Lean Project Delivery

Lean Project Delivery
Glenn Ballard
Project Production Systems Laboratory
Engineering and Project Management
University of California at Berkeley
Workshop Objectives
Understand Lean Project Delivery

Where did it come from?
What is it? How is it different?
Prepare for the pre-construction phase of your projects

Coordination and control through reliable promising
Set based design strategy
Maximizing value for money through target costing
Collaborative design process
Launch project planning

Business case, stakeholder map, stakeholder values
Constraints: financial, location, regulatory
Organizational and contractual structure; project governance
What will we start doing? What will we stop doing?
Glenn Ballard a brief CV

Experience
Pipefitter, Foreman, Construction Engineer, Productivity &
Quality Specialist, Internal Management Consultant for Brown &
Root and Bechtel
Independent Management Consultant for Petroleos de
Venezuela, U.S. Dept. of Energy, Pacific Gas & Electric, Koch
Refining, BAA (Heathrow Terminal 5), Channel Tunnel Rail Link
(St. Pancras Station)
Current Position
Professor in the Engineering & Project Management Program,
Dept. of Civil & Environmental Engineering, UC Berkeley
Director, Project Production Systems Laboratory, UC Berkeley
Education
B.A. in Mathematics
M.B.A.
PhD in Civil Engineering
The Airplane Game

An exercise in production
system design
Engineering and Project Management

University of California at Berkeley
Phase13AssemblyLayout
WS2
IncomingQueues
WS3
WS1
WS4
WS6
WS5
(QC)
Phase13AssemblyLayout
WS3
WS2
WS4
WS5
(QC)
IncomingQueues
WS1
WS6
Performance Metrics
Planes: the number of good planes
produced in each 6 minute phase.
Time: the time it takes the first good plane
to get through the system.
Rework: the number of planes turned
upside to indicate defects in configuration
or fit.
Work-in-Progress Inventory (WIP): the
number of subassemblies on the table at
the end of the 6 minute phase.
Phase 1 Logistics
Workstations in work flow sequence
Materials located at workstation
Workstations 2-5 have an incoming
queue space
Completed Batches of 5 placed in
queue space of next station
Batches remain together until final
inspection
Phase 1 Policies
Workers perform only their assigned tasks
- NO THINKING
Maintain Batch integrity - BUILD IT IF YOU
CAN and PASS IT ON IF YOU CANT.
QC Problems only detected by Inspector NO FEEDBACK - NO TALKING
All QC problems set aside as rework TURN UPSIDE DOWN
QC Inspector announces first good plane.
Assemblers are paid by the piece.
Your Hypotheses
How many good planes will your team
produce in Phase I?
How long will it take for you to produce the
first good plane?
How much rework will you generate
(planes turned upside down)?
How much WIP will you generate
(subassemblies left on the table)?
How could this system be

redesigned for better performance?
Phase 2 Logistics
Workers may have only one assembly at their
workstation
Only 1 assembly allowed in queue space
between stations (Batch size of 1)
Assembly can only be placed in queue when
it is empty (pull mechanism).
Workstations in Work Flow Sequence
Materials located at station
Stations 2-5 have an incoming queue space
Phase 2 Policies
QC Problems may be verbalized by any worker
SOME THINKING and TALKING ALLOWED
All QC problems set aside as rework at station

discovered.
TURN UPSIDE DOWN
Everyone is paid hourly wages plus a bonus for

team performance.
Workers perform only their assigned tasks
Workers cannot fix QC problems from upstream
Inspector announces first good plane.
Your Hypotheses
How many good planes will your team
produce in Phase II?
How long will it take for you to produce the
first good plane?
How much rework will you generate
(planes turned upside down)?
How much WIP will you generate
(subassemblies left on the table)?
Your Hypotheses
1.
How many good planes will your team produce in Phase II?
2.
How long will it take for you to produce the first good plane?
3.
How much rework will you generate (planes turned upside

