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Each person has an opinion regarding what affects the value of a product or service. Often, decisions are made by one dominant individual, who bases the choice on just one criterion, such as cost, quality, or reliability. Decisions like these lead to less than optimal overall decisions.
• Value Engineering (VE) is an effective technique for
reducing costs, increasing productivity, and improving quality.
• Value Engineering (VE) was developed at General
Electric Corp. during World War II and is widely used in industry and government, particularly in areas such as defense, transportation, construction, and healthcare.
" or the best relationship between worth and cost. facilities design and construction. . VE is a technique directed toward analyzing the functions of an item or process to determine "best value. standards. specifications.APPLICABILITY • It can be applied to hardware and software. or procedures. and manufacturing. development. systems. contract requirements. production. • It may be successfully introduced at any point in the life-cycle of products.
. Value is commonly represented by the relationship: Value ≈ Function + Quality/Cost • where function is the specific work that a design/item must perform. services. or money for something exchanged.VALUE • Value is defined as a fair return or equivalent in goods. desires. and expectations and cost is the life cycle cost of the product. quality is the owner’s or user’s needs.
Quality and Cost Function VALUE ENGINEERING Cost Quality .VALUE CONCEPT VE is a balance between Function.
TYPES OF VALUES COST VALUE Amount OF MONEY SPENT to produce or acquire an item .
EXCHANGE VALUE The Sale or Trade value of an item on the open market. .
Thus a vacuum cleaner that cleans better than another has higher functional value .most customers would be willing to pay more for it .USE VALUE Use value or functional value is the perceived value of goods or services to a customer because the goods/services do what they are supposed to do in the way they do it.
basically its same as value. many customers will pay more for a branded item of clothing because they want to 'wear the name' .they feel it gives them some status a non-branded item would not. or valuable. WORTH • The quality that renders something desirable.ESTEEM VALUE • Esteem value is the value of goods or services according to the status they afford to the buyer/user. useful. Thus. .
• Changes in owner requirements. • Outdated standards and specifications. • Lack of communication and coordination. • Temporary circumstances. • Honest wrong beliefs. • Habits and attitudes. . • Lack of ideas.POOR VALUE • Lack of information.
HOW IT WORKS? VE follows a structured thought process to evaluate options . Phase1 Gather Information Phase2 Analysis Phase3 Creativity Phase 4 Evaluation Phase 5 Development Phase 6 Presentation .
• Scope and constraints are defines. . • Areas of high cost or low worth are identified.Phase 1: Information Gathering • Determine the true needs of the project. • The team reviews and defines the current conditions of the project and identifies the goals of the study.
or creation to meet the project’s goals.Phase 2: Functional Analysis • The team defines the project functions. elimination. . • The team reviews and analyzes these functions to determine which need improvement.
.Phase 3: Creativity • The team lists creative ideas generated from its review of the project with the aim of obtaining a large number of ideas through brainstorming and association of creative proposals. • The team employs creative techniques to identify other ways to perform the project’s function(s).
• The team follows a structured evaluation process to select those ideas that offer the potential for value improvement while delivering the project’s function(s) and considering performance requirements and resource limits. . and the team selects the best ideas for further development.Phase 4: Evaluation • Creative ideas are analyzed .
technical information and cost summaries.Phase 5: Development • The team prepares alternative designs with capital and/or life cycle cost comparisons of original designs and proposed alternatives. . basic design concepts. All recommendations are supplemented with written descriptions. • The team develops the selected ideas into alternatives (or proposals) with a sufficient level of documentation to allow decision makers to determine if the alternative should be implemented. sketches.
.the report includes a statement of the follow-up necessary to ensure implementation .the presentation may be in written form or both written and oral .Phase 6: Presentation The objective in this phase to present the VE study report to the decision-makers .
VALUE ENGINEERING AND SUSTAINABILITY At project level. regeneration issues and community needs. Issues surrounding the use of land. sustainability means balancing value. are all considered. . risk and waste within project parameters. types of materials and construction techniques.
air quality etc. Generate innovative and creative solutions to improve issues such as energy use. .How VE influences Sustainability ? • Identify & prioritize project values amongst • • • • • stakeholders. Seeks best value for money spent. Ensures you do the Project Right (cost effective). Maximize system efficiency and alleviate consumption of natural resources Decrease both capital and life-cycle costs.
