Impressum
Lean Construction – Practical Insights for innovating Construction Management © 2016 Alexander Lange
Verlag: tredition GmbH, Hamburg
ISBN 978-3-7345-8169-4
Foreword
Lean construction is neither a collection of “best practices” nor a ready to use “tool kit”. It is rather a consistent set of principles, an approach to think about the core processes of construction management to foster improvement and innovation. Based on this approach, a variety of powerful methodologies and tools have been developed so far to achieve better performance in construction projects. However, the thinking effort to gain a good understanding of the underlying principles and processes and to adapt the tools for each single project is always indispensable to achieve improvements in a consistent and continuous way.
This book makes a valuable contribution in this journey by presenting “practical insight” to innovate some key processes in construction management. The insights are practical because they are the result of the systematization of a variety of experiences of the author in different fields of construction management and are presented in a simple, close to reality way. They are also practical because all the techniques and recommendations are presented to motivate its direct application to foster quick process improvements and innovation.
The first sections of the book present some root-causes of many of the common problems in construction performance in order to facilitate a good understanding of the processes. The other sections, all organized as modules using learning questions, present a rich variety of techniques and measures that have proved to be effective for achieving significant improvements in project performance. They reach from the soft skills in leadership, teamwork, communication and trust building measures, to the use of techniques like collaborative planning, building the project “control room”, selecting the best Key Performance Indicators, or the design of work flows using takt planning. By presenting all these value-adding techniques and measures, the author intents to encourage the reader to initiate and sustain over time a learning process to finally transform the organizational culture.
I am sure, the reader will find in this book new and inspiring ideas, as well as many practical recommendations, to get involved in the exciting journey of continuous improving and innovating construction management within his daily work.
Ing. Jorge Taboada
Senior Project Management Consultant
Santiago de Chile
HOW TO ANALYZE AND INNOVATE CONSTRUCTION MANAGEMENT?
This book is neither a scientific paper nor part of a master or PhD thesis. The objective is to develop and grasp some of the most practical and applicable concepts in optimizing construction projects and to dig deeper into what is behind this so-called “lean construction”. Six topics with specified questions are selected based on the criteria of highest relevance in conducting construction projects. Therefore, knowledge is gathered from international construction companies, management consulting and scientific institutions. My personal experience ranges from large-scale construction projects in infrastructure, industrial sites, steel- and facade buildings, bridge construction and turnkey housing projects. For reasons of confidentiality, I have kept all examples anonymous and do not specify company names. We will embark on a journey to discover answers for each of the learning questions listed in the contents above. These answers will allow you to understand the content, gain groundbreaking insights and learn applicable approaches to improve and innovate construction project management.
The term lean construction is used, because many of the suggested improvement levers in this book relate to the topic of lean-management in the context of construction. However, if you do not like to term leanconstruction you can skip this word and simply read the whole book as different modules that may take construction project-management further. My objective is to provide a starting discussion of how to drive change and improvement in construction projects.
My definition of lean construction is slightly more than just “adding value” and “reducing waste”. Lean transformation will only happen if we manage to create a new construction culture. This entails three areas that need to come together:
1. Implement new ways of collaboration and trust (e.g. by means of gain/pain sharing contracts or collaborative planning)
2. Internalize and apply methodologies and approaches to increase efficiency (e.g. by means of “takt”, transparency through KPIs, provision of steering rooms, PPC evaluation and many others)
3. Pursue a system of continuous improvement and learning (e.g. by establishing learning cycles and standardizing best-practice insights systematically).
Today’s practice in the construction industry is far from such an approach. This book will provide insights into many very useful elements for developing project management in this direction. However, lean construction is a very broad and fast developing field and covers further elements that are not included in this book, such as collaborative contract forms (e.g. IPD, Alliancing) or target value design.
I wrote this book parallel to starting my first company named ModelLean as a consulting and training boutique specialized in innovation and optimization via experiential learning with regard to construction management. In the meantime, ModelLean has grown and merged to FC Consulting (FC-Beratung GmbH) which offers the content of this book in the form of training and moderated consulting with tailored training, following the concept of a modular “learning-factory” for construction management. Client teams of managers, consultants or executive construction leaders or foremen can choose their relevant topics to experience hands-on training and team building.
To sum it up – this book will ease your life in construction, help you get things under control, increase value within the scope of your daily work and stop the typical construction management attitude of firefighting.
Let’s get started!
