7.

5 Value Analysis and Engineering

7.5.1 Description

Value analysis (VA) and value engineering (VE), when applied as processes, are “the systematic
application of recognized techniques which identify the functions of the product or service, establish the
worth of those functions, and provide the necessary functions to meet the required performance at the
lowest overall cost.”53 Typically, lowest overall cost refers to the lowest life-cycle cost. While VE is
focused on the development of new assets, and VA on existing assets or projects, their representation in a
basic process map is the same. This section refers to this process as VA/VE.

The concepts of “value” and “functions” are central to VA/VE. In general, value is a measure of the
worth of a thing in terms of usefulness, desirability, importance, money, etc. While not the same as value,
quality (i.e., as a measure of customer satisfaction) tends to be improved by VA/VE. In general, functions
are attributes of an asset or project that give it a purpose (i.e., allow user/operator to accomplish work) and
make it useful or desirable (i.e., to have value). In the VA/VE process, measures of a function’s value are
usually considered in relation to the cost of the function (i.e., a relative value; the function’s monetary
worth to the function’s cost). While these general definitions will suffice for understanding the general
concept, there are many types of value measures and functions considered in specific VA/VE methods and
tools.54

The objective of VA/VE is to improve the value for the intended asset or project objectives as defined
by the respective strategic asset requirements (see Section 3.1) or project implementation basis (see Section
4.1) inputs. However, unlike other practices used to improve “value” (e.g., suggestion lists, cost reduction
exercises, etc.), VA/VE is based on rigorous function definition and alternative analysis. The outputs of
VA/VE are asset and project scope alternatives with improved value, which must be decided upon by the
strategic or project leadership.

7.5.2 Process Map for Value Analysis and Engineering

In TCM, the VA/VE process includes six basic steps: (1) planning and initiation, (2) function analysis,
(3) creativity, (4) idea evaluation, (5) idea development and documentation, and (6) methods and tools
development.55 The value engineering process centers on steps that analyze functions and then assess their
relative value. The outputs of value engineering are used primarily as inputs for the project implementation
process. Figure 7.5-1 illustrates the process map for VA/VE, but keep in mind that the process is typically
applied in a phased manner (i.e., more than once during a project) consistent with the project scope
development phases described in Section 7.1

53
SAVE International, Value Methodology Standard (Glossary), 2003.
54
SAVE International defines the many types of value (e.g., esteem, market, perceived, use, etc.) and functions (e.g.,
basic or essential, work, sell, etc.). Refer to the SAVE International Value Terminology Dictionary, 2005.
55
SAVE International has established a standard it calls “Value Methodology”(VM). (See SAVE International, Value
Methodology Standard, 2003, www.value-eng.org). VM delineates a process in the form of a “job plan.” AACE
International’s VA/VE sub-process is conceptually consistent with the VM job plan phases, but the process is
abstracted here in recognition of the different purposes and contexts of the two products. (Again, see SAVE
International, Value Methodology Standard, 2003, www.value-eng.org).

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 Asset or Asset or
Cost Alternativ es
Project Project
Inf ormation f or f urther
Scope Technical
Strategic (5.1,9.1,7.3) creativ ity
(3.2, 7.1) Inf ormation
Asset
Requirements
(3.1) Study Perform
Scope
Plan and Initiate Function Analysis Apply Evaluate Ideas
&
the VA/VE Study Def ining (Value Creativity (Value Screening)
Project Deliv erables Measurement)
Implementation
Basis
(4.1) Customer
Requirements Candidate
Alternativ es

Develop and PlanningInf ormation Develop and

Maintain Methods (3.2., 3.3 and Document
and Tools 7.2,7.3,7.4,7.6,7.7) Alternatives

Value
Historical Historical
Study
Inf ormation Inf ormation
Report
(6.3 and 10.4) (6.3 and 10.4)
(5.1,8.1)

Figure 7.5-1 Process Map for Value Analysis and Engineering

The following sections briefly describe the steps in the value analysis and engineering process.

.1 Plan and Initiate the VA/VE Study

At the start of the process, VA/VE study leadership is established with the responsibility to plan and
prepare for the main effort of the VA/VE study that will begin with function analysis. Preparation typically
entails the following activities: (a) defining the subject asset or project including customer requirements for
it and attitudes about it, (b) gathering information about and building models of the asset or project that
will support the study, (c) establishing criteria for the study, (d) documenting the study scope, and (e)
establishing a value study team.

Basic inputs to value study planning and initiation include the documented strategic asset requirements
and project implementation basis (see Sections 3.1 and 4.1, respectively), and the current asset or project
scope definition (see Sections 3.2 and 7.1). Additional technical and programmatic information and
deliverables that define asset or project attributes are also inputs.

