LEAN construction was first applied in production management, with the most famous instance being within the automobile industry beginning with Henry Ford and then later expanded by Toyota. The focus of LEAN is best value and minimized waste and its application has expanded to many sectors, including construction.
LEAN Construction Delivery Methods have existed for decades and are proven to improve productivity, reduce waste, lower cost, speed delivery, and improve quality. However, since Owners need to provide leadershiop, drive the process and have minimum levels of capabilities and expertise, LEAN construction accounts for fractional percentage of all work done.
This lack of LEAN construction deployment is the primary reason for the low level of productivity and higher than average waster associated with the AECOO sector versus other non-farm industries.
LEAN techniques were first applied to construction in the form of Integrated Project Delivery – IPD (for major new construction), and Job Order Contracting – JOC (for renovation, repair, maintenance, and minor new construction). To date, Job Order Contracting has been used most extensively, though primarily in the DOD Federal Government Sector. It is now expanding somewhat into the non-DOD Federal Government, County/State/Local Government, Transportation, Healthcare, Education, and Utility sectors.
Core tenants of LEAN construction delivery methods are as follows…
Collaboration – among all participants throughout the project life-cycle (Owners, Architects, Engineers, Contractors…)
Long-term relationships – 3-5 years+
Focus upon best value
Early and ongoing information sharing
Common terms, definitions, and data formats
Monitoring & Continuous Improvement
Reliance upon participants’ expertise
The key to the success of LEAN construction delivery method best management practices is there ability to LIMIT VARIATION by enabling greater transparency and leveraging expertise throughout the process, thus assuring high levels of predictability.
Job order contracting, for example, uses a Unit Price Book, that provides detailed line item pricing for tasks. A high level of granularity is provided, including associated labor, material, and equipment costs. While not “perfect”, the UPB does deliver a very reasonable estimation of the amount of work required, throughput/productivity, and cycle time (the time to complete a task and/or project).
A UPB may not reflect true costs or account for variances caused by weather, material availability, labor issues, security constraints, etc. for each project, but it does on average reasonably predict costs across multiple projects. In addition, a co-efficient, or multiple co-efficients can be used to account for any variables known in advance.
A Job Order Contract can range in sized from a few million to hundreds of millions of dollars. Individual projects or task orders are awarded, and additional and ongoing work is provided, or not-provided to the contractor based upon performance.
This “self-leveling” aspect provides the Owners a reasonable price for quality work (versus lowest price and questionable quality), and provides the Contractor with a reasonable profit. The contractor can provide a “fair” versus “high margin” price as many of the variables are better understood in a JOC situation.
As the above chart shows, JOC outperforms both design-bid-build, and design-build. (Source – JOC Performance – Industry Study 2015 – ASU, PBRSG)