Value-Based Team Design Decision Making

By Stephen J. Kirk, PhD, FAIA, FSAVE, CVS; Richard G. Turk, RA; and Richard W. Hobbs, FAIA

Abstract
Architects and other design professionals are continuously challenged to satisfy clients' expanding expectations within modest or even shrinking project budgets. Value-based team design decision-making techniques such as value analysis (also called value engineering and value management) are meant to assist the architect and engineer in designing holistically within the context of "doing more for less." This is true whether the team (including the owner) is focused on enhancing building performance, achieving a strong design image, reducing life-cycle costs, increasing user performance and comfort, or optimizing environmental sustainability.

This presentation will focus on three important design skills for architects as they relate to value-based team design decisions to meet clients' needs:

• Design integration (design decision making)
• 
  
• Communication (among the client and design disciplines)
• 
  
• Facilitation (leading design workshops).

According to Richard Hobbs, FAIA, these are the skills that practitioners most need for the next generation. Specifically, this paper covers the following topics:

1. Value-based team design decision-making concepts and principles
2. Project case study applications
3. Leading a value-based team design workshop
4. Cost, quality, risk, and life-cycle cost modeling
5. Function/worth analysis
6. Group creativity and team dynamics
7. Life-cycle cost analysis
8. Integrating value-based team workshops within the design decision making process.


Owner Demands

Clients' Challenge to Architects

According to AIA Firm Surveys from 1996 to 1999, "Clients are increasingly challenging architects to provide greater leadership, accountability, and responsibility." Expectations are growing for architects to understand the business needs of the owner and to do more with the limited resources available to the owner. In turn, owners want to understand the architect's design process, and they also want to participate and will be actively engaged in decision making. Owners expect, and demand, to express their value expectations for the project and to see that the architect meets their priorities. This requires a more explicit decision-making process that all team members-including the owner, user, other stakeholders, facility manager, design architects and engineers, and the constructor-can participate in.

A common language is needed to communicate thoughts and ideas. A more formal process for group decision making is also needed. This is not to argue in favor of designing a facility by committee. As many have discovered, the design is best left to the apt skills of the architect. Such a formal process, however, does aim to get regular input into the design process to better address complex issues such as sustainability, life-cycle cost, operational effectiveness, flexibility, and engineering performance to maintain accountability for all decisions.

In addition, owners insist that all viable alternatives be considered and that the preferred alternative be selected. Performing this activity in real time allows owner participation as well as proper analysis for rapid feedback on decisions.

Government Value Engineering Requirements

For government owners, laws and regulations set more specific requirements for value-based decision making. For example, Federal Law 104-106 specifically mandates a value engineering (VE) study as a part of the design process. Government agencies are required to bring in VE teams. For federal work, every project costing more than $2 million needs value analysis study (and for highway work, any project over $5 million). New York City requires it for highest-cost projects. The state of Virginia requires VE for all capital projects costing more than $5 million.

The Federal Facilities Council (FFC) advocates that "to support sustainable development, value engineering and life-cycle cost analyses to evaluate a range of sustainable development options are used in the conceptual planning, design, and construction phases of acquisition."(1) The FFC further advocates that owners "focus attention at the front end during the conceptual planning and design phases, where the ability to influence the ultimate cost of the project is the greatest."(2) This translates to the application of value methods earlier in the planning and design process.


Architects' Need for Change

Defining Value and Return on Investment

Definitions of words?especially architectural terms?and how they evolve over time has always fascinated Hobbs. For instance, "design-build" once connoted a method to reduce costs at the expense of the design and even the client's strategy. Now it is recognized as an integrated design and construction process that respects the concerns of the client, architect, and contractor. Likewise, "value engineering" once defined a process to save money in the short term (client and building performance be damned). Now VE means using analysis to achieve maximum building performance over its entire life cycle, increasing return on investment for the owner. Architects need to be aware of how our adjusted perception?and resulting technology?contributes to the reinvention of the architecture profession.