down)?
4.
How much WIP will you generate (subassemblies left on the

table)?
Phase 3 Logistics
Use phase 3 Instruction Sheets.
Workers may have only one assembly at their
workstation
Only 1 assembly allowed in queue space
between stations (Batch size of 1)
Components can only be placed in queue
when it is empty (pull mechanism).
Workstations in Work Flow Sequence
Materials located at station
Stations 2-5 have an incoming queue space
Phase 3 Policies
Workers perform ANY step in the
production process.
QC problems can be fixed by any
worker - Fix it when you find it.
No restrictions on talking.
Everyone is paid hourly wages plus a
bonus for team performance.
Inspector announces first good plane.
Your Hypotheses
1.
How many good planes will your team produce in Phase III?
2.
How long will it take for you to produce the first good plane?
3.
How much rework will you generate (planes turned upside

down)?
4.
How much WIP will you generate (subassemblies left on the

table)?
Throughput
40
35
30
Phase 0
25
Phase I
20
Phase II
15
Phase III
10
5
0
1 2 3 4 5 6 7 8 9
1 1 1 1 1 1 1
0 1 2 3 4 5 6
Phase 0
4 1 0 10 3 9 8 3 5 5 4 4 4 2 5 3
Phase I
10 2 5 17 14 10 15 14 15 10 11 9 14 8 13 15
Phase II 17 5 17 19 19 20 23 20 26 23 12 13 17 16 28 19
Phase III 26 23 33 26 25 30 30 30 37 26 36 25 30 30 36 23
Phase0
not
played
here
Cycle Time
7:12
6:00
4:48
Phase 0
Phase I
3:36
Phase II
Phase III
2:24
Phase0not
playedhere
1:12
0:00
1
2 3
4 5 6
7 8
9 10 11 12 13 14 15 16
Lean Production Techniques in

the Airplane Game
1.
2.
3.
4.
5.
6.
Minimize the movement of materials and workers by

sequencing and positioning of workstations (layout)
and by maintaining materials at the workstations.
Release work (materials or information) from one
workstation (specialist) to the next by pull versus push
Minimize batch sizes to reduce cycle time.
Make everyone responsible for product quality
Balance the workload at connected workstations
Encourage and enable specialists to help one another
as needed to maintain steady work flow (multiskilling)
More Lean Production Techniques

1. Stop the line rather than release bad
product to your customer.
2. Minimize changeover (setup) time to
allow one piece flow.
3. Make the process transparent so the
state of the system can be seen by
anyone from anywhere.
The Airplane Game

1. What are the key points or lessons for
you?
2. How might these apply to designing and
making buildings? How could you use
what you have learned on your projects?
Lean Project Delivery

What is it?
Where is it going?
Graphic courtesy of
Extemin
What is this thing called LEAN?

What has changed Manufacturing, and sharply
pushed up productivity, are new concepts.
Information and automation are less important
than new theories of manufacturing, which are
an advance comparable to the arrival of mass
production 80 years ago.
Peter Drucker, The Economist, pg 12, November 3,
2001
Craft Production
One Off, Custom Products
Flexible, Simple Tools
Highly Skilled Workforce
Integrated Product
Development
Quality by tinkering and
rework
Build to Order
High Cost - Low Volume
Source: The Machine that Changed the World by Womack, Jones & Roos
Courtesy of Strategic Project Solutions Inc. 2005
Mass Production (Ford)

High speed, automated tools
Large batches and inventories
Good enough quality
Departmental organizations
Lengthy product development
Low innovation rate
Toyota Production System (aka Lean)

Started in the 1950s
Chief Architects
Taichi Ohno & Shigeo Shingo
Challenge:
Limited Cash & Space
Sophisticated Customers
Goal:
A custom product, delivered
instantly, with nothing in stores.
Lean Compared to Mass 1980s

Metric
Japan
USA
Productivity (hrs/vehicle)
16.8
25.1
Quality (defects/100 vehicles)
60.0
82.3
% of Work Force in Teams
69.3
17.3
Number of Job Classes
11.9
67.1
Suggestions/Employee
61.6
0.4
Space (Square.ft./vehicle/year)
5.7
7.8
Repair Area (% of assembly

space)
4.1
12.9
Inventories (days)
.2
2.9
Output:
Work Force:
Layout:
Design Performance
Japan
Avg. Engineering Hours (millions)

