Over the past two decades a rigorous focus on process improvement has generated notable gains in quality, productivity, and economy for the manufacturing sector. Much of this progress can be traced to innovations like just-in-time parts delivery and intensive waste-reduction efforts introduced by Japanese industry, most notably in Toyota's auto-making operations.
These advances are actually linked to a more comprehensive approach to production that has since become known as Lean Manufacturing. According to the Tradeline Glossary, “Lean is a process improvement technique in which a group of principles, practices, and tools are used to identify inefficiencies in a process, create value, reduce waste, and streamline process flow—resulting in a new process that uses less human effort, less space, less capital, and less time.”
Cross-pollination has now brought Lean—theory and practice—into a wider arena, with similar success. Manufacturers, pleased with the outcome on the plant floor, have started to apply the approach to other aspects of their business. Toyota Motor Sales USA Inc. incorporates many Lean practices in its Facility Integrated Resource Management (FIRM) process, a sustainability program whose goal is to increase relative energy efficiency in buildings by 50 percent by 2010.
For Hutchinson Technology Incorporated (HTI), based in Hutchinson, Minn., the Lean lesson came through the back door, from its own operations. HTI designs and manufactures very small, close-tolerance machined products, in a very repeatable process resulting from a carefully crafted Lean Manufacturing program, relates Jack Yates, corporate director of facilities. When the company, which had grown by about a million square feet in three years, decided to apply those same principles to a recent construction project, it was able to shave $6 million from the building cost during design development, and then another $1.5 million through process improvements.
Nevertheless, Lean has been slow to penetrate the capital projects universe. According to John Nelson, a design and construction industry consultant and adjunct professor in the College of Engineering at the University of Wisconsin-Madison, less than half of the total labor expended in the design and construction of large capital projects is ultimately applied to the end product.
Steven Cockerham, vice president for planning, design, and construction at St. Louis-based BJC HealthCare, which spends roughly $310 million per year in construction and facilities maintenance across its portfolio of 13 hospitals, underscores the need for change. “Construction is the last dinosaur,” he observes. “We still build hospitals the same way we did 50 years ago.”
Noting that “it’s up to project owners to streamline the project delivery process,” Cockerham was instrumental in steering BJC to a Lean approach in the design and construction of a new $28-million, 73,000-sf hospital tower. The effort started with the requirement that the entire project team—architect, engineer, construction manager, MEP & plumbing contractor, and electrical contractor—be identified and assembled on proposal submission. This proviso fulfills a cardinal Lean tenet: early engagement of key project players. Further supporting the unified effort, the project was awarded to all entities under a single contract. The results showed up early on: At 25 percent completion, the very complex tower project was about six months ahead of schedule.
Lean Tools: Single Contract
Owners, architects, and contractors have a combination of tools and techniques at their disposal to incorporate Lean principles in their capital projects. Some strategies address the divergent mindsets and cultures that have long isolated the various players in the traditional construction environment. Others identify concrete action items that lead to better, more cost-effective buildings.
Integrated project delivery (IPD) is a basic expression of the Lean approach. A broad category, IPD draws all entities that are party to the project into a productive, collaborative alliance working toward one goal. Some kind of incentive agreement gives each entity a proportionate stake in the success of the project.
“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,” remarks Sue Rogers, director of Business Development-Health for the Southfield, Mich.-based construction manager Barton Malow Co.
At the heart of integrated delivery is the single contract, often referred to as an Integrated Form of Agreement (IFOA). Parties to an IFOA “pledge to work collaboratively and avoid finger-pointing, without specifically stipulating how the process works,” Rogers explains.
Redwood City, Calif.-based DPR Construction Inc. worked under a Lean contract as general contractor for the recently completed $100-million, 250,000-sf Camino Medical Center in Mountain View, Calif. DPR executive vice president Eric Lamb points out that the IFOA, also known as the relational contract, is “already common” in the U.K. and Australia. The project team shares decision-making, pools contingencies, and provides incentives for team performance, along with sharing risks and rewards.
Describing the integrated agreement that guided BJC Healthcare’s recent hospital tower project, Steve Cockerham observes that rather than stipulating what each team member was going to do, the contract outlined what the team as a whole was to accomplish. “It basically said, ‘Here’s the project, here’s the scope, here are the drawings, and you have to deliver this. We don’t care how you do it.’”
Cockerham also notes that the challenge of an IFOA often lies less in orchestrating the work of all the players than in introducing such a novelty in the tradition-bound construction environment. “Getting the contractors’ lawyers to agree was our biggest hurdle, actually. It was out of the realm of their typical contracts,” he says.
