Identifying, measuring and monitoring value during project

development
MARI A KLI NI OTOU
{
This paper describes the ndings of the research done by Loughborough
University in conjunction with ten construction industry collaborators in an
attempt to identify what construction professionals mean by value. The aim of the
research is to establish a common approach to identify value in projects and to
monitor its development throughout the project life cycle so that it becomes part of
everyday thinking and communication in multidisciplinary teams. The author links
some of the ndings to the formal value management methodology applied in the
construction industry. The research draws on interviews with different professional
disciplines to show that organizational and professional values impact on project
value judgements. It further establishes a framework to identify and measure value.
The author analyses this framework and examines alternative approaches to
monitor value development as monitoring of value contributes to project success.
The paper concludes that, to achieve a high-quality product, it is important to
consider all stakeholder values on projects, not just those of the project sponsor.
However, to achieve this, key construction players need to develop a refreshed
approach to value management. To such an extent, teaching this research on
university MSc engineering programmes helps to prompt alternative thinking to
established methodologies.
1. Introduction
Value management is generally concerned with maximizing the benets of a pro-
ject or a business by seeking to satisfy or exceed the requirements of the various
stakeholders involved. To achieve this, formal studies in the form of workshops take
place at key project stages, usually corresponding to the initiation or completion of
various project milestones. The workshops during which participants express their
respective opinions on value matters typically involve project sponsor representatives,
the design team and third parties related to the project. We nd that different pro-
fessional disciplines dene value in different waysproject managers think value in
terms of least cost, architects in terms of the qualities of space and users in terms
of a high project specication.
The value management methodology has evolved from value analysis developed
by Laurence D. Miles (1961), a method that was originally used to identify and elim-
inate unnecessary costs. This interpretation is so common that value engineering, the
method used to optimize project benets at the detailed design stage, has become
almost synonymous with cost-cutting, and many designers are sceptical of the benets
of such studies.
{
Davis Langdon & Everest, MidCity Place, 71 High Holborn, London WC1V 6QS, UK.
e-mail: maria.kliniotou@davislangdon-uk.com
European Journal of Engineering Education
ISSN 0304-3797 print/ISSN 1469-5898 online # 2004 Societe Europeenne pour la Formation des Ingenieurs (SEFI)
http://www.tandf.co.uk/journals
DOI: 10.1080/03043790310001658613
European Journal of Engineering Education
Vol. 29, No. 3, September 2004, 367376
This paper draws on research in the construction industry of Loughborough
University that, by analysing the objective and subjective nature of value, conrmed
the notion that value means different things to different professionals. The research
distinguishes between project value and quality and examines the role that business
strategy and stakeholder values play in making various value judgements on
projects.
The paper links the above research with the current value management methodol-
ogy and examines how value management can contribute to making a project a suc-
cess. It emphasizes the importance of measuring value and of constantly monitoring
its development throughout the project in order to achieve the desired results. The
author demonstrates this application on a speculative ofce development and she also
examines other industry attempts to implement the monitoring of value. The paper
concludes by examining how new research on value may impact on the engineering
educational programmes at Loughborough University.
2. A case for a consistent value methodology
Loughborough University (Loughborough University and Partners 2003a), in con-
junction with ten collaborating construction organizations, has set out to establish a
value framework and language that will help to structure dialogues and build common
understanding amongst professionals on the concept of value. Structured interviews
with key personnel in the collaborator organizations revealed the following issues
that substantiate a difference in perception, denition and experience of value
management.

The people with the highest power usually determine which design features are
included or excluded in projects.

Ineffective communication between the various stakeholders during the formal

value studies reduces the effectiveness of the processes.

Value management workshops generally provide open and creative forums for
discussion.

Despite the early identication of value, its development is usually lost through
the project delivery process.

Often, designing proceeds without having identied project objectives.

The benets of thinking about value are often not understood by all.