Avg. Development Time (months)
# Employees in Project Team
# of Body Types per New Car
Supplier Share of Engineering
Ratio of Delayed Products
Prototype Lead Time (months)
Prod. Start to First Sale (months)
Return to Normal Quality (months)
USA
1.7
46.2
485
2.3
51%
1 in 6
6.2
1
3.1
60.4
903
1.7
14%
1 in 2
12.4
4
1.4
11
Source: The Machine that Changed the World
by James P.Womack and Daniel T. Jones
Lean Project Delivery System

Purposes
Design
Concepts
Constraints
Project Definition
Product
Design
Process
Design
Fabrication
& Logistics
Detailed
Engineering
Lean Design
Lean Supply
Installation
Lean Assembly
Production Control
Work Structuring
Learning
Loops
Commissioning
Alteration &
Decommissioning
Operations &
Maintenance
Use
Traditional
Decisions are made
sequentially by specialists
and thrown over the wall
Product design is
completed, then process
design begins
Not all product life cycle
stages are considered in
design
Activities are performed
as soon as possible
versus
Lean
Downstream players are

involved in upstream
decisions, and vice-versa
Product and process are
designed together
All product life cycle
stages are considered in
design
Activities are performed
at the last responsible
moment
Traditional
Separate organizations
link together through the
market, and take what
the market offers
Participants build up large
inventories to protect their
own interests
Stakeholder interests are
not aligned
Learning occurs
sporadically
versus
Lean
Systematic efforts are

made to optimize supply
chains
Buffers are sized and
located to perform their
function of absorbing
system variability
Stakeholder interests are
aligned
Learning is incorporated
into project, firm, and
supply chain
management
Profitability Increase
Waste reduction in a design

office
PRODUCT UNIT
ERRORS
% OF WAITING TIME
IN PROCESS
% NON VALUE
ADDING ACTIVITIES
3,0
10,0
60,0
2,5
8,0
50,0
2,0
40,0
6,0
1,5
30,0
4,0
1,0
0,5
0,0
20,0
2,0
10,0
0,0
0,0
Before
44% Decrease
After
53% Reduction
31% Decrease
PRODUCTIVITY INCREASE OF 31%
Moving from lean projects to lean

enterprises: the Toyota Way
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Base management decisions on long-term philosophy even at the expense of short-term

financial goals
Create continuous process flow to bring problems to the surface
Use pull systems to avoid overproduction
Level out the workload (heijunka) work like the tortoise, not the hare
Build culture of stopping to fix problems to get quality right the first time
Standardized tasks are the foundation for continuous improvement and employee
empowerment
Use visual control so no problems are hidden
Use only reliable, thoroughly tested technology that serves people and processes
Grow leaders who thoroughly understand the work, live the philosophy, and teach it to
others
Develop exceptional people and teams who follow your companys philosophy
Respect your extended network of partners and suppliers by challenging them and helping
them improve
Go and see for yourself to thoroughly understand the situation (genchi genbutsu)
Make decisions slowly by consensus, thoroughly considering all options; implement rapidly
Become a learning organization through relentless reflection (hansei) and continuous
improvement (kaizen)
Summary
What is Lean Project Delivery?
A third form of production system design, neither craft nor mass, adapted
for capital projects.
The lean ideal: Give customers what they want, deliver it instantly, without
waste.

Lean production was invented by Toyota, then adapted for construction by
researchers and practitioners associated with the International Group for
Lean Construction.
Where is it going?
From manufacturing to all industries, including those in which production
systems take the form of projects: construction, product development,
research, software engineering, air and sea shipbuilding, custom
fabrication, work order systems, health care delivery, oil field development.
Workshop Objectives
Action
Items
Log
Linbeck Next Stage Development

The Texas Showplace
As of December 2, 1998 Project Progress Meeting
Date OriginatedItem No.
Item Description
Revised:
Action R Date
By
N Required
C
12.14.98
Date
Completed
A.
Site/Civil
Texas Accessibility Standards:
AA07.01.98.01 Provide TAS requirements to ELS
AA07.01.98.02 Identify preliminary and final TAS review
process.
HA
ELS
07.07.98 07.07.98
07.14.98 07.14.98
AA07.01.98.03 Resolve building storm/sanitary site

