Value Management: Risk Management and Construction

Proposed agenda: To explore issues of value management that will have a positive impact towards a successful briefing and eventual acceptance an expansion of Techwatt corporation.

Introduction

The use of value management is crucial in an organisation. For one, the client’s main concern is how to get value for money invested. Users will also be keen to note whether or not the project will be able to meet their needs effectively. The designers will be more concerned with meeting the needs of their clients, as well as those of the users. Further, they will want to ensure that the project is of the required quality in order that it may be able to meet set standards.

Main text

On their part, the project managers will be obliged to ensure that the undertaking of the project is timely, cost-effective and of the required quality. Finally, the contractors will be out to ensure that they accomplish a satisfactory job, while also commanding a handsome profit at the same time. Through the use of value management, the needs of all these involved parties are both identified and met. This will in effect lead to enhanced working relationships and communication, with the achievement of significant benefits (DeSanctis & Galluppe 1987).

The value management process consists of an initiation phase, the value management phase, and finally, selection of a facilitator. In terms of initiation, this could be the prerogative of the client, the design consultant, or even the asset manager. Before embarking on such an undertaking, it is always wise to know beforehand what to expect. The access to and availability of stakeholders as well as the cost of the study should also be taken into consideration.

The costs of a value management study should not be restricted only to what the study incurs, but should as well include the venue hire, administrative support, the attendance of each participant as well as the cost of engaging a team of consultant facilitators. There is normally a laid down initiation criteria that should be adhered to, top of which should be the potential for savings through adoption of more cost effective ways to achieve functions. Temporary solutions could also be sought for interfacing problems, while difficult and recurring problems will call for a facilitated group process.

To ensure the realization of value for money, this value management study shall call for auditing (Dell’lsola A J 1982). Value management study is a three-stage process, with specific objectives laid down at each of these stages. They include the pre-workshop stage, the workshop stage and the post-workshop stage. It is therefore important than a corporation such as Techwatt embraces this process in order to address value management issues that are key to the proposed expansion that will see them realize the ambitious dream of building a regional headquarter.

A prior preparation in readiness to the oncoming workshop is mandatory in order to ensure that everything will go on according to plan. During this stage, the study timetable for the upcoming workshop session is normally established. The objectives of the workshop are also laid down.

The study team will also be finalized here, to include the technical specialists whose job it is to offer valuable advice on professional matters regarding the construction project. These will include

the design team, project consultants, and independent observers among others (Kelly et al 2004). Once the stakeholders have been identified and are fully committed to the task at hand, it is time now to not only nominate, but also invite the participants to the brief. Once a venue has been clearly identified, the presenters and sponsors will at this point be briefed on the upcoming information phase during the workshop stage.

Finally, the material is circulated to the concerned parties. The proper workshop stage is in itself made up of five crucial stages that ought to be followed religiously. At the information phase, the main aim is to facilitate the sharing, dissemination and clarification of information that is related to the project at hand. First, the problem situation is identified. The functions of the projects as well as assumptions are also brought to light. During the project overview, the key issues and concerns are addressed, in an attempt to clarify the objectives of the project.

When analyzing the functions of the project, key questions on what the project can and must do, as well as its life cycle costs, are brought to light. In a way, this is an attempt at finding the value of the function of the project. Through this way, the expensive functions of the project can easily be identified, so that the final brief will only reflect a cost-effective project. Alternative approaches to the project are well explored in the creative stage. This is ormally achieved by way of utilizing the power of group synergy to come up with numerous creative ideas, which are recorded as they emerge.

This phase seeks to evaluate alternative ways of achieving the required functions, and whether the function is necessary or not. the best ideas that emerge during the deliberations will normally undergo a keen scrutiny to identify the best. The development phase is responsible for further scrutiny of potential solutions from the judgment phase. It is also during this stage that detailed drawings and cost estimates may be developed. By coming up with an action plan, workshop findings and recommendations, the stage is now set for the next stage.

