Buy something with your people money: Value engineering approach

Buy something with your people money? Yes, it is routine for government official. Maintenance, car, tools, software, hardware, paper, computer, and etc. As government official, I have a right to use people money to buy something regarding to our program.

What are our program? Basically, in every country, the government program is to increase prosperity of the citizens. The strategy of government is to develop economy in every sector.

One of the sector is infrastructure. Everybody knows that infrastructure can triggers economy development. Road, airport, dam, mall, buildings, and etc always attract a new job.

To support developing infrastructure program, we need to buy something. For example : in accordance with our research program, sometimes we need to buy tools to support us such as computer and hardware.

Before we buy tools, we have to count appraisal of those tools. Appraisals are based on level of value.  Approaching the tools can use by value engineering method. Here is the illustration:

We want to buy car. The price is Rp. 500 Million.  Total of maintenance in 5 years will take Rp. 70 M.  Thus, in other ways, we buy a car with Rp. 570 Million. After 5 year, the price of the car is around Rp 200 Million. Thus, actually we will spend Rp. 370M

and then comparing with other ways to get function of the car.

Function Phase:

Function of the car is to deliver official and stuffs regarding to program.

Creativity phase:

1. Buy a car

2. Rent a car

Evaluation phase:

1. Buy a car : need Rp. 370 Million

2. Rent a car : Rp. 5 Million/month, Rp. 60 million/years, Rp. 300 million/5 years

Development phase

1. Buy a car: have to take insurance, need procedure of maintenance

2. Rent a car: no need to take insurance, maintenance is from vendor, the car is “always new”

MONEY: distinction is Rp. 70 Million

DECISION

The decision is depend on the quality of manager. If he focus on effectiveness , he will rent the car.

Every year, more than 500 car is buy for government purpose. Why we don’t just rent a car, make a good contract, and then running the cash flow of every sector in the country..

Cheers! No offence!

History of Value engineering in USA and Malaysia

There is a consensus that the evolution of the value analysis started in the General Electric Company (GEC) during the World War II (WWII) way back in 1941 by Lawrence D Miles(Che Mat M. M., 2002). Shortages of labour, raw materials, and component during the WWII made Mr. Miles forced to produce the product with the same function in less cost in GEC. He used a technique with the following five questions:(Miles, 1989)

1. What is the item or service?
2. What does it cost?
3. What does it do?
4. What else would do the job?
5. What would that alternative cost?

He succeeded in developing an amazing new package of techniques. He named the package as Value Analysis

After WWII, his techniques were recognized as powerful approach to problem solving through function-based analysis. Many industries and government use the technique to save unnecessary cost without sacrificing the function and quality.

In 1954, US Navy Bureau of Ships applied the technique to cost avoidance during design, calling it Value Engineering (VE)(Younker, 2003). This is the first government organization use the techniques. As good result of using this technique, US Government endorses VE to their organization such as US Postal Service, US Army Corps of Engineers, US Department of Health, Education, and Welfare, and many construction projects.

According to (Che Mat M. M., Value Management-The Way Forward, 1999), Malaysia started the technique in 1986 when Roy Barton from Canberra University, Australia introduced Value Management (VM). Even the terms are different, but the concept is similar to value engineering. In 1990, Barton made another subsequent visit and together with Mohd Mazlan Che Mat introduced Value Management Methodology to Petronas and Ministry of Defence. Later, many of industries and government use the VM.