CHPA/H 2 07.10.98 08.02.98
collection points and pipe inverts; still
A/
07.31.98
lacking inverts. Coordinate profiles with
LCC/TSP
water line surrounding building to be deeded
H
to City.
AA07.01.98.04 Develop site and parking lighting compatible TEE/FE/ 6 07.14.98 08.12.98
with Lone Star Race Park for site plan
HA
08.12.98
submission for Planning and Zoning approval
(Control Road "B").
AA07.01.98.05 Provide color rendering for submission for
ELS
7 07.14.98 07.27.98
Planning and Zoning review/approval;
07.27.98
resolve landscape issues (IA07.01.98.05).
Traditional Management Increases

Variability: Plan Reliability Data
Company 1
Company 2
Company 3
Company 4
Company 5
Company 6
Company 7
Average
33 %
52 %
61 %
70 %
64 %
57 %
45 %
54 %
The Physics of Coordination

Inquiry
1 Request
Will You?
Accepted
PO
Negotiation
Submitted
C
fi c
Pr
ep
ar
n
io
& a ti o
i
ot
eg
at
at
io
n
ri
la
N
Signed
CUSTOMER
4 Declare
Satisfaction
Thank you
Conditions of
Conditions
of
Satisfaction
Satisfaction
&
&
Date ofDate
Completion
Completion
COMMIT
2
PROVIDER
Pe
r
fo
rm
an
ce
nc
ra
su e
As
Declare
Complete
Im Done
I Promise I WILL
The Last Planner System of Production Control
Master Schedule
Functions of Master Schedules

Demonstrate the feasibility of completing the
work within the available time.
Develop and display execution strategies.
Determine when long lead items will be
needed.
Identify milestones important to client or
stakeholders.
Reverse Phase (Pull) Scheduling

Produce the best possible plan by involving
all with relevant expertise and by planning
near action.
Assure that everyone in a phase understands
and supports the plan by developing the
schedule as a team.
Assure the selection of value adding tasks
that release other work by working
backwards from the target completion date to
produce a pull schedule.
Publicly determine the amount of time
available for contingency and decide as a
group how to spend it.
Functions of the Lookahead Process

Make work ready by identifying and
removing constraints
Shape work flow sequence and rate
Match work flow and capacity
Maintain a backlog of ready work
Develop detailed plans for how work is to
be done
Constraints Analysis: Design

Project: Mega Bldg
Report Date: 3 Nov
n s t r a
i n
t s
______________________________________________________________________________
Activity
Respons- Scheduled Directives
PreResources Comments Ready?
_
ible Party Duration
requisites
Design
slab
Structural
Engineer
15 Nov to
27 Nov
Code 98
Finish?
Levelness?
Soils report
10 hours
labor, 1 hr
plotter
No
Get info.
from client
re floor
finish &
level
Get soils
report
from Civil
Layout
for tool
install
Structural
Engineer'
s gofer
3 Nov to
9 Nov
OK
OK
OK
Yes
Structural
Engineer
By 9 Nov
OK
OK
OK
Yes
Mechanic
al
Engineer
15 Nov to
27 Nov
OK
Tool
OK
configuratio
ns from
mfger
May need
to coord.
w/ HVAC
No
The Last Planner System of Production Control
Quality Characteristics of
Weekly Work Plans
Definition
Soundness
Sequence
Size
Learning
Action
Items
Log
Linbeck Next Stage Development

The Texas Showplace
As of December 2, 1998 Project Progress Meeting
Date OriginatedItem No.
Item Description
Revised:
Action R Date
By
N Required
C
12.14.98
Date
Completed
A.
Site/Civil
Texas Accessibility Standards:
AA07.01.98.01 Provide TAS requirements to ELS
AA07.01.98.02 Identify preliminary and final TAS review
process.
HA
ELS
07.07.98 07.07.98
07.14.98 07.14.98
AA07.01.98.03 Resolve building storm/sanitary site

CHPA/H 2 07.10.98 08.02.98
collection points and pipe inverts; still
A/
07.31.98
lacking inverts. Coordinate profiles with
LCC/TSP
water line surrounding building to be deeded
H
to City.
AA07.01.98.04 Develop site and parking lighting compatible TEE/FE/ 6 07.14.98 08.12.98
with Lone Star Race Park for site plan
HA
08.12.98
submission for Planning and Zoning approval
(Control Road "B").
AA07.01.98.05 Provide color rendering for submission for
ELS
7 07.14.98 07.27.98
Planning and Zoning review/approval;
07.27.98
resolve landscape issues (IA07.01.98.05).
Reasons for Non-Completion