This basis scope information should be further evaluated to define the specific asset or project
component to be studied, as well as the basic asset or project function that allows the customer to
accomplish his task (i.e., why the asset exists or is needed). Furthermore, customer requirements for (i.e.,
wants and needs) and attitudes about the asset or project must be defined. Study leadership may use focus
groups and/or surveys to determine the following:

a. The prime buying or investing influence (i.e., who the customer really is);
b. The importance of features and characteristics of the asset or project;
c. The seriousness of user-perceived faults and complaints of the asset or project;
d. How the asset or project compares to competing or similar assets or projects.

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 Much of this information gathering effort is focused on discovering the motivation for the customer to
invest (despite faults) in this asset or project above all other alternatives. This information becomes the
basis of the study team’s value proposition to the user and the value delivery system to get it to them.56

The VA/VE study will also require technical and programmatic information that defines the physical
attributes and performance characteristics of the asset or project (and any comparables that might be
considered) such as drawings, specifications, test reports, and so on. The study leadership should gather the
information needed for the study or at least make sure the information can be readily obtained or accessed
when needed. Site visits, inspections, or walk-throughs can provide understanding that hard documents
cannot convey. The study leadership may also obtain or build models of cost, energy use, and other
attributes as might be appropriate for the study.

The study leadership also must establish the general criteria and measures that will be used to rate,
rank, or decide upon value improvement ideas during the performance of the study. Finally, the VA/VE
leadership must determine the appropriate study team members who will participate in or support the
planned study activities, as well as lining up other resources required (e.g., meeting space, etc.).

The output of the planning and initiation step is documentation of the scope of the VA/VE study, as
reviewed and agreed to by the study team and strategic or project leadership as appropriate. The scope
describes the basis of the study (e.g., objective, methods, measures, assumptions, etc.) and defines what is
or is not included in the study and what the team is or is not able to control or change.

Planning for VA/VE studies is facilitated when the enterprise has a project system that establishes
guidelines for when and how VA/VE is to be applied and provides study support capabilities (i.e.,
methods, tools, and resources). VA/VE studies are typically applied in a phased manner consistent with the
project scope development phases described in Section 8.1. The VA/VE process may be applied at any
phase, but is most often applied at the initial phases of asset or project planning when scope definition is
evolving and changes are least disruptive.

Many individuals in the strategic asset or project team may be involved in performing the VA/VE
process. The value study team should be multidisciplinary. Management support of the process is vital to
ensure that all the necessary resources are made available and are committed to the success of the process.
Success is also facilitated by having an experienced cost or value specialist coordinate the effort.

.2 Perform Function Analysis

In this study stage, the study team uses function analysis to document the functions of the asset and/or
its project components. The analysis is based on the study scope and defining deliverables described in the
previous section. The primary method to analyze function is to model it using function hierarchy or
function analysis systems technique (FAST). FAST is a diagramming technique to graphically show the
logical relationships of the functions of a product in a hierarchical order (it is not a function flow diagram
based on time sequence). The technique’s value lies in the intensive questioning, challenging, and analysis
of functionality that takes place during the diagram development. One aspect to challenge is the validity of
constraints that dictated the original design, material, components, or procedures (i.e., constraints analysis).

Next, the study team quantifies function importance and cost metrics using value measurement
techniques. These techniques provide quantitative measurements that indicate the relative strength of a
respondent’s perception of the item(s) or attributes of items. Value measurement techniques include rating,
scaling, constant sum, pair comparison, criteria analysis, scoring model, ranking, and others. A “values
index” is a common metric that is the ratio of the function’s monetary worth to the function’s cost.

The output of the function analysis stage is an ordered list of functions or items arrayed from the
highest to lowest relative measured value as they currently exist.

56
See Section 11.1 for a discussion of societal values.

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.3 Apply Creativity

In this stage, the study team applies creative techniques to generate a list of alternative ways to replace,
improve, or eliminate the low value functions or items identified in function analysis. This is a creative step
that should be as unconstrained by habit and past thinking patterns as possible (i.e., “think outside the
box”). Judgment of the quality of ideas is set aside at this stage. The objective of creativity is not to find
ideas for asset design, but to find ideas for how to perform the functions, including unique combinations of
functions.

.4 Evaluate Ideas

In this stage, the study team synthesizes ideas and selects the most feasible for final development and
documentation. Value screening techniques are used to reduce the list of ideas to a manageable size.
Screening techniques are usually qualitatively oriented, but they may quantify the attributes of items where
numbers and scales indicate some measure of importance.

If none of the final ideas and combinations satisfactorily meet the study criteria, or if an apparently
low value idea is considered a possible candidate for further improvement, the study team returns to the
creativity stage. At the end of the evaluation stage, a ranked list of satisfactory alternatives is developed.

.5 Develop and Document Alternatives

Beginning with the highest rank value alternatives, the study team employs asset and project planning
process methods (as covered in the sections of Chapters 3 and 7) to develop the scope of the alternative
ideas and assess their impact on asset or project performance (e.g., cost, schedule, quality, risk, etc.). Based
on the study team’s understanding of the asset requirements and project objectives, the team identifies the
best alternative(s) (if any) and document its basis. Typically, the study team prepares a study report that
describes the performance of the study, its basis, and the team’s recommendations. Project leadership then
reviews the report and decides whether to implement the recommendations (see Section 4.1). If the project
is in the later planning or execution phases, the recommendation may be handled through the change
management process (see Section 10.3).

