Audience Reactions to SSM’s “This Changes Everything”

November 8th, 2006 by Hal

Key Points

Problems are universal
Alignment from IFoA and shared incentives
Asking the question, "WHat makes the work unproductive?"
No GMP
Selection of the right team
No GMP
Reduction of RFIs
The showed how communication flows along
100% sign-off on design
Poor financial reporting of subs
Core team
Public tracking of PPC
Core group authorized to make commitments
Owner's decision and commitment to change
IFoA underlying trust factor
Using PPC to track OAC performance
It's ok (with the client) to make a profit
Job satisfaction
Being careful not to revert to traditional practices
Planned work improves safety
The process is driven by the trades

Questions

How do you eliminate the GMP while providing a funding mechanism by preserving a contingency?
How did you establish target costs
What was unique about target costing methods
Want more details on open book pricing
How do you deal with the requirements of financial institution requirements for a GMP?
How did you handle it when the four core team members didn't agree?
How did you handle the changing equipment environment?
What might happen with subcontractor behavior if the same team were to build another project using a GMP? Would it still be fun?
How did you handle the T&M billing process?
Can't you see cutting material costs as well for improvement?
How do you expect the incentive program to work on the next project?
What were the discrepancies in the subcontractor financial accounting?
How does the open book accounting work with regard to the designers' fees?
How is retention handled?
With no RFIs how are changes documented?

Panel Member Responses

They worked with subcontractor owners and presidents to work out the basis for working on an open book basis. They found they couldn't strip overheads from their costs. They submit actuals with an agreed to mark-up. They do this monthly. They are only 1% retention, even though the team has deemed that unreasonable on a T&M project. They've accumulating the retention into a warranty pool that will be distributed at the end of one year.
SSM asked subs to estimate costs based on how they will bill it. They've previously asked them to estimate by system and by floor. They are learning. They want more improvement. Subs aren't used to having their estimates match their billings. And they don't admit it.
The core team has few disagreements, but when they do they talk them out.
When they have disputes with subs — where the subs won't play ball — they throw them off the island. They want the subs to follow the same behaviors as the core team.
The next project will be different because they will start earlier in the process rather than mid-design. The design team will look different because they will be selected for their ability to play this new game.
SSM thinks that if the GMP was used on the next project, then subs will revert to taking care of themselves rather than the project. That's what the contract provides for. It may still be an amicable job, but I don't expect to see the same level of cooperation and attention to what is best for the project. The posturing for claims and change orders would naturally occur. The GMP has helped when there is some resistance to change. It allows them to say, "Guys, how about just trying this with us. If it doesn't work we'll change it." Noticeably absent on this job is, "I didn't bid it that way."
Traditional AIA agreements have language like 'the project management will endeavor to communicate with the architect.' The IFoA specifically requires direct conversations.
About half of the work was performed on a fixed price. They decided who and what to contract that way they considered how that work would interact with or release work for others.
Will Lichtig asked where hasn't the team seen benefits. SSM said it was on the design size. They also think that batch sizes is getting in the way of producing flow. It needs more thought and help. Determining who the real drivers are in a construction environment. We didn't realize how important the dry wall guy is.
Will, "Is the core team accountable to another group?" There is no one senior to the team that oversees their work. The core team functions well together. They don't see a benefit of having a senior group as contemplated in the IFoA. If the project was smaller and the core team was made up of more junior people, then a senior team might help.
Will, "How do you intend to spread this beyond your project team. SSM sees it to be an impossible task to do that. They see that others might just dabble. It would be a challenge for the current organization. Christman thinks the thinking in design firms gets in the way of spreading this. It will take a champion. Alberici is sharing this within their company. Some other projects in St Louis are dabbling with this. Limiting their efforts to evangelism.

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