the Value Methodology by a multidis-
ciplinary team facilitated by one who is competent in VM
Information Phase – The VM study team reviews the study
techniques, ideally a Certified Value Specialist® (CVS®).
subject’s scope, schedule, cost, performance, quality, and
risk. Various modeling techniques are applied to develop The VM Standard Reference has not been prepared as a legal
an understanding of this information. document. If the user intends to use the VM Standard for pro-
curement purposes, the user should consult expertise familiar
with contract language, including seeking legal guidance.
161
Appendix D. Index
Appendix
D
Index
A Creativity 8, 15, 16, 17, 18, 19, 20, 26, 28, 59, 63, 68, 71, 73, 75,
76, 77, 78, 79, 80, 81, 88, 93, 94, 118, 121, 129, 133, 135,
Activity 1, 6, 7, 12, 27, 38, 39, 40, 41, 44, 47, 53, 54, 55, 56, 59, 145, 150, 153, 158, 161
62, 63, 83, 96, 97, 117, 119, 120, 133, 142, 149, 151, 153,
Creativity Phase 18, 19, 28, 59, 63, 75, 76, 77, 78, 79, 81, 94,
158, 163
121, 145, 161
Annuity 93, 94, 105, 106, 149, 151, 163
Creativity Techniques 20, 78, 79, 161
B Criteria 8, 12, 25, 38, 48, 54, 71, 81, 82, 83, 84, 85, 86, 87, 88,
89, 90, 104, 107, 113, 144, 146, 150, 154
Balanced scorecard 33, 37, 46, 95, 149
Customer 1, 2, 5, 6, 7, 8, 9, 11, 12, 34, 36, 37, 38, 39, 40, 41, 42,
Break-even point 93, 94, 149, 153 43, 46, 47, 48, 53, 54, 57, 60, 63, 67, 71, 85, 95, 102, 119,
131, 136, 142, 150, 152, 154, 159, 163
Bytheway, Charles 59, 68
D
C
Development Phase 17, 20, 30, 87, 88, 93, 94, 96, 100, 111,
CBA. See Cost-Benefit Analysis 114, 115, 121, 135, 136, 148, 149, 161
Change management 117, 148, 149 Divergent thinking 2, 75, 76, 94, 150
Constraints 23, 26, 28, 29, 38, 41, 63, 86, 88, 135, 149
E
Consultant 98, 125, 128, 139, 149
Efficiency 5, 11, 38, 63, 85, 88, 94, 99, 101, 108, 127, 144, 150, 152
Convergent thinking 2, 75, 94, 149
Escalation 36, 93, 95, 97, 106, 107, 150
Cost
Evaluation 2, 15, 17, 19, 20, 26, 27, 28, 39, 50, 79, 81, 82, 83,
Initial 5, 20, 40, 46, 101, 122, 141, 149 84, 85, 86, 87, 88, 89, 90, 91, 93, 94, 97, 111, 112, 113, 114,
119, 120, 129, 130, 135, 150, 153, 154, 161
Life-Cycle 5, 11, 20, 37, 39, 40, 46, 63, 84, 93, 94, 95, 97,
101, 102, 104, 105, 107, 109, 112, 114, 141, 145, 146, Evaluation Phase 19, 20, 79, 81, 82, 83, 91, 93, 94, 97, 119,
148, 149, 151 135, 161
Expected value 5, 12, 13, 150