To work effectively, people need to see the value in what they do.
The framework that Loughborough proposes is intended to facilitate formal and
informal communications in project teams by establishing a denition of value that
captures its subjective nature but it is also measurable, comparable and deliverable.
3. Value and quality
According to Miles (1961) and the ndings of the Loughborough University team,
value can take the form of: exchange value (the open market price of an item); use
value (the usefulness of an item); esteem value (the attractiveness or desirability of
an item, and this mainly represents the subjective value judgements); and cost value.
BS-EN 12973, the European Value Management Standard (British Standard
Institute 2000), describes value as the ratio describing the relationship between the
satisfaction of needs (business benets, worth) and the resources needed to deliver
368 M. Kliniotou
them. This denition implies a scientic, objective view of value that lends itself
to measurement but assumes that inputs can be expressed in unitary terms. It does
not account for the subjective nature of value. Our project has adopted a broader
denition, where value is the benet received over and above the sacrice made.
When making judgements on value, the values (principles or accepted standards)
of individuals play an important part in providing the attitudes and beliefs with which
individuals make subjective decisions. Values are not explicit, but inuence the way
individuals think. They depend upon the culture, background, education, experience,
etc. of each individual. Groups that share similar experiences have similar values.
Loughborough University (Devine-Wright et al. 2003) identied six levels of
group values that inuence decisions in construction projects: societal, industrial,
organizational, professional, project and individual values. The most important are
organizational values (expressed usually in the business strategy of an organization),
professional values (expressed in the stakeholder judgements) and industrial values
(represented in the industry trends).
The benets and sacrices, or value, that project stakeholders seek to achieve
through a project are expressed through the various value drivers (the project value
criteria agreed between the various project groups).
Project value
X
Value drivers
X
Benefits=Sacrifices:
The value drivers are visualized through the attributes or features of a project, realized
with its delivery and nally experienced and judged by the various users after its com-
pletion with the use of the building. Figure 1 graphically illustrates the relationship
between project benets, value drivers and design attributes. Figure 2 illustrates the
Loughborough University approach to value analysis.
Quality is the ability of the product to full the value drivers and therefore satisfy
the stakeholder requirements. The higher the fullment of the value drivers, the better
is the quality of the building and the more successful is the project.
Figure 1. The value chain relationships.
Identifying, measuring and monitoring value 369
The value drivers may change during the development of a project, due to changing
circumstances in the project environmentlegal, production and business issues.
These may alter the balance between the required benets and sacrices made and
consequently the value implications of the project. It is necessary to have a process
in place to monitor the development and delivery of the various value requirements,
as opposed to simply identifying them.
4. Where value management ts
Value management, a structured process aimed at improving project understanding
and promoting shared stakeholder decision-making, encompasses studies during the
project life cycle focusing on different deliverables at different project stages. At the
early, conceptual project stages the studies focus on strategic issues such as:

identifying the appropriate stakeholders with inuence on the project, and their
requirements;

