LEAN Construction

The origins of LEAN and LEAN Construction.   While there are many variants of LEAN methodology, they all focus upon LEAN focus upon the delivery of best value outcomes and minimizing waste. LEAN was first applied in production management, beginning Henry Ford and automobile manufacturing.   Since its introduction, LEAN methods have developed significantly and expanded to most business sectors, including construction and facilities management.

LEAN Construction Delivery Methods have existed for decades and proven to improve productivity and quality as well as reduce waste, lower cost and speed delivery.  While it is an owner’s  responsibility to provide leadership, and drive the process, this is done within an atmosphere of collaboration and mutual benefit.   The most widely used methods of LEAN construction are Integrated Project Delivery, IPD, for major new construction, and Job Order Contracting, JOC, for repair, renovation, and minor new construction
Despite the proven benefits 0f LEAN construction,  deployment has been limited to a small fraction (5% or less) of the industry.  This is largely due to the cultural changes required for initial adoption and ongoing execution.   LEAN construction requires fundamental changes in how people interact on a day to day basis.

lean construction

 

Job Order Contracting has been used most extensively and successfully across the DOD Federal Government Sector.   It is now expanding somewhat into non-DOD Federal Government, County/State/Local Government, Transportation, Healthcare, Education, and Utility sectors.

Core tenants of LEAN construction

  • Collaboration – among all participants throughout the project life-cycle (Owners, Architects, Engineers, Contractors…)
  • Long-term relationships – 3-5 years+
  • Focus upon best value
  • Shared risk/reward
  • Financial Transparency
  • Standardized Data Formats / Common Data Environment (CDE)
  • Early and ongoing information sharing
  • Common terms, definitions, and data formats
  • Monitoring & Continuous Improvement
  • Reliance upon participants’ expertise

LEAN construction LIMITS VARIATION by requiring collaboration and transparency, and leveraging the disparate expertise of team members throughout the process, thus assuring  high levels of predictability.

An example of how variation is controlled, it ths use of a unit price book, UPB.   Job order contracting uses a Unit Price Book, a detailed line item description of construction tasks and associated pricing.  A high level of granularity is provided,  including associated labor, material, and equipment costs. Common industry terms and definitions are used as well as standard data architecture (Masterformat).   While not “perfect”, the UPB does deliver a very reasonable estimation of  the type and amount of work required, throughput/productivity, and cycle time (the time to complete a task and/or project).   The benefit of a UPB is a significantly improved level of communication and understanding among project participants and stakeholders and full financial transparency.   These benefits lead to fewer errors, omissions, change orders, and a virtual elimination of legal disputes.
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.
lean construction
As the above chart shows, JOC outperforms both design-bid-build, and design-build. (Source – JOC Performance – Industry Study 2015 – ASU, PBRSG)

lean construction

Job Order Contracting