cofast diagram
The key to using a COFAST diagram to obtain answers to value-engineering questions is to move from left to right by asking, ‘How?’ and to move from right to left by asking, ‘Why?’

The route to delivering value engineering

Published:  10 November, 2004

DAVID CHURCHER and JOHN LANGMAID explain how to achieve deliver value engineering through functional analysis and whole-life costing.

Clients are becoming more discerning in how they choose building services for their projects. In terms of volume, the public sector is leading the way by implementing Government policy to rethink procurement practices in favour of PFI, PPP, integrated supply chains and framework agreements. Many private-sector clients are also embracing the change to longer-term thinking in the design, construction and operation of offices, factories and warehouses.

The driver for this change in how buildings are procured and managed is the desire to improve the value gained from the investment made. Better value in managing the property estate means not just lower initial cost but also lower operating costs, giving improved profitability or more money to spend on front-line services. Two of the most important tools for making these value judgements are a real appreciation of what the building is for and a real understanding of long-term costs and benefits.

Understanding clients’ needs

The key to appreciating what a building is for is to really understand the client’s needs. In practically every case, the building that we help design and construct is just a means to an end. The client only wants the building because it will help him undertake his business.

Understanding a client’s needs means understanding what his business is about. At a general level this gives rise to a range of questions. What products are made? What processes are used? How many people are involved? Where does it have to happen? What timescales are involved?

The tool to get answers to these and other, more detailed, questions is COFAST (Customer Oriented Functional Analysis Systems Technique). In reality, this tool is much simpler to apply than it sounds! COFAST is used to understand what functions the client requires from the built facility and generates options for delivering these functions by repeatedly asking. ‘How?’

For example, a functional requirement to carry out biochemical research gives rise to the need for close environmental control, which in turn gives rise to sophisticated building-management systems, back-up systems for temperature, humidity and air quality, which gives rise to dedicated sub-systems, plant rooms, power supplies etc. These are captured in a COFAST table, as shown (page 13).

The reason for providing any of the facilities listed in the COFAST table is found by asking, ‘Why?’

The means of building this COFAST table is a series of 3-way discussions between the client, the cost consultants and the designers/constructors. The purpose of these discussions is to make sure that everyone involved understands the implications of the decisions being made in terms of delivering the functionality that the client wants, within the resources that are available, using technology and systems that are appropriate.

More details about the theory and practice of COFAST for building services can be found in BSRIA Guide 6/2003 ‘Estimating — getting value from function’.*

Whole-life costs and benefits

An assessment of the long-term costs and benefits of alternative building-services technical solutions is used for two distinct purposes.

Initially it is used to choose between two or more alternative solutions, by reducing a series of financial costs and benefits over five, 10 or more years to a single financial value which is usually expressed in terms of today’s money — the net present value. This is a whole-life cost analysis.

Secondly, once a solution has been chosen, whole-life-cost information can be used to determine the absolute level of finance required to construct and operate the facility over time, in terms of annual budgets for facilities management and as input to long-term financial planning by the client organisation (See BSRIA Guide 15/96 ‘Value engineering of building services’.*

A simple example of using whole-life costing to compare alternative solutions might involve deciding whether it is better in the long run to install a cheaper heating system that is less energy efficient and will last 10 years, or a more expensive system that is more efficient and will last 15 years. While the maths involved in reducing the costs involved in each case to a net present value are relatively straightforward, a series of inputs is needed which are usually much more difficult to determine. For example, how much will maintenance and servicing cost over the lifetimes of the alternative heating systems? How much will fuel cost in the future? What regulations might be introduced that would bring financial penalties? What discount rates should be used? What rates of inflation are likely? Knowing these answers with any precision gets more difficult as the timescales increase. As an illustration, recall how mortgage rates have seesawed between 5% and 15% over the last 20 years, and what a difference this made to many people’s household finances!

As well as the difficulties in obtaining precise data to feed into whole-life-costing models, other difficulties arise from how client organisations are set up. Typically, different departments have been responsible for maintaining existing facilities and for building new facilities. The former are seen as operating expenditure (OPEX) and the latter as capital expenditure (CAPEX). Different budgets are set up, and these expenditures are treated differently in company accounts. The changes needed to get CAPEX budget holders to co-operate with OPEX budget holders include changing organisational structures, cultures and mind-sets, as well as overcoming hidden agendas. The personal dimensions that these changes bring are sometimes much more difficult to cope with than the technical difficulties of gathering precise data for the whole-life-cost calculations.

Little wonder, therefore, that clients have often been unwilling to embrace the long-term financial benefits that can come from a better understanding of whole-life costs, even though many would acknowledge that it makes sense.

However, this position is changing — partly as public-sector bodies are encouraged to use longer-term planning techniques to secure their departmental budgets and partly as private-sector organisations look for more and more ways to improve efficiency to retain their market competitiveness and deliver shareholder returns.

In all cases, building-services designers, manufacturers and contractors are increasingly likely to be asked about the long-term financial implications of the solutions they are recommending. Being able to answer these questions clearly, concisely and persuasively will be a differentiator between those who are doing business as usual and those who are determined to help their clients get better value from building services.

The theory and practice of whole life costing are covered in more detail in training courses organised by BSRIA (visit the events website below).

David Churcher and John Langmaid work in BSRIA’s construction practice team, providing management consultancy and research for building services firms, their clients and suppliers. For more information phone 01344 465600 or e-mail bsria@bsria.co.uk.

* For more information on BSRIA publications and to buy online visit the bookshop website.op



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