dening the project objectives and an agreed set of value drivers between the
above project stakeholders.
The ndings of such studies inform the project brief and dene the project qualities or
attributes. The designers translate these attributes into the design solutions.
At the detailed design stages, the studies ensure that the previously identied value
drivers have not changed and that the design solutions adequately satisfy them. At this
stage the project is value engineered to ensure that the desired benets are delivered
with minimum sacrices.
The following techniques support the studies described above. A third party to the
project, the value facilitator, usually conducts the necessary formal studies and guides
the study participants through the value management methodology.
4.1. Stakeholder analysis/identication
Stakeholders are those who have a stake or an interest in a project. They will be
affected by the project either directly or indirectly so they will attempt to inuence it.
There are two types of stakeholders, those internal and those external to the project
organization.
Figure 2. Loughborough University approach to value.
370 M. Kliniotou
It is important to identify the project stakeholders at the project outset. Through
open discussions or one-to-one interviews the facilitator identies the professional,
organizational and, in some cases, personal values with which stakeholders judge the
project, their level of project interest, power and inuence. Understanding these values
helps the project team to build a common understanding of what is important and how
to prioritize the project value drivers. The agreed value drivers are a reference for
project decision-making.
4.2. Project objectives/value criteria/design attributes
The project benets are summarized in the project objective or purpose.
Depending upon the project objective, some value drivers will have more impact than
others in achieving a successful project outcome and will carry more weight.
The weighting given is agreed amongst the project stakeholders and the facilitator
usually negotiates the necessary value trade-offs in order to achieve an agreed list of
value drivers. Provided that the project environment and objectives do not change, the
value drivers and their rankings remain constant during the project.
4.3. Value measurement and monitoring
To evaluate the success of the project it is important to establish measures for each
value driver. For some value drivers measures are objective and consequently easy to
identify using the benets/sacrices equation. For example, in a simple speculative
ofce development, prot is the ratio of sale value/capital costs and can be measured
in monetary units. The subjective value drivers inuenced by esteem values, such as
positive image impact, are difcult to measure. However, they can be judged on a
scale of one to ve, with one being the absolute minimum requirement and ve the
best possible outcome.
Measuring the value drivers helps to monitor the value development throughout the
project. At key project stages, the design solutions or deliverables can be evaluated
against the initial value drivers to monitor the progress made against the initial require-
ments. This helps the project team to visualize the extra value that their actions have
added to the project.
To illustrate this process I shall use as an example a speculative mixed-use
development in central London on which we offered a number of value and risk
management studies. The underlying objective of this development was to achieve
a good return on investment through a mixed-use building combining ofce use, resi-
dential and retail. The ofce space was developed for leasing to long-term tenants,
whereas the retail and residential elements were developed for sale. The sale proceeds
would nd the development. During the initial study (January 2002), the speculative
market conditions were deteriorating, the design was over budget, the design pro-
gramme overran and planning permission was not granted. The value drivers were
identied and prioritized as shown in table 1. Their assessment, on a scale of one
to ve, is as shown in the scoring column (Jan 2002).
Ten months later (October 2002), following a programme of risk and value engi-
neering workshops, a contractor was appointed on a guaranteed maximum price con-
tract (GMP), making the completion price and date more certain, demolition of the
existing building was completed and planning permission was granted with some con-
ditions. There were a number of interested buyers and tenants for the building and a lot
of the risks were mitigated. Re-scoring the value drivers against the new circumstances
would give the output in the scoring column (Oct 2002).
Identifying, measuring and monitoring value 371
If we examine the scoring against the prioritized value drivers, the value on the
building has increased by 195 units (value index) between January 2002 and
October 2002 (table 2). This tool helps the design team to focus its efforts on where
value can be easily increased.
Loughborough University (Loughborough University and Partners 2003b)
recommends a similar approach in monitoring value, however it suggests that each
design attribute receive a scoring as well. The measure of each value driver is an
aggregate of all the lower-level assessments of the design attributes. The total value
on the project is the sum of all the lower measures. Figure 3 demonstrates this
point.
This recommendation seems rational, however there are problems in implementing it.
Not all attributes that constitute a value driver are measured with the same metrics.
Take, for example, the success factor provide positive image. Its design attributes may
be: delight the senses; attract visitors: reduce stress; and feel spacious. These can only
be assessed subjectively using the one-to-ve scale mentioned earlier.
The design quality indicators, developed by the Construction Industry Council,
recognize the need to monitor the quality development of the various design attributes
in order to measure the quality of a building or design. The tool consists of a
questionnaire that each stakeholder responds to, assessing the quality of each design
attribute. The scoring system is similar to the one recommended earlier (on a scale
of one to six). The tool assumes that collective subjectivity is objective, and that the
collective requirements from all the stakeholders will establish the general quality
prole of the building. Stakeholders revisit the design periodically to assess how
things produced measure against the initial requirements. The results of the study are
plotted on a spider graph to facilitate comparisons between the anticipated and the
achieved. The closer the two diagrams are the better is the quality achieved.
Value driver
Percentage
importance
Scoring
Jan 02 Measure
Scoring
Oct 02
Maximize income
from investment
30 3 Income/capital costs 4
Attract future tenants/
buyers
20 1 Enquiries to rent/buy 3
Provide exible use
for multi-tenants
5 1 Allow for three tenants
per oor
5