Alexander Lange
Prof. Dr.-Ing. MBA.
If someone wants to change something within a project or management approach to achieve improvement, it is first necessary to fully understand the initial situation of current practices. Therefore, we start with a close look at pattern of typical progress constraints in construction settings. In any consulting project I would start with a diagnostic phase in order to provide transparency of what is happening from an external perspective, to determine the real pain points and sense where value is hidden.
Three questions help us get a closer understanding of the constraints pattern in a construction project:
1. Why is the real construction progress in 80% of all projects lower than planned?
2. Which root causes trigger bottlenecks in construction planning and execution most frequently and what are the pushing things behind?
3. Which soft skill patterns limit project success in construction management?
I sn’t it astonishing that despite improvements in technology and highly skilled engineers, today more than 80% of all large-scale construction projects still fail either on reaching the time- or cost-targets? By analyzing such target deviations in construction projects, one can deduce three underlying topics which are related to planning and execution practice.
Variability of trade performance is the most frequent and serious reason for low progress. The negative effect of variability on overall project performance today is still either not understood or largely underestimated. Why is this so? One reason is that variability across different trades and contracts is hard to understand, hard to see and to anticipate and difficult to control. So either construction planners add sufficient safety buffers into the planning based on their experiences or it is a neglected topic, which pops up as a “surprise” when it’s too late to counteract and will have an impact in the form of cost and time overruns. Without being naive – some contractors also play this game with the intention of gaining margin through claims, ending up in disgraceful disputes. The term variability is the opposite of steady flow. And steady flow in lean language is linked to stability, to the flow and pull principles which will enable an increase in value if implemented appropriately. On the other hand, if the performance of one party in a construction project is variable, it means that for the others it is not clear when and what the output will be exactly. As nobody of the dependent parties can count on the precedent results, each party includes some buffers into the planning process and create more uncertainty regarding the real output.
A big trap in common construction planning practice is to neglect variability and calculate with average progress values, some of them even published by construction associations. What does this mean? If the planned construction progress is based on the average progress values of each trade and there are dependencies, then any variability of one trade will have an effect on overall progress and the end date. Unless you’re luckier than the statistics, the effect will be negative.
Let’s look at a simplified example of two consecutive trades – steel erection and piping. Both trades manage to finish 5 units per day on average with their trade and have 90 units to deliver for the whole project. The construction owner fixed the contractual end date to be finished within one month (20 workdays). Is this possible? Let’s look at it by calculating with the average output values per trade and first neglecting the factor of variability:
Example of calculation – given:
• 2 consecutive interdependent trades
• Average performance: 5 units per day
• Number of units to finish: 90
• Target planning time to finish overall project: 20 workdays
• Setup time: trade 2 (piping) starts one day after trade 1 (steel)
The calculation without variability based on average values results in:
This simple example shows that the overall construction finish date based on an average duration calculation per trade can be kept and the planner even included 1 day of buffer.
Productivity and project duration: Calculation example without variability
Sounds good, doesn’t it? Yet two words were not carefully considered: “consecutive interdependent” trades. Now what is the effect on the overall finish date if the 2 trades have the same average productivity output of 5 units per day and their output variability from 1 to 9 is equally distributed?
The effect is a delay of 3 days (15% extra time) over the duration of the project as shown in the next graph. The first trade included a learning curve, thus during the first days starting with lower productivity values and speeding up (from 1 to 9). Trade 2 wanted to follow a front loading productivity approach to make the best use of his available capacity (from 9 to 1). The overall calculated productivity of each trade is identical at 5 units per day. Yet trade 2 is blocked due to the variability of trade 1, which results in productivity losses of 20 units. This could not be recovered by trade 2.
The example is very simplified and only considers the time effect (e.g. only two trades, balanced overall productivity values, standardized production unit size, etc.). Yet it directly explains the effect of variability, which happens every day in the construction reality. Clearly there are more implications than just delay. You can now already imagine the contractual dilemma of this project. The owner will try to put a claim regarding delay towards trade 2. Trade 2 will try to claim a delay on trade 1, who will state towards the owner to have finished on time, as he did. So there is no solution, unless the real productivity output levels per unit were contractually defined up front. Lean construction has found two major approaches to tackle this effect of variability in construction, as will be explained later in this book: collaborative planning with KPIs to improve process reliability or “takt” time balancing of trades. The following diagram illustrates how variability effects the end-date of an overall project.
