Current And Potential Future Application Of Value Construction Essay

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This essay is written with a series of literature review on academic articles ranging from value management to risk management with the subject country of Singapore, Hong Kong, China, and Malaysia. The aim of this essay is to have a discussion on current and potential application of value management and risk management in Singapore construction industry. Apparently, there is no official indicator on value management application such as academic journal articles, framework or other form of reading materials in Singapore construction industry context. Therefore, this essay is only able to discuss the current application of VM in the neighboring countries such as Hong Kong, China and Malaysia (Asia). As for risk management, the context has been actively appearing in Singapore construction Industry. Besides that, the discussion on potential application VM to be applied in Singapore construction industry which leading to potential benefits. Meanwhile, information modeling for risk management is considered a systematic approach of risk identification and assessment with a structured solution in managing it. Eventually, this essay shall ends with a conclusion and future recommendation of VM & RM areas of study.

2.0 Introduction

The needs of the client on construction development are increasingly demanding in terms of time, cost and quality in order to stay competitive in the business world. With such demand, this shows the initial briefing in capturing client's needs is very crucial and failing in meeting clients needs which may leads to major delay, cost overruns or contractual disputes.

The definition of briefing is referring to "a process of going throughout the project which all the requirement of the client and relevant stakeholders are captured, recorded, defined, firmed and distributed to design and construction team (Goran. L et al, 2006). As Goran. L et al (2006) did argued on a statement that client is encourage to a more active role in the construction as to enable them to understand the what makes a project successful and there is an indication shows that interest from the client on more value based and operational oriented management.

It is not common that construction projects are inherited with all sorts of risks and it can be deadly if it is not managed well as it may leads to death or bankruptcy. As mentioned by J.H.M. Tah et al (2000), the communication of risk in a construction project tends to be very unhealthy, incomplete and inconsistent throughout the whole lifecycle of the project and even risk management is in place but it is usually carried out in ad hoc basis and informal. Due to the informal and inconsistency on using of risk management, this has resulted that the use of different type of methods on risk assessment and producing different and conflicting results.

It is clear that value and risk management is important for a construction project as it involving a big amount of investment, affects healthy and safety of the environment, short and long terms of client's business aims, client's knowledge towards construction might not be strong and many more. In addition, value and risk management not only beneficial to the client's project but to all the relevant stakeholders as their concern towards of the project is taken into consideration in decision making.

3.0 Definition of Value and Risk Management

Value Management is defined as a structured and analytical procedure in achieving value for money by having all the required functions with the low cost consumption but without having downgrade on required level of quality or performance (Ann T.W Yu et al, 2005). The approach enables a systematic procedure in capturing client's requirements and clear defines the needs to all the stakeholders which it can be acts as a common language to all the project participants. This will reduces the difficulties on the whole process of the delivering client's need of the project and promotes a harmony working environment in identifying opportunities and threats of the project (Ann T.W Yu et al, 2005).

In project management context, risk management is defined as a formal and systematic procedure in identifying, analyzing and countering on the risk events throughout the life of the project as to achieve an optimum or acceptable degree of risk elimination or control (Syed M. Ahmed et al, 1999). A good project management is also depends on the efficiency and effectiveness in managing risks of the project (Syed M. Ahmed et al, 1999).

4.0 Value Management Application in Asia (Hong Kong, China and Malaysia)

Apparently, Hong Kong has a strong background of VM application as the practice has been actively in the past decade which mainly on the government projects. In the year of 1996, there are 6 major government projects (total value HK$7800 million) has been initiated with VM approach which carried out a government department known as ArchSD (Architectural Services Department) by promoting the use of VM as standard methodology for the major projects (Qiping Shen, 1997). The department did plans to carry out VM studies to all major projects during the sketch design stage with anticipated expenditure exceed HK$250million (Qiping Shen, 1997).

However, the VM studies is not favourable to Hong Kong private sector as the application is not widely used and as the survey by Qiping Shen (1997) showing the awareness of VM in Hong Kong private sector is relatively low with results of 12% of total respondent has good understanding on VM; 40% never heard of VM and others is only limited knowledge about VM. As Qiping Shen (1997) highlighted that it might be due to the low level of awareness from the senior management, lack of knowledge, lack of time and reluctant to change.

As for China, VM was approached in China during 1978 through a Chinese state -owned manufacturing companies with the notion of producing savings (Qiping Shen et al, 2004). Based on the VM case studies carried out by Qiping Shen et al (2004), the case studies is done through the collection of total 25 cases from the year of 1997 to 2001 showing the VM practices in China's construction industry. Out of the 25 cases, 21 cases showings cost saving data and figures is fluctuated from 3.5% to 36% from the initial construction cost but it has an average of 9% average cost savings (Qiping Shen, 2004). An important note on the data as the figures is higher than in practice merely because those data were captured only on the successful case being done. The impediments of the VM application in China are merely due to the overemphasis of quality, no proper framework of VM applications and transitional problems in construction markets (Qiping Shen et al, 2004).

