Marton Marosszeky has spent 25 years researching and mentoring teams in construction process improvement in relation to production, safety and quality and has co-authored two books, Total Construction Management: Lean Quality in Capital Project Delivery, with another book on lean construction due out in early 2017.
For the past 15 years, he has been in management consulting on the basis of lean thinking and was the co-founder and national chair of the Lean Construction Institute of Australia from 2011 to 2014.
In a two-part series exclusive to Inside Construction, Marosszeky discusses the principles of lean construction and how accelerating globalisation has resulted in a demand for larger and more complex projects in the sector.
Lean construction
All industries are undergoing rapid change under the pressure of technological change and changing client needs. The construction sector is no exception. The past ten years have seen accelerating globalisation, a demand for larger and more complex projects, and a requirement for them to be delivered in even shorter time frames.
Meanwhile, there is increasing concern that this sector is not keeping pace with improvements in productivity gain seen in other sectors of the economy and in addition, the impact of errors in quality and safety have been slow to improve. There is also evidence that some of the sector’s major clients are expecting much more from their construction supply chains.
Since the early 90s many companies in manufacturing, resource development and service industries including banking, aircraft maintenance, mining and health care have taken lessons from the lean movement and radically changed their own approach to business. These ideas are still relatively new for the Australian construction sector, though internationally there’s a growing number of construction companies that are leveraging these ideas to great benefit.
In this article, we look more closely at what lean production means for construction and review the benefits that lead adopters are reaping from their practices.
Today’s major project construction industry
Many among clients, designers, and contractors involved in major projects are seeing Building Information Modelling (BIM) as the silver bullet that will transform the industry. In my view, BIM is just one of two powerful forces that are causing disruption in the sector, the other which is even more fundamental is lean thinking.
These two developments will transform the sector, alter relationships from the client down throughout the supply chain, create the potential for collaborative innovation and drive the creation of greater efficiency and improved client satisfaction. While BIM is a very powerful enabling technology which provides a platform for improved communication, problem solving and solution optimisation, lean’s focus is on improving the capability of supply chains, and improving value creation for customers – the ultimate customer as well as for all intermediate customers throughout the supply chain.
In the recent past, the convergence of lean management and quality management thinking has taken place in organisations across many industries, including construction. Practices in procurement, design management and construction management are all evolving constantly, and understanding these changes and how to react are essential to successful management.
While within the construction sector, the genesis of lean practice was at the site level, improving planning reliability and collaboration, with time, organisations realised that improved communication, making more effective use of performance data to drive process improvement and closer relationships between clients, lead designers and contractors and their supplier chains are all equally critical. Lean thinking provides the basis for transforming the construction sector globally, significantly improving productivity and increasing the industry’s potential for value creation for its customers.
On the demand side, among infrastructure owners there is a common belief that the lowest cost tendered on a project represents best value. On large and complex projects this is a high-risk strategy. In fact, by adopting this approach to procurement, owners trade off flexibility and their ability to manage risk for the illusion of cost certainty. Large complex projects are almost inevitably time critical; they are unique; they run over several years and at the outset, there are many uncertainties. When clients are reluctant to invest in early stage planning and design, and are in a rush to start, they tend to push decisions and risk down the supply chain. Under these circumstances, all risks are priced conservatively to cover the suppliers’ risk in the absence of information; and client changes during the project are priced as variations and usually command a price premium. The final scope is rarely the same as the one priced at the outset and the opportunity for contractual disputation is significant.
On the supply side, today’s industry is extremely fragmented and specialised; numerous alternative technologies exist for each part of a building. Meanwhile, general contractors are increasingly becoming purchasers of materials and services rather than constructors. For reasons of managing industrial relations risk and increased technical specialisation, most of today’s large projects are built by a very large and diverse team of specialist designers, fabricators and construction organisations. This extraordinary fragmentation has brought with it significant challenges to control, coordination, integration and innovation.
Each subcontract organisation works on many projects concurrently; and there are competing demands for resources between different projects, making it difficult for subcontractors to make reliable commitments to each project. Subcontractors attempt to manage the widely fluctuating demand on their resources by adopting a pyramid sub-contracting strategy. Ultimately, almost all the safety, quality and production risk lies with the sub-contractors who supply materials and labour.
Coupled with the extreme fragmentation of their supply chains, many contractors in the sector favour short-term, cost-based relationships with their suppliers. Coupled with this, most project managers are more interested in the speed of the job than smoothing out the resource requirements for their subcontractor’s labour because speed is the factor that has the greatest impact on their own costs and profits. While in the past few decades, major contractors have narrowed their supply chains, it is fair to say that their relationships with their suppliers are still relatively shallow. Almost all contractors collaborate with their suppliers only when working together on projects. Examples of deep, long-term commitment to collaboration with the supply chain are relatively uncommon.
Within this fragmented delivery model, with low levels of trust between owners, contractors and the supply chain, open collaboration is further limited by the commercial terms of the contracts which tend to push as much of the risk and responsibility as possible down the supply chain. The outcome is that each party fiercely protects its margin and ensures that information is not shared openly. The tension between the self-interest of the parties and the common good of the project is considerable.
The construction industry does have several specific challenges, which create difficulties for it. The first of these is its one-of-a-kind production process – projects tend to be unique, even when the structure is similar and each site has unique features. To further complicate matters, every large project is designed and build by a new team, and each project team has to learn to collaborate, develop relationships and a project culture anew. To make this process more tenuous, the industry tends to be intensely cost-focused, and clients and general contractors value cost certainty above all else, even in the absence of scope certainty.
A further complicating factor is the long timeframe of procurement. For large projects, conception to completion often takes years and, within this time, many of the individuals involved in the process change, challenging the continuity of processes and relationships. This is further complicated by the fact that relationships between head contractors and subcontractors are essentially price-based and project-based.
In part two of the series, which will be published on Inside Construction next week, Marosszeky discusses the how lean thinking works in construction and the benefits to be had.
Marton Marosszeky, managing director of Marosszeky Associates, is a business improvement specialist and durability expert.