Traditional Design versus New Value-Based Approach

The traditional approach to the design process begins with the architect's assets, core competencies, and desire to create a product that ideally matches the client's priorities. The new value-based decision making approach takes the reverse view: defining the client's priorities, then acquiring or improving the skill sets, talent, and knowledge needed to create products that meet the client's needs. This more formalized decision making approach allows a more holistic understanding of the project by all stakeholders.

The new approach involves using a multidisciplinary team that includes representatives of the owner, user, facility manager, and constructor. Some participants should be new to the project in order to maintain independence and to ensure that all viable ideas are explored. If all stakeholders are not represented, it is a good idea to role-play those who are missing. The owner is involved from the beginning to help define the owner's value expectations for the project and to set priorities. Real-time decisions are reached using value-based methods in a team workshop setting.

Many of these workshops have now evolved into "value-based design charrettes" to more fully explore a variety of ideas. The architect's skill in facilitating these team-oriented sessions is paramount to their success. The facilitator might use the following tools to help communicate to the team: function analysis, quality modeling, group creativity/innovation techniques, life-cycle costing, design/cost simulation modeling, and choosing by advantages.

Architects Respond

Based on AIA Firm Surveys from 1996 to 1999, the number of firms offering expanded services has increased significantly. Architecture firms have responded to client challenges to provide greater leadership, accountability, and responsibility by expanding service offerings and the value proposition in different ways. For instance, large firms dominated the landscape and found economic stability by expanding their scope of services. Value-based services such as value analysis, life-cycle costing, and postoccupancy evaluation are examples of expansion. Small firms, on the other hand, sought stability through specialization, offering value-based services a la carte or in concert with other firms. The consulting firm of Kirk Associates, for example, offers value management and facility economics services directly to owners or through the bundled services offered by larger architecture firms and construction management firms.

A comparison of the three latest firm surveys shows that expanded services, such as value analysis, have increased in profitability to architects. In 1990, expanded services represented 22 percent of total revenue; by 1999, it was 39 percent. From 1990 to 1999, the demand for basic services increased by 86 percent; the demand for expanded services increased by 313 percent.

Taking an increasingly owner-centric approach to services has freed architects somewhat from the tyranny of construction financial cycles by decreasing their reliance on basic design services as their sole bread and butter. From 1996 to 1999, basic design services declined as a source of revenue?from almost 80 percent to just over 60 percent. It is fair to say that this approach to services provision is both planned (strategic), as firm principals set growth strategies and fulfill them, and by chance (opportunistic), as principals perceive unfulfilled client needs and expand to meet them. Expansion of services has also led to progressively diverse staffing; architecture firms are seeking personnel with a wider variety of skills, including people trained in value analysis such as certified value specialists (CVS).


The Value-Based Team Design Decision Making Process

Decision Making Using Value Methodology

Too many people equate VE with making things on the cheap. Done correctly, it is about value over the lifetime of the system, facility, community, or whatever is being analyzed.

VE is not simply about money. It is, as the name suggests, about value, including important intangibles such as patient care, in the case of a hospital; operational effectiveness, in the case of corporate offices; and creation of "destination," in the case of retail and entertainment centers. If VE aims only to save money in the short term?in construction?then it is a misnomer.

The power of value-based team decision making is in the methodology. The problem solving process focuses on increasing value in the all-powerful triad of cost, quality, and performance. The decision making process can be broken down into six steps:

1. Information gathering and benchmarking, e.g., creating cost and quality models
2. Function analysis?the exercise of stating the project purpose as a verb-noun phrase
3. Creativity phase, which does not stop with the first workable idea
4. Evaluation of ideas generated using life-cycle cost analysis and benefit-cost comparisons
5. Development of those ideas into a workable preferred alternative
6. Recommendations to the decision makers identified through the orientation meetings.