A value study workshop provides the vehicle for bringing key stakeholders together in a forum. This way, they are better able to maximize their contributions, drawing on their combined knowledge. The workshop also enables the key participants to realize results within the period that they are committed to the session. This stage is then followed by a post-workshop stage. This is where the action plan is finally implemented, by incorporating the recommendations into the project’s development.

A report on the workshop is prepared and then circulated to the participants to enable evaluation. Also, clarification, as well as justification of events that occurred during the workshop stage, is carried out. In order to realize a cost-effective achievement of the objectives of the study, it is necessary to carry out an evaluation plan. Whether this consultant shall be an in-house facilitator or a facilitation team will be dictated by the nature of the study (Green S D 1994).

During this stage,the involvement of the executive management is very crucial. Their commitment is a great enhancement to the value management process. They are able to provide the study team with a corporate benchmark for maintaining the study focus. The program agency representatives allow the addressing of a wide range of issues such as the rationale of the program to the functional requirements of the program. The service providers advise on functional requirements from an operational perspective. They are also critical by way of contributing to the generation of alternative ideas.

The design team and project consultants are responsible provisions of background data on the project evaluation, due to their vast amount of expertise. They will also provide essential participation in generation as well as evaluation of alternative ideas and options geared towards value improvement. The value study team provides structure, independent level of inquiry, probing and discussion on the study topic. Their roles include facilitation, reporting, organisation, and technical independence.

The independent technical specialists are normally included as part of the value study team in order to be able to give it an extra dimension, and also enhance the level of incisive review and analysis in the value management process (Flanagan & Norman 1993). Prior to the commencement of this workshop on value management, it will be the duty of the client to let the various stakeholders in attendance know what the significance of the project is. A proper identification and comprehension of the requirements of a client will ensure that the briefing document is precise and explicit.

Further, the designers will not have a hard time trying to identify the needs of the client, hence saving an abortive design or rework. the clients will also be at liberty to inform the participants at the workshop what the objectives of the project will be.

Scenario 2: A report on risk management study

Proposed agenda: to evaluate the various issues of risk management and how can impact on the expansion program of Techwatt corporation. A good risk management plan seeks to identify and treat potential risks to an organization, thus increasing the probability of success. It provides a framework which enables the organizationto contribute to a more efficient allocation of resources, while protecting and enhancing the company’s assets and image. Risk identification is not only the most important and time-consuming step, but also crucial.

When risks are not correctly identified, their consideration in the management system will lead to incorrect assessment as well as responses. A proper risk identification exercise is one that does not restrict itself to risk events, but makes provisions for uncertainties as well as associated responses. Through the use of a model, one can be able to address risks and uncertainties related to the project life cycle (Bryant J 1993).

The necessity of putting into consideration the different sources of risks present in the project as well as a classification of the different risks that could be of current interest cannot be wished away (Flanagan & Norman 1993). Risk identification calls for an intimate knowledge of the organization, the field of operation, legal, social, political and cultural environments in which the organizationexists, as well as a sound understanding of the strategic and operational objectives of the organization. Through a methodical approach, all the risks flowing in an organization can be identified.

Tools and techniques that operate on probabilities and consequences have been developed to facilitate risk assessment (Aven 2003). The use of scoring techniques, that incorporates the judgment of probability as well as consequences of a risk breakdown are common in construction projects (Grey 1995). Use of mathematical models and simulations is another way to go. Risk estimation involves quantification of risk, in terms of the probability of occurrence and possible consequences.

These could be both threats or opportunities. In this regard, the opening up of a regional office by Techwatt Corporation will be a threat to the competitors already established in that region, and an opportunity for both the management and stakeholders to expand their business empire. Risk response is whereby actions are taken to control risks that have been analyzed thus far. Grading of risk responses involves risk retention, risk reduction, risk transfer and risk avoidance (Flanagan & Norman 1993). By risk retention, it means the acceptance of risks, yet continuing with business as usual.

The argument is that by retaining a risk, one is attesting to the fact that the estimated probability, consequences, or a combination of these, is low and hence acceptable. These parameters can however be decreased through a risk reduction. One way through which this can be achieved is through sharing of the risk with other parties. An educational training of the personnel will also help reduce the risk, by way of increasing their knowledge of possible risks.

