value management and value engineering implementation in malaysia : sharing of success stories sr dr...
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Value Management and Value Engineering Implementation In Malaysia : Sharing of Success Stories
Sr Dr Mohd Mazlan Hj Che Mat, JMK,CVM,FRISM, FIVMM-Life, FMIM, MIVMA, MCIM (UK), Reg. QS
Founding President @ AdvisorInstitute of Value Management Malaysia (IVMM)
Contents1. The Honourable Prime Minister’s of Malaysia Remarks On Value
Management2. Definition of Value Management3. Objectives of Value Management4. The Conventional Approach Vs The Value Management Approach5. Application of Value Management In Malaysia6. Value Management Job Plan7. Organisation Structure of Value Management in Malaysia For
Government Projects8. Value Management and Relevant Agencies During Various Stages of
Development Projects/Programmes9. Value Management Framework In A Government Links Company (GLC)10. Value Management/Value Engineering Case Studies11. Some Key Success Factors of Institutionalising Value Management12. Conclusion
The Honourable Prime Minister’s of Malaysia Remarks on Value Management
“Untuk mencapai matlamat nilai untuk wang, maka kaedah pengurusan nilai atau “value management” perlulah diterapkan dalam semua pengurusan projek-projek kerajaan bermula dari peringkat awal lagi’’
Translated Version:
”To achieve the aims of Value for Money, the Value Management Methodology need to be implemented for all Government’s projects as early as the Inception Stage
YAB Datuk Seri Najib Tun Abdul Razak (MAPPAXI, 2010)Prime Minister of Malaysia
The Most Honourable Prime Minister’s of Malaysia Remarks on Value Management
“ Kita perlu mengambil kira “total life cycle cost’’ atau kos keseluruhan kitar hayat sesuatu projek. Sekiranya kita tidak mengambil kira kos-kos yang tersembunyi termasuk kos penyelenggaraan, maka, ia mungkin mendatangkan kesan negatif terhadap kesihatan kewangan”
kerajaan kemudian hari nanti’’
YAB Datuk Seri Najib Tun Abdul Razak (MAPPAXI, 2010)Prime Minister of Malaysia
Translated Version:
“We also need to consider the Total Life Cycle Cost of any project. Ignoring the hidden costs such as maintenance, may leads to the negative impact of the Governments Financial Strength in the future.
“ Value Management ensures transparency that no party is ’short-changed’ especially the public’’
YBhg. Tan Sri Megat Najmuddin Megat Khas, President of Malaysian Institute of Corporate
Governance (2012)
In 2010, the Government of Malaysia made VM studies mandatory for public service projects and programmes costing over RM50 million under the 10th Malaysia Plan.
Definition of VM
Che Mat, M.M. 2004) defines Value Management as a rigorous, systematic and innovative methodology with multi disciplinary approach to achieve better value and cost optimisation for projects, products, facilities, systems and services without sacrificing the required performance levels.
© MCMV
Objectives of VM To achieve better project value and cost
optimisation To focus on functions, minimise or eliminate
unnecessary costs, providing the key to maximise innovations and practical outcomes
To clarify on areas of ambiguity and uncertainty with regards to policy issues, agreements, documentations and expected outcomes
To focus on the objectives, goals and target before seeking solutions
Objectives of VM To have a clear performance brief in terms of
value objectives To ensure the Project Team has a clear
understanding on the needs and criteria imposed by the Client, users and Stakeholders
To identify specific skill needed and further training if required
To create an effective team with good communication system and skill
VM identifies unnecessary costs, which then can be removed
Quantity Surveyor
Architect
VM Specialist
Owner
The Conventional Approach Vs The VM Approach
Individual Efforts (Silos)
VM ApproachTeam Effort (Cross Functional)
User
Client
© MCMV
Application of Value Management In Malaysia
Mandatory
For all Government Projects and Programmes amounting to RM50 Million and above
Government Link Company (GLC) Malaysian Airports Holdings Berhad
projects > RM300,000 (US$80,000) Tenaga Nasional Berhad projects >
RM10 M (US$2.7M) Many of privatisation projects also need
to go through the VM Study Process Many Corporate Organisation
Implementing internal Value Engineering Exercises
•
VM JOB PLAN
PRE STUDYINFORMATION
CREATIVITY
EVALUATION
DEVELOPMENT
RECOMMENDATION & POSTSTUDYACTION PLAN
The five steps of the Job Plan are shown diagrammatically in figure above. The significant of the arrows is that, whilst a cascade system is used, with each phase flowing on from and using the output of the preceding phase, there is frequently reversion to a previous phase, as a result of some discovery or unexpected development.
