The Vrm Consultant Roles Construction Essay

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City Authority intends to build a new local government administrative headquarters to be located in the City centre of Edinburgh. The aim is to achieve centralization of all public sector departments and relocation of their staff to a single location. These departments who are currently located in various properties across the city have been considered unsuitable for the purpose of modern and efficient administration of government services.

The client's objective is to achieve value for money by rationalizing local government service departments in a high specification modern building that befits a progressive and visionary city. The project is expected to cover around 12,500m2 of accommodation with a budget of £25M, which could be reviewed as the design develops.

1.1 VRM Consultant Roles

Our Role as a consultant is to gather all necessary information ahead and facilitate the VRM Workshops, put all the information gathered prior and during the VRM workshop together to advise you, the client on how to achieve your goal to building a reputable local council headquarters to earn value for your money

Our approach is based on combined study of Kelly, Male & Graham's Value Management for construction, and Royal Shell BV's Opportunity Framing Guide, which is derived from internationally accepted VRM guidelines ie Information > Creative> Evaluation > Development & Implementation. The workshop has been designed in phases to achieve our goal of conducting VRM and accomplish the two tasks of identifying the business needs and meeting the business needs.

Shell defines opportunity framing (OF) as a structured approach for a team to understand an opportunity, whether it is a new venture, a new capital project (like this Local govt HQ) or any other opportunity. The emphasis of opportunity framing is on preparing for success and requires taking sufficient time with the right people to fully understand the opportunity, define a successful outcome and create a plan to deliver the opportunity/project.

1.2 Benefit of VMR

Identify business needs, reconcile the needs and views of different stakeholders

A better definition of project objectives

Providing value for money for customers

Eliminating wasteful practice

Options to meet business needs & confirm project still required

Bring about new ideas for improved results

Enhance knowledge and skill of the stakeholders

Eliminate or reduce conflict and potential risk

Balancing the use of resources to suit priorities

2.0 Orientation Phase

As a consultant our preliminary work is to understand our client's goal, their expectation for the new local council headquarters and how it's going to affect their business activities. This will involve meeting and interviewing some key staff of the Local council and all these facts findings will enable us to prepare for the VMR workshop. Other pre-workshop activities include:

2.1 Local Council's activities

VRM consultant need to have a common understanding of the client's activities. Hence, the need to list services Local government council provides:

Housing: applications and repairs

Jobs: council jobs

Education and learning: Adult education & Schools

Law & licensing: Birth, marriage and death, Licenses

Planning and the environment: Planning applications and conservation

Rubbish and recycling: Household rubbish and recycling

Transport & street: Parking & roads

Tourism & visitor attractions: museum & parks

Community life & leisure: Library & sport facilities

Also, VRM exercise will be a waste effort if wrong participants were invited and therefore part of the pre-workshop activity is to identify the key stakeholders.

'Stakeholders are persons or organizations (eg. Customers, Sponsors, the performing organization, or the public), who are actively involved in the project or whose interest may be positively or negatively affected by the performance or completion of the project'. Stakeholder may also exert influence over the project, its deliverables and project team members' - (PMBOK p23)

2.2 Preliminary Stakeholder Mapping

This is intended to enable us identify all the stakeholders to be invited for the VMR workshop

2.2.1 Leading Questions

Among questions to ask you:

Interested persons for the successful execution of the project?

Interest persons in the outcome of the project?

Who is going to use the project results?

Beneficiary from the project results?

Beneficiary from the project work?

Influencers/Supporters of project decisions?

The workmen on the project?

Potential victim of negative impact of project work?

e.g. noise of construction activities

Pollution from dust

Emission from chemicals etc

2.2.2 Inner / outside circle Model:

The model places stakeholders based on their interest and support for the project objectives versus the influence or power they have over the project .The inner circles is meant for the most important and influential stakeholders. This will highlight general overview of stakeholders and their impact. Below is a guideline

Strategic Partners



Organization & association





Regulatory Body









Interest group

Stakeholders to be invited

Senior responsible owner

Project Manager

Representative of Technical staff

Representative of staff union


Cost consultant

Representative of each Department

Head of finance

Head of personnel

IT/ communication consultant

Councilors' representative

Estate development consultant

Community group

Regulatory body

Environmental group


3.0 Value Management Workshop Phase

3.1 Workshop Ground rule / Agenda

Safety consciousness at W/shop

Defined & agreed activities time

Impossible to solve all problem but we must record unresolved

Alternatives rather than destroying

One person should speak at a time and no interruption

Be explicit and no abbreviation

All phones switched off

Abide by timing

All are colleagues and no rank at the Workshop

No dumb question as you challenge the obvious

2 - Day Value Management Workshop Agenda

Day 1

08:30 Introduction & Objectives

Where are we now?