Cost-Benefit Analysis 5, 12, 149
Cost model 33, 34, 35, 40, 47, 48, 57, 144, 149, 152
163
VM Guide®
F H
Facilitation 18, 78, 125, 126, 128, 131, 132, 133, 134, 135, 136, Handout 111, 112, 113, 116, 151
137, 141
Hitchhiking 75, 79, 151
Facilitator 2, 9, 15, 18, 23, 25, 26, 27, 29, 30, 31, 33, 35, 37, 38,
39, 40, 41, 43, 47, 50, 57, 75, 77, 78, 79, 80, 82, 83, 86, 88,
100, 101, 109, 113, 114, 115, 116, 117, 118, 119, 120, 121, I
122, 125, 126, 127, 128, 129, 130, 131, 132, 134, 135, 136,
Implementation meeting 20, 26, 114, 117, 120, 121, 136, 151
141, 142, 146, 153, 154, 161, 165
Implementation Phase 20, 25, 100, 111, 117, 118, 136, 151,
FAST 28, 53, 54, 56, 57, 59, 60, 63, 64, 65, 66, 67, 68, 70, 72, 73,
153, 161
113, 114, 133, 134, 144, 150, 161
Implementation plan 20, 114, 117, 118, 119, 120, 121, 122,
FPS matrix. See Function performance specification matrix
136, 151, 161, 164
Freewheeling 75, 79, 150
Inflation 36, 93, 95, 102, 104, 105, 106, 107, 108, 150, 151
Function 1, 2, 3, 5, 6, 9, 19, 20, 27, 28, 41, 42, 48, 53, 54, 55, 56,
Information Phase 7, 19, 25, 28, 29, 30, 31, 33, 34, 35, 36, 37,
57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72,
38, 40, 41, 63, 132, 133, 161
75, 76, 77, 78, 79, 82, 87, 88, 97, 111, 113, 114, 133, 134,
142, 145, 146, 148, 149, 150, 151, 152, 155, 157, 159, 161 Interest rate 93, 105, 107, 108, 151
All-the-time 54, 67, 68, 134, 150
Basic 54, 60, 61, 62, 63, 66, 67, 68, 78, 134, 146, 150
L
LCC.See Cost, Life-Cycle
Higher-order 54, 56, 60, 61, 62, 63, 67, 68, 134, 150
Analysis.See Life-Cycle Cost analysis
Lower-order 54, 61, 67, 68, 150
One-time 54, 150 Life-Cycle Cost analysis 37, 40, 93, 94, 97, 102, 104, 105, 107,
108, 149, 151
Secondary 54, 150
Life-cycle period 105, 108, 151
Unwanted 54, 150
Function analysis 9, 15, 17, 18, 19, 26, 27, 28, 53, 54, 56, 59,
M
62, 64, 73, 75, 76, 77, 78, 93, 94, 112, 129, 133, 144, 150, Miles, Larry 1, 15, 55, 158
153, 161
Miles Value Foundation 4, 53, 116, 159
Function Analysis Phase 9, 19, 53, 56, 62, 75, 76, 77, 78, 94,
133, 144, 161
N
Function logic path 54, 66, 67, 68, 150
Neutral 7, 15, 86, 125, 126, 127, 128, 150, 151, 153, 164
Function performance specification matrix 54, 71, 150
Function resource matrix 54, 70, 150 P

Future value 93, 105, 106, 151 Pareto model 33, 149, 151
Performance 1, 5, 6, 7, 8, 11, 12, 13, 19, 20, 21, 23, 24, 25, 27,
G 30, 33, 34, 35, 36, 37, 38, 41, 42, 46, 47, 48, 53, 54, 56, 57,
58, 59, 60, 63, 65, 67, 69, 71, 72, 73, 84, 85, 89, 90, 93, 94,
Gantt chart 25, 33, 34, 35, 36, 39, 47, 50, 95, 97, 117, 151, 152
95, 96, 97, 98, 100, 101, 112, 113, 115, 119, 122, 128, 130,
Grading 81, 83, 85, 86, 151 131, 137, 140, 141, 143, 145, 147, 148, 149, 150, 151, 152,
153, 155, 161, 164
164
Appendix D. Index
Preparation Phase 18, 23, 24, 28, 33, 34, 35, 37, 113, 116, 121, 101, 107, 112, 113, 114, 116, 117, 118, 121, 122, 132, 141,
131, 132, 143, 161 142, 151, 152, 153, 154, 157, 158, 161
Presentation Phase 18, 20, 29, 30, 111, 112, 113, 136, 161 Scope 8, 9, 15, 19, 21, 23, 24, 25, 26, 30, 33, 34, 35, 36, 37, 38,
41, 42, 47, 49, 54, 57, 60, 61, 67, 68, 69, 86, 95, 98, 99, 103,
Present value 12, 94, 108, 151 111, 112, 113, 114, 121, 129, 134, 150, 153, 154, 161
Process flowchart 24, 33, 35, 37, 38, 44, 57, 68, 77, 82, 83, 96, Simple payback 94, 99, 102, 153
112, 120, 152, 164
SME. See Subject Matter Expert
Productivity 5, 11, 12, 30, 98, 119, 151, 158, 164
Specifications 11, 34, 35, 36, 38, 41, 46, 57, 95, 103, 153
Project management plan 34, 36, 95, 152
Stakeholder 6, 7, 9, 36, 38, 41, 42, 44, 54, 71, 95, 100, 101,
Q 120, 121, 122, 131, 135, 136, 142, 150, 153, 165
Status reports 117, 119, 122, 153