Delay in project duration as an effect of variability
So the first take-away why construction progress is lower than planned is the underestimated effect of other’s variability on your own results and the overall outcome due to interface-dependencies. In later chapters we will describe what to do and how to diagnose the situation and define solutions.
No anticipation of progress deviations is the second reason for low construction progress. If progress deviations are discovered too late by the owner or general contractor, they’re not able to pose effective counteractions any more. In my experiences with conventional large-scale construction projects, there are typically monthly progress reviews between the owner (O), general contractor (GC) and project management-control (EPCM). In reality, these meetings actually dealt with the progress of last month. Thus, the progress in questions had already happened in part 4 weeks earlier, plus an additional 1-2 weeks of preparation time for the reporting. Imagine a group of important people whose time is big money meeting once a month to look at outdated figures. And the results will frequently show negative progress deviations. Even worse – everyone knows that during the last 6 weeks the site has changed and new progress deviations may have occurred since then and are not yet visible. Furthermore, the general contractor will try to take any chance to find reasons why it is not his fault, but maybe another party’s fault, instead of searching for proactive solutions. If you sit in on such meetings and want to change something, it’s frustrating. Even if you manage to move the participants forward and make some proactive decisions, it will still take some days until the decisions are put into practice. And in the meantime the whole situation may have changed. Without anticipation and direct counteractions on progress deviations, there is no way to achieve better results than planned.
Lagging optimistic planning instead of leading realistic planning is the third most common reason why progress is lower than expected. A “lagging optimistic plan” – what does that mean? The way general contractors (GC) in EPC settings still win the bid is mostly on price and owners want to get the earliest possible end dates (start of production / handover) to start amortization of their investments. Therefore, a GC will first calculate a planning offer with a very optimistic edge to win the bid and reflect on where and how to find ways to deal with claims or disputes in case reality turn out to be not quite so optimistic. Second, the way initial planning is conducted is in the form of static, up-front top-down planning, decoupled from yard reality. Particularly in mega-projects planners and executive people are completely decoupled from each other due to larger time frames and complexity. It seems, that the usefulness of collaborative end-front planning approaches (to think from the end to the beginning) is either neglected or not know.
Then during construction execution, the owner will look at the optimistic time plan and surprisingly find out that reality is less favorable. The owner may get the feeling of being cheated and tries to insist on what was written in the contract and planning. In this case it also gets tricky for the general contractor, because the money is not yet paid. Therefore, one way contractors protect their stake in this game is to try to keep the owner as long as possible in the clouds without knowing the real progress.
So typically the schedule will already differ from reality shortly after start of construction planning. What to do now? Update the schedule or speed up the yard? It is easier to update a schedule because this can be done by one person. But it will create problems if plans are updated according to construction progress instead of pushing progress in the yard according to the plan. Even worse is the situation, if the planning is not updated anymore and not been used as an efficient management tool to recover lost progress. Then it serves only as an instrument for creating claims for both sides. In my experience the general contractor, EPCM and subcontractors then start to have their own schedules that differ from each other and hinder further collaboration and transparency. Sometimes only a third independent party can re-establish transparency in this setting by revising a realistic baseline.
A plan “lagging behind” its yard reality means that planning is updated according to yard progress, instead of steering it. Such a planning practice has lost its main purpose to drive changes in case of progress deviations and to catch up towards the original master plan. Using planning as an efficient construction management tool requires realistic planning, also called a “baseline”, which reflects the capabilities, capacity, performance factors, construction technology and variability of the parties involved in construction. If the project has already started, it may require a thorough diagnostic approach (chapter 16) and to be based on the outcome of a mitigation plan (chapter 17) to transform lagging planning into leading planning (chapters 10-12), which is about enabling collaborative and integrated planning.
Now having discussed why construction progress is lower than planned, we will look one level deeper to understand which root causes are the underlying drivers that trigger bottlenecks in construction.
A bottleneck in construction execution is defined in this context as the main elements that hinder planned progress and results. This means the project does not proceed at the required pace. There may be multiple underlying reasons, but the influenceable root causes can be traced back to three major areas: systems, capabilities and motivation.
Imagine in a project it became clear that it is out of cost and delayed. The first step is to ask why and understand the reasons. As discussed in chapter 1, there are three very typical reasons related to inaccurate progress plans: 1. variability on trade performance was not taken into account and was not visible; 2. progress deviations were not anticipated and/or 3. planning was too optimistic and lagging behind yard progress, instead of steering it.