Original Post Date: Friday, October 5, 2012

I am currently involved in co-authoring a white paper on the “Role of Value Engineering in Affordability Analysis.” For the purposes of this discussion I define affordability as that characteristic of a product or service that responds to the buyer’s price, performance, and availability needs simultaneously. The writing of this white paper has been an interesting exercise for me because my fellow co-authors come from different backgrounds and thus have very different points of view. The majority of my colleagues are “card carrying” Systems Engineers. As such, they have a perspective that treats cost as one of those pieces of data that is given to them by someone else with little impact upon the design of the system. The thought process goes something like this, “I have a Key Performance Parameter, “A  Spec”, or “B Spec… I have the requirement and cost is a result of how I satisfy the requirement end of discussion.” There is an assumption that the inherent value of the requirement is already known. In my opinion this is not accurate. Value is truly in the eye of the decision maker and currently affordability is a primary driver of value. Value Engineering can help the Systems Engineer to understand what value a decision maker places on a system or more to the point the capabilities of the system.

However, if one expects to use Value Engineering to help inform the design then a hands off approach to understanding cost will not work. The primary focus of Value Engineering is assuring that the greatest functionality is provided for the least cost or expense, to maximize value[1]. Value Engineering is a systematic process which involves review and analysis of a project during the concept and design phases of acquisition. Value Engineering allows for the evaluation of the functions of a system within the architecture of the system or system of systems. Value Engineering starts with a current product, extracts the functions of that product, determines a number of potential alternative architectures that perform those functions, examines the architectures for associated functions, appropriateness, feasibility, implementability, and affordability. The analyst then chooses the "best" architecture based on a value to function calculus. In order to achieve an affordable architecture using the Value Engineering method the cost behavior of each of the candidate architectures must be understood. As the functions of important components of the architecture change the life cycle cost of the overall system will be affected. The relationship between function and cost will ultimately determine if a system is affordable. In order to achieve affordability as I define in the previous paragraph the Systems Engineer must understand what factors (new materials, cutting edge technology, new manufacturing processes, extensive support requirements) associated with the function that causes a cost to change. What are the drivers and how does cost change as those drivers are manipulated. This level of understanding will not be achieved by passively accepting a spreadsheet of costs from the cost estimator. The Systems Engineer must engage with the estimator or have a model of cost which allows him or her to understand the impact to cost as he / she changes function within the design.

[1] The authors defined value as a ratio or relationship of cost to function. How is that measured and are there certain norms or nominal values we should seek? There needs to be a component of functional value measurement. Value measurement is closely aligned to decision analysis. It is the means by which the analyst makes a differentiation between criteria used to make a decision. What decision process does the analyst conducting Value Engineering use to make these value decisions? I don’t think we explain function to value relationship well in the paper. I am more familiar with Multi Criteria Analysis, an evaluation process in which value elicitation is associated with the concept of incorporating analyst / stakeholder’s preferences via the application of weights to decision criteria. The weighting is the quantification of the relative importance of one decision criteria versus another for use in making judgments regarding benefit. Weights are applied to decision criteria to execute tradeoffs between multiple objectives, and to incorporate subjective judgment. This is less true in Value Engineering. The function being analyzed becomes the measure of value. But this is an elusive concept. Who is to say if the function is worthwhile or not and to what degree. What means of value judgment of  function to cost is to be used? Value Engineering will assist in helping set boundaries around this question.