Reasons/ 7/1/ 7/15/ 7/29/98 8/12/98 8/26/98 9/9/98 9/23/98 10/7/ 10/21/9 11/4/9 12/2/9 All
Date
98 98
98
8
8
8
Wee
ks
Decision
1
1
3
1
1
1
3
3
3
17
Prerequisit 7
16
8
2
7
10
3
5
6
4
68
es
Resources
1
2
0
3
Priority
3
4
6
1
1
15
Change
Insufficient 5
6
1
6
6
10
8
10
6
4
62
Time
Late start
4
1
1
1
1
8
Conflicting 7
7
3
1
7
2
4
6
5
42
Demands
Acts of God
3
0
3
Project
0
1
1
Changes
Other
2
1
3
Summary Recommendations for

Production Control
Limit master schedules to milestones and long
lead items.
Produce phase schedules with the team that will
do the work, using a backward pass, and making
slack explicit.
Drop activities from the phase schedule into a 3
week lookahead, screen for constraints, and
advance only if constraints can be removed in
time.
Learn to make reliable promises.
Track PPC and act on reasons for failure to keep
promises.
Plan Failure #1
Failed to transmit site plan package to the general
contractor as promised. Reason provided:
conflicting demandsI was overwhelmed during
this period. 5 whys revealed that the required
time was underestimated for collecting the
information needed because the Citys
requirements for traffic analysis were different and
greater than had been assumed.
Can Last Planner be Applied

to Design?
PPC on a Design-Build Project

Percent of Plan Completed
80%
70%
% Completed
60%
50%
40%
30%
20%
10%
0%
7/1/98
7/15/98
7/29/98
8/12/98
8/26/98
9/9/98
Week
9/23/98
10/7/98
10/21/98
11/4/98
Case Study - Theater Project

PPC for the various project teams
Site/Civil:
Structural:
Enclosure/Architectural:
Mechanical / Electrical:
Theatrical / Interiors:
Project Support:
Total Average PPC:
78%
35%
62%
55%
52%
85%
61.6%
Plan Failure Analysis: # 1

Failed to transmit site plan package to the general contractor
as promised. Reason provided: conflicting demandsI
was overwhelmed during this period. 5 whys revealed that
the required time was underestimated for collecting the
information needed because the Citys requirements for
traffic analysis were different and greater than had been
assumed.

Failed to revise and submit site drainage for revised
commissary roof drainage. Reason provided: prerequisite
work. The mechanical contractor originally provided
drainage data on pipe sizes, inverts, etc., then discovered
that City codes required additional collection points. Civil
is waiting on Mechanical to provide data on these
additional collection points.

Failed to make an engineering determination from 3 alternative pavement
designs provided. Reasons provided: prerequisite work and insufficient
time. This item was not anticipated. Why was it not anticipated? The City
refused to accept our pavement design. Why did they refuse to accept our
pavement design? Soil conditions were different from past projects. The
lack of prerequisite design work referred to the soil borings in the barrow
site. We also are investigating other sources for dirt. Why was time
insufficient? We neglected to plan for the time required to mobilize soils
testing. The root cause was assuming soil conditions would be the same. A
process flow diagram might have revealed the significance of that
assumption.
Plan Failure Analysis

Failures were generally the result of not
understanding something critically important-as
opposed to mistakes in calculation or otherwise
within the design act.
The fundamental causes of non-completion were
failure to apply quality criteria to assignments
and failure to learn from plan failures through
analysis and action on reasons.
Nature of the Design

Process: Implications for
Design Production Control
PPC of design processes is not very high.
Some type of task explosion or
decomposition is needed in order to identify
what needs to be done to make
assignments ready to be performed.
Given the nature of the design process,
such explosion must occur near task
execution.
The Physics of Design

Design is essentially a value generating
process.
Design generates value within
constraints and competing purposes.
Design is the domain of wicked
problems.
The flow of work in design is iterative
and generative.
Design criteria are the critical issue in
design work flow control.
Questions or Comments?
Workshop Objectives