In a Nutshell • Value Engineering Helps Organizations In – • DECREASING COSTS • INCREASING PROFITS • IMPROVING QUALITY • SOLVING PROBLEMS • SAVING TIME • USING RESOURCES MORE EFFECTIVELY .
THANK YOU !!! .
.What is a Contract? • Work being done between two or more parties should always involve a mutually approved document or contract. • This document usually covers: • Terms and Conditions of a specific job • An inclusive and detailed scope of work • A pricing breakdown • A timeline or schedule for work to be completed • Any exclusions that must be outlined. also part of the scope of work.
• They outline what needs to be present in a finished product for all parties to be satisfied. • They inform all involved parties of exactly what they are responsible for and in what time frame.Why do we need Contracts? • Contracts are designed to protect and legally bind all parties involved. . • They allow for progress evaluation and management.
they cannot be easily inflated to cover work not originally estimated.How do I make a Successful Contract? • A Contract should clearly state the project objectives. . • Contracts can be added to easily. if necessary. • Market and environmental conditions should be acknowledged and outlined. • Contracts should be thoroughly reviewed by a legal department. • Contracts should exclude anything that may otherwise be “assumed” to be part of a job assembly. normally a third party.
What will happen if my Contract is successful? • Any comprehensive contract will allow and aid in: • Efficient management and allocation of risk management • Maintaining and possibly undercutting existing timeframes and cost analysis • Identifying key “stumbling points” and mitigating their effect before they become major problems • Minimize schedule delays and maximize returns .
creating more difficult (and expensive) working conditions • A Breach of Contract results when terms of a contract are neglected or contradicted-more delays/termination of the contract usually follows .How bad could it get? • BAD! • Without clear definitions of responsibility. • Confusion can ensue and cause delays that may cascade into other parts of a project • Disagreements can get out of hand • Costs can increase in both direct and indirect areas • Additional labor • Additional material • Missing windows of opportunity as normally coordinated with other contractors.
How can I Maximize my Contract’s Effectiveness? • Open and constant communication between involved parties will ensure that everyone is always “on the same page” .
Other interacting contractors Arbitrators/Legal representatives Project Managers and Site Supervisors Any additional party that may otherwise be described as a principle stakeholder .Who cares? • The end customer. (usually the owner or • • • • representative of the owner). and contractor are the main people concerned with any Contract.
What are major types of Contracts? • Fixed price (or lump sum) • Time and Material • Time and Material not to exceed cost .
Fixed Price Contracts • Financially beneficial to the customer as long as the scope is well defined • Provides the most room for the contractor to maximize profit • Usually is most efficient by promoting coordination of a job ahead of time .
.Time & Material • Good for the customer when the scope of work is not well defined • Possesses more risk and not as much profit opportunity for the contractor • These types of jobs usually progress at a slower pace.
while still adhering to a budget .Time and Material-Not to Exceed • Similar to standard for of Time and Material. this upper limit is normally sought after by all contracted parties • Should only be used in situations where very little is known about the scope of work. only with an upper limit on total expenses • Historically.
Licenses.What should a Contract contain? • An Acknowledgement of an Invitation to Bid • Acknowledgement of all reference material used for • • • • • the estimate of the job in question Proposal letter outlining the scope of work Any bond information General conditions and any special conditions Permits. Any change orders . Reports. etc.
Are there any additional types of Contracts? • Cost-plus not to exceed &shared savings • Cost-plus incentive • Fixed price with incentive fee • Fixed price economic price adjustment • Bonus-penalty .
.Have I learned anything? • 10+ years of industry experience has shown that if a possible problem or negative outcome can be thought of during the estimating phase. or even earlier-it should be accounted for in a contract or at least specifically excluded from any responsibility up front and in writing.
Project Cost Capital Estimating
• A quantitative assessment of the likely costs of the
resources required to complete the scope of the project • If the scope is not well defined, we are doomed to failure in the estimate!
