VALUE MANAGEMENT THE APPLICATION OF VMVE FOR CAPITAL

VALUE MANAGEMENT THE APPLICATION OF VM/VE FOR CAPITAL EXPENDITURE PROJECTS FOR MAHB 17 – 18 DECEMBER 2008 PUTRA WORLD TRADE CENTRE (PWTC) KUALA LUMPUR By : Abdul Nasir Abdul Razak General Manager Planning & Development Technical Services Division PLANNING AND DEVELOPMENT 0

The Outline Contents • Introduction • The Emerging of VM at MAHB • Flow , Frameworks, CFT involvements • Workshop • Challenge & Overcome • Results • Sample of case study • Conclusion – Moving Forward PLANNING AND DEVELOPMENT 1

MAHB’s VISION WORLD CLASS AIRPORT BUSINESS VM UNIT’s VISION MANAGING COST-EFFECTIVE & OPTIMISATION PROJECTS, FACILITIES, SYSTEM, PRODUCTS AND PROCEDURES PLANNING AND DEVELOPMENT 2

Our View : What is a Value Management? • Value Management is a rigorous, systematic effort to improve the value and optimize the cost Projects, Facilities, Systems, Products and Procedures. • Value Management generates these cost improvements without sacrificing the needed performance levels. • Value Management can also make contributions to improve human factors, Such as attitudes, creativity and teamwork. PLANNING AND DEVELOPMENT 3

WHY WE NEED THE VM? Increase in Cost vs. Ability to Spend • Operating and Capital Expenditure – 2005 – Budget RM 324 mil >> Ability to spend RM 148 mil – 2006 – Budget RM 483 mil >> Ability to spend RM 175 mil – 2007 – Budget RM 486 mil >> Ability to spend RM 245 mil – 2008 – Budget RM 448 mil >> Ability to spend ? ? – Target 20% savings through Value Management Initiative VM to formulate a method of budgeting based on the ability to spend >> proper financial planning and efficient resource allocation PLANNING AND DEVELOPMENT 4

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PLANNING & DEVELOPMENT – ORGANISATION CHART PLANNING & DEVELOPMENT General Manager Project Management Office Design Management Airport Development & Planning Technical Excellence Airport Planning Airport Standard Value Management Construction Management Simulation Knowledge Management Excellence Centre Techno Economics PLANNING AND DEVELOPMENT 6

VM UNIT / SECRETARIAT ROLES MAJOR SCOPE VM TRAINING Continuous VM Improvement & Competence VM STUDIES Formal Application Of VM Methodology In PASP Challenge ** PASP (Procurement Activities and System & Procedures) PLANNING AND DEVELOPMENT 7

Members : Training & Workshop Hours Record Nos Name Unit / Division Hours Status of IVMM’s Membership Airport Standard 72 Member Project Management Office 100 Member 1 Zainol bin Mohd Isa 2 Ahmad Fadzil bin Arshad 3 Norazah binti Attan Value Management 124 Member 4 Syamsul Azuar Arshad Value Management 179 Member 5 Noraziah binti Badaruddin Value Management 171 Member 6 Enati binti Mohd Zahari Procurement & Contract 60 Member 7 Khatijah binti Mat Excellent Centre 48 Member 8 Noor Khasimah Mohd Sidek Excellent Centre 64 Member 9 Nor Azlina binti Mohd Isa Airport Planning 16 Member 10 Zaiton Hayati binti Muda Quality Management 16 Member 11 Md Azmi bin Baba Value Management 132 Member 12 Nabillah Zolifah binti Zolkifli Commercial Services 16 Associate Member 13 Mohd Fauzi bin Abdul Hamid Excellent Centre 24 Associate Member 14 Mohamed Ramlan bin Rafie Procurement & Contract 8 Associate Member 15 Zainuddin bin Ismail Procurement & Contract 64 Associate Member 16 Mohammad Muttagin bin Rapie Simulation 8 Associate Member 17 Mohd Ismail bin Kunjumon Knowledge Management 8 Associate Member PLANNING AND DEVELOPMENT 8

