Value and Risk Management: A Guide to Best Practice

Foreword xi

Preface xiii

About the Author xvii

Acknowledgements xviii

1 Key features and benefits 1

1.1 Why successful projects need value and risk management 1

1.2 Delivering success 1

1.3 Summary 7

2 Principles of value management 9

2.1 Essential attributes 10

2.2 A brief history 11

2.3 Language 13

2.4 Concepts 13

2.5 The family 15

2.6 Value management through the project cycle 17

2.7 The generic process 19

2.8 Value or cost – balancing benefits and investment 22

2.9 The value of time 25

2.10 Quality 26

2.11 Measuring value 29

3 Principles of risk management 33

3.1 Essential attributes 34

3.2 Evolution 35

3.3 Language 37

3.4 Concepts 37

3.5 The family 40

3.6 Risk management cycle 41

3.7 A generic risk management process 41

3.8 Risk to quality 43

3.9 Measuring risk 44

3.10 Contingency management 49

3.11 Time risk 49

4 An integrated approach to value and risk management 52

4.1 Why integrate? 53

4.2 The integrated process 57

4.3 Timing 58

4.4 Project stages and study types 61

4.5 Understanding the client’s business 66

4.6 Programmes of projects 69

4.7 Project launch studies 70

4.8 Summary of value and risk study types 72

4.9 Critical success factors 76

4.10 A framework for introducing value and risk management into an organisation 77

4.11 Embedding value and risk management in an organisation 81

4.12 Drawing on experience 83

4.13 Selecting the appropriate level of activity 86

5 People 88

5.1 The people and their roles 89

5.2 Collaboration versus confrontation 89

5.3 Stakeholder analysis and management 91

5.4 Team building 92

5.5 Partnering 92

5.6 Communications 95

5.7 The supply chain 97

5.8 Selecting the study team 100

5.9 The study leader 103

5.10 Styles of leadership 105

5.11 A study structure based on logic 105

5.12 Overcoming difficulties 107

5.13 Using conflict to advantage 110

5.14 Gaining consensus 111

5.15 Developing value and risk culture 112

5.16 Language 114

6 Concepts, standards and qualifications 117

6.1 Understanding value and risk 118

6.2 Understanding value 119

6.3 Understanding risk 140

6.4 Training and certification systems 150

7 Learning from others 154

7.1 Practice in other sectors 154

7.2 A value and risk approach to project development 155

7.3 Soft value management 161

7.4 Value management in manufacturing 164

7.5 Value management for public services 168

7.6 Risk and enterprise 174

7.7 The impact of partnering on value and risk 183

7.8 Just how mature are your organisation’s processes? 188

8 Study types 193

8.1 Types of study 194

8.2 Value management studies 194

8.3 Risk management studies 218

8.4 Combining value and risk reviews 226

8.5 Project reviews 227

8.6 European practice 230

8.7 The project cycle 230

8.8 Building on experience 231

9 Techniques for value and risk 234

9.1 The need for techniques 235

9.2 Preparation before a study 235

9.3 Invitation to participate 244

9.4 The workshop 245

9.5 Recording 250

9.6 The wrap-up meeting 250

9.7 Reporting 251

9.8 Reviewing progress 252

9.9 Whole-life costing 254

9.10 Stakeholder analysis 259

9.11 Partnering 263

9.12 Mind mapping 269

9.13 The Delphi technique 269

10 Value management techniques 271

10.1 Value management techniques 271

10.2 Function analysis 272

10.3 Function analysis system technique 274

10.4 Cost/worth 282

10.5 Multifunctionality 284

10.6 SMART methodology 285

10.7 Value drivers 287

10.8 Value profiling (or value benchmarking) 291

10.9 Option selection 292

10.10 Weighting techniques 293

10.11 Generating ideas for adding value (creative techniques) 295

10.12 Selecting the best ideas (evaluation) 300

10.13 Developing implementation proposals 305

10.14 Scenarios 306

10.15 Target costing 307

10.16 Function performance specification 308

11 Risk management techniques 311

11.1 Risk management techniques 311

11.2 Risk analysis and management 311

11.3 Identifying risks 314

11.4 Assessing risk 319

11.5 Managing risk 326

11.6 Optimism bias 335

11.7 Construction, design and management regulations 338

11.8 Risk breakdown structures 338

11.9 Failure modes and effects analysis 340

11.10 Hazard and operational studies (HAZOP) 341

12 Toolbox – checklists, forms and tables 343

12.1 Toolbox – summary 343

12.2 Briefing checklist 343

12.3 Information checklist 344

12.4 Study toolkit 345

12.5 Workshop invitation 346

12.6 Recording information generated during the workshop 346

12.7 Reports 348

12.8 Value management categories/prompt list 349

12.9 Risk identification prompt list 351

12.10 Value profiling proforma 354

12.11 Option evaluation matrix 355

12.12 Weighting tool 355

12.13 Paired comparison proforma 355

12.14 Proforma for whole-life cost estimating 356

12.15 Scenario building form 357

12.16 Whole-life cost checklist 357

12.17 HAZOP analysis sheet 357

12.18 Room layouts 358

Appendix A: Bibliography 362

Appendix B: Glossary 365

Index 376