Quality 3, 5, 6, 7, 11, 13, 19, 20, 21, 23, 24, 25, 30, 33, 34, 35,
36, 37, 38, 42, 46, 47, 48, 54, 58, 63, 69, 71, 77, 79, 80, 81, Subject Matter Expert 23, 29, 47, 128, 153
82, 84, 85, 95, 96, 97, 98, 101, 107, 119, 131, 139, 141, 142,
150, 151, 152, 153, 156, 158, 161, 165 Subject objectives 54, 60, 67, 134, 153, 165
Quality management plan 34, 36, 95, 152

T
Quality model 34, 152
Time 6, 11, 26, 27, 28, 31, 35, 36, 48, 69, 85, 88, 94, 95, 101,
105, 106, 107, 113, 114, 116, 153, 157
R
Time value of money 94, 102, 105, 106, 153
RACI matrix 34, 37, 44, 152
Random function identification 53, 54, 59, 62, 63, 64, 65, 68, U
152, 161
User 1, 5, 6, 7, 9, 11, 12, 34, 41, 48, 53, 54, 58, 60, 61, 67, 85,
Ranking 81, 84, 88, 89, 152 102, 107, 135, 146, 150, 152, 153, 159, 161
Resistance to change 20, 117, 119, 140, 142, 143, 148, 152 Utility 6, 153, 155
Resource 5, 31, 34, 152

V
Resource model 33, 34, 57, 149, 151, 152
Value 1, 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 15, 16, 17, 19, 21, 24,
Return On Investment 94, 99, 101, 102, 112, 114, 144, 152, 165 25, 26, 27, 28, 31, 34, 36, 39, 40, 41, 51, 53, 55, 58, 60, 64,
68, 73, 75, 76, 77, 82, 90, 91, 101, 102, 106, 108, 113, 114,
Risk 5, 8, 11, 12, 13, 19, 20, 23, 29, 30, 33, 34, 35, 36, 37, 38, 40,
115, 116, 119, 125, 133, 139, 142, 143, 147, 152, 153, 154,
47, 48, 49, 51, 54, 63, 69, 84, 85, 89, 90, 93, 95, 96, 98, 99,
155, 156, 157, 158, 159, 161
100, 101, 112, 113, 114, 115, 118, 122, 141, 142, 145, 148,
149, 150, 152, 161, 165 Expected. See Expected value
Risk model 34, 152 Future. See Future value
Risk register 34, 36, 95, 152 Present. See Present value
ROI. See Return On Investment

