TOPIC: VALUE MANAGEMENT IN THE NIGERIAN

CONSTRUCTION INDUSTRY

Aliyu Shehu
091500739

A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT

FOR THE AWARD OF THE DEGREE OF MSc IN CONSTRUCTION PROJECT
MANAGEMENT

SCHOOL OF BUILT ENVIRONMENT

HERIOT WATT UNIVERSITY

APRIL 2010
 ACKNOWLEDGEMENT

I would like to first of all thank Almighty Allah for His blessings and good health throughout the
academic and dissertation period. I would like to express my profound gratitude to my parents;
Alhaji Galadima Shehu, Hajiya Jannatu Shehu and my other siblings for the guidance, advice,
patience, financial and emotional support and finally blessings throughout the dissertation.
Furthermore, I would also like to express my profound gratitude to my Supervisor Ms. Hakim
Hagir for her tremendous and highly effective advice and guidance throughout the dissertation.

The research interviews were conducted based on the information provided by large professional
organizations from the Nigerian Construction Industry which was very helpful in providing
credible information at the right time. Not-withstanding, I would like to express profound
gratitude to the organizations, Prism Consultants, Prodel Consultants, Proman Associates and
finally Prime and Bell Associates for their extra support and guidance throughout the
dissertation.

ABSTRACT
The concept of Value Management as distinct from Project Management is relatively new in the
Nigerian construction industry. Value management is analytical and structured process for
ensuring client value maximization from project inception to completion at a minimum cost. It is
a process which takes a closer look at the clients’ values and goals in the project with the aim of
achieving such goals and objectives throughout the project and in the project outcome. This
concept is increasing been adopted by countries worldwide in their effort to improve
performance and effectiveness of the construction industry.

Relevant literature from text books, journals and conference papers were analyzed in order to
collect information on the history and process of value management, the practice of value
management in the Malaysian construction industry and the general overview of the Nigerian
construction industry. The Nigerian construction industry has some similarities with the
Malaysian construction industry and furthermore, such characteristics enable bothconstruction
industries to be compared and analyzed with the aim of determining the best value management
style suitable for the Nigerian construction industry, the level of awareness and the benefits and
limitations of applying value management to the Nigerian construction industry.

Semi-structured interviews were undertaken in order to capture relevant information from

participants of the Nigerian construction industry relating to the problems of the construction
industry and their views on the applicability of value management. Conclusions arrived at
showed the level of awareness and practice of value management in the Nigerian construction
industry as well as the value management style most suitable and the benefits and limitations of
applying value management to the Nigerian construction industry.Recommendations were
formulated with the main purpose of ensuring the practice of value management in the Nigerian
construction industry.
Table of Contents
ACKNOWLEDGEMENT ............................................................................................................................... 1

ABSTRACT.................................................................................................................................................. 2

List of Figures................................................................................................................................ 5

Chapter 1: Introduction ......................................................................................................... 6

1.1 Rationale for the study ................................................................................................................. 6

1.3 Aim ................................................................................................................................................ 8

1.4 Objectives...................................................................................................................................... 8

1.5 Scope and Limitations ................................................................................................................... 9

1.6 Research methodology ............................................................................................................... 10

1.7 Structure of the research ............................................................................................................ 11

Chapter 2: Essence of Value Management in the Construction Industry ....................... 14

2.1 History and Development of Value Management Thinking....................................................... 14

2.1.1 Value Management versus Value Engineering .................................................................. 15

2.2 The Value Management Process ................................................................................................ 17

2.2.1 Information stage ............................................................................................................... 18

2.2.2 Functional Analysis Stage ................................................................................................... 19

2.2.3 Creative Stage ..................................................................................................................... 19

2.2.4 Evaluation Stage ................................................................................................................. 19

2.2.5 Development Stage ............................................................................................................ 19

2.2.6 Presentation Stage ............................................................................................................. 20

2.2.7 Implementation and Feedback .......................................................................................... 20

2.2 Value Management in the Construction Industry ...................................................................... 20

2.3 Problems Existing in the Construction Industry .......................................................................... 20

2.3.1 Value management Approaches to tackling problems in the construction industry ...... 21

2.4 Value Management Benchmark Study ....................................................................................... 27