09:00 Grounding Presentations

What do we know, what don't we

What do we have, what don't we

10:00 Break

10:15 Project challenge

12:00 Lunch

13:00 Recap all ideas put forward in the Morning

13:30 Value Driver & critical success factors

15:00 Break

Where do we want to be?

15:15 Definition of Success

16:45 Recap everything we did today

17:00 End Of Day 1

Day 2

08:30 Recap Day 1

Where do we want to be?

09:00 Definition of Success

10.00 Break

10:15 Strategic fit

12:15 Lunch

How are we going to get there?

13:15 Tactical issue

15:00 Break

15:15 Road map / short Term Action Plan

Workshop Close Out

16:30 Structured Feedback

17:00 End Of Workshop

3.2 Where are we now?

3.2.1 Project Challenge

This enables all the participants to have a wider understanding of the project and any interdependencies activities. Following are some of the questions to address

Leave our staff in current locations?

Build new HQs or refurbish existing facilities?

Lease or rent developed estate?

Proximity to staff residential areas?

Transport logistics?

Any expectation in staff growth that could lead to further expansion

Promote Council's reputation?

If building new HQ is only alternative does cost commensurate with similar project somewhere?

Can we justify this cost if it is more?

3.2.2 Project Statement

Characteristics of Project Statement:

Clear and explicit to any reader


A means to communicate with internal stakeholders and to test with the management the team understands of the project

Contains at least one number or date to give scale and size of the project

Project statement may already exist depending upon project stage; hence it is presented and discussed to confirm the correctness of the statement

Example of Project Statement

3.2.3 Value Drivers and Critical success factors

Value drivers act as a lever on the outcome of the project, hence participants will identify them to increase the success of our VRM

Standard examples are

Will the project

reduce Capex

reduce Opex

enhance productivity

Compliance with HSE standard

Conducive environment for staff and customers

earns the local council authority more reputation

3.3 Where do we want to be?

3.3.1 Definition of success

This is another brainstorming section to identify potential risks, critical success factors and measure of success. A broad range of measures for all TECOP aspects of the project that include

T- Technical









Life-cycle cost


Valuation method


Economic model

Regret costs












Knowledge Management

Systems, IT










3.3.2 Strategic Fit

This tool will establish a common understanding and confirmation of how the project fits within the organization, the local council. The tool requires the participants to consider the broader local council context of why the project should be addressed. We will be examining Seven Sustainable Development Principles that provide a prompting list at the Workshop

Generate Profitability:

Reduce Capex

Reduce Opex

Lifecycle Costs

Manage Resources:


Generate Employment

Service Inputs/Efficiencies

Energy / Water / Consumables / Chemicals / Fuel

Deliver Value to Customers

Shareholders(Reputation Management)

Product Receivers-(Schedule/Quality) Driven

Government (Recovery, Revenue)

Regulators (Compliance)

Protect the Environment

Emissions/Discharges, Waste, Noise

Protected Areas Minimum Environmental Standards


Respect and Safeguard People

Human Rights, Diversity





Benefit Communities

Revenue Distribution (Influencing Governments)

Local Content

Local Capacity



Work with Stakeholders





3.4 How are we going to get there?

This is evaluation and development period of the VM

3.4.1 Tactical issues

Project delivery time frame

Is it going to have any impact on the local government business?


Sources of fund

Is the money enough,

Credit facility or subvention if budget is overshoot

Procurement route

Risk for each procurement route

alternatives funding option


Tender process

Value Engineering to optimize whole life design quality


Is the location suitable

Facility Ergonomics

Is the facility enough for the number of staff

Does it have enough provision for functions like: toilets, archiving, security requirement etc?