*Directs + Indirects = Total Base Estimate (TBE)
Front End Loading (FEL)
Risk & Uncertainty
Unknown > 70 Known < 30
Unknown > 65 Known < 35
Unknown > 60 Known < 40
Unknown > 30 Known <70
Probabilistic VS Deterministic
• Probabilistic Estimate • A range of estimates • In FEL-1 and FEL-2 stages • Deterministic Estimate • A single point estimate, one number • In FEL-3 stage
then Estimated total cost = $31.000 and Lang Factor = 3.Types of Estimate 1. Definitive • Very defined engineering data 50% + • Used for Project Cost Control and Cost Monitoring . Conceptual • Made without detailed engineering data • Lang Factor: • Equipment price = $10.000 2.1 for Solid process plants. Detailed • Engineering is 40% to 60% complete • Used as a basis for awarding the contract 4. Preliminary • Engineering is 10% to 20% complete • Used for initial budgeting 3.
Why Do The Estimates Vary? • Level of scope definition • Level of design details • Availability of time .
000 . if in FEL-1 phase TBE is $10.800.600 = > the real cost should be between $11. $14.$2.200 and $19.FEL Stages & Types of Estimate FEL Stage Type of Estimate Level of Project Definition 1% to 3% Contingency Range* 20% to 40% Accuracy Range** -20% to +40% FEL-1: Appraise Preliminary FEL-2: Optimize Detailed 3% to 5% 20% to 30% -10% to +15% FEL-3: Define Definitive 40% + 10% -10% to +10% *For example.000 @ 40% contingency) ** $14.600 .000 + $5.000. then the Total Cost will be $14.
Probability Ranges • P(10) • There is only 10% chance of project cost being equal to or less than estimate • In FEL-1 stage • P(50) • There is 50% chance of project cost being equal to or less than estimate • In FEL-2 stage • P(90) • There is 90% chance of project cost being equal to or less than estimate • In FEL-3 stage .
AACEI* Classes Type of Estimate Conceptual Preliminary Detailed Definitive AACEI Class Class 5 Class 4 Class 3 Class 2 FEL Stage FEL-0 FEL-1 & FEL-2 FEL-3 Execute * Association for the Advancement of Cost Engineering International .
Responsibilities Who are these people ? .
Responsibility Chart Project Manager Engineer Manager Construction Manager Project Engineer Project Controls Manager Scheduler Procurement Manager A/C Manager Estimator Cost Control Electrical Mechanical Civil Environment * Bolded are directly communicating with the Contractor .
. PCM: Prepares and supervises detailed estimates and presents them to the PM. Estimator Estimator: Structures and prepares estimate. Controls Contingency.Responsibilities Project Manager Project Control Manager PM: Supervises and approves cost estimates.
Timber line) •Sanity checks Plan •Schedule of activities •Team preparation •Buy in of all stakeholders .Organizing for an Estimate •Historical data •Professional references •Market surveys •Techniques •Procedures •Policies •Practices Information Methods Skills •Past experience •People skills •Software use (Icarus.
THANK YOU! .
Clauses • Clauses are like earmarks that are used when a bill is passed by congress • They include special rules within a major deal • For example if bill is passed to build roads in Iowa and that bill has is an earmark that says that they also need to build a McDonalds on top of The Rocky Mountains for a politician that gets hunger when climbing. .
Key Contract Clause • Audit • Changes • Contractors Responsibilities • Delays • Changed conditions • Dispute Resolution • Force Majeure • Governing law .
Key Contract Clause • Indemnification • Insurance • Late Completion Damages • Limitation of Liability • No Damage for Delay • Order of Precedence • Owner Responsibilities • Payments .
Key Contract Clause • Quantity Variations • Schedules • Suspension of Work • Termination • Time of Performance • Warranty .
There will be a clauses that states it if there is. This is called an Universe of Claim .Claims • This is when you request extra money due to an occurrence • Usually there are a certain amounts of claims in a contract.
Types of Claims • Direct Changes • Constructive Changes by the owner • Differing site condition • Suspension of Work • Constructive suspension of work by the owner • Force Majeure .
Types of Claims • Delays • Acceleration by the owner • Constructive Acceleration by the owner • Termination for Convenience by the owner • Termination for default by the owner .
• Litigation: Is when you file a lawsuit .Solving Disputes • Negotiation: this is the best and fastest way to handle a dispute • Mediation: Here you have another person of group that helps negotiate • Arbitration: This is when you present your evidence and a final decision is made without any negation after the final decision.
The End .
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