National Development Planning Committee (Chairman: Chief Secretary to the Federal
Government)
Economic Planning Unit (EPU)Prime Minister’s Office
(VALUE MANAGEMENTSTEERING COMMITTEE
Secretariat,Value Management Section
EPU, PM’s Office)
Implementation ByVarious Ministries
1Value Assessment/
Value Planning
2Value Engineering
3Value Review/Value Analysis
Organisation Structure of Value Management in Malaysia For Government Projects
VALUE MANAGEMENTPROJECTS AND PROGRAMMES
GOVERNMENT AGENCY
Preparation of Project Brief
Scope and Budget
Schematic Design
Project Evaluation
Project Implementation
Completed Projects and Operation
Value Assessment/Value Planning
EPU,PM’s Office/MOF/Ministries
Value EngineeringLead ByPWD/Technical Departments
Value Review Lead ByAuditor General’s Office
Value Management And Relevant Agencies During Various Stages Of Government Projects/Programmes
VM Framework In A Government Link Company (GLC)
MANAGEMENT BUDGETARY POLICIES & OBJECTIVES
PhaseBefore(RM m)
After(RM m)
Saving /Extra (RM m)
%
Ceiling 237.5
Std & Cost Recom. 237.5
VM Study 172.2 65.3 27.5
VM Post Study(Follow Up) 161.1 11.1 6.4
OVERALL SAVING(from Original Estimate Prior to VM Study)
45 ideas were generated76.4 32.2
SOME OF VM/VE CASE STUDIES (1)
Aminuddin Baki Institute (ABI) Sarawak Branch
Lessons Learned from ABINeed to understand function (Enhance the Skills of School
Leaders Vs Enhance the Quality of School Leaders) and alignment to purpose
Optimisation of resources/features
Need to challenge assumptions and norms
VM is not about cost cutting but about enhancing value
Need to involve stakeholders early
17
SOME OF VM/VE CASE STUDIES (2)
VM study was commissioned to find solutions in achieving the aim of increasing the yield of paddy (Padi) from 4-5 MT/Hectare to 8-10 MT/Hectare for Kemasin-Semerak area farmers
The VM study was to look into four(4)key areas such as Soil and Water, Environmental, Social and Irrigation.
One of the key consideration was to look into the function of “Convey Water” to the Paddy field as some stretches of soil was quite acidic and some alkaline resulted in poor water quality.
The idea was generated to convey water using underground pipe system rather than conventional open channel system.
Cost Benefits Analysis was also undertaken comparing the open channel system and underground piped system.
Kemasin-Semerak (Phase II Stage III) for Department of Irrigation and Drainage (DID) (Covering on Area of Around 10,000 hectares)
The study was very successful and achieved the desired objectives.
A trip to Japan by DID personnel and relevant experts was made to study the piped system, resulted from the VM study recommendation.
SOME OF VM/VE CASE STUDIES (3)
The quality criteria were consensusly agreed by the participants according to the level of importance as listed below.
Reliability Operation & Maintenance (O&M) Site constraint Equipment life span Safety / Rating Flexibility for future expansion Public Acceptance Outages
Rehabilation of KL East Sub-Station
Option A - Original Proposal using GIS Option B(i) - AIS new site Option B(ii) - AIS – switching Option C - Series Reactor Option D - AIS – L shape or Boomerang shape
SOME OF VM/VE CASE STUDIES (Cont’d)
Option Quality Points
Life Cycle Cost (RM
‘mil)
Value Index
(V=Q/LCC)
VM Recommendation Hierarchy
A 439.52 114.35 3.84 5
B(i) 427.42 95.62 4.47 4
B(ii) 454.03 92.88 4.89 3
C 463.71 60.50 7.66 1
D 458.06 71.46 6.41 2
Summary of Quality Based Selection (QBS) Analysis for KL East Sub-station
Item Descriptions Notes
1 Total development cost RM 4.8 Billion
2 Development after VM (VE) – (30Mppa) RM 3.2 Billion
Est. Final Development Cost (45Mppa) RM 3.6 - 3.9 Billion
3 Total Project Duration 5 years
Project Start June 2009
Project End (Completed with fully automated Baggage Handling System)
17th April 2014
4 Total Gross Floor Area 275,000 sqr metre
5 Design Capacity MPPA (Million Passenger per Annum)
45 MPPA
6 Total sub-packages(Resulted from Value Planning Process)
35 packages-Procurement Stages
Conventional Design and Build/Turnkey Privatisation (Commercial
Area)
7 Fully Automated Baggage Handling System (BHS)
8 Runaway (with provision for A380 aircraft) 4 km length and 60m width
KLIA 2 Project Development Summary (Some Key Facts)
SOME OF VM/VE CASE STUDIES (4)
“ VM helped MAHB save RM1.6billion in the
construction of KLIA2’’YBhg. Tan Sri Bashir Ahmad Abdul Majid ,
Managing Director Malaysia Airports Holdings Berhad (2012)
MAHB adopted the method as part of its annual budgeting process and set up a dedicated unit to spearhead VM.
“VM exercises are carried out on capex projects valued at RM300,000 and above.”
“VM helps us rationalise and optimise capex to get the best value from each Ringgit spent”, says Tan Sri Bashir Ahmad Abdul Majid (2012).
The following methodologies are part of any Value Management Services which may be incorporated where appropriate:
Life Cycle Cost Total Asset Management Risk Management Partnering Financial Models Cost Models Sustainability Strategic Thinking Strategic Management
Other services rendered as part of VM Study
Source:
Institute of Value Management Malaysia’s Rules and Regulation (Page 3 & 4)
Some Key Success Factors of Institutionalising Value Management
Top Management Buy-In Passion Innovative Function Rather Than Projects, Programmes or Systems Cross Functional Team – Elimination of “Silo” Mentality
Conclusion
The application of this technique has proved to be very successful in various human endeavors. The systematic process that it offers promote creativity and innovation towards achieving customer’s satisfaction and in many cases producing results that are beyond expectations.