Key performance indicator e.g


Quality of work etc

3.4.2 Project Roadmap

According to Shell, the roadmap is the agreed plan for the delivery of the project, and aligns the activities of the project team, the individuals in the line of sight and other stakeholders. The project roadmap should articulate which activities need to be undertaken by when and by who, including:

The timeline, with dates for key milestone decisions

The key decision points

Any intermediate decisions between key decision points

The deliverables, activities, controls and assurance required to support the decisions.

Recap of decision Gate

Do we understand what we are starting?

Have we looked wide enough?

Have we selected the optimal solution?

Is everything in place to ensure success?

Are we ready to operate?

4.0 Risk Management Workshop Phase

4.1 Risk Management Objectives / Workshop Agenda


08:30 Introduction & Objectives

08:45 Project highlight by the Project manger

09:15 Identification of Risk

10:00 Break

10:15 Continue Identification of Risk

11.15 Assign owner

12:00 Lunch

13:00 Recap all ideas put forward in the Morning

13:15 Risk assessment (Risk Matrix)

15:00 Break

15.15 Decide response (Take, Treat, Transfer, and Terminate)

16:45 Recap today exercise

17.00 Presentation on Action Plan- (Risk Monitoring and control)

The objective of Risk management is to identify and analyze all potential risks to the project and propose adequate measures to respond to the risk, monitoring & control.

Shell's Risk Management System (RMS)

4.2 Risk Identification

Participants will identify Risks, assign owners and capture in Risk register

The risks could be categorized as follows:

Project risk

Failure to meet timescales

Increased cost/resources requirements

Project failure

Health & safety risk

Workplace accident


Serious injury or death

Organizational Risk Issues

Inadequate number of project team members

Inexperienced project team

Deviation from project objectives

Stakeholder conflict

Financial risk

Improper cost estimate

Instability of cash flow

Project cost shoot-up due to a reason of variety


Regulatory/Compliance risks

Breach of regulation

Failure to meet legal/contractual requirements

Legal action

4.3 Risk assessment

Having identified and categorized the risks participants will adopt Risk assessment matrix which is a two-dimensional grid scaled probability and impact (consequence) that allows risk to be 'scored' or ranked relative to one another

E.g a. consequence with qualitative consequences (reputation, legal) and others with quantitative consequences (Cost, schedule)

b. Qualitative and Quantitative likelihood scales

Risk will be evaluated by asking participants questions like

What could happen?

What is the real impact?

What is the worst case scenario?

What are the changes if it happens?

This evaluation will be based on participants experience and the history in the Industry.

Example of Risk matrix to be used is this

Impact / Consequence



























The agreed RAM scales for probability and impact results in the Risk severity intervals will direct the Workshop team to define risk response strategy

4.4 Decide Response (Take, Treat, Transfer, Terminate)

Having identified the risks and assess the impact appropriate strategy will be formulated:

Take: Accept risk as inherent to the project and this could be viable for high consequence but likelihood risks,

Treat: Reduce by actions, which will minimize the impact of the risk on project cost, schedule, quality or objectives

Transfer: Mitigate by transfer of risk to a third party (e.g. Insurance, contracting, hedging)

Terminate: Eliminate the risk completely either by design or other option so that impact is no longer felt by the project

4.5 Risk Monitoring and control

Risk register is a document that will be used to document all relevant information pertaining to the project risk and this should be a live document, a unique source of reference for all risks and their current status

The participants will brainstorm to evaluate all the ideas put together to come up with project develop within a timeframe, cost effective and quality

5.0 Implementation Phase

5.1 Follow up Report Recommendation

A detailed formal report that recommendations among will include

Need to make VRM a continuous exercise

A short term action plan to reaffirm the actions for the Workshop team to take away, which will include (what, who and by when) needed for immediate focus decision identified in the roadmap.

