In an era when owners are increasingly demanding faster, safer, and less costly projects, industry statistics indicate that 40 to 50 percent of construction projects are behind schedule, points out Sue Rogers, director of Business Development-Health for the Southfield, Mich.-based construction manager Barton Malow Co. Waste in many areas—from change orders to rework to systems incompatibilities—means that productivity and efficiency fail to improve. The four primary components of lean project delivery—owner leadership, integrated project structure, open information-sharing, and building information modeling (BIM)—have been proven to enhance performance and drive out waste and unwanted costs.

“The current contracting methodology limits cooperation, often making capital programs unreliable in terms of delivery and inflexible in terms of process,” Rogers contends. “The transformation to lean project delivery entails moving away from the fragmented single-function work teams that we have right now, and uniting the designers, contractors, and subcontractors into fully integrated collaborative teams with standardized systems.”

A $5 Million Savings

The first lean project example, the hospital, is a real-world embodiment of the MacLeamy curve conclusion that positive change and lower costs are more readily effected in the earliest phases of a project, according John Raimondo, formerly director of Barton Malow’s Central Region.

Shortly after its selection, the firm confronted the pressing need to shave time off the project schedule so the owner could be proactive in a competitive situation. Taking a leadership role, the CM brought key subcontractors on board early as trade management partners. Working as a team, they decided to focus on three different areas—structural steel, the exterior skin, and mechanical/electrical/plumbing (MEP) systems—as targets for economies in time and money.

The subcontractors’ expertise allowed the project to benefit from several savings opportunities. The structural steel package was awarded 60 days before design development was finished, avoiding a $200,000 price increase from the steel mill and expediting steel structure top-out by one month. In contrast to the normal five- to six-month lag time, erection of the steel began just 30 days after the normal shell and enclosure went out for bid.

In a similar vein, the contract for the exterior skin system was awarded 30 days before completion of design development. The curtainwall subcontractor’s proposal to use an alternative format to achieve the same design intent made a $2 million contribution to cost reduction. Using a different type of glass not only lowered material costs but also allowed for the installation of a less complex anchoring system, trimming labor costs as well.

“As we were moving toward preparation of construction documents, we worked with the design team to accelerate the different document stages so we could actually award individual packages for HVAC controls, mechanical piping and plumbing, and electrical. Completing this early detail coordination allowed us to dovetail the interior fit-out into the schedule gains that we’d already achieved,” Rogers notes.

“Our value-engineering efforts are better when contractors are involved and share their knowledge of the industry,” she continues. “For example, on this project we might not have been aware of the alternatives in curtainwall material and glass installation without their participation.”

Another tactic was the three-dimensional building information model, provided by the structural steel contractor as part of the project scope. The BIM technology was made available to other subcontractors so they could perform clash detection and overhead coordination on the job site, fostering a more seamless and rapid integration of their efforts.

However, as Raimondo observes, BIM does have a downside. First is the additional cost for its implementation. It also challenges traditional architect control of project documents, undoubtedly slowing down its acceptance in the risk-averse climate of the industry.

“Using 3-D BIM technology allows other actors to be part of the play, but there is some concern about how far the model goes before crossing the line where the architects or engineers are no longer in control,” he remarks. “The industry has to work out that nebulous area.”

One solution he proposes is the integrated form of agreement, in which the parties pledge to work collaboratively and avoid finger pointing, without specifically stipulating how the process works.

The coordination and change order avoidance resulting from the use of BIM produced an estimated savings of $600,000. Early completion contributed $95,000 in cost of capital avoidance, and early occupancy of the hospital produced an estimated $1.1 million in savings, based on national averages.

“In all we saved $4.85 million on a $158-million project,” Rogers says. “The owner did not really set out to utilize all the lean principles, but adopting just a few components yielded a savings of three percent.”

A $12 Million Savings

Against a backdrop of intense competition, the manufacturing facility, the second case study, began with a much more integrated form of delivery. Already well aware of significant waste on previous projects, the owner issued an internal challenge to attain a 25 percent performance boost in safety, quality, cost, and schedule. As a manufacturer, the company had first-hand evidence of the value of lean practices in its own operation, so it was not too difficult to make the leap to an alternative delivery approach on this project, Raimondo relates. Facing a critical product launch on a very aggressive schedule reinforced the need to deviate from normal processes.

To deliver on these objectives, the construction manager relied on four key tools: collaboration, a fully integrated project team, BIM to promote information flow among all the team members, and error-proofing and built-in quality to avoid rework.

When Barton Malow joined the team in October 2004 the project was just a rough process layout, with no further planning or documents. The owner’s initial budget put the cost of the facility at roughly $61 million.

The CM’s practice of identifying prequalified partners already committed to lean principles enabled the CM to quickly assemble a team of key suppliers and subcontractors appropriate to the job. They began meeting jointly with the owner’s team (including representatives for processes, procurement, and legal) in a collaborative effort from day one.

“Once those trades are selected, we negotiate lump sum fees and general conditions based on the estimated value of the work they’re delivering,” Raimondo explains. “This sequence allows us to focus on areas where we can use the joint expertise to attack costs, instead of being preoccupied with the competitive bid process.”

(He also reassures owners concerned that the collaborative approach might lead to higher prices that approximately 85 percent of the project will be the result of competitive bidding. “We adopted sole source selection for this particular project in order to make sure all the cultures were aligned,” he points out.)

Construction started in mid-December. The structural steel went up within 11 weeks of the date the owner first consulted with the CM.

After 12 to 13 weeks of design-assist and face-to-face problem solving with suppliers, the project team came up with a savings of 13 percent. The guiding principle was “challenge everything,” with no opportunity overlooked to drive out cost. In addition to uncovering economies in the areas of steel, foundation design, and mechanical, electrical, and fire protection systems, the team reaped savings in a host of “little things.” For example, the roof sump pump called for an 18-inch line for no other reason than it was a long-used standard. Ultimately, an 8-inch pipe was selected for the same function.

“The team has to be able to let go of some of its tradition and look at things differently,” Raimondo comments.

After establishing a guaranteed maximum price of $52 million in an arrangement that included a contribution from client savings to match the contractor’s fee-at-risk performance program, the project team held a formal value-analysis and value- engineering  (VAVE) work session during which the decisions made over the previous 12 weeks were revisited.

“Value engineering used to mean cutting scope, but now with trade management partners collaborating, the effort produces the most scope for the least amount of money,” Rogers notes. “We have to figure out how to get what the owner is looking for within the budget constraints.”

“We also achieved further cost reduction during construction through contract management, really challenging our suppliers and subcontractors to look at costs and pull money out of the project,” Raimondo adds.

The final adjusted contract value was about $48.6 million, roughly 20 percent lower than the original estimate of $60.44 million. Of that total, less than one-third of one percent was attributable to change orders. Such a significant accomplishment is an integral part of the lean approach, Raimondo points out.

“Coordination errors out in the field didn’t happen. Rework didn’t happen,” he insists. “We use the right tools and technology to do it right the first time.”

Other savings came from a collapsed schedule that cut the project timeline by 33 percent. The facility was delivered in mid-July 2005.

“That project should have taken nine solid months, but we delivered in eight months. We were able to erase the cost premium and still deliver an accelerated result due to the lean process.”

Owner as Change Agent

Raimondo and Rogers emphasize that owners must take a leadership role in order for the lean approach to be successful.

“Owners have a big role to play as agents of change. Otherwise, the old ways will prevail. Something has to create that sense of urgency to do things differently, whether it’s your business, your product, or something else,” they conclude.

By Nicole Zaro Stahl