The involvement of a third party to act as part of the quality assurance of the project so that nothing is either overlooked or forgotten. This can best be achieved through work plans, use of timetables and resource allocation. Risk transfer to for example a contractor, through a contractual agreement is yet another way to respond to risks. One can also transfer the uncertain cost of a potential loss by way of insuring the project. Finally, if the project at hand is too risky to undertake, the corporation can refuse to accept it (Friend & Hickling 1987).

Risk evaluation, following a completion of risk analysis, is akin to comparing the estimated risks against risk criteria already put in place by the corporation. This criterion could involve associated costs and benefits, legal requirements, concerns of the stakeholders, socio-economic as well as environmental factors. On the whole, an effective risk management exercise will call for a reporting as well as a reviewing structure to ensure risks are not only effectively identified and assessed, but that appropriate procedures and controls are enacted (Covella V & Mumpower J 1985).

The client has a vested interest in not only having the job completed, but also within the budget, on time and to a satisfactory quality standard. Financial institutions will normally appoint professional construction mentors to be actively involved in their risk management regime. Subsequently, the risk of providing finance to the contractor is reduced. On behalf of the insurance firm, the actuary will be involved in the assessment, evaluation and management of the financial risks faced by the corporation.

When the senior management of a company embraces risk management, this is an outward mark of success for the organization. It is thus their role to send the message not only inside the organization, but outside as well on the importance of managing risk (Hanson 2004). The senior management is charged with the responsibility of coordinating,identifying, controlling, evaluating as well as reporting risks.

The contract manager will normally oversee the running of the project once in operation. He or she will need to analyze contract management portfolio and also be able to reflect the provisions in practical monitoring processes. One of his or her major key roles would be to set up contract management arrangements. The contract manager will also come in handy during the negotiation phase with the preferred bidder on relevant technical issues (Apostolakis 2004).

The project manager is responsible for the oversight and control of the entire project. The project manager sees to it that funds are secured, plans and budgets for these funds, processes schedules, bid documents, approve changes, and generally,is an overseer of the project from inception to completion. As an overseer to the construction engineers, principal construction engineer assures consistency throughout the section, as well as guiding construction engineers to interpret contracts that are dogged with controversy.

The construction engineer will be responsible for ensuring a successful completion of the contract in line with laid out plans, specifications,time allocated, within the authorized contract price and standard of quality. Any professional responses to either the public, city administration or council are done by the construction engineer. This way, he/she can undertake reasonable steps to minimize the impacts of construction on affected parties. It is also important that the client is able to reveal at this point whether or not he wishes to partner with a second party in the expansion process. This will facilitate in the laying down of plans as strategies that will reflect the overall expected outcomes.

Bibliography

Apostolakis, G. E. 2004, How useful is quantitative risk assessment? Risk analysis, 24(3).

Bryant, J. 1993, Supporting management teams, OR insights ,6 (3), 19-27.

Covella, V. & Mumpower J. 1985, Risk assessment and risk management: An historic perspective, Risk analysis, 5(2), 103-119.

Dell’lsola, A. J. 1982, Value engineering in the construction industry, 3rd ed. New York: Van Nostrand Reinhold.

DeSanctis, G. & Galluppe B. 1987, A foundation for the study of group decision support systems, Management science, 33(5), 588-609.

Flanagan, R. & Norman G. 1993, Risk management and construction, Oxford: Blackwell science publication.

Friend, J.K. & Hickling A. 1987, Planning under pressure: The strategic choice approach, Oxford: Pentagon.

Green, S.D. 1994, Beyond value engineering: Smart value management for building projects, International journal of project management, 12(1), 49-56.

Hanson, S. O. 2004, Fallacies of risk. Journal of risk research, 7(3), 353-360.

Kelly, J. R, Male, S. P & Graham D. 2004, Value management of construction projects, Oxford: Blackwell publishing.