A structured approach stakeholder engagement plan which maximizes their positive impact that will allow value in the project to be delivered

Project assurance plan which will focus deliverables section in the roadmap and cover TECOP (Technical, Economic, Commercial, Organizational & Political) spectrum


A guide to the project management book of Knowledge PMBOK 4th Edition, p23

Part 1 Value Management Study-

Value management Guideline - September 2004 TAM04-14, p7

David Pitchford, Best management practice for portfolio, programme, project, risk & service management. Launch of Management of Value (MoVâ„¢)-OGC Official Product. P6

Opportunity Framing Guide, Royal Dutch Shell, September 2010 Version, pp 20-23, 44

J. Alvarez, F.M Gast & D Pieterse, Construction Risks: Identifying and Mitigating, Nixon Peabody LLP. p11

Part 2 Contents

An evaluation of current and potential future application of Value and Risk Management into (QS/CPM/FM/BS) professional services in

the construction sector in Nigeria


Essence of VRM

Current status of VRM in Nigeria

Case Studies of VRM



An evaluation of current and potential future application of Value and Risk Management into (QS/CPM/FM/BS) professional services in

the construction sector in Nigeria


The opportunities in construction industries in Nigerian are enormous ranging from road, rail, real estate, oil and gas industries. Real estate is fast growing in cities like Abuja, Lagos & Port-Harcourt. Office rent in Nigeria rank 5th highest globally (according to Knight Frank research). However, are these latent opportunities being explored and are the stakeholders getting values for their money. With these hidden opportunities in Nigeria only Julius Berger Plc is the quoted company in Nigeria. More than 70% of residents in Nigeria live in single room slum apartment in both urban & rural areas. Most roads are dilapidated with dire need to reshape the seemingly dead railway system to reduce the heavy traffic and damages being done on the roads by Trucks mainly used in transporting goods from one part of the country to the other. Nigeria has the potential to develop its infrastructure which is in a deficit state but how does Nigerian manage the numerous opportunities to the benefits of the citizenry! From research carried out it is obvious that Nigerian Construction industry has lots of challenges.

According to Oluwakiyesi 2011 ' Nigeria's construction sector accounts for 1.4% of its GDP (Q3'10) More important, is the fact that despite the growth seen in the construction sector output, (7 year CAGR of 35%, its contribution to total GDP has remained at abysmally low levels…Nigeria's total GDP has risen to approximately 495 times its size. On the contrary, construction sector GDP has only grown to 125 times its size in 1981'

Also Sanusi 2008 reaffirmed this 'Over the last decade, several changes have occurred in Nigeria, which have helped all sector of the economy, especially the building & construction sector. With double digit growth rates in the last 3 years, the construction industry has outgrown all other sectors of the Nigerian economy. However, its contribution to the Nigerian GDP and employment labour are still very low. Despite its impressive performance, the industry faces a significant number of challenges including the lack of local skilled labour, power shortage, the unavailability of materials, and the unethical practices that are very common in the industry'

Essence of VRM

It is imperative to define and understand the essence of Value & Risk Management

Value and Risk Management stands on common base to providing best information for decision makers when setting objectives and management strategies.

TAM0414 Value Management Guidelines describes 'Value management as a structured, analytical process for developing innovative, holistic solutions to complex problems' and mentioned the following as its key characteristics:

A specific methodology

Based upon a creative problem solving approach

Involves key stakeholders in a managed team approach

Focuses on function ie what it must do, not what it is

Focuses on achieving value-added solutions

Based upon on integration

Focuses on project learning

'Project Risk Management includes the processes concerned with conducting risk management planning, identification analysis, responses, and monitoring and control on a project' - (A Guide to the project management body of knowledge PMBOK. p444)

Current status of VRM in Nigeria

Most of the risks related issues in Construction project in Nigeria lead to low quality of work, over budget and time overruns. Many lack Risk management knowledge & often apply insurance as mitigating tools for identified risks. Ijaola 2012 said that 'many studies carried out in Nigeria indicated that formal risk assessment is often not carried out leading to unsuccessful projects, sometimes building collapse or even harm to construction workers. Ojo (2010) carried out an empirical study and found out the risk factor with the highest occurrence is design changes during construction, followed by inadequate specifications while Obiegbu (2010) found out that awarding the design to unqualified designer is the most important ranked factors in risk categorization'