 2.4.1 Benchmarked value management study styles................................................................. 30

Chapter 3: Value Management in the Malaysian Construction Industry ....................... 34

3.1 Introduction: Malaysia ................................................................................................................ 34

3.2 The Malaysian Construction Industry ......................................................................................... 35

3.2.1 Stakeholders of the Malaysian Construction Industry...................................................... 35

3.2.2 Procurement Methods used in the construction industry ................................................ 35

3.2.3 Problems of the Malaysian Construction Industry............................................................ 36

3.2.4 Similarities between the Malaysian Construction Industry and the Nigerian Construction
Industry 37

3.3 Value management in the Malaysian Construction Industry ..................................................... 38

3.3.1 Introduction ........................................................................................................................ 38

3.3.2 Level of awareness and application of value management to the Malaysian Construction
industry ............................................................................................................................................... 39

3.3.3 Value management approach/style adopted by the Malaysian construction industry .. 41

3.3.4 Benefits of applying value management practice to the Malaysian Construction Industry
42

3.3.5 Problems associated with applying the value management style to the Malaysian
construction industry ......................................................................................................................... 43

3.3.6 Solutions to problems associated with applying Value Management to the Malaysian
construction industry ......................................................................................................................... 44

Chapter 4: The Nigerian Construction Industry ............................................................... 46

4.1.0 Introduction: Nigeria ............................................................................................................... 46

4.20 Nigerian Construction Industry ................................................................................................... 46

4.2.1 Stakeholders of the Nigerian construction industry ......................................................... 47

4.2.2 Procurement methods in the Nigerian construction industry .......................................... 48

4.2.3 Problems facing the Nigerian construction industry......................................................... 49

4.2.4 The Bureau for Public Procurement and the Nigerian procurement process .................. 50
Chapter 5: Research Methodology ...................................................................................... 52

5.1 Introduction ................................................................................................................................ 52

5.2 Literature review......................................................................................................................... 52

5.3 Semi-structured Interviews......................................................................................................... 53

5.4 Data Collection and Design of the Semi Structured Interview ................................................... 54

Chapter 6: Data Analysis and Results ............................................................................................... 56

6.1 Summary of Findings................................................................................................................... 66

Chapter 7: Conclusion and Recommendations ........................................................................ 68

7.1 Conclusions ................................................................................................................................. 68

7.2 Recommendations ...................................................................................................................... 71

References .................................................................................................................................... 72

List of Figures

Fig 1.0: The Value Management Benchmark Process………………………………………27

Fig. 2.0 Value management opportunities and styles based on the RIBA plan of work…28

List of Tables

Table 1.0: Awareness of Value management in the Nigerian Construction Industry…….60

Table 2.0: Stage of the Project Life Cycle Most Suitable for Application of Value
management In the Nigerian Construction Industry………………………………………. 63
Chapter 1: Introduction

1.1 Rationale for the study

The construction industry plays a very important role in Nigeria’s economic growth and
development. It accounts for about 13% of gross domestic product (CBN, 2008) and it is also
responsible for a large portion of total fixed capital investments (Omole, 2000). The construction
industry provides a platform on which economic growth and development can be assessed.
The Nigerian government is the largest client of the construction industry; it is responsible for
75% of the projects executed by the construction industry (BMPIU, 2005). As a result, the
performance of the construction industry has a great influence on government activities and
functions. The Nigerian government and the other stakeholders of the Nigerian construction
industry are not happy with the services provided by the industry (Olatunji, 2006). The low
quality of housing, roads and other infrastructure has led to discomfort, increase in maintenance
costs and other the problems to the Nigerian government as well as its citizens.

Nigerian construction projects are also characterized by delays and contract cost escalation
(Aibunu, 2008; Omoregie and Radford, 2006). Prevalent among the factors which contribute
immensely to the failure of the Nigerian construction industry in achieving its cost, time and
quality objectives include lack of proper financial planning, scheduling and management of
projects, incomplete designs and variations (Aibunu, 2008; Omoregie and Radford, 2006). Most
of these problems occur as a result of lack of proper attention to the pre design and design stages
of projects (Aibunu, 2008; Fadamiro and Bobadoye, 2007).

