Lean Construction: What's To Come?

Lean Construction: Only One Variable in the Capital Project Value Formula

By Charles Spina

Director, Corporate Client Relationships

eZsigma Group 

There are few sectors where Lean and its cousin, Six Sigma, can have a more conspicuous beneficial impact than construction. The end-to-end value streams are phenomenally extended, yet the decomposed streams have historically been de-coupled from each other. What are we saying here? Let’s first look at what we are not saying. We are not saying that  project smarts are not being applied, that smart people are not behind the projects, that some of these projects are actually delivered on-time and on budget and on spec. What we are saying is that value stream integration, true collaborative planning and re-planning, and a little Lean skill can dramatically improve the processes intended to be housed in the buildings being constructed, shorten timelines, improve safety and increase profit margins.

It is sometimes claimed that when it comes to best practice, Canada lags other countries. If we look at construction, even the least objective of us must admit that with all of the sector’s monumental accomplishments, when it comes to process efficiency, the claim has merit.

Yet are we being myopic if we limit our view of process improvement opportunities only to the construction phase of capital projects or to the constructors themselves? We think so, because we believe that the quest for optimization must encompass the constituent processes managed and otherwise owned by the other players in the capital projects value chain: owners, funders, architects, functional programmers and sub-contractors.

It Comes Down to Time and Customer Value

We are not about to insult our readers with oversimplifications; even modest capital projects are complex, but if we were to isolate a single measurable to be managed in such projects, it would be the elapsed time measured from design concept to the first customer service occurrence. A customer service occurrence could be triggered by an emergency room visit, or in the case of a courthouse, a first trial proceeding, so non-value added time is not only money, it is social cost and it is opportunity cost.

If Lean is about understanding the voice of the customer and about translating it into experiences that can be monetized, constructors certainly have their contribution to make to the customer experience by completing earlier, and in a DBFM context, designing from inception for flow and motion. Indeed, in a future entry in this series we will give the constructor’s role its due emphasis. In this entry, however, with the time measure as our backdrop, we are going look at the role of public and private sector project owners.

Public Sector Project Owners

Government-sponsored projects, such as those for municipal buildings and hospitals having service fulfillment mandates, necessarily have long lead times, owing to the requisite community and stakeholder consultations, partnership formation (particularly in this era of DBFM) and funding and regulatory approvals. Lean practitioners who are familiar with the sector view this pre-construction cycle as a value stream in its own right, and one that is in need of much attention. To be sure, it is composed of a certain amount of distributed value-added activity - after all, the job eventually gets done- but it is performed over a waste-laden timeline.

Private Sector Project Owners

The private sector project owner is interested in minimizing his or her cash-to-cash gap; that is, the time from the commencement of capital outflows to the time cash from revenue generating activities starts to materialize. If a hospital first opens its doors six months after scheduled completion, it’s certainly a human impact problem, but above all, it’s a political problem. When the turbines of a power plant start spinning six months late, however, it’s a financial problem: for lenders for sure, but also for the investors holding units in the infrastructure fund that took a $100 million bet on the project.

An Ounce of Lean Knowledge Sheds Pounds of Waste

Owners need not take more than a day to orient themselves to Lean principles and methods for them to be empowered to identify projects’ winning pre-conditions and how those conditions can be embedded in RFPs and contracts. According to one distinguished Lean practitioner, just by operating in Canada, owners already have a cultural advantage.    

“In general… levels of collaboration seem to be higher. Canadian contractors often work with the same suppliers and the same subs over multiple projects. That makes ideas like lean construction easier to bring in. There’s a baseline of trust in the beginning.”

(Dick Bayer, Executive Director, Lean Construction Institute)

Canada has world class architecture, construction materials and constructors. Yet, if we isolate the construction value stream in the capital projects life cycle, we need not look farther than the typical contract to see that risk, lateness and uncertainty are embedded in them and priced accordingly. The impetus to re-invent process can come from two sources: owners who demand best value for money and constructors - in their quest for competitive advantage.

The extent to which Lean construction methods are being adopted, at least south of the border, can be gleaned from Dassault Systèmes' seminal 2013 survey. The continuous improvement mindset and the deployment of its corresponding methods and tools requires leadership. Canadian constructors can either lead its deployment and thus influence the entire project life cycle, from concept development, to design, to modeling, to contracting, resource engagement, construction and commissioning, or be led by others. Given the choice, we know where we would stake our ground….and our brands.

eZsigma Group is pioneering the usage of Lean Six Sigma in the construction industry. Contact us for more details about how we can help your organization perform better.