VM/VA Competence Center, Germany The European VM Training & Certification System Value Analysis A good practice for elaborating result-oriented new methodology

VM/VA Competence Center, Germany

The European Governing Boardof the Value Management Training and Certification System

Value for EuropeValue for Europe

The European VM Training & Certification System

Value AnalysisA good practice for elaborating result-oriented new methodology

Dipl.-Ing. Wilhelm Hahn

President of the European Governing Board of the VM Training & Certification System (EGB)

Chairman of the VM CertBoard of the Association of German Engineers (VDI)

Project Manager, MBtech Consulting GmbH, Sindelfingen, Germany





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Content

History of Value Analysis and the concept of Value1

Value Analysis Methodology2

Function-Analysis and Function-Cost-Analysis3

4 Project examples in the public administration sector

5 Regulations in the USA and status of use in Europe

6 European Training & Certification System for Value Management





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Definition of Value Analysis according to Lawrence D. Miles

Value Analysis is an organized effort to provide required functions of a product at lowest overall cost

consistent with achieving the required quality, performance and market acceptance

Value analysis is not a cheapening process. Reliability and performance are not sacrificed for the sake of

cutting cost

Value Analysis was developed in the late 1940s by Lawrence D. Miles. He worked in the purchasing department of General Electric Company in the USA

Value Analysis was a response to the question: How had companies managed to innovate during World War II despite of rationed materials and war time shortages

Miles presented a model on the idea that “All cost is for function”. Customers buy functions experienced through products and services

A function is something that a product or service “does” for someone who uses it

Miles named his approach Value Analysis and later Value Engineering. Today it is also called Value Management

Since 2000 there is a European Standard EN 12973 Value Management

Origins of Value Analysis, Value Engineering, Value Management

Definition of Value Analysis

Source: Value Management, Roy Woodhead & Clive Bone; Value Analysis, L.D.Miles





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Value is the relation between the satisfaction of needs and the resources which are used to achieve a desired satisfaction

1 The symbol indicates that the relation between the satisfaction of needs and the use of resources is a balance. Both factors have to be weighted against each other to achieve the best value.

Value 1

Satisfaction of needs(monetary and non-monetary)

Use of resources(money, people, time, energy and materials)

= =Benefits

Expenditure

Functions

Costs

Integration of more functions alongside with a low cost-increase

Cost reduction , without changing functions

Removing unnecessary functions and their costs

Integration of more functions alongside with a cost-reduction

Balance between stakeholders

Balance between use of resources

Ba

lan

ce

be

twe

en

b

en

efi

ts a

nd

ex

pe

nd

itu

re

Various options to increase value

Source: European Standard EN 12973 Value Management





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Content











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Value Analysis is characterized by four key elements

Function-Cost-Analysis

Structured Approach with 10 Steps (VA/VE Job Plan)

Focused Team Effort

Creativity

0 1 2 3 4 5 6 7 8 9





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With the VA Job Plan of EN 12 973 functions and cost of VA objects are analyzed and optimized in several phases and 10 steps

Project Definition- Identify requirements- Make target cost plausible

5

4.2

9

Information phaseSituation As-Is

Define targets in detail

Identify value (cost) drivers

Collect and generate ideas

Plan and implement selected concept

Match

Evaluate ideas

Qualitative & quantitative evaluation

Analysis &

Specification

Verif

icat

ion

Validation

Project preparation

Project planning

Function Analysis

6

8

Develop solution concepts7

Implementation control

Comparison to situation As-is

Present concepts fordecision making

3

1

0

2

4.1 4.3

Implementation Phase

Analysis and Definition Phase

Concept Phase

VA Job Plan EN 12973

Source: Interpretation of W. Hahn based on EN 12973





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Content











9

A function description which is neutral in regard to solutions will increase the room for creativity and new solutions

connect Sheets

hold sheets of paper together

Situation “As-is”

Level of Functions

Level ofTransformation

Level of Solutions

Paper Clip

Situation “To-be”

connect Sheets

to stick, to glue, to rivet,to staple, to clamp, toturn down corners, to put in a hose, …

What does it do ?

by accident

Pro

cess

of

Ab

stra

cti

on

What exactly does it do? In what way else?

Folder Clamp

If you want to solve a problem detach yourself from the problem first !

?

clip Sheets





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Customer functions are transformed and detailed to technical functions with a How- and Why-Logic to stimulate creativity

Example:Function Tree of a 2-ways Head Rest of a passenger car

How? Why?

support

Head

protect

Occupant

adjust

Height

fix

Height

give

Comfort

Customer related functions

What are the needs of users?