VM AS A STRUCTURED PROCESS Thought Processes Analytical 1 - Analyse information 3 - Organise Functions 5 - Evaluate Alternatives 7 - Appraise Options Creative 2 - Brainstorm Functions 4 - Generate Ideas for Alternatives 6 - Develop Proposals 8 - Recommend Solutions PLANNING AND DEVELOPMENT 9

WHEN ? VM interventions should be undertaken when: 1. Key decisions need to be made 2. Conflicts or problems need to be resolved 3. Consensus needs to be achieved 4. Team building is required 5. Cost or Time overruns need to be addressed 6. Other identified benefits need to be secured PLANNING AND DEVELOPMENT 10

VALUE MANAGEMENT : HOW? VM Awareness, Seminar & Familiarization 2007 (1 st Year) Planning (Zone by Zone) Central Region – MATC, KLIA Penang Airport On Aug 2007 North Region South Region Central Region Mo. U with Pejabat Harta Bina, UTM Sabah Sarawak PLANNING AND DEVELOPMENT 11

VALUE MANAGEMENT INITIATIVE 2008 (2 nd Year) Cross Functional Team TMO Initiative • Top Management buy the Idea & initiative that the VM as a tools of cost savings & optimization elements • Part of Key Performance Index (KPI) Objective : To achieve 20% Saving from CAPEX (selected) i. e Project more RM 500 K Multi Discipline - Members VM/VE Manual For MAHB & Groups PLANNING AND DEVELOPMENT 12

MAHB – VALUE MANAGEMENT MANUAL’s COVER PLANNING AND DEVELOPMENT 13

BACKGROUND OF GLC TRANSFORMATION PROGRAMME 1. GLC Transformation Programme was launched in May 2004 2. The main objective is to transform GLCs into high-performing entities 3. Three key principles govern the GLC Transformation Programme : * Programme is part of the larger national development strategies * Programme is focused on enhancing performance at the GLC’s * Programme takes full cognizance of matters relating to governance, shareholder value and stakeholder management. PLANNING AND DEVELOPMENT 14

Implementation of 6 Colour Books in the Transformation Programme Key Focus Areas Strategic Initiatives Profitability • Increase concession income by improving ROE • Develop value proposition for all Malaysia GLC Transformation Initiatives - (Colour books) • Optimising capital management positioning, product mix and space utilisation practices (addressed after the Financial Restructuring) Purple Book Airports and market intensively • Update and implement airport and land Regional Airports development masterplan • Reengineer processes and • Centralise Procurement in line with Red Book review costs to be more efficient Efficiency Service Level People Development • Enhancing operational improvement (Yellow Book ) • Reviewing and revamping procurement Red Book • Manage stakeholders proactively • Improving regulatory environment • Enhance capabilities and leadership • Strengthening directors’ capabilities qualities • • Source: Ethos Analysis PLANNING AND DEVELOPMENT Green Book Managing and developing leaders and other human capital Orange Book Intensifying performance management practices Blue Book 15

CROSS DISCIPLINARY TEAM Varies Ideas Distinct Perspectives Comprehensive Approach Shared Vision Consensus PLANNING AND DEVELOPMENT 16

VALUE MANAGEMENT METHODOLOGY & TECHNIQUES Budget Owner Rep. VM JOB PLAN QS/Estimator OUTCOME Airport Planner Airport Standard VM PROCESS RECOMMENDATION Commercial Services Finance Services Procurement & Contract IMPLEMENTATION Etc PLANNING AND DEVELOPMENT 17