In terms of Malaysia, Aini Jaapar et al (2009) highlighted that VM application in Malaysia still not widely adopted which was first introduced on 1986 even there are successful application in Malaysian's construction industry. Referring to the questionnaire research by Aini Jaapar et al (2009), the survey shows that the awareness of VM in the construction is 78% of total respondent (244 respondents) understand the VM application. However, it is only 16% of the aware respondents with proper training of VM application. From the survey, the results shows that project that adopts the VM in the range of RM11 million to RM 50million of the project value and only 57% of the projects used in-house facilitors in running the VM rather than appointment of external party (Aini Jaapar et al, 2009). Eventually, the setbacks on the VM application in Malaysia has the similarities with China's situation mainly are lack of knowledge, reluctant to change and negative mindset towards the VM exercise.

From the 3 countries, Hong Kong has the most significant adoption on the VM in the construction industry and the involved projects are mainly huge value.

5.0 Risk Management Application in Singapore

According to N.N. Hlaing et al (2008), there is a great increase of awareness and adoption of RM over the years and traditionally for the contractor's in Singapore in managing risk by setting a high markup price on the tender bidding in order to cover the risk which leading to the reduction on the profit margins (no longer effective).

From research survey done by N.N. Hlaing et al (2008) on Singapore's contractor perception of risk identification, the respond of the survey shows that contractor in performing risk identification via tender review by the departments and joint meeting, by a group people from the department and it can be one or two experienced personnel in the company which it is clear that there is no clear framework or consensus on the suitable procedure of the risk identification.

Besides that, the survey results did shows the technique of the risk identification adopted by the contractor usually are analysis of historical data (past project reference), case-based approach and judgment or based on experience (N.N. Hlaing et al, 2008). These are the 3 common techniques that adopted by the contractor during the tendering and estimating activities. Eventually, there is no adoption any fuzzy logic system in identifying the risk with the level of seriousness and risk response towards the risk events. It is merely relying on the personnel of the firm to give indication or advice or past records of any risk events. This may turns out to be disadvantages to the firm in the event that the key personnel has left the firm from the employment or past project records are lost or misplaced.

6.0 Value Management - A need for Singapore Construction Industry?

In my opinion, with the above statement I would answer as "Yes, Singapore does need VM implementation as part of the strategic tool for a construction development". The reasons on this argument are VM is a framework that gives a good notion in improving the value of the development. However, the construction industry does practicing value management or value engineering unknowingly and it is only did not formed it as an official framework or part of ISO requirement in carrying out the workshops and exercise.

VM adoption may poses with impediments similarly to construction industry in China and Malaysia (section 4) in Singapore construction industry. However, it can be managed by setting a well structured framework for construction industry and promoting the VM through seminar and conference to increase the awareness. Government does play an important role in setting policy or guide in achieving the VM adoption. In addition, subsidized courses or seminars can be held in order to educate construction clients, contractors, professional consultant and others stakeholder the use of VM and mandatory policy on project reaches certain total value (for eg. S$150million) are to be mandatory to carried out VM.

7.0 The Use of Information Modeling in Risk Management with Potential Improvement in Managing Risk

Based on the survey from N.N. Hlaing et al (2008), it is significant that most of the contractors do not adopt any risk management system to capture all the risk systematically and in depth analysis on the risk. In order to improve the control on the risk and mitigate the adverse event from the risk events, information modeling on construction risk can be adopted. This can serve as a main system of recording all types of project, risk events, level of seriousness and appropriate response towards the risk. Eventually, it also can be serves a common language in interpreting all the construction risk in the system. With reference to J.H.M Tah et al (2000), IDEF0 is one of the types of modeling method by producing an outline model of risk management process with details on function and flow of information.

The classification of risk can be formed by Hierarchical Risk Breakdown Structures (HRBS) which mainly enable the difference of the risks in relation to internal resource management and external environment (J.H.M. Tah et al, 2000). In addition, risk and action catalogue can be formed as well to categorize in types, scope, risk and risk factor which ultimately all the actions are set to response different types of risk accordingly (J.H.M. Tah et al, 2000).

8.0 Conclusion

In a nutshell, the adoption of VM and RM can be more effective in the construction project management with the effort from all stakeholders in a project. It is crucial to educate the construction professionals on the terminology of the VM & RM before the application as to prevent any confusion or misuse of the management tool. Therefore, pre-workshop or awareness session is essential and it should not be neglected with reason of lack of time, insufficient resources or resistance to change. Hong Kong is one of a good role model in the VM field as their involvement in the VM study in construction projects is substantial and supportive.

Setting up an organization or professional bodies towards the VM & RM can be beneficial as people tends to have a better direction in obtaining right information and right guide from the bodies and this is the place where accreditation can be granted to people who has taken up courses or training in carrying out the VM workshop and RM exercise. In terms of academic research, it is advisable to perform more in depth research in the Singapore construction industry in order to grasp the culture and norms. This will enable the better formation of VM and RM guideline to the construction industry and improvement on the current application.

Eventually, people should practice more transparency culture and open to the industry by sharing more information or tools being practiced as to learn from each and other plus improve on the current practice.

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