Memorandum by the Institute of Value Management
(SBR 2)
This is the response of the Institute of Value
Management to the call for evidence. This response relates solely
to the following item:
— "the rationale for introduction
of a supplementary business rate".
The evidence we give is as follows:
INSTITUTE OF
VALUE MANAGEMENT
The Institute of Value Management was first
established in October 1966 with the assistance of the Ministry
of Technology in order to promote and disseminate best value programme
practice for the wider benefit of the UK economy. We are also
the UK's representative and qualifying body in respect of value
management.
We are currently representing the UK with the
revision of the BS EN 12973: 2000 standard. We represented the
UK in relation to the European Commission's SPRINT programme set
up by the Council of Ministers in 1989 to improve EU productivity.
The SPRINT programme included several major research projects,
a series of publications, six international conferences, the initiation
of EN standards and the European System for Training and Certification
in Value Management. Within the UK the Institute maintains links
with HM Treasury and other government departments, also a range
of universities and research bodies and we draw some of our members
from local government.
SECURING "BEST
VALUE" IN
LOCAL GOVERNMENT
The position of the Institute is best explained
by reference to the "best value" policy. This is addressed
first. We see little point in changing the methods of local government
finance while the capacity to raise performance and value for
money remains as relatively poor as it is. This lack of capacity
is well illustrated by the fate of the "best value"
policy.
There was little difference in principle between
the "best value" policy and value management—the
4Cs, stakeholder challenge sessions, steering groups, etc, all
are well known in value management. The problems experienced with
"best value" generally boil down to poor execution due
to a lack of expertise and experience on the part of central and
local government alike along with those responsible for inspection.
We had reports from our members saying that, for example:
— Reviews took far too long—often
a year when three to four months should suffice (from planning
to reporting).
— Reviews were poorly structured—with
a lack of key milestones, therefore encouraging "drift".
— Inadequate tools to analyse functions
and cost—this also impacted on topic selection and "scoping".
— Goals insufficiently ambitious to
fully stimulate challenge.
— Lack of suitable training—teams
went in at the deep end.
— Lack of top management support—matters
were allowed to drift without check.
The chemistry of project management, skills,
methods, etc needed in the context of reviewing products and services
to improve value is provided for in the part of value management
known as value analysis. Value analysis provides the methodology
for reviewing existing services or products. Value management
relates to the entire programme and related methods. This is supported
by BS EN 12972: 2000 that includes the Value Management Framework.
The Framework includes all that is found in the original DETR
Best Value Framework plus elements relating to methods, tools
and training to ensure programme success. It should be stressed
that the Institute was fully supportive of the "best value"
policy—indeed the term "best value" has been used
in value management circles for decades.
We also fully supported the principle of "best
value" inspection. Unfortunately we could see that inspection
under "best value" served to reinforce the low expectations
and poor practices reported above. For example:
— Inspections focused too much on individual
reviews and too little on overall programmes and their effectiveness
in keeping down costs.
— We encountered instances where topics
that need reviewing were not reviewed under "best value"
due to fear of heavy handed inspection.
— Inspectors made heavy weather of
inspection due to lack of previous value programme experience
and related training—wholly avoidable given the availability
of training.
We would like to close this section with an
extract from the proceedings of the First European Value Conference
held in 1966. At the 1966 conference a Mr R I Parsons, Head of
Systems and Services for Philips Industries said this:
"I would stress that the effective results
through making Value Analysis a part of everyday thinking has
been dependent on:
1. Clear and unequivocal top management
support—demonstrated through direction and review of
team activities.
2. Team work—in which the
necessary energy and enthusiasm are automatically generated.
3. Intensity—where the
team have a task, a time deadline and set themselves a cost saving
target.
4. Training where all team members have
participated in a training seminar".
Had advice of this sort been heeded "best
value" might not have failed. Instead of a benefit to cost
ratio in the order of ten to one the policy appears to have cost
more in overall terms than it delivered. The Institute would emphasise
that a ten to one benefit to cost ratio is a long established
benchmark for an effective value programme—a figure that
is often exceeded in respect of programmes relating to existing
products and services.
CONCLUSION
The Institute sees little point in making changes
to arrangements for funding local government while there is reason
to doubt the effective use of funds secured from current arrangements.
The Institute has no views as to what arrangements should be made
for funding if and when problems associated with value for money
and performance are resolved, or to what purposes the funds are
put. We do believe, however, that getting value for money right
should have priority over the inevitable upheaval and distraction
that changing funding methods would incur. In short we submit
that:
— The value for money issue should
be resolved before additional or changed methods of funding are
introduced.
RECOMMENDATIONS
In order to improve the capacity of local government
and other public services we believe that value management should
be given the same level of support and encouragement by the Government
as has been given to BS 5750/ISO 9000, the EFQM Excellence Model
and Investors in People. These are worthy topics but are not as
powerful in the delivery of performance as value analysis and
value management. Nor did they underpin the quality revolution
of post-war Japan as did value analysis—along with the statistical
quality control work of W Edwards Deming. Indeed, there is a case
for giving the work of Deming similar such support. It is also
the case that value analysis and value engineering methods and
tools play a key role in modern lean practices—as do statistical
quality methods. These are also embodied in six sigma.
In the view of the Institute it seems perverse
that successive governments, while lamenting the performance and
value for money delivered by public services despite increased
funding, have failed to promote the very topics that could ensure
better service delivery. The costs of supporting "delivery"
topics such as value management, statistical process control and
six sigma are negligible and would be vastly offset by the benefits
so derived. The cost of the investment required cannot be an issue.
The Institute believes that all types of value
for money inspection should assume the rigorous use of one or
more of the "delivery" topics in order to raise expectations
to what is possible and not limit expectations to what is currently
done. This was a major weakness under "best value".
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