This Changes Everything

Will Lichtig made a one-slide presentation of the Sutter's Integrated Form of Agreement. He did this as the preface to the SSM presentation "This Changes Everything, Integrated Project Delivery". Tom VanLandingham, Christner (Architects) opened the conversation with a description of the SSM Cardinal Glennon Children's Medical Center. They are making $60 million of upgrades to a functioning facility adding operating rooms and neonatal intensive care units.

What is the "This"? It is an integrated approach to delivering projects based on lean construction.

Tom did a comprehensive review of why it is we see the symptoms of a broken system that has been codified in AIA and AGC contract documents. He goes back to architectural schools to trace the original sources of the problems. He added that the highly specialized highly subcontracted current situation. In that situation, communication follows the relationships of the contracts rather than directly from one person to another.

SSM then spoke about how they got into lean construction. They were frustrated with the symptoms of the conventional approach; they wanted to save money; and they thought they could do better. They sought permission to do something different.

"Gross maximum price (GMP) contracts were part of the problem."

Tim Gunn, Alberici Construction jumped in sharing how they shifted from the usual approach underway to a lean approach. They selected subcontractors purely on attitude rather than price. Once they got subcontractor on early they asked them what made they work unproductive. The list was quite long. They determined that everything on the list lean construction tries to address.

They decided they didn't know what they were doing…so they got help from Lean Project Consulting. It was there they learned about Integrated Form of Agreement. They really believe in LPS. They are using it in the office and the field. They score reliability using PPC. They went on to score the constraints resolution process.

SSM "shamelessly stole the Sutter (Will Lichtig) agreement" making only minor changes for Missouri state law and indemnities. They see the IFoA as the roadmap to Integrated Project Delivery. They highlighted the importance of having a core team that is always asking, "What is the best thing for this project?" The core group meets weekly. They evaluate how the project is going and what the project needs. They've agreed to the following standards for behavior:

• Candor and thick skin
• Enthusiasm for change and improvement
• Commitment to goals and principles
• Ability to decide and commit
• No hierarchy

In addition to improvements in planning and scheduling, coordination and communication, they started to have fun! At this time they wrote a project-wide financial incentive plan. They decided that contingencies hid waste. They would make the contingencies available to the owner, architect, contractors, and a 10% discretionary amount to award to outstanding contributors. It was at this point that they decided that gross maximum price contracts were part of the problem. The contract frames the extent of what is possible in the behaviors on the project. They decided to eliminate the GMP taking all the risk by the owner. The principle behind eliminating the GMP is it puts all the risk on the table. This allows the best person to manage that risk. Common sense behavior results from that decision.

Lean Construction Results

• MEP contractors provided cost and technical constructibility support
• Designs are 100% signed off by the users of the documents. They attribute this to making and keeping commitments. It's part of the assurance phase of completing a commitment.
• After 24 months of working, only 63 RFIs. At the usual administrative costs of $600 per RFI they are incurring far lower costs than a usual project of this type where they could expect about 1,000 RFIs.
• Safety is far better than the industry recording only 3 incidents in 152,000 hours. This is less than 1/2 of what could be expected.
• They are on a schedule to finish the project 3 months early.
• At 50% complete over 94% of the construction contingency is intact…and rising, perhaps to over 100%.
• While cash flow started out ahead of expectation, at this point in the project cash flow is below what is expected.
• Preferred job site: morale is high; quality is high; no facility interruptions; subs are making fair profits; and they're having fun!

"If this had been a conventional project it would have been very difficult."

Lessons Learned

• Replication is hard
• Get the right team
• Must have an enlightened owner
• Perseverance is a must
• Gain alignment — the core team is essential
• The LPS helps the subs do the right work

What Has Been Hard to Do?

• Subcontractor financial reporting doesn't match how work was estimated
• Document control
• Pace of progress
• Determining batch size and workflow — it differs by trade
• 3D coordination
• Replication

Surprises

• Thought it would be a cake walk…not!
• It's easy to slip into conventional ways
• It was significant eliminating the GMP
• The field quickly embraced the changes — it's the best job they've ever worked on
• There was a reduction in strife. No difficult conversations about money.
• The CM effort was reduced

"If this had been a conventional project it would have been very difficult."

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This entry was posted on Wednesday, November 8th, 2006 at 3:25 pm and is tagged: lean, design, construction. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed. Convert this post to a PDF document.