Description
Solution
Table of Contents
2.2 Function Analysis in Value Management 5
2.3 ISO 31000 Risk Management Framework. 6
2.4 Literature Review Summary. 7
3.0 Emergent Insights and Knowledge. 7
4.0 Key Learnings and Action Points. 9
1.0 Scope of Inquiry
The hotel project in Riyadh provided an opportunity to evaluate the impact of value engineering (VE) and explore how a more proactive Value Management (VM) approach could have enhanced project outcomes. In the course of the project, VE was applied at RIBA Plan of Work Stage 4, after the design had been finalized and construction was underway. The VE exercise was aimed at identifying cost-saving opportunities without compromising the quality or functionality of the project. The savings were achieved through changes such as alternative fireproof coatings, adjustments to substructure waterproofing materials, and revisions to the mechanical, electrical, and plumbing (MEP) specifications. The cost-saving measures ranged from SAR 13.4 million to SAR 20.4 million, reflecting substantial savings potential as shown in table 1 below.
These are tabled below for consideration by DGCL for further negotiation and agreement with the recommended bidder, or as a post contract variation. No. | ||||
Identified Value Engineering Opportunity | Bidder 1 | Bidder 2 | Bidder 3 | |
1 | Application of cementitious fireproofing coating (to a similar acceptable specification) to columns, beams and trusses in concealed areas. | -469,200.00 | -1,031,931.83 | -2,144,520.00 |
2 | Cold applied bituminous paint of appropriate specification in Substructure waterproofing in lieu of the specified Waterproofing. | -2,289,701.00 | -8,723,090.37 | -11,735,136.44 |
3 | Additional cost for CMU (Concrete Masonry Unit) in lieu of adobe block. | -2,283,762.00 | -710,045.44 | 5,682,515.83 |
4 | Concrete change in mix specifications | -658,753.00 | -1,635,771.62 | -2,400,923.45 |
5 | MEP value engineering proposal schedule | -7,790,455.00 | -8,387,155.15 | -3,017,531.53 |
6 | Roof waterproofing changed to combo roofing system | -444,717.00 | Not Offered | -223,885.62 |
Total (Incl. VAT) | -13,936,588.00 | -20,487,994.41 | -13,839,481.21 |
Table 1: Cost Saving Opportunities
This reactive VE process, however, raises an important question: could these cost-saving opportunities have been identified and implemented more effectively earlier in the project lifecycle? This is the primary focus of my inquiry. By shifting to a Value Management (VM) approach applied at the start of the project, it is possible that a more strategic and value-focused framework for decision-making could have been established. VM that aims at enhancing value by ensuring that objectives are, cost, quality and functionality aligned at an early stage could have offered a more integrated approach with regards to selection and specification standards of materials. Originally VM would have provided a better option of decision making during the conceptual along with the design phases meaning that VE measures would not have to have been so reactive at the subsequent phases.
The inquiry also looks at the disadvantages of the reactive VE which typically happens once there is enough progress to compromise the project schedules, costs, and quality. For instance, the post-bid savings approach in items like fireproof coatings and other waterproofing materials may bring a number of compromises in to the system which in turn can affect the project wrongfully. Due to the need to make decisions and keep within certain budget expectations, these kinds of reactive decisions may call for optimal solutions which are often based on the cost instead of making choices that are best for the project in terms of value for money ad performance over time.
From the literature on VM and risk management, the following implications provide understanding of how such challenges could be tackled at advanced stages of the project life cycle. Had the project considered VM concepts including function analysis, cost consideration, and identification of stakeholders, the project could have concentrated on value optimization, cost, function and performance with minimal compromise on many of the principles. In addition, had the risk management techniques been incorporated within the initial developmental stages, it may have been possible to prevent the emergence of conditions that could lead to cost overruns or unexpected alterations in direction by assessing critical risk factors at an early stage and formulating plans which could reduce the effect of such a factor on the overall development of the project .
The purpose of this report is to investigate how VM at the initial stages might have affected the result identified in the VE exercise and to elaborate the shortcomings of reactive VE and how using proactive approach could eliminate those problems. Thus, answering these questions, the report will give understanding of the further purposes of VM and risk management in relation to project goals and expenditures for its economical usage. The research results could prove useful as a reference in enhancing future project performance, as far as value creation, project cost, and overall success is concerned.
2.0 Literature Review
2.1 Introduction
This literature review elaborates Value Management (VM) and Risk Management frameworks
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- Within six months, PS&M personnel will be provided with chances for capacity building through partnerships with educational institutions to gain knowledge and skills for implementing category management.
- The PS&M would become more motivated in the long run by providing recognition and benefits for pursuing category management implementation.