Value Engineering Change Proposal 139, 147, 153
S Value Methodology 1, 2, 3, 4, 5, 7, 8, 15, 16, 19, 24, 25, 27, 28,
39, 40, 41, 53, 55, 58, 60, 68, 75, 76, 77, 91, 113, 114, 115,
SAVE International® 2, 4, 31 116, 125, 133, 139, 143, 152, 153, 154, 157, 158, 159, 161
Schedule 5, 6, 13, 19, 20, 21, 23, 24, 25, 26, 27, 28, 30, 33, 34, VECP. See Value Engineering Change Proposal
35, 38, 39, 41, 42, 47, 48, 50, 57, 63, 84, 89, 90, 96, 97, 99,
165
VM Guide®
Visual presentation 111, 112, 113, 153
VM. See Value Methodology
VMfacilitator 2, 9, 15, 18, 23, 25, 26, 27, 29, 30, 31, 33, 35, 37,
38, 39, 40, 41, 43, 47, 50, 78, 79, 80, 82, 83, 86, 88, 100,
101, 109, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122,
125, 126, 127, 128, 129, 130, 131, 132, 134, 135, 136, 142,
146, 153, 161
VM Job Plan 1, 2, 3, 9, 10, 15, 16, 17, 18, 19, 20, 26, 27, 28, 33,
35, 56, 57, 59, 75, 93, 94, 111, 113, 114, 117, 125, 127, 128,
129, 132, 133, 135, 148, 150, 151, 153, 161
VM pre-study meeting 19, 23, 24, 25, 26, 28, 29, 30, 31, 41,
154, 161
VM program elements 139, 154
VM program manager 117, 118, 120, 121, 122, 139, 140, 141,
142, 144, 145, 148, 154
VM proposal 15, 20, 28, 39, 95, 97, 98, 100, 101, 102, 104, 111,
114, 117, 121, 122, 133, 136, 139, 140, 141, 143, 148, 151,
154
VM study 1, 2, 3, 5, 6, 7, 9, 10, 15, 17, 18, 19, 20, 23, 24, 25, 26,
27, 28, 29, 30, 31, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43,
44, 47, 49, 54, 56, 57, 58, 59, 62, 63, 65, 67, 68, 69, 72, 75,
76, 77, 78, 79, 82, 83, 84, 85, 86, 87, 88, 93, 94, 95, 96, 97,
98, 99, 100, 101, 102, 107, 111, 112, 113, 114, 115, 117,
118, 119, 120, 121, 122, 125, 126, 127, 128, 129, 131, 132,
133, 135, 136, 139, 140, 141, 142, 143, 144, 145, 146, 147,
149, 150, 151, 153, 154, 159, 161
VM study decision maker 23, 154
VM study report 25, 26, 111, 112, 114, 117, 119, 120, 136, 154
VM study sponsor 19, 23, 24, 25, 26, 27, 28, 31, 43, 84, 86, 93,
101, 107, 146, 151, 154
VM team 3, 5, 15, 18, 24, 26, 36, 39, 43, 54, 58, 85, 93, 98, 100,
101, 112, 113, 114, 115, 119, 121, 122, 132, 135, 140, 141,
143, 149, 150, 154, 161
Voice of the customer 6, 7, 36, 37, 42, 47, 57, 95, 142, 154
W
WBS. See Work Breakdown Structure
Weighting 81, 83, 84, 85, 90, 154
Work Breakdown Structure 34, 35, 36, 38, 49, 50, 63, 95, 121, 154
166
VM Guide® was made possible by SAVE International®
www.value-eng.org
IS B N 9 7 8 -1 -7 3 5 0 8 8 0 -0 -6
56500
9 781735 088006

VM Guide PDF

Uploaded by

Copyright:

Available Formats

VM Guide PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

VM Guide PDF

Uploaded by

Copyright:

Available Formats

vm guide ®

A Guide to the Value Methodology Body of Knowledge

VM Guide® Technical Committee:

Cover and book design by Jeremy Banka.

This edition copyright © 2020 SAVE International®.

Printed in the United States of America.

