Value Management and Value Engineering

Why Value Management Matters

Every project faces the same fundamental tension: stakeholders want more scope, higher quality, and faster delivery — but rarely want to pay more for it. Left unmanaged, this tension breeds scope creep, budget overruns, and deliverables that technically meet specifications but fail to satisfy the customer.

Value Management (VM) exists to resolve this tension systematically. Rather than slashing budgets or gold-plating deliverables, VM asks a deceptively simple question: "What functions does the customer actually need, and what is the least-cost way to reliably deliver them?"

In heavy engineering and defence — where a single design decision can lock in millions of dollars of downstream cost — mastering VM isn't optional. It's a strategic competency.

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What Is Value Management?

Value Management is the integration of proven and structured problem-solving techniques to find the best functional balance between cost, reliability, and performance of a product or project. — Zimmerman & Hart, 1982

Three ideas are embedded in that definition worth unpacking:

1. "Structured problem-solving" — VM is not brainstorming over coffee. It follows a rigorous, phased methodology called a Job Plan.
2. "Functional balance" — The unit of analysis is function, not component. VM asks "What does this do?" before asking "What does this cost?"
3. "Cost, reliability, and performance" — These three variables form a triangle. VM optimises across all three simultaneously, rather than sacrificing one for another.

The Core Formula

At its heart, VM operates on a ratio:

$$\text{Value} = \frac{\text{Function (Performance)}}{\text{Cost (Resources)}}$$

To increase value, you either improve function while holding cost steady, or reduce cost while maintaining function — or ideally, both.

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The Job Plan: Standardised Methodologies

The Job Plan is the backbone of every value study. Three internationally recognised versions exist, each adding layers of analytical rigour.

Key observation: The ASTM and AFNOR models both insert a dedicated Function Analysis phase that the traditional model folds into the Information phase. In complex engineering projects, separating function analysis forces the team to define what the product must do before anyone starts proposing how to do it — a discipline that consistently produces better outcomes.

1. Information — Gather data, understand — the problem

2. Function Analysis — Define WHAT it must do — (verb + noun)

3. Creative — Generate alternatives — without judgement

4. Evaluation — Screen ideas against — criteria

5. Development — Refine best ideas into — workable proposals

6. Presentation — Present recommendations — with cost-benefit data

Relationship details

From	Relationship	To
1. Information — Gather data, understand — the problem	leads to	2. Function Analysis — Define WHAT it must do — (verb + noun)
2. Function Analysis — Define WHAT it must do — (verb + noun)	leads to	3. Creative — Generate alternatives — without judgement
3. Creative — Generate alternatives — without judgement	leads to	4. Evaluation — Screen ideas against — criteria
4. Evaluation — Screen ideas against — criteria	leads to	5. Development — Refine best ideas into — workable proposals
5. Development — Refine best ideas into — workable proposals	leads to	6. Presentation — Present recommendations — with cost-benefit data

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Value Management vs. Value Engineering: What's the Difference?

These terms are frequently used interchangeably, but they serve different purposes at different project stages.

Value Engineering is a specific application of the value management process with the objective of generating a large number of small and simple ideas to improve the initial engineering design of the project — reducing cost and enabling a benefit-to-cost ratio that assists in deciding whether the project will proceed.

The Value Engineering Process

Before commencing VE, the team requires an initial evaluation consisting of:

• A description of the problem (the project)
• The required outcomes
• The options already considered
• A description of the preferred option
• Initial identification of scope
• A preliminary estimate

The VE process itself then follows six steps:

Project Breakdown — (cost, benefit, time)

Idea Generation

Idea Evaluation

Risk Assessment — & Management

Idea Review & — Client Sign-Off

Cost Breakdown — Review

Relationship details

From	Relationship	To
Project Breakdown — (cost, benefit, time)	leads to	Idea Generation
Idea Generation	leads to	Idea Evaluation
Idea Evaluation	leads to	Risk Assessment — & Management
Risk Assessment — & Management	leads to	Idea Review & — Client Sign-Off
Idea Review & — Client Sign-Off	leads to	Cost Breakdown — Review

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When and Where to Apply Value Management

VM should be considered every time a new product or project is being planned, or when an existing one needs improvement. More specifically, VM is profitable when:

• A product does not sell or generates customer complaints
• New markets need to be explored
• A project is not evolving according to plan
• One or more project parameters or objectives are not being achieved

The Golden Rule of Timing

Ideally, value management should be implemented in the very early stages of a project — before a commitment has been made.

