As real estate and capital investments drive the construction industry, and owners/investors are constantly looking for the right balance of programming, quality, safety and cost. They are forced to choose between “low price” or “best value,” two confusing terms whose actual implications are not understood. Many owners, especially those bound by legal requirements, buy “lowest first price.” The truth is that this may not translate into the “lowest final cost” or best value.
Private owners have the flexibility to choose “best value,” not lowest first cost, which can result in a lower final cost when all things are considered – changes, owning & operating costs, financing costs, higher general conditions costs and efficient project programming. “Value” is much harder to define at the onset of a project, and many look to the contract type to determine it.
Construction delivery methods vary in their ability to meet value and cost needs, from traditional Design/Bid/Build to more collaborative method like Integrated Project Delivery where major stakeholders in the project become signatory to a single contract agreement.
The more collaborative methods can actually yield more successful results. The key to their effectiveness is establishing a rapport for the project team in an atmosphere that promotes accountability, collaboration, and communication.
A great project starts with culture – not the contract – if the potential of the project is to be maximized. Starting with the contract is like using a pre-nuptial agreement, a fear of failure is considered and the contract is used to "prepare for the worst.” This is not ideal for a project team that must sustain itself for three to five years, depending on the size and complexity of the project.
An IFOA project team shares the project risks and rewards proportionate to their financial and technical involvement using the contract as the proverbial glue. There’s opportunity to develop and grow a team anchored in trust, transparency, and a common goal from the inception of the project. Oftentimes IFOA projects begin with this worthy goal but fall short of expectations, creating tension for the various stakeholders. Unfortunately, too often are the expectations and “rules of the road” unspoken or undocumented with the hope that “the team will work it out.”
As with a personal relationship, a better premise is an alignment of culture. Many in the industry talk about Collaboration, Lean, The Big Room, Pull Planning, Last Planner, IPD and IFOA as if they are mutually exclusive, but the most successful teams view them as complementary and mandatory. Only by assembling teams that embrace and practice all of these can a team realize the many benefits of an IPD-type approach. Hence, a new approach has emerged in the industry that encompasses the tools, techniques, and philosophies of Lean Construction, IPD, IFOA and collaboration in general: Lean IPD approach.
Under a Lean IPD approach, the project constituents contribute their expertise beginning at the programming stage through final turnover to the owner, making the project better:
- The owner gets “more value” from each invested dollar whether it’s raw construction cost, financing or operational costs.
- The design team spends more time on “value-added” services such as analyzing programming, optimizing energy usage, improving wayfinding, evaluating systems, working closely with the end users on design, and spending less time on construction-related activities.
- Construction professionals begin planning and coordination earlier in the process while working hand-in-hand with the design team. By accepting more responsibility for production work, they can inject constructability-thinking into the final layout and design. This helps eliminate costly changes which improves both the schedule and construction efficiency. Electrical and Mechanical distribution systems are great examples of work often done multiple times under a conventional Design/Bid/Build scenario, wasting time, money, and resources. But under a Lean IPD approach, these tasks can be done once providing greater accuracy, lower cost, and more efficient design.
Lean/IPD metrics that prove savings are still too few, but I can share a personal experience. A Children’s Hospital in the Midwest used Lean in analyzing their everyday operations– both from an operational and throughput perspective. More patients were helped at a lower cost. With the improvement in their daily operations, they decided to use the same process in the design and construction of a new patient wing.
The Lean IPD approach provided exceptional value to the owner – first costs were lowered by more than $35 million; construction interest costs decreased; depreciation, maintenance and utilities costs were lowered; and they had a more functional design. The team used many creative approaches to accomplish these results like full Mock-ups of the facility, department by department, and a challenge to one trade to reduce typical construction costs by 14% compared to the conventional Design/Bid/Build approach. This trade used Target Value Design for their scope. Rather than design and estimate typical systems, they did continuous "value analysis" for every major component. Although the 14% challenge was not met, that trade reduced the first costs by almost 13% – still a major success.
Key elements of the project’s culture:
- A facilitator helped develop team goals and chemistry, involving Trade Partners and Design Professionals.
- Trade Partners were selected based on their vision, teamwork and proven record of collaboration.
- The team shared goals and expectations early and often. While that very aggressive goal of 14% cost savings was not met, the team collectively achieved a reduction of almost 13% -approximately $4 million.
- An IFOA Agreement reinforced desired behaviors, not establish them.
- New approaches to programming, design and construction were embraced. The caregivers, design team, owner, construction companies and Lean Consultant invested time and money early and received an incredible return on each invested dollar.
- The team was encouraged to innovate, experiment, fail early, and explore techniques like Lean Construction, Modularization, Prefabrication, Pull Planning, Last Planner System and other ideas.
- The process was easy, fun, understandable and rewarding. A reward system was established to share the savings among all major players, and it helped align interests and efforts.