The Upstream Series is an essay series where Dean Reed engages with the leading practitioners within the AECO community. The goal of the upstream series is to improve how design and construction projects are delivered by asking the question "what should be done upstream to make design and construction better?". In this series, each person will share a few ideas that the industry should adopt and use to make projects faster, safer, and better value for the money.

My big idea very briefly is to apply Lean thinking to a big and common problem using Collaborative Design and Scoping (CDS) with Fundamental Scope Blocks (FSBs).

Wouldn’t it be great if we did not need to spend the entire design budget and duration until we were confident the project was technically feasible and could be completed with an acceptable cost? That is the key idea behind Target Value Delivery. But let’s go further. Wouldn’t it be even better if the project Scope, Cost, Requirements, Risks and Uncertainties were clearly linked to key project features? And what if we could complete this process quickly, avoid frustrating rework and build learning into it? Such crazy thinking has inspired several “big ideas” that have captured my attention over the past 25+ years, including:

• Recognizing Waste Hidden in Plain Sight
• Collaborative Design and Scoping
• Functional Scope Blocks based on defined Scope Activities

Background – How Did These Ideas Develop?

This stew of ideas has been simmering for a long time. I was fortunate to be included in a tribe of “like-minded malcontents'' gathered by Greg Howell, Glenn Ballard, and a handful of other pioneers to form the Lean Construction Institute (LCI) in 1997. The key ideas were emerging on several leading-edge technology projects that demanded rapid schedule response to hit hot markets. Prior training in Total Quality Management (TQM) and Systems Thinking had led to recognition that communication gaps, especially failure to align on Scope, were creating huge problems. Construction projects need not be combat zones prone to failure while providing an onerous experience for the participants. Locked into the notion there was enormous potential for improvement and have spent the last 25+ years on a mission to make projects better. The ideas were shaped by many Lean-thinking collaborators over many projects yet are not part of mainstream LCI thinking or vocabulary. Maybe now is the time to explore these “new” ideas that have been simmering for more than 25 years?

Countless friends contributed to the ideas presented here. While listing all of them is not possible, some get special mention. The Neenan Company, including Hal Macomber, David Shigekane and Mike Daley were early like-minded collaborators that shaped my vision of collaborative design. Jeff Loeb, Terry Wheeler and Del Profitt were among many at CH2M that helped me implement the ideas on projects as were new collaborators at Burns & McDonnell. Harder Mechanical’s Pat Wenger showed me how to shift the Scope List from unwieldy spreadsheets to a slick interactive database. Clients were the most important enablers. Special thanks go out to Steve Howard and Jeff Joyner from Hollingsworth & Vose and a host of friends from “confidential clients”. And thanks to Dean Reed’s persistent nudge to get me to write this down.

Recognizing The Waste – There’s More Than You Think

Expensive and disruptive design rework is an almost inevitable unintended consequence of conventional project delivery. The Diagram below illustrates a simplified version of the design and bidding process intended to provide a “Reliable Cost”, based on comprehensive bidding documents. It does not represent the process used by any specific firm but is generally representative of processes used across many sectors of the construction industry.

This general process is very well “tried” but not well “trued” due to some intrinsic problems, a few of which include:

• The estimating team responsible for Preliminary Estimate and the Detailed Design team typically report to separate functional groups within their organizations with limited interaction once Detailed Design begins – even in progressive Design-Build firms. In essence:
  • the Design Team doesn’t fully understand the countless assumptions built into the Preliminary Estimate
  • the Estimators rarely participate in the myriad decisions and trade-offs made during Detailed Design
  • They often get frustrated and speak in disparaging words about one another.
• Change control typically does not begin until after big changes have been made that affect funding decisions. Scope and Owner expectations continue to emerge during the Detailed Design phase – as they should. Every project manager will advocate “designing to the budget” but few can systematically deal with the degree of change and uncertainty inherent in major industrial projects: the documents are just too cumbersome.
• The trade contractors that will eventually provide real market pricing are rarely involved in the defining the Scope and may make no commitment to their pricing advice even if they are retained on a design-assist basis. As a result:
  • Conversations between designers and trade contractors are severely restricted as they are forced to communicate via voluminous and complex documents ill suited for a clear mutual understanding.
  • The potentially valuable constructability expertise of the trade contractors has little chance of influencing a design that has already been done.
  • Uncertainty from the ill-suited communication process leads to defensive behaviors in the form of hidden contingencies and time buffers/schedule padding.