This methodology goes beyond the more traditional design approach and will benefit consultants in any field, including architects, engineers of all kinds, and business managers. Moreover, this service can be provided even when another architect is doing the design and documentation phases. The value specialist works closely with the design architect to develop a variety of options from which to choose. This role works best with repeat clients, with whom trust and rapport are already established. An option for providing these services to a first-time client is to come into a project as part of the design or construction management team.

Incorporate Function Analysis
The degree of specialization is also an important consideration. It is vital to know the client's business at least as well as his or her primary competitors. Obviously, the tools and techniques differ among client types; however, function analysis is used on every project, using two-word "verb-noun" phrases to allow the team to communicate the purposes to be achieved if the project is to be a success for the owner. Function analysis, considered by many to be the heart of value-based decision making, helps the team discover how and why each function is related to the goals of the project.

Apply Value Engineering Early in Design Process
Historically, VE was applied late in the design process, when all the construction documents were finished. If new ideas were identified that would improve project performance or reduce life-cycle costs, it was too late to make design changes by the time the information was known. Today, value analysis has moved closer to the crucial formative stage of business development decisions. At its best, value analysis is a process of coordinating and integrating interdisciplinary teams. Because changes become more expensive as project development progresses, it is important to start the process early to generate and recommend ideas. A great idea for adding value to a project becomes not so great when it requires the whole team to back up and start over again on some of the basic assumptions. So some great ideas never get used.

Augment the Design Team with Value Specialists
The overarching mindset of the value analysis process is the integration of the whole for the benefit of the project life cycle, regardless of where the value management team came into the project. However, owners find it to their advantage to bring certified value specialists (CVS) on board early to work with the architect team to make sure a full range of solution options are explored for the client's consideration and ultimate decision. A large part of the value specialist's skill set is in team building acumen and understanding of group dynamics in the facilitation of the team. Architects find this to their advantage because of the skills a value specialist brings to the team such as facilitation, communication, and decision making methods and techniques. Sometimes architects themselves bring value specialists on board to provide team leadership. Construction managers also use value specialists to assist in value-based team decision making. Team experts for value-based studies vary from project to project. Therefore a value specialist requires a large network of experts to move from one project to the next. It is also important to find experts who work well on teams.

Goals of a Value Study

To retain focus in such a short value-review session, look for the big-picture issues such as sustainability, more effective visitor interpretation, visitor inspiration, operational enhancements, greater building flexibility, or increased engineering systems performance. If life-cycle cost is a concern, the task is to figure out where most of the money in an operation goes (and comes from). And you have to determine how and where money is wasted in day-to-day procedures. With a hospital facility, 5 percent of the overall cost may be capital costs for construction, and 95 percent will be the ongoing operating cost. In corporate facilities, the breakdown is about 30 percent capital cost and 70 percent operating cost.

When evaluating operations, the team must constantly challenge the existing operating procedures with insight into what the next generation of operating procedures are likely to be. Because of the short time and immense complexity, this is a particularly difficult mindset to achieve and task to tackle. With value management, you may set a strategy to spend the same amount of money and still increase productivity, or you can set a higher range of first-cost expenses to gain major increases in productivity. Either way, the first-cost is more than offset by the productivity gains over the life of the facility.

Cost of a Value Study

The cost of a study can range from as little as the fee for the team facilitator or as high as the cost of an entire value study team working over several days. A five-day value analysis workshop involving 12 people for a hospital project at schematic design recently cost an owner $75,000. This is the high-end range for the cost of a single review of a complex project. Two weeks before this workshop, a one-day orientation meeting was held to discuss objectives for the value study. It began with a discussion of the goals of the project and continued with a tour of the site and existing building. The five-day value analysis workshop followed the methodology described above. The value management team continues to work as a group to keep ideas moving and coordinated. A value analysis report is issued at the conclusion of the study to document decisions reached.

Case Studies of Value Analysis in Design

Value studies are best applied in the early stages of design. This usually occurs at normal owner review points such as the end of schematic design and design development. Value studies may be performed on new construction as well as renovation projects. Two case studies illustrate the application of the process and tools used within the decision making framework.

