CVS Benchmarking and Best Practices in Value Studies — Questions and Answers
Question 1: In a VM context, what is the PRIMARY purpose of benchmarking?
- To set team performance goals for the facilitation workshop
- To establish best-in-class cost and performance references that define worth and identify value gaps (Correct answer)
- To compare facilitators' hourly rates across different consulting firms
- To rank competing VM methodologies by number of published case studies
Correct answer: To establish best-in-class cost and performance references that define worth and identify value gaps
Benchmarking in VM identifies what top-performing alternatives achieve in cost and function performance. These references are used to set realistic 'worth' estimates and reveal how far the current design deviates from best practice, quantifying the value improvement opportunity.
Question 2: Which type of benchmarking is MOST useful when no direct industry competitor data is available for a VM study?
- Competitive benchmarking using rival product teardowns
- Internal benchmarking using the organization's own historical project data
- Functional benchmarking that compares the same function performed in a different industry (Correct answer)
- Financial benchmarking using stock market valuations
Correct answer: Functional benchmarking that compares the same function performed in a different industry
Functional benchmarking looks at how the same underlying function is performed in unrelated industries where superior methods may exist. For example, studying how aerospace achieves lightweight structures can inform automotive VM even without direct competitor data.
Question 3: A VM team discovers through benchmarking that a competitor achieves the same required function at 60% of the current design's cost. How should this finding MOST appropriately be used?
- Discard the finding because competitor data may be inaccurate
- Use the benchmark cost as an input to establish the function's worth and set a target for creative idea generation (Correct answer)
- Adopt the competitor's design directly without further analysis
- Report the gap to management without incorporating it into the VM study
Correct answer: Use the benchmark cost as an input to establish the function's worth and set a target for creative idea generation
Benchmark data informs the worth estimate — if a competitor achieves the function at 60% of current cost, that figure represents a credible lower bound for worth. The team then targets creative ideas that approach or surpass that benchmark, rather than treating competitor designs as a plug-in solution.
Question 4: In VM best practices, what distinguishes a 'performance benchmark' from a 'cost benchmark'?
- Performance benchmarks apply only to manufacturing; cost benchmarks apply only to services
- Performance benchmarks measure how well a function is executed; cost benchmarks measure how cheaply it is executed (Correct answer)
- Cost benchmarks are always set internally; performance benchmarks always use external data
- They are synonymous terms used interchangeably in SAVE International literature
Correct answer: Performance benchmarks measure how well a function is executed; cost benchmarks measure how cheaply it is executed
A performance benchmark defines the target level of function execution (e.g., load transfer capacity, signal latency), while a cost benchmark defines what delivering that performance level should cost. Both are needed: improving cost without meeting performance benchmarks fails VM objectives.
Question 5: Which of the following is the MOST reliable source for establishing a cost benchmark during a VM Information Phase?
- The project owner's initial budget estimate
- Published cost engineering databases, teardown analyses, or supplier quotes for equivalent function performance (Correct answer)
- The VM facilitator's personal judgment based on prior projects
- The average of all team members' cost guesses
Correct answer: Published cost engineering databases, teardown analyses, or supplier quotes for equivalent function performance
Reliable cost benchmarks require objective, defensible data — published databases (RSMeans, PRICE Systems), physical teardown data, or competitive supplier quotes. Estimates based on opinion or internal budgets carry bias and reduce the credibility of the worth calculation.
Question 6: After completing a VM study, a team compares their proposed alternative against a best-practice benchmark and finds the proposal is still 15% above benchmark cost. What is the MOST appropriate VM response?
- Reject the proposal because it does not match the benchmark exactly
- Accept the proposal if it still improves the Value Index over the baseline, and document the remaining gap as a future opportunity (Correct answer)
- Discard the benchmark data and rely only on the project specification
- Extend the creative phase indefinitely until the benchmark is achieved
Correct answer: Accept the proposal if it still improves the Value Index over the baseline, and document the remaining gap as a future opportunity
VM seeks improvement, not perfection. A proposal that closes the value gap significantly — even if not fully to benchmark — represents real value and should advance. The residual 15% gap is documented as a future improvement opportunity, maintaining continuous improvement discipline.
CVS Benchmarking and Best Practices in Value Studies
In a VM context, what is the PRIMARY purpose of benchmarking?