Lean Design: An Overview

Organize in Cross
Functional Teams
* Involve downstream players in upstream decisions

* Alternate between all-group meetings and task force activities
* Create and exploit opportunities to increase value in every phase of the project
Pursue a set based

strategy
* Select from alternatives at the last responsible moment

* Share incomplete information
* Share ranges of acceptable solutions
Structure design work

to approach the lean
ideal
* Simultaneous design of product and process

* Consider decommissioning, commissioning, assembly, fabrication,
purchasing, logistics, detailed engineering, and design
* Shift detailed design to fabricators and installers
Minimize Negative
Iteration
* Pull scheduling
* Design Structure Matrix
* Strategies for managing irreducible loops
Use Last Planner

System of Production
Control
* Try to make only quality assignment

* Make work ready within a lookahead period
* Measure PPC
* Identify and act on reasons for plan failure
Use technologies that

facilitate lean design
* Shared geometry; single model

* Web based interface
Needless (Negative)
Iterations
h
e
P r o je c t P a r tn e r
A
S
E
A
H
E
S
r c h ite c t
te e l F a b r ic a to r
n g in e e r
r c h ite c t
V A C S u b c o n tra c to r
n g in e e r
te e l F a b r ic a to r
.....
(m m )
(m m )
(m m )
(m m )
550
550
200
200
450
400
400
.....
6
9
9
9
8
9
9
.....
5
0
0
0
0
0
0
0
0
0
0
0
0
0
6
6
6
6
6
7
7
5
5
5
5
5
3
3
.....
0
0
0
0
0
0
0
500
1100
1100
1000
600
700
800
.....
From Lottaz, et al. Constraint-Based Support for Collaboration in Design and Const. Jrnl of Computing in Civ.Eng., 1/99
Set Based Design

Set-based engineering has been used to name Toyotas
application of a least commitment strategy in its product
development projects. That strategy could not be more
at odds with current practice, which seeks to rapidly
narrow alternatives to a single point solution, but at the
risk of enormous rework and wasted effort.
It is not far wrong to say that standard design practice
currently is for each design discipline to start as soon as
possible and coordinate only when collisions occur. This
has become even more common with increasing time
pressure on projects, which would be better handled by
sharing incomplete information and working within
understood sets of alternatives or values at each level of
design decision making; e.g., design concepts, facility
systems, facility subsystems, components, parts.
Set-Based Design
Preventing engineers from making
premature design decisions is a
big part of my job. (Toyotas
Manager of Product Engineering)
Set Based Design

Toyotas product development process is
structured and managed quite differently
even than other Japanese automobile
manufacturers. Toyotas product
development:
Develops multiple design alternatives.
Produces 5 or more times the number of
physical prototypes than their competitors.
Puts new products on the market faster than
their competitors and at less cost.
Negative vs Positive Iteration

We suspect that Toyotas superior
performance is a result of reducing
negative iteration, and that the reduction is
more than sufficient to offset time wasted
on unused alternatives. Negative iteration
occurs as a result of each design discipline
rushing to a point solution, then handing
off that solution to downstream disciplines
in a sequential processing mode.
Making Decisions at the Last

Responsible Moment
Whether or not one has the time to carry
alternatives forward, would seem to be a
function of understanding when decisions must
be made lest we lose the opportunity to select a
given alternative. We need to know how long it
takes to actually create or realize an alternative.
Understanding the variability of the delivery
process, we can add safety-time to that leadtime in order to determine the last responsible
moment. Choosing to carry forward multiple
alternatives gives more time for analysis and
thus can contribute to better design decisions.
Advantages of Set-Based Design

1. Enables reliable, efficient communication.
Vs point-based design, in which each change may
invalidate all previous decisions.
2. Waste little time on detailed designs that cant be built.
3. Reduces the number and length of meetings.
4. Bases the most critical, early decisions on data.
5. Promotes institutional learning.
6. Helps delay decisions on variable values until they become
essential for completion of the project.
7. Artificial conflicts and needless iterations of negotiations are
avoided.
8. The initiator of a change retains responsibility for maintaining
consistency.
A Set Based Design Strategy