Also he identified lack of knowledge of risk management techniques as a major problem as it was clearly identified from his findings that most of the mean value of risk management techniques calculated by the grouped contractors falls within 'No'

Often in Nigerian construction industry cost is set aside for budget overrun but these funds are most time never enough to meet up with the contingencies, which means that a proper risk management is not in place. Aibinu & Jagboro 2002 confirmed this" 'Contingency sums are allowances of project cost included in the pre-contract estimate for the purpose of ensuring that the budget set aside is realistic and sufficient to contain the risk of unforeseen cost increase during construction. The data obtained for this study in respect of 61 completed building projects revealed that contingency allowances in all the cases were inadequate to offset the cost overrun'

Risk management entails risk identification, risk analysis and responses. According to Tang et all his empirical study revealed that construction industry has moved to risk reduction instead of risk transfer, while Dada concluded that risk transfer as mitigating tool is still the highest approach in Nigerian construction industry, and this is followed by risk avoidance and risk retention.

Apart from food, shelter is the next when you consider human needs Nigeria with a population of 150,000,000 has not been able to solve the problem of housing. There are many housing estates developed by Estate developers and government to meet the need of the populace. However, most projects are not delivered to standard, within budget and timeframe. Tenants do not receive value for the money they pay. According to Ladi & Ruya 2012 who examined the social-economic and environmental context of housing delivery in Kaduna they found out that most end users are not completely satisfied with some social amenities, housing providers, and term important value criteria. They argued that there is insignificant contribution of end users to the housing delivery. They then advised that 'There is the need to explore the use of VM in housing provision for effective delivery of project objectives and fulfillment of user satisfaction in Nigeria'

Value management not only tries to reduce cost but to satisfy both the client and all stakeholders, and stakeholders include the users. Issues in Nigerian construction Industry are numerous ranging from corruption, competency of the project management team and delivery within time frame. Inability to deliver project within timeframe is corroborated by Aibinu & Jagboro 2002 and according to them 'from existing literature on the construction industry in Nigeria and based on the preliminary investigation conducted at the outset of the study, it was possible to identify certain major effects of delay on project delivery.

The six effects of delay identified were:

Time overrun,

Cost overrun,



Total abandonment and


One of the tasks in Value management workshop is to identify value drivers and success factors, which include reduction in capex & opex, safety improvement & enhance productivity etc. It is a brainstorming section to identify potential risks in all aspects of the project that include technical, Economy, Commercial, Organization and Political. This process is lacking in most construction projects in Nigeria and this is deduced from Eshofonie 2008 who identified various factors leading to project delay and cost overrun in Nigeria construction industry to include:

Price fluctuation

Fraudulent practices and kickback

Poor contract management

Material procurement

Poor technical performance

Escalation of material prices

Stakeholders' identification and objective of the project are part of the preliminary work that VRM consultant does in preparation for VRM workshop and this helps to identify key area of the project to identify and analyze. Since most projects in Nigeria do not follow due process following factors affect project delivery as highlighted by Eshofonie

Bad Weather

Construction cartel

Inadequate production of raw materials

Government policies

Design change

Relationship between Management & labour

Wrong method of estimation

Mode of financing, bond and payment

'Eshofonie then concluded that 'high construction costs have obvious negative implications for the major actors in particular, and the industry in general. Project abandonment, drop in building activities, bad reputation and inability to secure project finance are all implications of high construction cost'

Also, Ahiakwo & 3 others 2012 concluded that most Nigerian clients moved to construction stage without structural drawings and full detailed engineering drawings and bills of quantities, and this posed a risk of misinterpreting designs, and design decisions were left in the hands of tradesman. Their research also revealed that clients did not adopt building regulations and standards while carrying out their projects.

From the aforementioned it could be deduced that Value & Risk management is not yet fully integrated into construction industry in Nigeria if at all it exist. Nigeria is a colony of British and it should borrow a leaf from it. VRM is an integrated part of construction in UK and this has helped it a lot from the following case study.

Case Studies of VRM

Intensive Value management workshop was conducted into the London Underground, South Wimbledon refurbishment project. The objective of the project was to enhance the passenger environment and improve operational functionality. This project was part of the Northern Line's southern end's 10 station-improvement programme. The value management workshop not only reduced the cost by almost half but still developed an implementation plan that achieved quite a number of project benefits.