The first is a new science center for the Great Smoky Mountains National Park. At 14,660 GSF, the center includes space for curatorial functions, work areas, research offices, education, labs, and support. The construction cost is more than $3.9 million. A value study team reviewed the project in the concept stage prior to project funding to assure the owner that all viable alternatives had been explored.

The second project was a renovation and addition to a forensic laboratory for the U.S. Fish and Wildlife Service. The facility's functions include receiving evidence, housing the evidence, labs for analysis, and documentation of forensic results for testimony. The project has 23,000 GSF of renovated space and 38,000 GSF for the addition. The construction cost is more than $14.5 million. A value study team reviewed the project in the schematic design stage to assure the owner that best value had been achieved. Value objectives included enhanced sustainability, optimized life-cycle cost, best project phasing, minimized project risks, and improved project quality.

Both value analysis studies included representatives of the owner, the user, facility management, and the design architect and engineers. Members of the study team role-played the constructor. The team followed the process described earlier. The workshop duration was three days for the science center and five days for the forensic lab. Independent new team members were added to each value study team for fresh ideas.

The value-based team study for the science center resulted in proposals that improved the building layout, adjusted the site master plan and utilities, modified architectural and mechanical systems for improved sustainability, and listed a number of other recommendations for the owner's and architect's consideration. It also identified project cost savings opportunities of $500,000 (13 percent). More than 80 percent of the team's recommendations were ultimately incorporated in the design.

The value study for the forensic lab resulted in proposals that improved the project phasing; site and building layout; structural, architectural, mechanical, and electrical systems; sustainability; and project management. It identified project cost savings opportunities of $1.7 million (12 percent). More than 85 percent of the team's recommendations were ultimately incorporated in the design.


Opportunities for Application

Strategic Value Planning

New developments in value analysis have led to the term "strategic value planning," which means using strategic thinking during project planning so that the client gains maximum value. In fact, many clients seem to view this as the most important of all services. Clients see the tremendous impact of setting proper design criteria, preparing a quality model, and defining client and community quality and performance expectations.

Value-Enhanced Master Planning

Using value-based decision making for site master planning at NASA's Goddard Space Flight Center resulted in better-defined requirements over the next 25 years. The value study team developed scenarios of "possible futures," then evaluated the space and other technical requirements for each possibility. The master planners then used the data to develop a plan that would accommodate the projections yet have the flexibility to adapt to each possible scenario.

General Management Planning

Using Choosing by Advantages (CBA)?a tool to quantify nonmonetary advantages?the National Park Service uses the value method to balance benefits and costs during general management decision making. The value methods allow planning teams to understand the relative advantages of alternatives and make judgments about their value when selecting a preferred planning alternative. After evaluating initial planning alternatives, the value study team uses the knowledge gained to craft a final preferred alternative, which may include valuable components of several of the alternatives. In one case, approximately $100 million was saved through the process of value planning in the General Management Plan for a national park.

Criteria and Standards, Prototype Layouts

For General Motors, the use of value-based decision making tools such as life-cycle costing and value analysis helped update existing criteria and standards. This resulted in the change of some former systems?for example, from built-up roofing to 80-mill PVC roofing. Even some prototype manufacturing layouts were evaluated and new building layouts developed.

Programming/Project Definition

The use of VE tools such as function logic diagrams and quality models assist in the programming phase of new projects. The Functional Analysis System Technique (FAST) diagrams help the owner see the big picture of project requirements. The quality model helps the owner define expectations and set priorities for the architect.

Value-Based Design Charrettes

The Army Corps of Engineers is using value-based design charrettes to define new project requirements, explore alternative solutions, and establish project budgets. They have used this approach on a variety of projects over the past five years with great success. The National Park Service is encouraging that all predesign and design charrettes be value-based and that they document the rationale and reasons for specific design choices.

Value Engineering in Design-Build

VE is particularly a good idea in design-build projects because it helps the client establish the parameters before the design-build firm comes on board. The National Park Service is beginning to use value methods for evaluating the cost and benefit impacts of setting specific performance specifications of standards.