Provide positive image 10 1 Good publicity,
magazine articles
3
Satisfy planning 15 2 Planning with minimal
conditions
5
Deliver within budget
and on time
15 3 Reduce capital cost
and programme
4
Inspire the project
team
5 3 Enthusiasm of team 4
Satisfy market
requirements
for building
10 1 Secure buyers/tenants
for different parts of
the building
3
Total 100
Table 1. Value driver evaluation at project inception stage (January 2002) and at
post-project tender stage (October 2002).
372 M. Kliniotou
Evaluation criteria
No.
Maximize
income
from
investment
1
Attract
future
tenants/
buyers
2
Provide
exible
use for
multi-tenants
3
Provide
positive
image
4
Satisfy
planning
5
Deliver
within
budget and
on time
6
Inspire the
project
team
7
Satisfy
market
requirements
for building
8
Value
index
Evaluation date Weight 30 20 5 10 15 15 5 10
January 2002 3 1 1 1 2 3 3 1
90 20 5 10 30 45 15 10 225
October 2002 4 3 5 3 5 4 4 3
120 60 25 30 75 60 20 30 420
Table 2. Value development evaluation matrix.
Success factor evaluation: poor, 1; fair, 2; good, 3; very good, 4; excellent, 5.
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5. Conclusion
The primary purpose of undertaking a project is to deliver a business benet and to
satisfy the project stakeholders. Value management interprets these benets with the
value drivers. Measuring these gives a snapshot picture to the team of the value
achieved on the project at a point in time, a useful method to evaluate the project
quality achieved.
Prioritizing the value drivers stresses to the team the areas that add the greatest
value to the project. Usually, project sponsors drive projects and the value drivers are
prioritized to reect their project requirements. According to the evaluation matrix
described earlier, the value of a project may increase substantially by perfecting one
or two value drivers that have high importance ranking but neglecting the value drivers
with the lower ratings. However, quality is the ability of a building to satisfy all
stakeholder requirements, not just those of the project sponsor.
Therefore, in line with establishing a system of monitoring value development
in projects, we need to educate the project sponsors and the project team about the
importance of satisfying all stakeholder value drivers identied. The various tools
mentioned earliervalue evaluation matrix, Loughborough University, DQImay not
cover adequately this issue of measurement, but a combination of these approaches
supported by a value-aware industry may do so in the future.
The main emphasis of the Loughborough approach is to make value delivery part
of everyday communication and thinking in multidisciplinary teams, rather than just a
one-off formal activity at key project milestones.
The university teaches value management, design management and teamwork as
management modules in the building undergraduate and postgraduate courses. The
modules promote value management as a methodology to identify value, formulate
innovative and creative alternative design or management options and evaluate team
performance. The university teachings are based on the accepted (within the construc-
tion industry) methodology of BS-EN 12973 and some modules incorporate elements
Figure 3. The project value (Loughborough University).
374 M. Kliniotou
of lean thinking. The Loughborough University members of the research team
are active lecturers on the above modules and advance some of the research ideas into
the teaching of the modules at MSc level. This provides awareness to students of
where the eld of value management may be heading in the future.
Most of the students at the MSc level who already have a few years experience in
the industry are surprised by the ideas put forward. They have learnt to associate value
management with cost-cutting, especially due to their varying experiences of work-
shop situations branded as value engineering. The undergraduate students, being less
exposed to industry practices, are easier to convince about the benets of the
Loughborough University research team approach.
The lecturers found that when ideas came through nal research ndings the like-
lihood of them being adopted in industry increased as students may implement them
upon graduation. Teaching research ndings plays an intermediate step in getting the
ndings diffused into industry through the network of innovations approach.
Specically valuable for the students is the consideration of project stakeholders
and their project interests in selecting and evaluating design solutions in order to
achieve real project value, a relatively new industry perspective. This is communicated
to and experienced by the students through a simulation of a workshop situation where
students participate, undertaking project player roles that represent the various project
stakeholders, including members of the design team. Industry practitioners are invited
to participate with the students in the workshop. This activity helps the students under-
stand the value management process and methodology as well as the various necessary
trade-offs that stakeholders and teams make in developing, evaluating and adopting
design solutions. The students and the lecturers consider the workshop to be an extre-
mely valuable aspect of the module as it helps the students understand the principles of
decision-making driven by the value added to the project, learn about team dynamics
and experience negotiating based on value interpretations.
Students are assessed through written exams at the end of the academic year
and some assignments during the year. The workshop is a method of applying and
understanding the theoretical background that they are taught throughout the year.
References
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DELL ISOLA, A., 1997, Value Engineering: Practical Applications for Design, Construction,
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DEVINE-WRIGHT, H., THOMPSON, D. and AUSTIN, A., 2003, Matching values and value in
construction and design. EPUK (Environmental Psychology in the UK) Conference,
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Identifying, measuring and monitoring value 375
LOUGHBOROUGH UNIVERSITY and PARTNERS, 2003, Managing value delivery in designvalue
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About the author
Maria Kliniotou, BA(Hons), DipArch, MSc, RIBA, MAPM, is a senior consultant at Davis
Langdon & Everest responsible for the development and integration of value and risk manage-
ment into the range of services offered by the practice. She regularly runs risk and value man-
agement studies for a wide range of construction projects. She started her career as an architect
working on commercial developments in central London, and later was a project leader on the
pilot scheme for the British Airways re-branding in 1997. She worked on international schemes
such as the redevelopment of the Beirut Central District and the development of the Corcoran
Gallery in Washington, DC before joining Davis Langdon & Everest in 1999.
376 M. Kliniotou