Taking the various players out of their individual silos of expertise reinforces a broader vision of the project and produces a cascade of positive outcomes. For example, subcontractors that are empowered as equal partners can provide valuable input based on their own specialized knowledge. The benefits of their experience can be significant. Cockerham cites one instance in which a glass contractor recommended a different way of attaching glass to a building, cutting labor requirements in half.
More Tools: Obeya and BIM
Many such opportunities for improvement are often identified as an outgrowth of two other collaborative Lean tools: the obeya, which means “big room” in Japanese, and Building Information Modeling (BIM).
The obeya, instituted by Toyota to facilitate project management, serves as a repository for visual tools such as charts and graphs that depict a project’s program timing, milestones, and daily progress, with the goal of enhancing effective and timely communication. While building the Camino Medical Center, the MEP contractors and specialty trades were co-located in a double trailer that became known as the obeya. The centralized location was the result of a contract provision requiring design detailing to be done on site. DPR’s Lamb reports that the specialty detailers held priority conversations, coordinated work, and readily resolved issues with other specialists thanks to their common quarters.
Three-dimensional Building Information Modeling integrates and coordinates the architectural design and trade-specific design details on a project. It can be a joint effort of the project team, as at Camino Medical Center, where the comprehensive virtual model was the result of early efforts on the part of all key design teams. It can also be provided by an individual project participant, as exemplified by a recent Barton Malow project, a $58-million, 503,000-sf hospital, where BIM was the responsibility of the structural steel contractor. Made available to other subcontractors for clash detection and overhead coordination on the job site, BIM promoted a more seamless and rapid integration of their efforts, notes Barton Malow’s Rogers.
The potential for additional financial gain can make a Lean project very attractive. The contract for BJC Healthcare’s hospital tower guaranteed participants a certain level of profit, based on a third-party estimate of the project cost. It also created an incentive pool, which at 25 percent completion had already reached close to $1 million (out of an expected total of $2 million), to encourage innovation and motivate all players to work hard at eradicating waste. Every documented saving went into an incentive pool to be distributed on project completion, upon confirmation that the total cost was lower than the estimate.
Sometimes individual team entities need extra help to realize overall economies in a Lean arrangement. BJC’s incentive pool provided capital against which team members could borrow in the short term to make alterations to the program sequence, if such alterations would increase the eventual savings.
Lamb also points out that gains are not always uniform across the board. On the Camino project, the Lean approach led to an increase in the mechanical contractor’s shop labor hours, and the drywall contractor suffered from worse-than-estimated productivity. However, the overall production system was remarkably more efficient because of better design and planning and reduced work flow patterns in various areas. The incentive-sharing plan compensated and rewarded parties for such contributions and sacrifices.
Despite its many benefits to the bottom line, Lean’s economic contribution will not be fully realized until the overall view of project risk is realigned, maintains industry consultant and professor John Nelson.
“The single biggest inhibitor to construction efficiency is a flawed risk proposition,” he emphasizes. “Lean construction, which is not about increasing the efficiency of each individual step, but rather about improving the efficiency of the entire process, is an attempt to address the problem, but it doesn’t get at the core of the matter. My big idea is that we need to redefine the risk proposition.”
That effort begins by separating process-management risk—mistakes, oversights, or unforeseen conditions such as weather—from outcome risk, which includes cost, quality, and scope. Then it must be determined which entities own them. For example, Nelson identifies error and negligence as risks that are inherent in the design and construction process that rightly belong to the parties accountable for them—owner, architect, and constructor. Ultimately, though, the owner is responsible for the risks associated with prevailing market conditions, unforeseen events, and project scope—either directly through compensation, or indirectly through reduced quality and performance.
To avoid unintended compromises such as inhibiting designer creativity or diminishing contractor productivity, Nelson recommends delineating between who is best able to manage particular risks and who benefits from taking them. This path often entails a higher level of engagement from owners.
“Owners should assume some of the risk because ultimately they have the long-term benefit of a completed building,” he remarks. “An integrated delivery process shares risk among all parties: owner, designer, and constructor.”
In that sense he echoes advice from both BJC HealthCare’s Cockerham and Barton Malow’s Sue Rogers that it is up to owners to take the lead in creating a sense of urgency to do things differently. “Owners have a big role to play as agents of change,” Rogers comments. “Otherwise, the old ways will prevail.”
By Nicole Zaro Stahl
The Tradeline conference on Lean Management Processes for Facilities Management and Capital Projects is scheduled for March 30-31, 2009 in St. Petersburg, Fla., where speakers and attendees will be discussing the next generation of facility solutions and capital spending plans (for both new construction and renovations and upgrades). Visit www.TradelineInc.com/conferences for more information and registration details.