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.

 

Construction Industry and its characteristics

DEFINITION

Construction is constructing, altering, erecting, repairing, and demolishing building, civil engineering, works, and other similar structure. It also  contains assembly and installation on site of prefabricated component and building engineering services. Building a house, repairing a road, demolishing dams, erecting bridge, etc are an example of constructions.

Industry is a group of related economic classified in accordance with the output or services supplied. Thus, construction industry is a sector of economic activity which erect, alter, repair, and demolish a building, civil engineering works, and other similar structures.

CHARACTERISCTICS

Characteristics of construction industry can divide by its features of output, its size, government as a main client, nature of demand for  construction output, nature of construction work, variety of construction technology, and structure of industry.

Feature of construction output are durable or long lasting output such as house, building, road, etc large and heavy units, unique, immobile, complex process, and expensive. Construction industry is capital goods industry. It also requires other industries to support them and contributes gross domestic product of the country. Many worker are required by construction industry. The main client of construction industry is a government regarding to their policy in infrastructure development. Demand of construction is in various types and sizes. There will be different locations, different resources, different inputs and different stages of their process.  There are discontinuities and uncertainties in demand pattern.

Construction industry needs a lot of worker with many level such as skilled labor or unskilled labor. People imagine construction industry as dirty job as well as dangerous jobs. Even some said the construction industry is unatrractive job, but i would say this is the attractive job and lot of money especially in off shore construction industry such as drilling, piping, and dredging. The development of construction industry grows rapidly as well as triangle connection between cost, quality, and time to improve benefits. There are a lot of firm in small scale to big scale in construction industry and it is ease to enter in construction industry. Just supply cement to the building construction, it can say that we just enter construction industry. Cheers!