The Nigerian government has initiated policies aimed at improving the construction industry
with the sole aim of improving its image abroad as well as to meet up with its responsibilities
and obligations (BMPIU, 2005). Some of these policies include the passing into law of the
National building code in 2006 and the public procurement law in 2007 (Adekemi, 2008). This
has intensified pressures on the construction industry to improve on the quality of services it
offers.

Furthermore, the increase in the number of private organizations in Nigeria in the areas of
finance, telecommunications and transportation among others has further increased the pressure
on the Nigerian construction industry to increase its performance by adopting newer methods,
concepts and techniques in order to meet up with the increasingly complex demands and
expectations of its various clients. This is based on the fact that private organizations are more
value oriented and cost sensitive than their government counterpart. They require high quality
services at the most economical cost (Awodele, Ogunsemi and Rotimi, 2008).
In order to meet up with the complex needs of the client and to solve the problems facing the
Nigerian construction industry, it is necessary to adopt value management into the Nigerian
construction industry.

Value management practice is not new; it has been in existence since the 1940’s when it was
introduced into the American manufacturing industry; although it had a different name at the
time (Value Engineering). Value management as it is fondly called today is defined as the
“process in which the functional benefits of a project are made explicit and appraised consistent
with a value system determined by the client, customer or other stake holders”.(Kelly, Male and
Graham, 2004: pp,1) It is a process for identifying the exact values of the client in a project with
the aim of understanding and maximizing such values in the project and devising the most
economic method to adopt for ensuring client values are met in the project. Value management
practice was introduced into the American construction industry in the 1960’s and has been
adopted by several countries including United Kingdom, China and Australia. (Kelly, Male and
Graham, 2004)

Most of these countries have adapted different value management styles to suit the nature of their
respective construction industry. For instance the Japanese approach to value management
emphasizes continuous improvements in the value management process which is different from
the American approach to value management which strictly views value management as an event
which should take place at a certain stage during project execution. United Kingdom has also
adopted certain aspects of value management such as the Charette. (Kelly et al, 2004). As a
result, Male et al (1998) undertook a 5 year research into the different value management styles
adopted for use and had therefore developed the international value management benchmark
which can be used as a reference point for which other value management styles can be
analyzed.

The level of awareness and application of value management to the Nigerian construction
industry is not known and therefore its’ advantages and limitations cannot be ascertained. This
research shall investigate the level of awareness and application of value management by
professionals of the Nigerian construction industry. The research shall determine the benefits and
limitations of applying value management practice to the Nigerian construction industry. The
value management style which is most acceptable to the professionals and which is adaptable to
the nature of the Nigerian construction industry shall also be determined based on client
perceptions and the nature of the construction industry.

1.3 Aim

The overall aim of this research is to identify value management as a process which shall help
improve the performance of the Nigerian construction industry through proper client value
definition and planning. As a result, the benefits and limitations of applying value management
to the Nigerian construction industry and the value management style most suitable for
application in the Nigerian context shall be assessed and identified.

1.4 Objectives

The objectives of the project thesis includes the following

 Background study into the history, development and application of value management to
the construction industry
 To identify different value management styles existing today and their benefits
 To study the international value management benchmark in order to provide a reference
point through which value management can be assessed
 To study the value management style adopted in a developing country similar to and
comparable to the Nigerian construction industry where lessons can be learnt based on
the development and use of value management
 To clarify that Malaysia, as a country together with its construction industry has
similarities to the Nigerian construction industry and therefore can be used as a basis for
analysis.
 To study the benefits and limitations of value management style adopted by the
Malaysian construction industry and the benefits and limitations of applying such to the
construction industry
 To highlight the scope, structure, stakeholders and procurement processes and methods of
the Nigerian construction industry.
 To investigate the degree of awareness and application of value management to the
Nigerian construction industry
  To determine the value management style most suitable to the Nigerian construction
industry
 To determine the benefits and limitations of value management to the Nigerian
construction industry.

1.5 Scope and Limitations

The scope of the research shall cover the benefits and limitations of applying value management
practice to the Nigerian construction industry based on the information gathered from the
analysis of the value management practice in the selected developing country, review of relevant
literature and inputs from stakeholders’ in the Nigerian construction industry. This shall provide
an insight and understanding into the adoption and practice of value management applicability to
the construction industry.