The intrinsic problems are leading contributors to the all-too-common “now what?” problem shown in red below:

Finding out that project costs will exceed the Owner’s expectations after the design duration has been consumed and after the contactors have spent considerable time and effort to prepare bids and after the Owner’s project team has requested funding introduces all kinds of problems, which often include:

• Delays in releasing funding and allowing the construction team to get started.
• Frustration and Wasted Effort for nearly everybody Owners either agree to pay more than they think necessary or endure the dreaded “value engineering” cycle in which Scope is stripped and lower cost components are substituted, both of which disappoint the facility end users. Designers rework their efforts, usually under considerable pressure as they are chastised for not “designing to the budget”. The extra work often consumes key resources that were supposed to be available for other projects so the impact cascades throughout their organizations. Contractors have to rework their pricing at their own expense under considerable pressure. Only the winner will see any potential return on that effort.
• Inability to Match Costs to Value as the information is presented to the Owner as a single lump sum or as a construction estimate not corresponding directly to the features that add value. Imagine your last purchase of an automobile. You were likely very interested in the key features for which you had choices, such as audio system or the seating surfaces and how much the various options cost but you probably had no use for an estimate listing how many inches of wire or how many pounds of steel were involved. Typical construction estimates, even when the Owner gets to see them, do not organize the costs to enable key trade-offs between cost and features. Confrontation and Friction as participants often begin assigning blame and character flaws to one another. The project culture takes a potentially fatal blow before the team forms.

Conventional pre-construction processes produce highly variable and often unacceptable results while generating excessive waste and frustration. That sounds like a job for Lean thinking. The Construction Industry Institute (CII), LCI, and many other organizations have released study after study telling us that most large projects fail to meet their cost and schedule targets. The problem is very real and highly pervasive – clearly all-too-common.

I’ve presented the diagrams above countless times over the past 15 years in many different forums. Participants report encountering the disruptive rework cycle “most of the time” or “nearly always”. A primary goal of the conventional process, of course, is market leverage to achieve the “best cost”. Unfortunately, no allowance is made for the dysfunction created nor the value unnecessarily stripped out during the Value Engineering process. Opportunity costs, including projects that might be viable but are unnecessarily scrapped, are not considered at all. Nor does the industry measure the time and money required to support the bidding process from both the designers and the pool of contractors. Owners may not see invoices for estimating and bidding but that doesn’t mean they are free. The illusion of “free estimates'', built into every bid, is costing somebody a bundle. Ultimately that cost shifts to the Owners and eventually to those that consume their products. That “somebody” is us.

Readers interested in how they can be assured of competitive pricing might want to check out “Collaboration and Competition are not Mutually Exclusive” published in the 2010 Lean Construction Journal. Collaborative delivery approaches may well enhance, rather than diminish, competition.

Collaborative Design is Naturally Better

Collaboration is a natural way for most humans to interact with one another and an effective way for diverse groups to make decisions and learn from one another. With the right leadership, teams thrive in a collaborative environment. Several years ago, I observed that frustration is to waste as smoke is to fire – find frustration and waste will be nearby – often in the form of lousy work processes. It follows that the primary role of leadership is improving work processes to remove the waste that creates the frustration. With that in mind, let’s consider wasted time and money that can be mitigated using Collaborative Design and Scoping (CDS) as the pre-construction strategy.

Collaborative Design & Scoping is a comprehensive method characterized by the following principles:

• Commitment to team-based delivery focused on satisfying the owner’s Conditions of Satisfaction.
• Early engagement of those that will be designing and building the facility with those that will be using it, along with other key stakeholders.
• Group problem-solving and decision-making processes with a Big Room way of working.
• Facilitative leadership and mindset.
• Scope distilled into tabular form linking costs to major project features and clearly linking “What” with “How” and “Who,”
• Concise answers to several Big Issues which establish viability for every project, including:
  • What are we trying to accomplish?
  • What is the scope?
  • How much will it cost?
  • When will we be done?
  • What are the risks and uncertainties?