PROCESS FLOW OF VM Divisional Directive Preparation Budget By Unit / Division Budget Owner GM / HEAD Not Approved Budget Challenge Committee VMC Approving Budget Authority VMAC Capital Expenditure List Before Issuance of Form A (2) Sole Proprietor (1) Tendering & Evaluation & Approval Award VMC = VM Committee VMAC = VM Approval Committee (1) = VM may be applied during negotiation stage for Sole Proprietor Project (2) = Form A refer to MAHB 3 P’s PLANNING AND DEVELOPMENT BUDGET OWNER VMC PCD & BUDGET OWNER PCD & PMO 18

MAHB’s MANAGEMENT BUDGETARY POLICIES & OBJECTIVES VM POLICY Consistent with and contributes to Other Policies VM PROGRAMME Managed and Coordinated by VM Unit VM TRAINING Continuous VM Improvement & Competence PLANNING AND DEVELOPMENT VM STUDIES Formal application Of VM Methodology In CAPEX Challenge VM METHODS AND TOOLS Application of Appropriate Techniques FEEDBACK FOR CONTINUOUS IMPROVEMENT To be gathered by VM Unit VALUE CULTURE Towards delivering better Value of Projects, System, Products & Procedures THE VALUE MANAGEMENT FRAMEWORK VM / VE STUDY RESULTS 19

CROSS DISCIPLINARY TEAM “Participants selection & stakeholder involvement is the key to SUCCESS” Cross Functional Team: • • • Airport Planner Airport Operation Quantity Surveyor Risk Management Procurement and Contract Airport Engineering i. e BHS, PLB, Infra Finance Management Human Resources Outside Consultants Project Management Other stakeholders i. e receptionist PLANNING AND DEVELOPMENT 20

MD’s APPROVAL – VM INITIATIVE PLANNING AND DEVELOPMENT 21

PRE-STUDY PROJECTS STARTS WEEK BEFORE STUDY ØCFT/VM Unit inform the Budget Owner the intention to hold VM study at their time appointments ØTo collect all data / info / drawings / etc VALUE STUDY ØMonday Morning - Phase 1 (Information) Client and design team presents the scope of works to VM Team ØMonday Afternoon - Phase 2 (Creativity) Brainstorming session to search for alternatives ØTuesday Morning - Creativity continues ØTuesday Afternoon - Phase 3 (Evaluation) ØWednesday - Phase 4 (Development) Ideas from Phase 3 developed into feasible costed technical alternatives ØThursday - Development continues ØFriday Morning Selection of optimum technical alternatives ØFriday Afternoon - Phase 5 (Presentation) Above alternatives presented to Client and design team, VM Team disperse POST-STUDY NEXT WEEK LATER ØCFT/VM Unit prepares detailed reports and sends to budget owner ØPhase 6 (Feedback & Action Plan) CFT/VM Unit informed of ideas put into practical DESIGN CONTINUES PLANNING AND DEVELOPMENT 22

CHALLENGES IN IMPLEMENTING VM & TO OVERCOME ROADBLOCKS • The “I have no time “ Syndrome • Change of Working Culture • New barrier on their work • “ Cut Cost “ perception • There are not ready for implement the new tasks • CFT tied with their core job responsibilities • In initial stage, it is hard to get management involvement in the workshop OVERCOME • More awareness session • Knowledge Sharing Session • KPI Setting – Value Added • Recognition – i. e IVMM’s Membership • Workshop & Brainstorm session at hotel / resort PLANNING AND DEVELOPMENT 23

RESULTS : 2008 MONETARY SAVINGS BY VM INITIATIVES Actual : Cost Saving of RM 60. 8 Million Target : Cost Saving of RM 45 Million PLANNING AND DEVELOPMENT 24

VM/VE CASE STUDIES Project Retail Optimization at KLIA = Project Brief • Increase of Commercial Revenue from 30% - 50% • To increase amount of spending per passenger • Limit the credit risk borne by the management of KLIA • Maximize the retail space • Improve retail placement to maximize customer penetration rate • Improve product placement to maximize sales • Improve retail management • VM studies was commission to achieved the following objective: To optimization of space inline with cost Saving: RM 8, 651, 874. 00 PLANNING AND DEVELOPMENT 25