- Within a year, an effective change management strategy would be pursued, focusing on tracking the change and spotting change resistance
1.0 Introduction
1.1 ADNOC Organisation Background
In this report, the organisation of focus is Abu Dhabi National Oil Company (ADNOC). This is for understanding the impact of contract terms and conditions on distribution of risk and power with their suppliers. This is an organisation which began its operation in 1971 and today is ranked as the leader in diversified energy group which is owned by Abu Dhabi Government (ADNOC, 2022). The organisation network of holistically integrated business has based their operations across the entire energy value chain assisting their capacity for meeting overall demands of the consistently changing energy markets. For remaining competitive, the organisation has allocated $15 billion for advancing and accelerating lower-carbon solutions, investment in new energy solutions and decarbonisation technologies for lowering their carbon intensity with 25% by 2030 and successfully facilitating their NetZero by 2050 target. The company has a network of fully operational companies that operate throughout the entire hydrocarbon value chain, handling tasks including exploration, production, processing, storing, refinement, and supply in addition to manufacturing a wide range of petrochemical products. I work as a Contract Engineer for ADNOC Offshore, one of the company's divisions. The offshore division of ADNOC is responsible for the delivery and development of oil and gas resources in the waters surrounding Abu Dhabi. With OPEX and CAPEX, ADNOC Offshore spends over 3,000 million dollars annually. The organisation structure is as illustrated in figure 1; Figure 1: ADNOC Organisation Structure1.2 Identified Category Management
The deployment of the iSourcing system, a technology-focused procurement procedure, was chosen as the category management in this study. The need for oil and gas has significantly expanded in the modern era since the Covid-19 epidemic. As a result, ADNOC is forced to spend money on equipment to help them process and refine more oil and gas products. In light of this, the team leader's responsibility is to see that an iSourcing system is in place and can be utilised to purchase the new machines that the company needs to upgrade its operations. Locally in UAE, regionally in the Middle East, and internationally in Western nations, this would apply. This project aims to produce a report outlining the implementation of the change approach. This is done while ensuring the team members and leader have the necessary abilities to carry out the plan successfully. Implementing the new category management strategy is the kind of change being sought. The learner will be the team leader throughout the full category management process since a team has been chosen to oversee the deployment of iSourcing. The practical approach would be utilising various tools and strategies that demonstrate leadership and best practices in change management, along with a focus on the category management data from the ADNOC firm.2.0 Change Management Approach
2.1 Introduction of the Required Change Process
In its Procurement Supply and Management (PS&M) budget, ADNOC had allocated roughly 10 million UAEis before the COVID-19 epidemic. Up to 5,000 domestic and foreign providers are currently utilised in this. Because of the significant financial allocation in PS&M, the ADNOC sourcing method is crucial to their operations in this scenario. Logistics, equipment, and facility administration are all purchased separately by the organisation, all of which fall under the organisation's primary spending categories of computers and technical systems. As a result, they lack a centralised system that would allow all departments to be involved in aiding the procurement procedure (CIPS, 2020). The Burke-Litwin Model (Coruzzi, 2020) can pinpoint the internal and external factors that contributed to the identified change. This model ranks the many change drivers according to their importance and provides evidence of each one in figure 2; Figure 2:Drivers of Change Model When taking into account the ADNOC organisation and indicated change, these elements have the following effects, as stated in Table 1: Table 1:Summary of the Drivers of Change in ADNOC OrganisationFactors of change | Explanation |
External environment | Supply chain networks have been significantly impacted since COVID-19. ADNOC's ability to replenish stock, equipment, and machinery has been affected. Therefore, ADNOC would participate in strategic alliances by including diverse actors and intermediates in the complete value chain through iSourcing |
Individual and oganisational performance | ADNOC's investment in iSourcing would reduce PS&M turnover, everyone's performance, and supply chain network satisfaction. |
Leadership | To ensure iSourcing success, the PS&M will lead and manage efficiently. This inspires and guides other organisations to iSourcing success. |
Mission and strategy | The achievement of ADNOC's aim to provide high-quality oil and gas products would be ensured by the deployment of iSourcing. The justification for this is to quickly and effectively engage highly qualified vendors. |
Organisation culture | Implementing iSourcing would promote the collaborative and teamwork-oriented organisational culture of ADNOC. This is due to the platforms offered by iSourcing that provide suitable options for teamwork and collaboration. |
Task requirements and individual skills | Employees at ADNOC lack the knowledge and skills necessary to deploy iSourcing. This deficit might be filled by offering possibilities for professional advancement. Implementation of the change would be successful. |
Employee motivation | This report's proposal suggests that providing monetary and non-monetary rewards is necessary to encourage people to adopt iSourcing. This is for employing remarkably contemporary systems of practice. |