The “Big Issues” are better and more rapidly addressed by developing well-defined and mutually understood Scope than by producing the large volume of bid documents. Imagine how much risk and contingency funding might be removed if contractors based their pricing on thoroughly understood scope they helped define rather than on bulky bid documents. What if the contractors and designers jointly focused on delivering great results for the owner rather than posturing to protect their Scope? Such arrangements would naturally improve both the project results and the experience. This explains much of the attraction of Integrated Project Delivery and Project Validation. It certainly explains my lack of interest in returning to the transactional world.

Nothing in this essay intends to discount the talents of our design professionals. Quite the opposite: the CDS process frees up creative capability and allows critical resources to focus on collaborative options and solutions rather than on producing bidding documents. High levels of design effort and expertise are still required – but in a different “sketchy” form that allows for rapid iteration. Layouts, equipment lists, process flow diagrams, circulation diagrams and many other foundational design elements still need to be developed but in a form tailored for evaluating options. Design iteration is necessary and certainly not waste. Exploring different ways to solve a complex problem is essential. Choosing too quickly, on the other hand, and then spending the entire design duration and budget producing highly refined documents that are subsequently scrapped or heavily reworked is extremely wasteful – and something that happens all-too-often. Sometimes the CDS process reveals there is no workable solution set for the Big Issues. That’s an important, but sometimes underappreciated, benefit as the owner learns this quickly and saves the cost of a design they cannot use while the design team capacity is free to undertake more viable projects.

“Chunking” with Fundamental Scope Blocks

The “Collaborative Design” aspects of the CDS process align with mainstream LCI thinking, including Target Value Delivery (TVD), Integrated Project Delivery (IPD), and Big Room thinking and will be familiar to many readers of a Lean Construction Blog. Let’s take a look now at the “Scoping” part of CDS that may not be familiar at all. Fundamental Scope Blocks (FSBs) are chunks of work or services that form the “building blocks” of the project for which Conditions of Satisfaction and Design Requirements can be defined and evaluated. Key characteristics include:

• FSBs are things - defined by nouns – that break the “What?” into easily visualized chunks of Scope that provide a specific utility.
• FSBs tend to be added to, or deleted from, the project as whole units.
• FSBs typically span the work of multiple design disciplines, trade contractors, and process systems and are natural focuses of coordination.
• FSB definitions, along with the integral “Scope Activities” defined in the next section, help the entire delivery team visualize how projects will be constructed and typically correspond closely to turnover and commissioning packages. Note that we are thinking about the turnover process before we have started Detailed Design.
• FSBs definitions and the strategy for modularization and prefabrication are mutually dependent – you must consider how the project will be built before you can establish the FSB breakout. That means you have to have the right people in the room at the right time to make the right calls.
• FSBs definitions should be understood by the entire project team – everybody ought to be aware of the full range of FSBs. As such, they need to be defined in a simple and easily scannable format.

An air handling unit provides a great example of an FSB that appears on many projects and is illustrated on the simple graphic below.



The air handler provides a distinct utility to the project for which the design criteria and Conditions of Satisfaction can be concisely defined. It is easy for every design discipline, every contractor and the Owner to visualize what is required to make it function.

Defining the Fundamental Scope Blocks (FSB) through Scope Activities

Looking at the simple graphic of the Air Handling Unit it is clear to see that it sits on a concrete housekeeping pad, which will be designed by the structural engineer and installed by the concrete contractor. You can also see there will be chilled water supply and return lines from the chilled water headers that will be designed by the mechanical engineer and installed by the piping contractor. Similarly, there will be an electrical connection to an electrical panel designed by the electrical engineer and installed by the electrical contractor These are examples of Scope Activities – the particular construction activities necessary to make the Air Handling Unit operational. Scope Activities are the true heart of the “Scoping” activity and the innovation I have been using since discovering them 25 years ago. Scope Activities have the following general characteristics:

• Scope Activities are Actions – always starting with a verb – that concisely describe the construction activities associated with the FSB and allow for easy visualization by all parties involved with the associated FSB.
• Specific Activities are construction activities that will be accomplished by a particular crew as a continuous operation - a close approximation of the activity breakdown for some future phase planning effort.
• Scope Activities define the interfaces between the design disciplines and the contractors. Each Scope Activity has a unique
  • design discipline,
  • installing contractor,
  • and, in process industries, a unique system
  • allowing for the convenient roll-up of Scope by contractor, design discipline, or process system.
• Scope Activities represent the 'common denominator' that allow all major project control and administration systems to be intrinsically linked, forming the basis of a multi-dimensional Work Breakdown Structure and a means to organize and distribute costs, knowledge, and learning. That’s a lot of content to put into one sentence but the effect can be profound.