ROP AT SATELLITE, KLIA PLANNING AND DEVELOPMENT 26

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VM/VE CASE STUDIES No Description Savings / Extra Group 1 1 To Omit Provisional Sum of Board Walk 2 To omit 3 columns of Mezzanine level slab and redesign 1 column per section at central core 3 To change from 2 hr fire rated door to 1 hr fire rated door 4 To limit contingency RM 4. 0 M as provided to 5% project cost 5 To consolidate design, centralized of or utilize FIDS monitor (Prov RM 2. 0 M) (3, 000. 00) (2, 000. 00) - Group 2 2 To change Imported granite to Alucobond for internal finishes (15, 568. 00) 3 To change Imported granite tile to local granite for floor (46, 080. 00) 4 Ditto (62, 000. 00) 5 To change brickwall (1 hour rated) to Lightweight prefabricated concrete panel (1 hour fire rated) 6 To change Luxalon aluminum strip ceiling to Galvanized iron strip ceiling (91, 746. 00) Group 3 7 Omission of 10 nos Lifts and relocation of 8 Nos of Lifts TOTAL SAVINGS PLANNING AND DEVELOPMENT (2, 020, 000. 00) (8, 651, 874. 00) 29

VM/VE CASE STUDIES Project Upgrading and Enhancement of Washrooms / Toilets at MTB, KLIA PROJECT BRIEF - To upgrade the existing Washrooms / Toilets to enhance the aestatic & image in line with market VM studies was commissioned to achieved the following objective: - - To minimize odour inline with cost & hygiene & no ponding water Enhance the image Saving: RM 1, 976, 936. 80 PLANNING AND DEVELOPMENT 30

VM/VE CASE STUDIES No Description Savings / Extra Group 1 1 Repaint ceiling, no skim coat for wall & maintain electrical works 2 Provide auto air freshener, suitable hygieneic bin and introduce curve-railing (114, 000. 00) 2, 000. 00 Group 2 3 Repaint the ceiling (415, 156. 80) 4 Install non-slip tiles to cubical area (398, 880. 00) Group 3 5 Double counted items in BQ (233, 400. 00) 6 Demolition works (160, 800. 00) 7 Install corrian vanity top c/w built in wash basin (102, 000. 00) 8 Omit the wash basin 9 To omit urinal c/w glass divider and replace with urinal c/w fin 10 Remove suspended hanging cabinet 11 Change to advertising panel (60, 000. 00) 12 Remove graphic embrossed coloured glass (18, 000. 00) TOTAL SAVINGS PLANNING AND DEVELOPMENT (58, 200. 00) (408, 000. 00) (1, 976, 936. 80) 31

ENHANCEMENT TOILET AT MTB, KLIA PLANNING AND DEVELOPMENT 32

EXCHANGE EXPERIENCE & KNOWLEDGE WITH UTM PLANNING AND DEVELOPMENT 33

COLLABORATION WITH UTM (UTM HEADED BY TNC DATO’ PROF. IR. DR. ZAINI UJANG & MAHB HEADED BY EN ABDUL NASIR ABDUL RAZAK) PLANNING AND DEVELOPMENT 34

VM AWARNESS & WORKSHOP AT MATC, KLIA ON 18 -21 ST MARCH 2008 PLANNING AND DEVELOPMENT 35

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CONCLUSION : MOVING FORWARD • Conditions of Contract – VMCP • Life Cycle Costing to all our Airports • Manual of Value Management • Passionate – staff is encourages to further study (Msc & PHD) Strategic Partner with other company in varies industries (i. e Other GLCs) • Leader in Industry (VM) • Business Venture – Oversea • Prime Consultant PLANNING AND DEVELOPMENT 37

Q&A SESSION PLANNING AND DEVELOPMENT 38