PROJECT EXECUTION AND VALUE FOR MONEY: THE ROLE OF THE ENGINEER

This post was contributed by Engr. (Sir) M. O. Ebah, Chief Lecturer/Engineering Consultant with the Mechanical Engineering Depertment, Delta State Polytechnic, Ogwashi-Uku, Delta State, Nigeria. I feel deeply grateful for this article and look forward to having the likes of this great and senior professional colleague being part of this blog.

Abstract

A project is an important and carefully planned piece of work, that is intended to build or produce something new, or to deal with a problem. A project could be the design and construction of a building, an airport, an offshore oil platform, or the development of a prototype car. Project execution is the doing of the project. For engineers to ensure value for money in project execution, there are two main, albeit interwoven approaches The approaches are Value Engineering and Project Management. The Value Chain method is also available for use and has been included herein under Value Engineering in the first part of this two part presentation. Value Engineering often thought of as part of Project Management, is a systematic method employed for improving the value of goods or products and services by using an examination of functions. In project execution, value could be derived from cost, use, esteem or exchange. Project Management is the science of assuring that meticulous attention is paid to all aspects of a project. The Value Chain details how the essential activities of an organization adds Value to  its products and or services. This  presentation lists and expounds  what the engineer can do in project execution to make the process both effective and efficient so as to ensure value for money. It is an exposition of how the professional engineer can use Value Engineering, the Value Chain and Project Management techniques to give value for money in the execution of projects.

PART 1: THE VALUE ENGINEERING AND VALUE CHAIN APPROACH

1 .0      INTRODUCTION

Value analysis or value engineering and value chain are systematic approaches currently being applied in industries and other business organizations for cost reduction and competitiveness. Value engineering is the analysis of the functions of a project, programme, system, product, item of equipment, building, facility, service or supply to improve performance, reliability, quality, safety and life-cycle cost. The industry and present day society have become so complex that it can no longer rely on the rule of thumb to execute and evaluate projects. Higher education has  enhanced knowledge, skills and the technical ability of people. There are now newer and advanced materials and equipment. Information is also now more readily available.

Systematic techniques such as value analysis and value engineering allow industry and business get projects executed more economically. A system is a collection of interacting elements that operate to achieve a particular objective. These systematic approaches can be used in the following areas:

-       Design and development of complex and highly engineered industrial equipment.

-       Design and development of military equipment and weapons.

-       Management of operations.

-       In choice of tactical alternatives and

-       In deciding major policy alternatives.

2.0       VALUE FOR MONEY

The value approach or value analysis and value engineering was developed in order to make or produce cheaper and so sell cheaper but retaining the utility of the product.

            Value is the cost (of a product or production) proportionate to function. Value is the ratio of function to cost. Value can be mathematically expressed thus:

Value =          Function/Utility Cost

From this formula for value it can be seen that the value of a product, in this case the output of project execution, can be increased by either increasing functionality or utility, or by directly decreasing cost of providing the function. Function is the purpose of product or project output and there can as many as three  types of functions:

a    Primary function

b    Secondary function

c    Tertiary function

        
            2.1 Examples of project functions

PROJECT	FUNCTION
Road	a). Transportation b). Economic development c). Status enhancement
Stadium	a). Sports building/Organization b). Development of sports c). Status enhancement
Airport	a). Air transportation b). Development c). Status enhancement
Painting	a). Protection against corrosion and deterioration       b). Recognition/Identification c). Appearance

Viewed from this perspective of functionality, a project can be properly evaluated to know its worth vis a vis the money expended. Value as already stated is the ratio of functionality/utility to cost. Also value can simply be increased by either improving the function or reducing cost. It is a primary principle of value engineering that basic functions be preserved and not reduced for value improvement (http://en.wikipedia.org).  Value engineering can be applied to just about any functional aspect of a project. Emphasis should not be on cost reduction alone. Cost is the extent of resource expenditure on all aspects of the project. It is better to spend on just what is necessary and not more. Most times we spend more only to be asked why later.

2.2      Value Types

Knowing the various types of values that can be derived from product or project execution result, will surely enable us as engineers to properly evaluate and execute projects for their worth in monetary terms. Types of values are:

-       Cost value: Which is the cost of producing or manufacturing a product or executing the project that gave birth to the product.-money expended on all resources.