1.1 Foundational concepts..................................................1

1.1.3 The Value Methodology........................................ 2

1.1.4 Divergent and convergent thinking..................... 2

1.2 Application areas.......................................................... 2

1.3 History and evolution.................................................... 3

1.4.1 SAVE International®............................................ 3

1.4.2 Miles Value Foundation........................................ 4

1.4.3 Other Value Methodology organizations............ 4

2.0 Introduction.................................................................. 5 2.3.3 Stakeholders........................................................ 7

2.1 Terms and definitions.................................................... 5 2.3.4 Design, project, product, development,

2.3 Who determines value?................................................ 6

2.3.1 Customers ........................................................... 6

3.1 Terms and definitions...................................................15 4.1 Terms and definitions.................................................. 23

3.1.1 VM facilitator....................................................... 15 4.1.1 Constraints......................................................... 23

3.1.2 VM Job Plan......................................................... 15 4.1.2 Subject matter expert (SME)............................. 23

3.1.3 VM proposal........................................................ 15 4.1.3 VM pre-study meeting........................................ 23

3.1.4 VM study............................................................. 15 4.1.4 VM study sponsor.............................................. 23

3.1.5 VM study subject................................................ 15 4.1.5 VM study decision maker................................... 23

3.1.6 VM team.............................................................. 15 4.2 Process........................................................................ 23

3.3 The relationship of a VM study 4.2.2 Inputs and outputs............................................ 24

3.5 Phases of the VM Job Plan.......................................... 18 4.2.2.3 Activities..................................................... 24

3.5.1 Preparation Phase.............................................. 18 4.2.2.4 Process flowchart...................................... 24

3.5.2 Information Phase............................................. 19 4.3 Activities...................................................................... 24

3.5.3 Function Analysis Phase.................................... 19 4.3.1 Conduct VM pre-study meeting......................... 24

3.5.4 Creativity Phase................................................. 19 4.3.1.1 Identify VM study participants................... 25

3.5.5 Evaluation Phase............................................... 19 4.3.1.2 Identify VM study schedule and agenda... 26

3.5.6 Development Phase........................................... 20 4.3.1.3 Identify site visit requirements................. 28

3.5.7 Presentation Phase............................................ 20 4.3.1.4 Identify VM study logistics........................ 29

3.5.8 Implementation Phase...................................... 20 4.3.2 Identify, collect, distribute,

4.3.2.2 Distribution of information........................ 31

4.3.2.3 Review of information................................ 31

5.0 Introduction................................................................ 33 5.3.1 Reviewing and transforming

5.1.7 Quality management plan.................................. 34 5.3.6 Conducting a VM study kick-off meeting.......... 41

5.1.8 Quality model..................................................... 34 5.3.7 Conducting a site visit........................................ 41

5.1.9 RACI matrix......................................................... 34 5.4 Basic techniques........................................................ 42

5.1.10 Resource model............................................... 34 5.4.1 Voice of the customer........................................ 42

5.1.11 Risk model......................................................... 34 5.4.2 SWOT analysis.................................................... 43

5.1.12 Risk register...................................................... 34 5.4.3 RACI matrix .......................................................44

5.1.13 Scope................................................................ 34 5.4.4 Process flowcharts............................................44

5.1.14 Specifications................................................... 34 5.4.5 Balanced scorecard.......................................... 46

5.1.15 Work breakdown structure.............................. 34 5.4.6 Gantt chart......................................................... 47

5.2 Process........................................................................ 34 5.4.7 Cost models....................................................... 47

5.2.2 Reviewing and transforming Information......... 35 5.4.9 Work breakdown structure............................... 49

5.2.3 Orienting participants....................................... 36 5.5 Informative References...............................................51

5.2.4 Inputs and outputs............................................ 36

5.2.5 Process flowchart.............................................. 37

6.0 Introduction................................................................ 53 6.3 Activities...................................................................... 58

6.1 Terms and definitions.................................................. 54 6.3.1 Define functions................................................. 58

6.1.1 Activity................................................................ 54 6.3.1.1 Identify functions ...................................... 59

6.1.2 FAST.................................................................... 54 6.3.1.2 Classify functions ...................................... 60

6.1.3 Function.............................................................. 54 6.3.1.3 Organize functions .................................... 62

6.1.4 Function, all-the-time........................................ 54 6.3.2 Allocate resources ............................................ 63

6.1.5 Function analysis............................................... 54 6.3.3 Prioritize functions............................................ 63