Application of Value Engineering in Nepalese Building Construction Industry

Completion of construction project within given time, cost, quality and material specification has become major issues in construction industry. The typical problem that the construction industry has been always victim of is project delay and cost overrun dispute (Kaliba et al., 2009). Owner budget, and schedule constrain, design engineering’s design and preparation of contract document without deep-rooted understanding of construction method and the contractors who often builds without appreciation of design principles or consulting the design engineering are the main reasons that cause disputes among these different parties that are involved in a construction project (Bedian, 2004). This dispute is the root cause for the project delay and cost overrun. In such condition most of the time quality has to be scarified in order to save time and cost. So to avoid such critical situation there is a need of key creative ideas that can reduce the project life cycle cost without lowering quality or function of the product. The creative idea is known as Value Engineering (Dell’s Isola, 1988). Foo and Chong (2002) have given some beneficial structure on the application of VE. This concept has been implemented successfully in various developed countries across the globe and it has been successfully proven that construction industry can be benefited by the application of the VE concept.

From preliminary investigation, it was found that Nepalese building construction industry is also suffering from the problems mentioned above. In most cases, local contractors have not been able to deliver projects on time and sometimes not up to the required quality standard (Bhattarai, 1996). They still follow the old construction technology and methods.

The problems that Nepalese construction industries are facing from the past many years are as follows:

(i) Delay in project, revise and cost overrun due to lack of supervision and coordination.

(ii) Outdated standard and poor technology method used for preparing and conducting all job in site.

(iii) Lack of developing and maintaining construction schedules and incomplete drawings and terms and condition.

(iv) Lack of funding directly affecting in productivity and quality of work.

(v) Lack of effective communication which causes conflicts.

(vi) Lack of expertise which leads to dissatisfied customers and a negative reputation of the industry.

(vii) Unsatisfied customers due to poor quality service and delay in work

Therefore it is important to search for VE applications in Nepalese construction industry.

Ms. Shreena Malla made as case study to understand the concept of Value engineering that is required throughout the construction process. The major objectives of her study were to:

1. develop a Value Engineering application methodology in building construction projects by using 6 value job plans.
2. identify the cost overrun itemsin building constructions projects and apply the VE methodology to reduce the cost of the project.
3. propose recommendation and suggestion.

Conclusion

Nepal is a developing country, where construction industry is just booming. Even though construction is booming, people involved in this industry are still following the traditional construction technology. People are still unaware of the high and advance technologies that have been already adopted by other developing countries. The typical problems that Nepalese construction industry has been facing for years are project delay and cost overrun. Lack of key creative ideas, out-dated standards and poor construction technology, communication gap among project team members are the major drawbacks that cause project delay and cost overrun. So the main objective of this research was to apply value engineering in Nepalese construction industry in order to omit those weaknesses.

Value engineering is a methodology that helps to reduce project cost by generating value alternatives. So here in this research also value engineering methodology was applied in both cases throughout the research. First the VE methodology (6 job plans) developed in chapter 3 was verified from the professionals which was the first objective of this study then each step that this method consists was applied in detail. Before applying those steps the cost overrun items were identified with the help of professionals. Value engineering 6 job plans was then applied on those items in order to test the VE application, which was second and the core objective of this study. After purposing VE, it was found that the project cost was reduced by 7% and 14% in case 1 and 2 respectively.

1. The key findings of the research

In Nepalese construction industry, it was found that people always try to find the low price materials without considering the quality in order to save the project cost. Sometimes they even adopt poor construction technology to complete the projects within given time frame. But they don't think about the future consequences that might cause bigger problems than they have expected. As a result they always have to suffer from reworks leading the project towards delay, which is the main cause of cost overrun. Due to delay and cost overrun, clients are found disappointed with contractors. So, this research was done to omit these typical problems seen in Nepalese construction industry.

 After the detailed research, it is found that value engineering is quite beneficial for a developing country like Nepal where people are suffering from project delay and cost overrun due to lack of key ideas and poor construction methods. This method proved that it has a high potential for bringing a new change in Nepalese construction industry as it will help them to identify the problem areas and also provide ideas to solve them. This new method will help Nepalese contractors to bring quality in work and also to enhance their credibility. It will not only enhance the contractor's credibility but will also enhance the relationship between owners and contractors.

Other key findings observed during the research were as follows:

       (i) Lack of Incentive clause in contract document.

       (ii) Lack of VE re-proposal clause in contract document.

       (iii) Project delivery system is usually based on unit price, where all scope of works and   items are already fixed by clients.

       (iv) Designers are not ready to change the design or materials once contract is awarded.

       (v) Not applicable for Government project since the overhead cost is fixed.

       (vi) More appropriate for relation based contract.

     2. Limitation

(i) Research was done on construction phase projects.

(ii) Only contractors were involved.

(iii) Research was done on BOQ items only.

(iv) Only building construction projects were considered for this research.

3. Recommendations

A.  Recommendation as per the Research

(i) Incentive clause for VE re-proposal should be included in contract document.

(ii) Commitment from top management level

(iii) Highly experiences people to form a VE tem

(iv)Sufficient time to apply VE ( depending upon project size)

(v) Open communication among client, consultant and contractor

(vi) Complete design should be provided to the contractors to avoid reworks, wastage of materials, labor overhead cost and schedule overrun.

B.  Recommendation for further Studies

(i) Conduction study from design phase to construction phase.

(ii) Only construction companies shouldn't be focused for the research.

(iii) Incorporate all the parties involved in the project (Contractor, Owner, an Designer).

(iv) Conducting qualitative study

(v) This study can be further extended to all type of construction projects such as road, bridge etc.

Her thesis abstract is copied below.

Abstract

Construction industry is considered as economic activities that play essential role in accomplishing socio economic goals of any country. But the construction industry of Nepal has shown a continuous decline since last few years. The industry has become noticeably wasteful, unproductive, ineffective, and adversarial. The typical problems that this industry has been facing for years are poor performance, project delay and cost overrun. Lack of key creative ideas, out-dated standards and poor construction technology, communication gap among project team members are the major drawbacks that leads the project towards delay and cost overrun. To overcome such critical problems, value engineering has been introduced as a tool for cost reduction within construction industry in a developing country like Nepal. It is a proven method that has been already applied in various developed and developing countries. This is a technique that not only reduces project cost but also enhances the quality of the project. So this dissertation presents the essential fundamental of Value Engineering and its different phases that have been applied in projects to reduce the cost without compromising quality. This research discusses about building construction projects in which construction materials of the project are changed according to Value engineering methodology. The alternatives of those materials are chosen such that the cost is reduced without affecting the value of the project. Since the main objective of this research is to investigate the opportunity of VE application in the construction industry of Nepal, the VE methodology (6 Job Plans), after being verified from seven experts was applied for collecting data from Nepal. During the data collection process, cost overrun items are identified through face to face interview and then VE methodology is applied on these items. Then detail analysis of both chases has been done to investigate the opportunity of value engineering application in construction phase.

After detail analysis, it was found that this concept is very much new in Nepal but quite beneficial for the people involved in this industry. This investigation finding reflects that  this concept has high potential to reduce the project cost, but in order to apply this method commitment from top management level is required first and then highly experienced people to form a VE team.

Keywords: Value Engineering, Cost reduction, Nepalese construction industry, BOQ, VE Job plans, Value alternative.