2019BookofCases

5 L EAN C ONSTRUCTION I RELAND A NNUAL B OOK OF C ASES 2019 Chapter 1 – Target Value Delivery Target Value Delivery (TVD) is a process for delivering value to public and private clients/owners, as well as other project stakeholders , wi thin thei r economic, social and environmental conditions of satisfaction. TVD was adapted from manufacturing’s Lean Product Development. When a manufacturer wants to add a new product to its portfolio, they decide what benefits they expect from the product over its lifetime, then decide what is the most they are willing and able to spend to get those benefits, namely, the al lowable cost. This cost/benefit ratio is illustrated in Figure 1. Figure 1. Costs and Benefits The data for constructing this figure came from a study undertaken for the UK’s National Health Service (NHS). “Healthcare outcomes” on the right lists some of the benefits expected from the use of the building to deliver healthcare. Some benefits, such as increased publ ic awareness or projecting a desired image, may not be easily measured in Euros but may nonetheless be valuable to a client/owner. The costs of acquiring those benefits are the sum of capital costs (Design and Construction) and use costs (Operation and Maintenance plus Business) over 20 years. The unit of cost is Construction at 1.0; Capital costs are 1.1 units; and Use costs are 46.3 units. The value of benefits to the clients/owners must be greater than the sum of whole-life costs in order for the project to proceed. In other words, the area of the big circle on the right must be greater than the sum of the four cost circles. Cost figures in this diagram are intended to represent the relationship between cost elements. By far the biggest costs are those for business use of the hospital (mainly staffing costs) and for operating and maintaining the physical facility. Engaging these users in designing how healthcare will be delivered in the hospital, and how the hospital will be shaped to facilitate both healthcare delivery and operations and maintenance, is strongly advisable. Otherwise, the risk is great that the cost of using the building for its intended purpose will push lifecycle costs beyond the allowable – or worse yet, the cost is controlled but benefits are not delivered. Figure 2. Early TVD Project Example The Project in Figure 2 – Sutter Health’s Fairfield Medical Of f ice Bui lding Project – had an est imated cost of US$22Million based on what Sutter Health and other healthcare companies in California had spent on similar facilities. The target cost for the project was set at US$18.9Million based on a desired return on investment from use of the building through i ts des ign l i fe, and the actual cost at complet ion was US$17.9Million. The cost to design and construct the building was reduced as a result of a combination of factors, chief of which were integrating builders into the design team, providing rapid cost feedback on design alternatives, and shared risk and reward by the key design and construction firms involved in the project. As illustrated in Figure 2, cost at completion was 5.2% below target and 18.6% below market. The success of this early project, completed in 2006, persuaded Sutter Health to use TVD to deliver all of its acute care hospitals. Key Points 1.Most clients are multi-faceted. They include the business owner, those who use the constructed asset for its intended purpose, and those who maintain and operate the physical facility. These are the primary clients. Additional customers Target Value Delivery by Glenn Ballard, Project Production Systems Laboratory at University of California Berkeley