The value study report, and lessons learned about the study process, are captured in the project system
historical database (see Sections 6.3 and 10.4). The value study team leadership may further track and
assess the performance of the actions resulting from the value study. While it is difficult to parse the effects
from any particular study, industry benchmarking has shown that there is a statistical correlation between
the use of value improving practices and improved project cost outcomes.

7.5.3 Inputs to Value Analysis and Engineering

.1 Strategic Asset Requirements and Project Implementation Basis. (see Sections 3.1 and 4.1). These
define the basis asset scope, objectives, constraints, and assumptions.
.2 Asset or Project Scope. (see Sections 3.2 and 7.1). Deliverables (asset options, work breakdown
structure, work packages, and execution strategy) that define the current asset or project scope. Scope
changes (see Section 10.3) for which VA/VE will be applied also channel through the scope
development process.
.3 Asset or Project Technical Information. Deliverables that define the physical and performance
attributes of the asset or projects to be studied.
.4 Customer Requirements. These requirements are the wants and needs of the user or other stakeholders.
VA/VE must discover the motivation for the customer to invest (despite faults) in this asset above all
other alternatives.
.5 Planning Information. (see Sections 3.2, 3.3, 7.2, 7.3, 7.4, 7.6, and 7.7). While VA/VE value
measurements are focused on cost, outputs from other planning processes—such as schedule planning
and development, risk management, and quality function deployment—are considered in evaluating

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 candidate alternatives. Specialists for applicable processes (e.g., estimating, scheduling, etc.) may be
part of the value study team.
.6 Cost Information. (see Sections 5.1, 9.1, and 7.3). Value measurement is focused on relative cost and
value measures. The cost information comes from cost estimating or accounting measurements.
.7 Historical Information. (see Sections 6.3 and 10.4). Past study approaches and results may help the
plan the VA/VE study.

7.5.4 Outputs from Value Analysis and Engineering

.1 Cost Information. The VA/VE function analysis and evaluation steps apply the cost estimating
methods covered in Section 7.3.
.2 Planning Information. (see Sections 7.2, 7.3, 7.4, 7.6, and 7.7). The VA/VE evaluation step applies the
methods of the project planning processes.
.3 Value Study Report. (see Sections 4.1 and 7.1). Describes the performance of the study, its basis, and
recommendations for implementation. The recommendations may be implemented at the asset
management or project level as appropriate.
.4 Historical Information. (see Sections 6.3 and 10.4). The study approach and results are captured for
use in future methods and tools development and VA/VE study planning.

7.5.5 Key Concepts and Terminology for Value Analysis and Engineering
The following concepts and terminology described in this and other chapters are particularly important
to understanding the VA/VE process of TCM:

.1 Value. (See Section 7.5.1).

.2 Functions. (See Section 7.5.1).
.3 Customer Requirements. (See Sections 7.5.1 and 3.1).
.4 Function Analysis. A type of function model (See Section 7.5.2.2).
.5 Value Measurement. (See Section 7.5.2.2).
.6 Value Screening. (See Section 7.5.2.4).

Further Readings and Sources

Portions of this section are excerpted from Chapter 24 (“Value Analysis” by Del L. Younker) of the
Skills and Knowledge of Cost Engineering referenced below. Also, as previously mentioned, this process is
conceptually consistent with SAVE International’s “Value Methodology Standard” (www.value-eng.org,
2003). SAVE International is the primary technical association for this technology. However, there are
many references describing value analysis, engineering, management, and methodology for various asset
and project types in various industries. The following provide basic information and will lead to more
detailed treatments:

• Akiyama, K. Function Analysis. Cambridge, MA: Productivity Press, Inc., 1991.

• Amos, Scott J. Skills and Knowledge of Cost Engineering, 5th ed. Morgantown, WV: AACE
International, 2004.
• Dell'Isola, Alphonse. Value Engineering: Practical Applications. Kingston, MA: R.S. Means, 1998.
• Fowler, T. C. Value Analysis in Design. New York: Van Nostrand Reinhold, 1990.
• Lawrence D. Miles Value Foundation (www.valuefoundation.org)
• Miles, L. D. Techniques of Value Analysis and Engineering. New York: McGraw Hill, 1961.
• Mudge, A. E. Value Engineering: A Systematic Approach. New York: McGraw Hill, 1971.
• Parker, Donald E. Value Engineering Theory. Washington, DC: The Lawrence D. Miles Value
Foundation, 1995.
• Shillito, M. L., and D. J. DeMarle. Value: Its Measurement Design and Management. New York: John
Wiley & Sons, Inc., 1992.

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• Younker, Del L. Value Engineering: Analysis and Methodology. New York: Marcel Dekker, Inc.,
2003.

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