Selection Phase Training Sampler

The first step in the Value Method is to generate an opportunity through a job plan activity called the selection phase. The following information is Chapter 4, Section from our Internet online Introduction/Refresher course. Please feel free to use this information to help you select the activity, expertise, and team balance needed to turn that unprofitable problem into a success. Alternatively, you can contact us and we will perform a selection analysis for you.

3. The Value Method Job Plan
   1. Selection Phase
      

      Selection of an activity is the first step of the Value Method job plan. The person that is in the "trenches" is usually the person that has the greatest ability to recognize the potential of an activity for value study and benefit from it. Unfortunately, due to lack of training in the field and the phenomena of being "so close to the trees that you forget it is really a forest," the staff that has the best: ability to recognize it, affect high quality value study results, and benefit from its use, are often the last ones to suggest it. Therefore, it is crucial in any introductory discussion of the Value Method to review some of the selection procedures so the people using the discussion can better recognize opportunities when the Value Method can produce benefits for them and their customers.

      When an activity is just beginning, the cost to enact a change to the project is negligible and the potential benefits available due to a change are very great. As the activity progresses, choices are made, data are collected, resources are obligated and expended, customer and regulatory buy-offs are attained, etcetera. Accordingly, the cost to change the project goes up and the potential benefits available due to a change decline. For a time, at some point, the cost to change may exceed the benefits available. This means that the more effort placed into improving the value at the initial phases of the activity, the greater the potential benefits. This behavior is illustrated below.

   2. Value enhancement assessment should not be considered to be exclusively expenditure reductions. Other factors such as: schedule improvement or recovery, improved product, improved client satisfaction, reduction of risk, and other features beneficial to the mission and intent of the activity should be considered value enhancements too. Further, if the proposed activity approach does not appear to have appropriate value to the customer, entails too much risk, or has other troublesome qualities, a person may wish to initiate a value study irrespective of the projected expenditures. When the comparison indicates that the benefits are sufficient, a value study should be scheduled and performed.
      1. Typical Percent Value Enhancement Expected in Value Study. One of the techniques used to estimate the potential for typical value enhancement available from value study is to multiply the total estimated project cost by a simple ercentage. The percentages used are based upon experience in the Value Method field.
         
         Although it is not an optimum approach, calculating the potential for savings in a value study through use of a percentage reflecting the expected value enhancement can be used. In the event that the current activity information is too scarce to make better determination or a person with the adequate expertise is not available to perform and FAST or other technique, the percentages listed in the table below may be used as a conservative estimate of cost savings, cost avoidance, and/or efficiency, in percent of original estimated cost or value involved, for various phases. Examples of savings greater or less than these averages abound.
         
         

         Phase
         Feasibility	Planning	Generate Method-Concept	Generate Method- Final	Maintain Activity Operation
         20%	10%	6%	2%	4%

         
         Recommended common value study result percentages used to estimate potential due to operation of a single value study.
         
         
   3. Assessment of Value Enhancement Expectation. The best method to determine if an activity would benefit from value study is to make an actual assessment. Two basic techniques are common, historical and actual estimates.
      1. Historical Common Value Mismatches. Value Method professionals have generated lists of items that are the more common features determined to contain a value mismatch. The list shown below is a result of our examination of publications that show common categories of endeavors and components that are often found to offer significant value enhancement through a value study.
         
