Value Creation as a means to success - Creating value for owners and users in construction projects

Abstract

The focus on delivering the project goals and objectives is a critical aspect in the management of any project. In the context of management, delivering in accordance with the contract is still an essential issue in defining the success in the project. However, during the past decades, the long-term effects of projects have gained more attention as measures for success in a project. Any project has its origin in the identified needs. This implies that the value creation of a project should be measured in terms of how these needs are satisfied. At the same time, how efficiently and to what cost these needs can be satisfied is of importance. Value in its simplest form is defined as the relationship between the cost and benefit or a measure of what one gains for what is given. Premises and decisions during the project will directly affect the benefits when the building is in use. The operation phase of a building’s life cycle is the longest phase. Hence, knowledge regarding what contributes to a higher benefit and maximizes the creation of value in the operation phase is essential for success in a project. Considering that a great share of the premises and critical decisions are determined during the early phases of a project, transferring the knowledge about what creates value to this phase could have a positive effect on the success of the project. Research has revealed that there is a lack of understanding users’ and owners’ strategic needs and a lack of methodology for transferring them into functional buildings. Consequently, this PhD aims to identify what creates value for owners and users of the building and how this knowledge can contribute to better processes for maximizing value creation in projects. Three research questions are being addressed through this thesis. 1. How are value and value creation conceptualized and defined in relation to construction projects? 2. What are the characteristics of value in construction projects? 3. How can value creation be enhanced in construction projects? As the definitions of value and value creation were unclear and inadequate in the context of construction projects, the first research question is answered through a literature study of the conceptualization of value and value creation in four other contexts (psychology, manufacturing and production, facility management (FM), and real estate and marketing). As value has been defined differently in different contexts over the years, this PhD work attempted to investigate whether there is a common ground in the conceptualization of value in different contexts. The study revealed that the focus on users and how users perceive value is the common ground. Hence, the focus on satisfying the various needs of the users, as the most important source of value creation is emphasized. At the same time, the owner has his or her own strategic objectives for initiating a project. Aligning these strategies with the user needs is revealed to be of great importance for maximizing value creation. The next question is how value is created in construction projects. To answer this question, I examined what the characteristics of value are and the means for value creation for users and owners. A workshop with two workgroups contributed to the creation of a long list containing elements that can either directly contribute to creating value or indirectly function as a means to value creation. Later, elements from this long list were used as the basis in developing questions for the interview and questionnaires in three separate studies. These three studies investigated value and value creation in three different types of buildings: office buildings, hospital buildings, and university campuses. The characteristics of value and the means to value creation can be divided into several essential groups. They are preeminently related to user requirements, owner requirements/strategies, and management issues. As value was defined to be dependent on the perception of users, finding a unanimous answer to what creates value for users is a difficult task. The fact that users of different types of buildings can have contrasting needs reinforces this argument. However, conducting a questionnaire and asking users of different types of buildings to rank a long list of value-creating elements revealed some interesting findings. The findings can be used as a tool to identify value-creating elements in different projects. The findings revealed that the user requirements that had the highest ranking also had the lowest standard deviation in both the study of university campuses and office buildings. This indicates that, even though users can have different perceptions of value, there is a convergence in the perception of the most important value-creating factors in the conducted research. However, the lower ranking factors should not be disregarded, as the high standard deviation expresses that these factors are of high importance for some of the users, while others might not need them. As an example, parking facilities for bicycles are very important to cyclists and should not be disregarded as a value-creating factor, although it might have a low mean since those who are not cyclists would give it a low ranking. Owners consider factors such as FM, life-cycle cost, and adaptability of the buildings as value-creating elements. Both user and owner requirements are input to the design process that transfers them into functional buildings through the project. In this regard, some management issues were identified to have an effect on the value creation of the project. Issues such as multidisciplinary focus and early involvement of the resources, the power in organizations, and user involvement are identified as value-creating management issues and are investigated further in this thesis. To enhance value creation, two large and complex hospital projects were studied as case projects to identify challenges and opportunities regarding value creation in each phase of the project. A knowledge base regarding what can create value or affect value creation in projects is provided by this research through findings related to the following: - Conceptualization of value and relating it to the context of construction projects; - Identifying the characteristics of value and the means to value creation; - Identifying challenges and opportunities regarding value creation in each phase of the project. The results of this research is used to provide a framework for enhancing value creation in construction projects. The framework contains eight steps. The first step stresses the importance of thorough strategic analysis to provide complete strategy documents containing the most essential information for the project team. The second step substantiates the multidisciplinary focus and early involvement of resources. The third step concerns identifying the needs and value-creating elements and creating ideas for the fulfillment of the requirements and aligning owner strategies with user needs. The fourth step includes using the information from the third step and suggesting solutions, alternatives, and descriptions for how to achieve the objectives. A plan for action evolved through validating these suggestions during the fifth step by the production suppliers before the production phase starts. Production starts in the sixth step, where the plan for action is implemented, and the building emerges. The seventh step substantiates the importance of commissioning and transitioning the building from the project to the operation phase. The delivery of the building should be structured and planned with accuracy, and the systems should be tested and optimized over time. The last step concerns the evaluation of the results. As a substantial part of value creation is revealed as the building is put to use, the long-term effects should be measured over time. A systematic approach for measuring these effects at the right time is essential for successfully conducting this step. The analysis and evaluation over time forms the foundation for new projects and the further development of the building throughout its life cycle.