-       Use or functional value: Which is the work that can be done, functions or services that can be provided by the product execution.

-       Esteem value: Which is the quality or appearance of the product or project execution output.

-       Exchange value and

-       Life span value: Will it serve out its specified life span?

-       Safety value: Reduction/Elimination of  accident and danger 

-       Reliability Value: Performing to expectation

 Fully functional outputs will guarantee value for money. Moreover, project execution must be thorough to ensure good quality and appearance of product. Good quality and appearance are good values for money. Reliability, safety, and life span are essential values for cost effective project execution.  

Exchange value, where applicable is also a sure value for money. If the life span of the output of the executed project is up to standard specification, then there is value for money in that project.

In all project execution therefore, we cannot compromise all the above stated types of values. They must be given the utmost consideration if our interest is value for money in project execution.

3.0       The Value Chain

The value chain as shown in figure1 below, is an illustration of how the essential activities of an organization can add value to the products and or services it provides (Porter, 1985)

The value chain is very useful for assessing the ability of an organization’s various functions to contribute towards competitive advantage so as to give value for the money it gets from customers or clients (Thompson, 1990)

For clients to have value for money in their patronage of your organization or firm, it must be efficiently and effectively managed to produced values from the aggregate of support and primary functional activities. And in this case, for project execution or operations to enhance value for the money paid for its outputs or productions, primary activities must be properly linked to the appropriate support activities. See figures 1 and 2.

3.1       Value Chain Activities

As illustrated in fig 1 above, the value chain consists of five primary activities. The primary activities are linked to four support activities.

3.1a    Primary Activities

The five primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Primary activities are physical activities that create the product or service which is then sold to the buyer with required after sale service.

Inbound activities consists of activities that concern the receiving, storing, internal distribution of inputs for operations. These are warehousing, stock control and internal transportation.

Operations are activities that transform inputs to finished products and services in project execution.. Examples are machine/plant assembly, machining, production-sand filling, compacting, plastering,   packaging etc.

Outbound logistics are activities that concern the distribution/handing over of finished goods and services to customers or clients.

Marketing and sales activities include advertising and promotion, pricing and sales matters.

Service activities concern, the provision of required after sales service, such as installation services, maintenance  and repairs.

3.1b    Support Activities

The four support activities are the firm’s infrastructure, human resource management, technology development and procurement.

Firm’s infrastructure concerns organizational structure, planning, financial control and quality management used for the whole value chain.

Human resource management concerns activities that have to do with recruiting, training, developing and rewarding and motivating staff.

Technology development activities concern know-how, research and development, product design and process improvement.

Procurement activities concern the purchase of inputs used in the value chain.

Like the primary activities, all support activities can contribute in sustaining competitive advantage in project execution and so add value for money (Thompson , 1990)

Depending on the nature of the industry, proper linkage of these listed activities can contribute to the creation of competitive advantage and so provide value for money. As engineers involved  in project execution, the activities must be of crucial importance to us if we want to provide value for money paid by our clients.   

                   

Conclusion

By applying the concepts of value analysis or value engineering  in project design and its execution process,  we can cut down on unnecessary costs without impairing  implementation. By so doing we can add value for the money paid for  our work by  clients. This is the value approach.

Another means of ensuring that our project execution delivers value for money is the value chain. This approach analysis the value chain activities and highlights how well the activities of the various functions and business units in an organization can be organized and coordinated. When the activities within our ministries and parastatal organizations are effectively managed, and linkage opportunities are utilized, cost can be better controlled and reduced to deliver value for money in project execution.

The value approach comprising analysis and engineering, and the value chain are suitable and appropriate methods that can be applied to deliver value for money in all industrial/engineering  project executions. They are hereby recommended for use.

Comin up in the next post, Engr.Sir. M.O. Ebah will conclude this discuss in

PART TWO: THE PROJECT MANAGEMENT TECHNIQUE

Once again, I say thank you to Engr. (Sir) M. O. Ebah, Chief Lecturer/Engineering Consultant with the Mechanical Engineering Depertment, Delta State Polytechnic, Ogwashi-Uku, Delta State, Nigeria. I feel deeply honoured to have you as part of this resource sharing network for the development and advancement of the practice of engineering and management.