Brad Buchanan, AIA, of Buchanan Yonushewski Group, a Denver design-build firm, speaks of the "timing of value." The biggest return on an investment of time happens early in the design-development phase, Buchanan says. It increases in a smooth curve up from the concept phase. This added value doesn't have to be seen as a cost savings that lowers the project budget, Buchanan tells us. Rather, the client can view it as an opportunity to keep the original budget, add value, and create a better product.

Creativity and flexibility are the keys to adding value to the design-build process, according to Buchanan. Changes occur on every building project all the time, and each change creates a giant ripple effect, even though it may not be immediately felt. The traditional tendency is to hammer each change to fit the earlier decision rather than to remain open to new implications. If you can be open, as Buchanan says, "You can take the project from expected to extraordinary. You need to lean into the project and be a cheerleader for the possibilities."

Contractor Value Incentive Clauses

These construction contract clauses have been used in construction for more than 20 years by government organizations such as the U.S. General Services Administration, Army Corps of Engineers, and the Navy Engineering Command. These clauses permit the construction contractor to perform a value-based study and submit recommendations to the government for change. If the owner approves the value change, the owner and contractor share in the savings achieved.

Postoccupancy Evaluation

More recently, owners have used postoccupancy evaluations to assess recently completed projects for lessons learned before proceeding to the planning and design of new similar projects. This value-based process examines both performance and cost issues to properly access their value in later projects. Some discoveries have led to modifications in existing owner and architect criteria and standards.

Benefits of the Value-Based Approach

The value-based team approach to decision making benefits both the owner and the architect. Using the leverage of the architect during the planning and design stage, the owner gains significant improvements to project performance, quality, and life-cycle cost with minimal investment in the new decision making process. The architect gains new profit potential through expansion of value-added services to clients.

Owner Benefits

Kirk's findings show that owners recognize that there is a definite return on investment for strategic value planning services by the architect. He estimates that every dollar spent in the planning phase saves $100 in the implementation phase. Every dollar spent in the programming phase after the strategy phase saves $50 in the implementation phase. These dollars can be reallocated into the project?meaning the architect is providing a true value-added service. The graphic below shows strategic planning fee dollars spent in various phases of the design process and their corresponding savings in implementation costs. (Notice that postoccupancy evaluations can offer value-added savings as well. Kirk considers construction services as the implementation phase.)

Kirk's research indicates that clients recognize?and will pay for?value-added services through all phases of the project. In fact, clients are willing to pay a greater fee for more value-based services because they are used to paying other (non-architect) consultants for these services, Kirk says.

Architect Benefits

This field carries enormous potential for architects looking to expand into new areas of profitable consultation. Among 200 certified value specialists (CVS) in the U.S. today, only about half are in construction fields. Perhaps 20 of them are architects. Many architecture firms have found that including value-based decision making services in a design proposal increases the firm's chances of selection by the owner. Offering these services also increases chances for continued involvement with the owner.

Summary

In summary, owners expect and are demanding more from their architects and design teams, and all decisions must evaluate benefits and costs. The architect cannot make decisions for the owner, but he or she can ensure informed decision making. The architect can meet these new demands through expanded service offerings and by increasing the firm's offerings to include those with skills in team facilitation; use of function analysis to improve group communication; and new, advanced tools in decision-making tools such as life-cycle costing, CBA, and other benefit-cost decision making processes. Certified value specialists (CVS) are currently trained in these skills to assist architects in meeting owner needs. Architects should consider joining SAVE International to learn the skills necessary to perform value-based team decision making services for owners.

(1) Federal Facilities Council. Sustainable Federal Facilities: A Guide to Integrated Value Engineering, Life-Cycle Costing, and Sustainable Development. Federal Facilities Council Technical Report No. 142. Washington, D.C.: National Academy Press, 2001. See Executive Summary, p. 3.