         The following endeavors and components are often found to offer significant value enhancement through a value study: If you find one or more are present in your activity, value enhancement, greater than that usually found in a value study, may be possible.
         1. Involves large amount of expenditures or resources (staff or equipment). In such cases even a minuscule reduction can involve large expenditures or other resources.
         2. Costs exceed budgeted amount.
         3. Great complexity is noted in plans. (Often the more complex the plan, the more opportunity to improve value and performance.)
         4. Potentially involves major resource impacts (staff or equipment).
         5. Activity cycle is highly compressed. (Such situations usually generate short cuts. Often, the potential value impacts of shortcuts have not been fully evaluated.)
         6. Involves critical, exotic, hard-to-get, or expensive resources (materials or staff) and/or requires sole-sourcing to obtain them.
         7. Activity uses non-standard components such as specialized software, fasteners, unique sizes, computer equipment, or other resources.
         8. Plans include use of specialized components that have comparable counterparts available off-the-self.
         9. Activities involve advancement in the state-of-the-art.
         10. Involves status enhancement, new records (e. g., largest database, first time used), embellishment, special interest requirements, high viability, extensive political objectives, or strong controversy. (Such projects often involve strong, often conflicting, requirements that increase the costs and resources involved. Sometimes, the true cost, purposes, and tradeoffs of such requirements have not been fully considered.)
         11. Highly skilled labor or time consuming tasks are involved.
         12. Items with poor service or cost history, or have high maintenance and staff operations, are proposed or being used.
         13. Plans have been in use or "on-the-shelf" for more than five years. (These activities, especially if they receive little or no changes in that period, are prone to losing touch with the present situation and overall mission objectives.)
         14. Solutions are included in activity to solve problems or improve conditions unrelated to immediate cost. Examples are: reliability, aesthetics, reliability, noise, safety, risk protection, simplification (KISS), maintainability, standardization, time, quality, resource use (e. g., energy, limited staff or equipment), environmental factors, performance, or past history avoidance.
         15. Components or functions are identified in a Value Methodology FAST diagram as being a potential value mismatches.
         16. Similar components or functions are being commonly submitted and accepted as Value Engineering Change Proposals (VECP's). This situation indicates that the VECP is not acting as only an added "safety net" to reduce costs and that added value at the initial stages should be examined.
         17. Activity has repetitious components. Repetitious examples include: several organization units being formed and/or destroyed or awarding multiple contracts.
         18. Activity has fallen behind the specified schedule. Such a condition often generates poor value situations in the effort to get the activity back on schedule. The nature of the value study effort can be used to illuminate the problem generating the delays and bring the project back on schedule.
         19. Activities have been operating for a long period of time without extensive review or modification. Such activities often continue to solve problems that are no longer relevant in the organization or do not include use of new innovations in the industry.
         20. Issues involved are highly charged with diverse interests present. Such situations often have highly favored solutions, that may have been the best option once, but continue to be favored long after the value has declined below optimum. They are often retained due to the perception that to change them would create problems in acceptance and would be difficult.
         21. Conditions have changed in the base assumptions used to make previous selections such that they are more costly, difficult to implement, and otherwise reduced in value. Larger projects often have this problem since the small issues are more difficult to keep track of and are perceived to be of lessor importance.
         22. Construction or rehabilitation activity involves: intricate shapes, deep excavations, high embankment slopes, steep slopes, large dewatering requirements, long material hauls, extensive quantities of borrow and/or waste, extensive reinforcement, and embellishments of a visual nature.
         
         If one of these are present, a value study is typically highly beneficial. If the potential looks promising, a more detailed examination of the activity by a person with the appropriate Value Method selection expertise, may be helpful.
         
         
      2. Actual Estimate Techniques. The staff at the location of, or involved with the activity, often have a good idea of where they think they are not getting good value. When they augment this expertise with Value Method techniques (FAST, function-worth-cost, cost modeling, etcetera), an extremely good estimate of the potential value enhancement can be attained.
         
         In the event that the activity staff does not understand the Value Method sufficiently to make a detailed assessment, Value Method professionals with a good understanding and technical expertise in the activity, can make, or assist activity staff in making, assessments of the potential for value enhancement at any point in the activity cycle.
         
         1. Relative Cost Ranking. This method uses the relative cost of components to identify the most costly parts or functions of an activity. When the activity is large and/or complex, or the costs to perform a value study for the complete project appear to be too large, the use of Pareto's Law, "80-percent of the costs occur in 20-percent of the parts" is often used in the selection process of the activity section as well as value study operations. Highlighting the most extensive parts of the organizational budgeted program stretches limited resources to obtain maximum results.
            
            A caveat to relative ranking method use is prudent. Exclusive use of this method may generate losses in overall Value Method results and organizational performance.
            
            
         2. Computation of Return on Investment Expectation. The apparent benefits (value enhancement) are usually compared to the expected incremental cost to perform the value study endeavors. If personnel will be needed to be doing that type of work anyway, then no incremental cost would be incurred. In fact, in this situation, it is probable that their actual costs would be reduced due to the improved efficiency of their using the Value Method to perform those tasks. The Return on Investment (ROI) equation is:

            ROI =	Value Enhancement
            	Value Study Cost

            
            If the resulting ROI is sufficient, use of the Value Method should be initiated. If the effort shows sufficient promise such that forming a value study team for the activity is appropriate, a person trained in the application of the Value Method should be contacted to assist in team leader and other selection criteria. So that the best effort can be attained and duplication of effort can be minimized, it is strongly recommended that someone with Value Method Value Study Team Leader / Facilitator expertise be contacted so they may assist and coordinate in the value study endeavor. An ROI is between 1 to 5, a value study should pay for itself and entails little risk of returning less than is invested. When the ROI is between 5 to 20, the return is usually good enough to invest the expertise of a Value Study Team and minimal risk of returning less than is invested in the value study. When the ROI exceeds 20, the project return is excellent and no risk of lack of return is contemplated. (The maximum ROI actually achieved in a a Systematic Analytic Methods and Innovations value study was more than 2,500 and its projected ROI in the selection phase was about 100.)
            