Product related functions

How can these needs be fulfilled?

transmit

Force

create

Emotions

provide

Notches





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Content











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Application of VA in administrative topics has often further advantages besides the improvement of the cost efficiency of processes

Advantages and effects

1 Simplification of administration processes

2 Integration of new scopes of action

3Decision support for politicians and the management of administration processes

Processing of cross-sectional topics which concern many administration levels

Transparency in topics

Sustainable changes

Moderation of various stakeholders

Efficient process design

Clarification of how to communicate and cooperate cross-sectional

Precise definition of responsibilities

Conflict resolution in organizations4

Examples of VA objectives

Thomas E. BergEs geht ums

Ganze13

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Project examples of Führungsakademie Baden-Württemberg

• Founded in 1986 for the further-education of high-potentials in the state administration of Baden-Württemberg. Meanwhile over 400 graduates

• Since 2001 competence center for organization and human resource development of the whole public sector of Baden-Württemberg

• Coaching of executives and institutions in change processes and development of strategic goals in the public sector. Optimization and quality improvement of business processes

• Facilitation of over 120 Value Analysis projects in the past 20 years

VDI Innovation Award VM 2008

Optimization of the forced sales process of real estate at the district court of Loerrach,

Germany

VDI Innovation Award VM 2007

Development of the ambulant service areas of the Badischer

Landesverband for prevention and rehabilitation of addicted people

2006: Optimization of school office

processes

2010: Reorganization of laboratories of the

Landesanstalt für Umwelt, Messungen und Natur-

schutz Baden- Württemberg (Institute for

environment, measurement and nature protection)





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A VA potential analysis can be used to clarify underlying conditions, the feasibility and profitability of a project – and to set priorities

Subject-specific potential

Project goal andtask

Underlying conditions

Emotional potential

VA-Facilitator

Potential ofmethodology

Specific approach and methods Reset of project team. Integration

of experts. Revision of start time of project Pull in of additional information Cancellation of a project or

integration into another one Others

Results

Sufficient complexity of the assignment for VA?

Potential to approach with VA?

Priorities in case of several competing project proposals

Adjustment of project situation before start if required





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United States – Proactive application of Value Engineering in the Government is regulated

US - Federal Acquisition Regulation (1996)

Public Law #104450 Act, Section 4306 requires Value Engineering for Federal AgenciesEach executive agency shall establish and maintain cost-effective Value Engineering procedures and processes

Source: http://www.whitehouse.gov/omb/circulars_a131/#1, http://www.globalsecurity.org/military/library/congress/1996_rpt/h104450.htm

US Circular No. A-131 for Federal Departments (1993)

To the Heads of Executive Departments and EstablishmentsSubject: Value Engineering

1. PurposeThis Circular requires Federal Departments and Agencies to use value engineering (VE)as a management tool, where appropriate, to reduce program and acquisition costs.

8. Agency responsibilities1. Designate a senior management official to monitor and coordinate agency VE efforts.

2. b) The minimum threshold for agency projects and programs which require theapplication of VE is $1 million. Lower thresholds may be established atagency discretion for projects having a major impact on agency operations.





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United States – VE Studies in Federal-Aid Highway Programs show an average Return on Invest of 192:1 for FY 2004 to 2009

FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 FY 2004

Number of VE Studies 427 382 316 251 300 324

Cost of VE Studies Plus Administrative Costs

$17,1 Mil. $12.3 Mil. $12.5 Mil. $8.15 Mil. $9.80 Mil. $7.7 Mil.

Estimated Construction Cost of Projects Studied

$29.2 Bil. $29.6 Bil. $24.8 Bil. $21.5 Bil. $31.6 Bil. $18.7 Bil.

Total No. of Recommendations

3,297 2,978 2,861 1,924 2,427 1,794

Total Value of Recommendations


No. of Approved Recommendations

1,460 1,308 1,233 996 1,077 793

Value of Approved Recommendations


Return on Investment 99:1 205:1 157:1 219:1 325:1 145:1

ROI Average: 192 : 1

Source: http://www.fhwa.dot.gov/VE/

Europe: There is no governmental regulation for the application of VA

In the private sector VA becomes more and more popular but no figures known





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Content











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Participation in a VM/VA-Project

Leading VM/VA-Project

Pra

ctic

al e

xper

ien

ce

VM Module 2

Professional in Value Management (PVM)

Train the Trainer

VM Module 1

Further training

TVM

VM Module 3

QVA

1. Re-Certification PVM

PVM Professional in Value Management

TVM Trainer in Value Management

QVA Qualified Value Associate

A European training & certification system for VA facilitators does exist already - VA experts are available in many member states

Source: EGB, Value for Europe, structure of training and certification





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EGB observer (participates in meetings)

EGB member country

Other EU countries

Norway

UK Netherlands

Belgium

France

Portugal

Italy

Austria

Germany

Hungary

Spain

Paris

Portugal (APAV) Associação Portuguesa para a Análise do Valor, Lissabon

United Kingdom (IVM)Institute of Value Management, London

France (AFAV) Association Francaise pour le développement de l‘Analyse de la Valeur, Paris

Spain (IAT) Innovación y Tecnologia, Sevilla

Netherlands (DACE)Dutch Association of Cost Engineers

Germany (VDI) Verein Deutscher Ingenieure, Fachbereich Value Management/ Wertanalyse, Düsseldorf

Austria (IITF) Institut für Innovations- und Trendforschung, Graz

Belgium (AVD) Association pour la Developpement de l’Analyse de la Valeur

Italy (AIAV) Assocciazione Italiana per l‘Analisi del Valore, Pisa

The national certification bodies for VM are mainly located in the Value Analysis organizations of the EGB member countries

EGB membership expected in 2011





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Back up





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The VA Job Plan provides a guide and frame for the application of adequate VA techniques and other methods and tools

Phase Thought process + Phase questions Methods/Tools Examples

Preparation• What is the problem and why?• Who is involved and necessary to solve it? • Until when?