Identify and sequence key design decisions
For each decision, generate alternatives and
the criteria for evaluating them
Determine the last responsible moment for
decision making
Evaluate and choose from alternatives
Document each key design decision:
alternatives, criteria, evaluation & selection
Workshop Objectives
Making a Virtue of Necessity

Lower the river to reveal the rocks
Systematically stress the production system
to identify needed improvements
Buffer the production system so experiments
can be performed without risk of violating
commercial agreements
Price Profit = Cost

Artificially manipulate constraints to drive
innovation
How to lower the river on capital

facility projects
1) reduce the amount of money made available for
design and construction of facilities with prespecified functionalities, capacities and
properties;
2) increase the minimum acceptable ROI, or
3) increase the valued facility attributes required
beyond what current best practice can deliver for
a given cost.
St. Olafs College Field House
Comparing Projects
Carleton Recreation
Center
St. Olaf Field House
Completion Date
April 2000
August 2002
Project Duration
24 months
14 months
Gross Square Feet
85,414
114,000
Total Cost (incl. A/E

& CM fees )
$13,533,179
$11,716,836
Cost per square foot
$158.44
$102.79
Setting the Target Cost

1.
2.
3.
4.
5.
6.
Assess the business case (demand, revenues), taking into account the
cost to own and use the facility (business operations, facility operations,
facility maintenance, adaptability, durability) as well as the cost to
acquire it.
Determine minimum acceptable ROI or maximum available funds.
Answer the question: If we had a facility with which we could achieve our
specific purposes, and if we could have that facility within our constraints
of cost, location and time, would we do it?
If the answer is positive, and if project delivery is not considered risky,
fund the project. If the answer is positive and project delivery is
considered risky, fund a feasibility study to answer the question: Can we
have the facility we have in mind, will it enable us to achieve our
purposes, and can we acquire it within our constraints?
Start a feasibility study by selecting key members of the team that will
deliver the project if judged feasible.
Determine and rank stakeholder values.
Setting the Target Cost

7.
8.
9.
10.
11.
12.
Explore how the facility will perform in use through process

modeling and simulation.
Scope the facility that will deliver the values.
Determine the expected cost if the facility were provided at
current best practice.
If expected cost exceeds available funds or violates ROI, attack
the gap with innovations in product/process design, restructure
commercial relationships, etc.
If expected cost still exceeds available funds or violates ROI,
adjust scope by sacrificing lesser ranking values.
If the scope and values that support the business case can be
provided within financial constraints, fund the project. Otherwise,
kill the project.
Project Definition Process

Whats Wanted (Ends)
What Provides (Means)
Purposes
Operation
Design
Values
Design
Criteria
Facility
Design(s)
Funds,Time,
Location,
Regulations
Constraints
Designing to the Target Cost

1.
2.
3.
4.
5.
Allocate the target cost to systems, subsystems,

components,
Form teams by facility system: substructure,
superstructure, envelope, HVAC, lighting, etc.
Establish a personal relationship between designers
and cost modellers/construction experts in each
system team.
Have cost modellers/construction experts provide cost
guidelines to designers up front, before design begins.
Require designers to consult cost modellers on the
cost implications of design alternatives before they are
developed.
Designing to the Target Cost

6.
7.
8.
9.
10.
Incorporate value engineering/value management tools and

techniques into the design process.
Periodically convene all teams together to make sure they are
not sacrificing project-level value to local optimization.
When previously agreed, by meeting or beating the target cost,
release funds for adding back lower ranking values or other
scope additions valuable to the client.
Schedule cost reviews and client signoffs, but develop design
and cost concurrently.
Use computer models to automate costing to the extent
feasible.
Tools
Feasibility Study With Detailed Budget (Target)
Engage all parties at earliest possible time
Scheduling (At SRMC the end users were divided into
clear groups for SDs and beyond)
Use a room data sheet
Full engagement from the Affiliate
Estimating at the design table
Empowerment to declare a breakdown
Clear conditions of satisfaction to teams
Willingness to say no (need to have or want to have)
Target team matrix (Organize Teams)
Adopt a Budget Realignment Approach and Tool
Workshop Objectives



Workshop Objectives




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