Scope Activities are assigned to the FSB they serve. For example, the Electrical line feeding the Air Handling Unit shown above exists only to serve FSB. If the AHU were to be deleted that line would also be deleted. The electrical panel that supplies power, however would still be needed and would therefore be part of a separate FSB, which might be labeled “Power Distribution Backbone”. This distinction is key for determining the number of FSBs needed. Scope Activities therefore define how the various FSBs are inter-connected. Understanding the Scope Activities is essential part of understanding the Scope.

A simplified example of Scope Activities for our hypothetical Air Handling Unit appears below.




Visualizing work that has not been designed is both a prerequisite for developing Scope Activities and one of the primary benefits. Experienced design and construction professionals typically enjoy the interaction when they develop the list together – which is key to successful use of the method. Estimators and design professions discuss the Scope Activities to align on the key assumptions such that the estimator feels confident in the number they provide. The design team understands the factors that will affect cost and are much more likely to recognize potential cost changes during subsequent phases of design. Understanding the Scope baseline is the most important part of an effective change control process. A well defined set of Scope Activities provides a foundation for that understanding.

Estimating Precision without Bidding Documents

The CDS estimating process requires a high degree of conceptual estimating skill – it requires people that can see what is not yet on the drawings. Estimators requiring comprehensive design documents in order to produce detailed quantity take-offs for unit price estimates are of little help. Small variances in commodity quantities have relatively little impact on the cost of the project and the accuracy of the estimate depends far more upon the completeness of the scope than the accuracy of the quantity take-off. Quantity take-offs are not inconsequential and must be based on well defined layouts and schematics but exact dimensions are neither available nor required for conceptual pricing. This is one of the key insights underlying the FSB and Scope Activity approach. Take a moment to think of a project for which there was a major cost overrun. Was the root cause an inaccurate quantity take-off or was it a failure to fully grasp the scope or requirements?

A senior pre-construction estimator recently told me that an estimate generated from the FSBs, Scope Activities and sketches was “within a +/- 15% range of accuracy” although based on “2% engineering”. His comment about “2% engineering” may have been a bit of hyperbole but made the key point: FSBs and Scope Activities help us address the Big Issues rapidly and reliably with far less chance of wasting design effort.

What If Early Trade Partner Engagement Isn’t Possible?

I tirelessly argue for engaging trade partners early in the Scoping process because it improves communication, promotes innovation,and reduces risk. But are these ideas applicable to every project? Of course not, only the ones where cost, speed of delivery or client satisfaction are important. Jest aside, not every project will be allowed to follow this path, but I think the best ones will. Those are the jobs I want to work on.

Despite my clear preference for early Trade Partner engagement I have been able to help several teams get a lot of value out of these ideas on projects not yet ready for full IPD approach. Visualizing and concisely describing key project features and requirements via FSB development allows the design team to launch their efforts quickly with enhanced understanding of interdisciplinary coordination issues. This pays big dividends even if the trade contractors cannot participate and may be a good gateway to Lean thinking- let’s start where we are and how we can. Organizing scope, cost, risks and uncertainties in the concise FSB format allows for rapid comprehension to reviewers and other intermittent participants and creates a very good platform for explaining the project to the eventual cast of characters. The FSB breakdown provides a flexible and adaptive work breakdown structure regardless of the form of contract. Don’t let a restrictive commercial strategy prevent you from taking advantage of the big ideas. Let’s just hope you get a chance later on to experience the full benefits on some subsequent project.

Wrap Up and Next Horizons

Remaining committed to doing things differently has surely had its costs, but the road less traveled was the right road for me. Hopefully you now have a few new insights about the nature of some of our most pervasive problems and ideas about a more natural, effective, and healthy way to work. There is a lot more to discuss, such as using the FSB and Scope Activity concepts to link Lean Construction with CII’s Advanced Work Packaging strategy and using the FSBs as the backbone for an information system that intrinsically integrates the efforts of IPD cluster teams. I look forward to comments and discussions.




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