Value for money is sought, specified and required in almost every investment endeavour, business transaction, Board recommendation and project brief. Value Management provides the processes that help deliver better value for money outcomes.

Value Management is a planning and review process which is distinctively different to other processes because of its structured approach using a prescribed Work Plan and an analytical focus to achieve best value or, where appropriate, best value for money.

The Value Management process is proven to deliver better value outcomes than alternative approaches.

Value Management started life known as value analysis in General Electric and then later as value engineering in the USA as an initiative to better manage scarce resources during post-war economic reconstruction.  It has been a key element in the ongoing success of General Electric by encouraging boundaryless behavior of its employees, as described by Jack Walsh, the chairman and CEO in the 20 years in which the company’s stock value increased by 4000%.

In Australia we have embraced the various titles assigned to the process under the single name: Value Management. This is the basis of the approach employed in the Australian Standard for Value Management and in the Institute's efforts in the value debate and education course criteria.

An important starting point in understanding Value Management is the recognition that value and value for money are not the same thing. In Value Management, value and value for money are treated separately. 

A complicating aspect in this is that the term value is used in different ways and means different things according to context as well as sometimes being used as an abbreviation for value for money.  


It is primarily for these reasons that the Australian Standard was introduced – to provide standard terminology and definitions for the purposes of undertaking the Value Management process.

Value
One of the main tasks of the Value Management process is to identify the value of the entity being considered (but not its monetary value). The Value Management process deals with money separately.

We can capture the perceived value of any entity in three factors, namely:

  • the useful purpose fulfilled by the entity
  • the benefits that flow from fulfilling that purpose
  • the important features and characteristics of the entity.

 

Value Management Study Facilitators generally refer to these as the value factors. Collectively, they form a value statement.

Value is fundamentally a matter of perception and, therefore, will be different from person to person, organisation to organisation, and from time to time. The facilitated workshop phase of the Value Management process provides the opportunity to capture the value factors from  a variety of perspectives.

Value for money
This is where the cost element is introduced into the picture. Having established the value of an entity, we can then explore opportunities and develop proposals to achieve best value for money. The cost element may be in the form of capital costs, recurrent costs, whole-of-life costs, or, in some instances, the resources utilised.

Value for money is a performance measure used to compare options or alternatives.  By having already established the value of the entity, alternatives (or options) can be considered to determine which of those costed alternatives delivers best value for money. This is achieved through systematic analysis of the degree or quantum of value provided by each alternative, compared to the other alternatives.

Value Management in action
Value Management can be applied to virtually any entity, activity or decision making task.

The Value Management process may be carried out as:

  • facilitated workshops involving key stakeholders or stakeholder representatives at discrete points during the formulation or life of an entity
  • by an individual Value Analyst, usually working alone as part of their day-to-day activities.

 

In both cases, there is a structured work plan to follow which is set out in the Australian Standard for Value Management (AS 4183:2007). This Standard was reviewed in 2018 and found to remain current and relevant.

Value Management workshops are intended to nurture learning, collaboration and understanding about value factors, current proposals (if any), and the context within which an entity is being considered so that stakeholder groups can work collaboratively in developing alternative ways to achieve best value and value for money.

Value Management facilitators are trained to work with multi-disciplinary groups, taking the groups through the work plan in pursuit of agreed objectives. A register of accredited Value Management Study Facilitators is maintained by the Institute and available from this website

Australian government, industry, consumers and professions have access to the Australian Standard for Value Management AS4183:2007. Initially released in 2007, the Standard was recently reviewed and found to remain current and relevant to its purpose.

This Standard is a critical document for the understanding and practice of Value Management in an Australian context.

Many neighbouring countries reference and/or utilise the Australian Standard as a basis for practice within their jurisdictions.

value management standard

The Standard contains key definitions, applications and links to other processes related to Value Management (including economic and financial appraisal as well as risk management techniques). The Standard also defines the principles of Value Management, and for delivering and following up a Value Management Study. In addition, the Standard also describes the work of a Value Analyst who may work alone.

Standards Australia manages all Australian Standards documentation. Although the Institute participated in the preparation of the initial 1994 and subsequent 2007 Australian Standard for Value Management, the Institute cannot reproduce or supply copies of or content from AS4183:2007. Information about buying the Australia Standard can be found here.

Other nations and the European Union have their own standards and with which the Value Management work carried out in those jurisdictions must comply.

