Value breakdown structure

A value breakdown structure (VBS) is a project management technique introduced by Stephen Devaux as part of the total project control (TPC) approach to project and program value analysis.

A work breakdown structure (WBS) in project management and systems engineering is a deliverable-oriented decomposition of a project into smaller components into a tree structure that represents how the work of the project will create the components of the final product. Resources and cost are typically inserted into the activities in a WBS, and summed to create a budget both for summary levels (often called "work packages") and for the whole project or program. Similarly, the expected value-added of each activity and/or component of the project (or projects within a program) are inserted into the VBS.

In most projects (and programs), there are some components and activities (and projects) that are mandatory and others that are optional. Mandatory activities are required, and have the full value of the project investment, as the project cannot be completed without them. In contrast, optional activities have only the value that they are adding to the project, i.e., their value is equal to the delta between the project/program value if they are included and the value if they are omitted.

For example, in creating an automobile, an engine, a driveshaft and wheels may all be considered mandatory, whereas cupholders are optional. If any of the mandatory activities are excluded, the project's value approaches zero. But the value of the cupholders is only the difference between the value of the car with and without cupholders.

The value from the VBS should also be used as the basis for tracking project value through Devaux's Index of Project Performance (DIPP). If scope is changed during execution, that change should be input into the VBS, the numerator in computing the Actual DIPP adjusted, and the DIPP Progress Index thus updated.

Unlike cost, which can be summed up the branches of a WBS to provide an overall budget, value cannot similarly be summed in a VBS. If the value of an automobile is $25,000, there are many components and activities that are mandatory in generating that value – leave any of them out, and the value of the project approaches zero. Therefore the fact that the engine, driveshaft and wheels are all mandatory, and each therefore has a value-added of $25,000 does NOT make the value of the automobile $75,000.

...
Wikipedia