Early application allows VM to reach its greatest potential: clearly identifying the expected performance and functions of the product or project. However, VM remains effective at any stage of the planning or development phases.

Any size product or project is suitable for a value study. Only the extent of the study and the size of the team will vary.

Workstream	Activity	Type	Timing / dependency / duration
Project Phases	Feasibility	Activity	a1 · 0 · 2
Project Phases	Design	Activity	a2 · 2 · 4
Project Phases	Procurement	Activity	a3 · 4 · 6
Project Phases	Construction/Delivery	Activity	a4 · 6 · 9
Project Phases	Closeout	Activity	a5 · 9 · 10
Value Activities	VM (Maximum Impact	Activity	crit · v1 · 0 · 3
Value Activities	VE (Design Review	Activity	active · v2 · 2 · 5
Value Activities	VE (Diminishing Returns	Activity	v3 · 5 · 7

As the chart above illustrates, the cost of implementing changes increases exponentially as a project progresses. VM applied during feasibility can redirect the entire project at minimal cost. VE applied during construction may save money, but the savings are smaller and the disruption greater.

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The Creative Phase: Killing the Idea Killers

The creative phase of VM demands divergent thinking — generating as many ideas as possible without filtering. This is where Pareto's Law becomes critical:

Pareto's Law demonstrates that 20% of the functions or elements of a problem hold 80% of the resource expenditure. Concentrating creative energy on the vital 20% yields the greatest optimisation potential.

However, teams routinely sabotage this phase with what practitioners call "roadblocks" or "idea killers" — reflexive statements that shut down creative thinking before it can develop.

The 10 Most Dangerous Idea Killers in VM Workshops

Workshop facilitation tip: Print these on a poster and display them prominently. When anyone utters a killer phrase, the facilitator flags it — not punitively, but as a pattern-interrupt that refocuses the team on generating, not judging.

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The Pitfalls: Where Value Management Goes Wrong

Even with a solid Job Plan, VM studies fail when teams fall into these traps:

1. Starting too late. Applying VM after design is locked in limits options to cosmetic tweaks rather than fundamental improvements.

2. Confusing cost-cutting with value improvement. Stripping features without understanding their function destroys value — it doesn't create it. The function-first approach prevents this.

3. Skipping function analysis. Teams that jump from "information" to "creative" without rigorously defining functions end up solving the wrong problems.

4. Homogeneous teams. VM requires multi-disciplinary perspectives. A team of only engineers, or only accountants, will produce one-dimensional solutions.

5. Treating VM as a one-off event. VM is most powerful when integrated into the project management framework as a continuous process — not a single workshop.

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Key Takeaways

• Value = Function ÷ Cost. The goal is to maximise function while minimising cost, not simply to cut budgets.
• VM is strategic; VE is tactical. VM defines what to deliver; VE optimises how to deliver it.
• Timing is everything. The earlier VM is applied, the greater the potential impact and the lower the cost of change.
• Follow the Job Plan. Whether using the 5-phase, 6-phase, or 7-phase model, the structured methodology prevents the team from skipping critical analytical steps.
• Protect the creative phase. Idea killers are the single biggest threat to generating breakthrough solutions. Recognise them. Neutralise them.
• The integration of VM and VE in project management contributes to what practitioners call value-added project management — where every process, decision, and deliverable is tested against the question: "Does this create value for the customer?"

VALUE

Cost

Reliability

Performance

Information

Function Analysis

Creative

Evaluation

Development

Presentation

Relationship details

From	Relationship	To
VALUE	leads to	Cost
VALUE	leads to	Reliability
VALUE	leads to	Performance
Information	leads to	Function Analysis
Function Analysis	leads to	Creative
Creative	leads to	Evaluation
Evaluation	leads to	Development
Development	leads to	Presentation
Presentation	leads to	Information
Information	leads to	Cost
Function Analysis	leads to	Reliability
Creative	leads to	Performance
Evaluation	leads to	VALUE
Development	leads to	Cost
Presentation	leads to	Reliability