 

Proven Process

"Value Analysis" and "Value Engineering" were key processes in the ongoing success of General Electric, from their development in the late 1940's, by encouraging “boundaryless behavior” of its employees, as described by Jack Walsh, the Chairman and CEO.  During the 20 years of his tenure the company’s stock value increased by 4000%.

In Australia we have embraced the various titles assigned to the process under the single name: Value Management.  This has been the basis of the approach employed in the Australian Standard on Value management and in the Institute's efforts in the value-debate and education course criteria.

Effective application of Value Management has delivered benefits in the private and public sectors in over 25 of the world’s major economies. It can be applied either generatively or as a review for new ideas or entities and to the upgrading and improvement of existing entities or situations.

Science Technology Communications  

FINANCING OPTIONS   innovation Psychology

ENGINEERING   People Systems 

ENVIRONMENT Marketing
 

Processes   Manufacturing  Staffing

The tools and techniques inherent in Value Management, including the generic Function Analysis approach, means that the Value Management process has a very wide application in delivering value-improved outcomes that achieve the best, balanced use of all resources and targeted value for money.

Structure of the Process

The Value Management process may be carried out as:

(i) facilitated workshops involving groups of handpicked participants, at discrete points during the formulation or life of an entity or, it may be carried out
(ii) by an individual Value Analyst as an ongoing, day-to-day activity.
In both cases, there is a structured work plan to follow. This work plan is set out in the Australian Standard on Value Management (AS 4183-2007).

A "Work Plan" establishes the template for the conduct of a Value Management process and it is detailed in the Australian Standard 4183:2007 for both a Value Management Study involving a facilitated workshop phase and for the activity of a Value Analyst.  Whilst the detailed activities in the Work Plans can be reviewed in the Standard, the primary stages for the Value Management study are:

  1. Pre-workshop planning, logistics and preparations;
  2. Workshop eventfacilitation and management;
  3. Post workshop reporting
  4. Post Study implementation of action plan, directions and agreements

 
Value Management workshops are intended to nurture learning and collaboration amongst all participants. Indeed, it is by establishing shared knowledge and understanding of vision, the value factors, current proposals (if any) and context of the entity that groups are enabled to work collaboratively in developing proposals to achieve best value for money.

Value Management facilitators are trained to work with multi-disciplinary groups, taking the groups through the work plan in pursuit of specified objectives. A register of qualified and accredited Value Management facilitators is maintained by the Institute.

Is VM applicable to my Industry or problem?

Value Management may be applied to virtually any entity, activity or decision making task.

Value Management has been used in virtually every industry category of private and public sector endeavour, some examples being:

  • Communications Services
  • Defence
  • Education
  • Healthcare and Community Services
  • Mining
  • Manufacturing
  • Property developments (commercial, residential, retail – new and refurbishment)
  • Services infrastructure (electricity, gas, sewage disposal / recycling, water, renewable energy)
  • Transport infrastructure (air, ports, rail, road, transport interchanges, control centres)


Within these sectors Value Management is presently used within and across critical and challenging business areas, including:

  • Strategic planning
  • Management systems (information technology and manual systems)
  • Long-term infrastructure and service delivery programs
  • Building construction and Industrial projects
  • Product development
  • Services delivery and process flow projects
  • Existing building and industrial plant refurbishment and upgrades
  • Integrated programs and projects that address environmental and sustainability issues

 

When should VM be appied?
Value Management is most effective when applied at the earliest point in the decision-making process as it ensures a common understanding of the context, scope and required outcomes by the customers / users and the project team. Thus, Value Management proactively guides the preparations of briefs of action and development of solution options by ensuring that all stakeholders have a common understanding of the core value factors, any issues, givens and assumptions and the required functional outcomes.

The perceived constraints, influencing factors expectations, priorities and assumptions are laid bare through the value management process enabling progress with greater confidence lesser risk.

 

Key success factors in achieving the most effective application of Value Management, obtaining stakeholder consensus and securing best value for money, include:

  • use of a prescribed Work Plan
  • an appropriate mix of and commitment by Value Management Study group members, usually stakeholders relevant to the commissioning organisations and the entity under consideration
  • effective management of value management studies
  • senior management commitment and support in the commissioning organisation
  • effective study facilitation by a registered Value Management Study Facilitator
  • follow-up by the commissioning organisation of the actions agreed at the conclusion of the Study