            
         3. Mandated Project Selection. Federal government agencies have laws and that specify that construction related projects, with award amounts greater than specified thresholds, are selected for performance of a value study by default. Such projects also have mandatory goals and reporting requirements. The definitions for these types of projects are given in OMB A-131 and agency internal regulations. In general, depending on the agency, all construction related projects must be value studied if they are either $1,000,000 or $500,000 or more in final awarded value. The awarded amount of similar component parts on the same Program, Project, or Activity (PPA in the Federal government), whether involving several contracts or not, are often considered to be a single PPA within the confines of the regulations and reported as such.
            
            
         4. Value Study Team Selection. Once a project has been selected for value study, selection of a team to perform the study is needed. (If you are planning to do an individual type value study, consider yourself the team of you, yourself, and I. See the types of value studies section in this short course for more details.) Selection of the team membership should incorporate the multi-discipline team procedures. To avoid the "group think" that can develop and hinder team performance, no more than two of any one discipline should be allowed. Ideally, the staff responsible for the activity's execution are conferred with to obtain their viewpoint on the major types of expertise that they believe is needed. A common error in team selection is using a strict cost basis. High cost but simple off-the-self components may not gain as much value enhancement from value study as a much less costly, but very complex and difficult to complete component.
            1. Blending. Combining the team member attributes is an important feature in team selection to the success of the value study proposals. Study components that have high importance need more than just one person's expertise working on it. If this is allowed the team effort can end up being more of an individual rather than team effort. However, extremely similar backgrounds should be avoided too. An appropriate, and if possible, optimum balance is desired. The team members should also have sufficient experience that will allow them to understand the difficulties involved in the activity being studied.
               
               Another common mistake is paying too much attention to the technical side of the activity. non-technical expertise should be included too. Client, site, and other viewpoints should be represented on the team by participation from the organizations with the most affect on the project. However, inclusion of different viewpoints should not be allowed to bias the study result.
               
               
            2. Group Interactions. Expertise and expertise blending go a long way towards ensuring that a team can generate good value study proposals. However, it takes more than smart people to make a good team. Team selection should also consider if the members can operate as a smart group. The Value Method uses many techniques to generate a high performing team. The process is tuned to get team members to an optimum performance level quickly. However, the individual human equation can harm this performance. Team membership needs to include people that can understand not only their specialty, but can also interact with and accept the concepts of other disciplines, accept the philosophy of changing an approach (think "outside the box"), play with the team and accept a team selected direction, able to understand and apply the Value Method procedures and principles, and will accept responsibility.
               
               
            3. Prior Involvement. In all cases, a general rule applies and is generally accepted by practitioners throughout the Value Method field in team type value studies of an ongoing activity. No team member should be intimately involved with the activity, its design, or prior decisions nor should they have had strong participation in the design, planning, management, or execution of the activity. There are a multitude of reasons for this stipulation.
               1. It is difficult for a person who has been heavily involved with the current conceptual design to be objective enough to take an "outsider's view" of the project;
               2. Most people use their most recent experience for ideas, people involved in the design under study are usually unable to divorce themselves from the project enough to garner a different idea as is desired and a stated object for performing the study;
               3. Other team members may come to rely too heavily on the activity intimate knowledgeable person and this can effectively constrain other team members to preset solutions already considered;
               4. It is unfair to ask a intimately involved person to pursue, develop, and support ideas which may affect the present accepted direction of the activity or could generate unpopular proposals (e. g., "How could you propose to downgrade our jobs?", "As your client I told you that I did not want to consider that!", and "Why did you present the idea of using concrete when we had already agreed to use steel?"); and
               5. Results of such studies indicate a reduction in the value of proposals generated by the value study team. Further, in the case of Federal government construction related projects, it is contrary to the specified practices as listed in guidance from various agencies (e. g., Corps of Engineers, Interior, and Reclamation.
                  
                  It should be noted that study while team membership is not appropriate or accepted, consulting people with prior involvement is not only encouraged, but study and activity team cooperation is even required. Failure by the these teams to consult is a criteria used in specifying poor value study performance and may be a basis for criticism of the value study.
                  
                  
            4. Study Team Quantity. To perform optimally, the team should consist of no more than about five to eight people. Due to the number of sub-group interactions that can be formed and other factors, teams with nine to ten people become hard to manage and productivity suffers. Therefore, if possible, formation of a large study team should be avoided.

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