Introducing VALUE Methodology: Enhancing Performance and Reducing Costs

1. SAVE International introduces “Value Methodology” Presentation version 1

2. Agenda: • What Is It? • History of VM & SAVE • Why Use It? • Who Uses It? • How Is It Applied? • Methodology • Function Analysis • Example Applications • Reasons for Low Value • Next Steps • SAVE Membership • Training, Certification • VM in the next Millennium

3. What is It: • Value Methodology (synonyms: value analysis, value engineering and value management) • ... function-oriented, systematic, team approach to add customer value to a program, facility, system, or service. Improvements like performance, quality, initial and life cycle cost are paramount in the value methodology.

4. Brief History: • Began at GE early 1940’s • 1947 - Value Analysis • Lawrence D. Miles • “Father of VM” • 1954 - Value Engineering • U. S. Navy • Society of American Value Engineers (SAVE) • Formed in 1959 • Value Management, Value Control, Value Improvement • SAVE International • Name change 1996

5. Why Use It: • Customer Satisfaction • Performance Improvement • Productivity Improvement • Quality Improvement • Time Saving • Proven over 50 years • Functions Achieved • Results Oriented • Enhanced operation • 5 - 15% cost savings • Lower life cycle costs • Increased revenue • Benefit to cost 20:1

6. Who Uses It: • Construction • ASTM E-1699 • Manufacturing / Industry • ISO Certification • Transportation • Environment • Health Care • Services & Systems • Government • OMB Circular A-131 • Public Law 104-106

7. How is it Applied? • Methodology • PRE-STUDY • VALUE STUDY • Information Phase • Function Analysis Phase • Creative Phase • Evaluation Phase • Development Phase • Presentation Phase • POST-STUDY Pre Study Value Study Post Study

8. Value Study • Information Phase • Review Data Package • Present Study Overview • Stakeholder Briefing • Review Project • Background / History • Determine Value Study Expectations • Visit Site • Conduct Interview Pre Study Value Study Post Study

9. Value Study • Function Analysis Phase • Identify Functions • Verb / Noun • Classify Functions • Basic, Secondary • Model Functions • FAST, Hierarchy • Establish Function Worth • Determine Function Costs • Establish Value Index • Select Functions for Study Pre Study Value Study Post Study

10. Define Functions • Basic Function • Defines a performance feature that must be obtained • Satisfy only user’s needs not desires - What must it do ? • Secondary Function • Defines performance features other than those that must be accomplished • Are user’s desires rather than needs - What else can it do ?

11. Value Study • Creativity Phase • Reduce Roadblocks • Brainstorming, Check Lists, & Other Techniques • Produce Solutions, QUANTITY of ideas to accomplish FUNCTIONS in alternative ways • Synthesize Ideas Pre Study Value Study Post Study

12. Value Study • Evaluation Phase • Rank & Rate IDEAS • Functional Compliance • Eliminate Nonsense • Cost Impacts • Schedule Changes • Project Objectives • Study Goals • Select IDEAS for Development Pre Study Value Study Post Study

13. Value Study • Development Phase • Create Benefit Analysis • Review Technical Criteria • Complete Descriptions • Original and Proposed • Produce Support Material • Charts, Graphs, Drawings • Perform Cost Analysis • Original and Proposed • Determine Life Cycle Costs • Generate Implementation Plan Pre Study Value Study Post Study

14. Value Study • Presentation Phase • Present Study Results • Issue Report • Determine Next Steps • Obtain Commitments to Implement Alternatives Pre Study Value Study Post Study

15. Post Study • Complete Changes • Implement Changes • Monitor Status Pre Study Value Study Post Study

16. Example Applications: Construction • Criminal Court Complex New York, NY • Improved Function • Reduced Required Area • Enhanced Operations • Added New Technology • Improved Master Planning • $412 million LCC savings • Veterans Administration Hospital, Dayton, Ohio • Improved Layout • No Functional Reduction • $3.8 million LCC savings

17. Example Applications: Manufacturing / Industry • Heat Pump Project • Changed design so that all parts were at 90o to others • $229,655 savings • Reduced material needed • Catenary Anchor Leg Moored (CALM) Oil Transfer Buoy • Survive Accidents Better • $17,000 savings per unit • Doubled no. of bulkheads

18. Example Applications: Transportation • U.S. Highway 31, Miles, Michigan • Eliminated Unnecessary Functions • Reduced Costs of Required Functions • Made Design more Cost Effective • $1,000,000 savings

19. Example Applications: Government • Targeting Navigation System for U.S. Army’s Apache Helicopter • Reduced Maintenance • Simplified Assembly • Improved Durability • $390 million savings • Patriot Missile • Improved Reliability • Enhanced Useful Life • $134 million savings

20. International Affiliates • Japan • 40 year History • Industry, Management, Construction, Electronics • India • 25% of Companies use VM • Hungary • Newest Affiliate • Additional Members in 30 countries

21. Reasons for Low Value: • Pride • Built-In Resistance • Lack of Time • Habits (comfort factor) • Customers Priorities • Lack of VM Budget

22. Improving Value • Increase Awareness of VM • Involve all Participants • Schedule VM as Routine Activity • 20:1 Improvement • Innovative Solutions

23. VM in the Next Millennium: • Expanded Role • Technological Advancements • More Strategic Applications • Expanded Focus on New Markets & Businesses • Worldwide Team of Experts • Comprehensive Use • Improved Customer Communications Goal: World Class Value

24. VM in the Next Millennium: “VM is moving into a new cycle of high visibility, and we (SAVE International) must be proactive rather than reactive to this move.” Joe Lambert, CVS, President, SAVE International

25. Closing Statement Value Methodology is a Value Added service that demonstrates your organization’s commitment to be: “Customer Focused” and “Responsive to Emerging Needs”