Due to time and cost constraints, this research shall concentrate on studying the international
value management benchmark process which shall provide the necessary reference point to
which value management practice in the selected construction industry can be compared. It shall
also study the value management practice in the Malaysian construction industry which has a lot
of similarities and attributes to the Nigerian construction industry. The research shall also be
limited to analyzing value management practice in a few countries although the author shall try
as much as possible to cover the relevant literature.

There is not enough information on the practice of value management in the Nigerian
construction industry and the author doesn’t have any prior experience on the application of
value management therefore, this research depends on the literature review and inputs from
stakeholders in order to acquire the information necessary to achieve the objectives of the
research.

1.6 Research methodology

This research involves an investigation into the practice of value management and the value
management styles existing today. It shall determine the benefits and limitations of applying
value management to the Nigerian construction industry and the value management style most
suitable to the Nigerian construction industry. This research is approached by making reference
to the international value management study benchmark and the investigation of value
management practice in the Malaysian construction industry.

In order to carry out this research, extensive use of textbooks, journal articles and interactive
field works and investigations shall be done to gather relevant data necessary to achieve the first
five objectives of this research. These objectives include general information on value
management, value management study styles, International value management benchmark study
and finally value management in the Malaysian construction industry context.

The Malaysian construction industry is selected for this research based on the fact that it is a
developing country whose construction industry has a lot of similarities to the Nigerian
construction industry. This is deduced from the fact that the Malaysian construction industry and
the Nigerian construction industry are tailored after the British construction industry.
Furthermore, both construction industries are composed of the same type of construction
professionals and projects are undertaken based on similar plan of work that is the RIBA plan of
work. The International value management benchmark shall be regarded as the base case model
for application of value management in countries.

Semi-structured interviews shall be used to acquire data which shall be analyzed together with
the data acquired from textbooks, journals, articles and conference papers. The adoption of
interviews as against questionnaires is necessary to better capture the views of the professionals.
Interviews also have the advantage of gathering data very quickly while providing an easier and
much cheaper means of doing so. The information derived shall the last3 objectives of the
research which are the benefits and limitations of applying value management to the Nigerian
construction industry and the value management style most suitable for adoption by the Nigerian
construction industry. The Interviews shall target mainly quantity surveyors, Project managers
and construction companies.

1.7 Structure of the research

This research dissertation consists of six chapters which are summarized below

Chapter 2: Essence of Value Management in the Construction Industry

This chapter covers value management in general. It starts with the history of value management
practice and its development as it rapidly spreads to the construction industry and other parts of
the world. The general value management process and value management styles existing
globally and adapted to the construction industry based on the North American Value
management and the International value management benchmark shall also be covered by this
chapter.

Chapter 3: The Malaysian Construction Industry

This chapter gives a general overview of the Malaysian construction industry and its similarities
to the Nigerian construction industry. It studies the value management practice of the Malaysian
construction industry, the value management style adopted for practice in the industry and finally
the benefits and limitations of applying value management to the Malaysian construction
industry.

Chapter 4: The Nigerian Construction Industry

The Nigerian construction industry consists of professionals who are qualified to carry out
specialized works and services which form an integral part of the industry. This chapter gives a
general overview of the structure of the Nigerian construction industry, the professionals of the
industry, the types of clients of the industry, the public procurement processes and procurement
methods existing and frequently used by the construction industry. Finally the problems and
challenges facing the construction industry and areas of improvement shall be highlighted.

Chapter 5: Research Methodology

This chapter covers the design of the semi-structured interview, information on respondents and
discussions of the results obtained from the interviews (Qualitative Analysis). The interview
shall begin with the SWOT analysis of individual respondent organizations and professionals,
the collection of information regarding the level of awareness and understanding of value
management by the professionals of the construction industry, the benefits and limitations of
applying value management the Nigerian construction industry and the value management style
most suitable to the Nigerian construction industry.

Chapter 6: Data Analysis and Results

The data collected shall be presented and analyzed in order to provide relevant information and
trends necessary to form a conclusion and recommendations for the research. This chapter
utilizes some aspects of quantitative analysis in order to present the data for easy reference and
analyses.

Chapter 7: Conclusions and Recommendations

This researched dissertation shall conclude with some recommendations which shall identify the
value management style most suitable to the Nigerian construction industry and the
identifiablebenefits and limitations of applying value management to the Nigerian construction
industry.