(2) Federal Facilities Council. Adding Value to the Facility Acquisition Process: Best Practices for Reviewing Facility Designs. Ralph S. Spillinger with the Federal Facilities Council Standing Committee on Organizational Performance and Metrics. Federal Facilities Council Technical Report No. 139. Washington, D.C.: National Academy Press, 2001.

References

Kirk, Stephen J., and Kent Spreckelmeyer. 1993. Enhancing Value in Design Decisions. Detroit: Smith, Hinchman, and Grylls.

Kirk, Stephen J., and Alphonse J. Dell'Isola. 1995. Life Cycle Costing for Design Professionals. 2nd ed. New York: McGraw Hill.

Kirk, Stephen J. 2002. Leadership in design team innovation using value-based decision making techniques. Presented at Executive Education Seminars, 24-25 January, at Harvard Design School, Harvard University, Cambridge, Mass.

Kirk, Stephen J., and David Sherwood. 2000. Conversations about establishing a value management program. Presented at SAVE International Conference, 25-28 June, Reno.

Kirk, Stephen J., and Michael M. Paquette. 1999. Scenario learning for value master planning. Presented at SAVE International Conference, 27-30 June, San Antonio.

Kirk, Stephen J., and Robert Vrancken. 1998. PIPP-Process Integration for Peak Performance (integrating scenario planning, life-cycle cost analysis, and value management techniques). Presented at American Institute of Architects conference, 12-14 March, Cincinnati.

Kirk, Stephen J. 1997. Value management assistance in design-build. Presented at Hong Kong International VM Conference, November 1997, Hong Kong.

Kirk, Stephen J., Jill Woller, and George Gish. 1997. Value-enhanced court operations and courthouse master planning. Presented at SAVE International Conference, May 1997, Seattle.

Kirk, Stephen J. 1996. Life-cycle costing for value-enhanced healthcare. Presented at SAVE International Conference, May 1996, Chicago.. 1994. Quality modeling: defining project expectations. Presented at SAVE International Conference, May 1994.

---. 1993. Strategic value planning using VeNTURE computer simulation modeling. Presented at SAVE International Conference, May 1993, Phoenix.

---. 1990. Integrating value engineering into the design process. Presented at SAVE International Conference, May 1990.

---. 1988. Postoccupancy value engineering. Presented at SAVE International Conference, May 1988.


Stephen J. Kirk, PhD, FAIA, FSAVE, CVS, is president of Kirk Associates, which specializes in value analysis services. He has more than 25 years' experience in applying value-based design decision making techniques to corporate offices, courthouses, research facilities, and hospitals. He is an instructor at the Harvard Graduate School of Design, professional education program, and has recently served as president of SAVE International, of which he is also a Fellow. He is the author or coauthor of six books related to value analysis. Kirk can be reached through 313-823-7330 or kirkassociates@aol.com . His mailing address is Kirk Associates, 1177 Berkshire Road, Suite 100, Grosse Pointe Park, MI 48230.

Richard G. Turk, RA, has pioneered the use of value methods and Choosing by Advantages (CBA) as a required part of the National Park Service planning and design program. He is a registered architect with experience throughout the National Park Service. He was project architect or project manager on several rehabilitation projects throughout the country and served as the planning team captain for the Comprehensive Design Plan for the White House. Turk has presented material on value analysis and sustainability to several national venues including the U.S. Green Building Council. He can be reached through 303-969-2470 or rich_turk@nps.gov. His mailing address is National Park Service, 12795 W. Alameda Parkway, Denver, CO 80225-0287.

Richard W. Hobbs, FAIA, is an advisor to the professional design community, providing vision and strategy for professional service firms and organizations. Following 22 years in private practice, 10 years as The American Institute of Architects' vice president for professional practice, and two years as AIA resident fellow for marketplace research, Hobbs is now a strategic advisor and change agent, helping groups and individuals capture new value in the redefinition or reinvention of the architecture profession. He can be reached through 360-378-1060 or rhobbs@richardwhobbs.com . His mailing address is P.O. Box 4307, Roche Harbor, WA 98250.