Value management in Pizza Hut UK- A three day workshop was conducted to review the 1997 Pizza Hut anticipated programme of 25 refit projects (Pizza delivery Units) at an estimated cost of £145,000 each. The value management workshop was able to save £14,000 per project, raised the standard of the project and reduced the mean time between maintenance. Also contract period and long lead items were shortened. A return on investment of 35:1 was achieved for investing about £10,000 on Value Management Workshop

Silwood Estate Regeneration, New Cross, London- Demolition of low and medium rise blocks (up to 11 storeys) and replacing with new houses and flats (up to 5 storeys) in a phased development. Phase 1 comprises demolition of 6 blocks and replacing with 116 units, new roads, external works service diversions and remediation works. Follow on phases involve demolition of a further 22 blocks and replacing with a further 500 plus units and 100 plus refurbished units, new community buildings and a nursery over a 7 year period.

Value management in phase 1 though conducted late but the project team learnt to use it as integral part of the subsequent phases and was able to use the information gathered from tenant satisfaction questionnaires to incorporate more features with increased cost but meeting the needs of their customers to a large extent.

'The new rector at Liverpool Hope University used value management techniques to help realize major expansion plans. The value management exercise helped him achieve the consensus of all stakeholders regarding the design brief used in procuring the design team' - (Constructing excellence)

From the above case studies in UK following could be deduced:

Value management workshops has brought about

Reduced cost

Improved project quality

More features into the project

Realized expansion

Integrating VM into subsequent phases after late start up in 1st phase

Nigeria needs to reposition itself to be able to face present and future challenges in construction industry. The human capital to face the challenges is available as Ogunsemi & Aje 2010 claimed that 'all identified areas of competencies of quantity surveyors are significant to the practice of value management and Nigerian Quantity Surveyors exhibit all the required areas of competencies of value managers'

Future of VRM in Nigeria

According to the forecasts made in June 2010 in a report by Global Construction Perspectives and oxford Economics, Nigeria's construction industry is growing fast and is likely to grow astronomically over the next decade. The aspiration of Nigerian government is to creating more housing, improving rail and road transportation, improving public services, hotels, tourist attraction centers, creating new jobs and eradicating poverty and all these are construction activities.

Considering the evolving world both natural and artificial crisis which were never envisaged have happened and still happening e.g

Bird Flu

Tsunami & recent storm sandy in US

Unskilled workers

Fatality in construction sites

Construction overheated market 2006

Financial crisis 2008

Indonesian sand ban during civil construction

Recently, flood has done devastating damages in different part of Nigeria this year, making many people homeless by destroying houses value at multimillion naira and breaking apart regions as flooding enveloped roads and damaged bridges. Oil & Gas companies declared 'forces majeur' due to the damages to their installations and inabilities to access their facilities.

It is obvious that risk and spectrum of risk are increasing day in day out. Scarce resources should not be allowed to be a waste. Hence, Nigeria as a nation needs to do a lot to address the present and future challenges in its Construction industries and the only available approach is the universally acceptable mechanism called Value & Risk Management (VRM). Nigerians need to hearken to the call of Popescu MIIRSM p10 that stated ''the success of any organization depends on its ability to create and grow value for its internal and external stakeholders. The creation of value comes when organization is able to identify and make investments with only a positive return or net present value considering all the risks in the project. Hence, risk and opportunity go hand in hand'


Nigerian need among others

Special training for Quantity surveyors and all construction professionals to keep them abreast with the current directions in the construction industry

Serious and well coordinated awareness campaign on the need to make VRM integrated part of construction

Risk management knowledge is lacked by many and hence well coordinated Risk management training should be put in place

Establishment of Value Management institute

Enforce rules and regulation guiding construction industry

Sensitize masses & all key Stakeholders to be more committed to construction activities

Be committed to fight against corruption

Ensure that only professionals are allowed to operate in construction industry.

Finally, Nigerians need to be proactive rather than reactive to meet the future challenges its growing construction industry poses by establishing well coordinated Value & Risk management strategies.