• Quotes to client Budget• Resource Planning• Project Management

Information• What is the status today (As-Is)?• What functions are being performed today?• What do these functions cost?

• Stakeholder analysis• Function-Analysis• Function-Cost-Analysis

Definition• What is the targeted status (To-be)?• Which functions are required?• What should these functions cost?

• Stakeholder analysis• Target Costing

Creativity • What other ways are there to accomplish the required functions?

• Creativity Tools

Evaluation• What will the alternatives cost?• What is their feasibility?

• Classification + Prioritization,• Risk analysis, • Qualitative +quantitative evaluation

Presentation • Decision and approval by the client? • Presentation

Implementation • Target Functions and target costs achieved? • Project management• Follow up tools

Val

ue

An

alys

is J

ob

Pla

n

Val

ue

An

alys

is C

ore

Tea

m





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The application of Value Analysis yields in general to an improvement of the As-is-Situation

1

2

4

3

Cost reduction

Service improvement

Increase of effectiveness and efficiency

Process optimization

Reduction of process time

Innovative solutions

Quality orientation

5

6

is applicable for products, processes, and services in many different areas

involves team members cross-functionally

drives cost oriented thinking

encourages creative new approaches

results in holistic and sustainable solution concepts

enhances competences of team members and fosters the organizational development

Fields of application and effects Value Analysis …





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Function-Cost-Analysis spreads the component cost to the relevant functions to identify the function cost and the function cost drivers

4,27 €Function Cost

0,61 €5 PIP Process

1,07 €4 Produce Cover

0,92 €3 Cover

0,31 €2 Foam

1,36 €0,1310%0,4230%0,4230%0,4230%1 Frame

transmitForce

fixHeight

adjustHeight

Cost ofcomponent/process step

createEmotions

giveComfort

Protect Occupant

54321Functions

Component/Process step

4,27 €Function Cost

0,61 €5 PIP Process

1,07 €4 Produce Cover

0,92 €3 Cover

0,31 €2 Foam

1,36 €0,1310%0,4230%0,4230%0,4230%1 Frame

transmitForce

fixHeight

adjustHeight

Cost ofcomponent/process step

createEmotions

giveComfort

Protect Occupant

54321Functions

Component/Process step

1,36€

How to spread the cost of components to the functions (see example): Take a component and mark all functions which the component contributes to Estimate how much of the cost of this component can be assigned to each of these functions Continue with the next component The total leads to function cost. Functions with the highest cost are the cost drivers Challenging the cost drivers will focus on the relevant functions to improve the value





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Required core competences

Management competence• Project representation and argumentation• Knowing and maintaining interfaces• Reporting to decision makers• Knowing and use of constitution laws of environment• Change management• Conflict management

Leadership competence• Leading without authority• Knowing and using group dynamic• Identifying and solving conflicts• Identifying, using and supporting skills• Leading and moderating discussions

Technical-, methodical competence• Knowledge of branches, products, process.• Market- and customer analysis• Marketing and controlling• Quality control and documentation• Business administration & legal knowledge• VM-Methods (Functions, costs, creativity,

evaluation, presentation)• Other methods

Social competence

• Communication behavior: active, partner oriented, clear, understandable, analytical und appropriate

Personal competence• Self-confidence• Customer orientation• Stress resistance and awareness of the own

conflict-behavior• Self-organization• Curiosity, openness, constructive thinking

Basic requirements: technical, business und organizational know-how

Facilitation of VA projects requires a high degree of core competences – specific training to develop these competences is needed

Source: VDI 2801, Blatt 1 u. 2





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The EGB is the European association for the Value Management Training & Certification System (Value for Europe)

History• Origin: SPRINT Program of the European Union 1989-93 (Strategic PRogram for INnovation and

Technology Transfer) to enhance the European infrastructure for innovation through transnational networks. VM Handbook published in 1995

• EN 12973 published 1999 in English, 2000 in German. Foundation of the EGB as an informal committee in June 2000

• Formal registration of the EGB as an organization according to the French law in June 2004 in Paris. Reason: Closeness to AFNOR (Association française de normalisation) and CEN (Comité Européen de Normalisation)

Objectives• Common European Value Management Standard• Common European formation and certification system, its supervision, quality monitoring, development,

deployment in Europe• Representation of European countries in global VM Topics

Actual tasks in 2009

• Revision of “Value for Europe“. Integration of the executed changes since 2000. Simplification of systems and adaptation of requirements.

• Start and steering of taskforces in CEN TC279:

1. Revision of EN 12973 with the target to create an ISO-Standard

2. New guideline for the implementation of Value Management

3. New standard for the method Functional Performance Specification (FPS)

Documents

VM/VA Competence Center, Germany The European VM Training & Certification System Value Analysis A good practice for elaborating result-oriented new methodology