2019BookofCases

6 L EAN C ONSTRUCTION I RELAND A NNUAL B OOK OF C ASES 2019 include the neighbors, regulators, lenders and ‘patients’, the customers of the client. Meeting the different needs of these clients and customers is a challenge every project faces. Even a developer that produces buildings “on spec”, meaning that they haven’t sold it beforehand, consider Use costs because that impacts sales/lease price. 2.Design to targets for net benefits in use – what is wanted and the allowable cost for what is wanted. Don’t design and then cost. How is TVD different? Many, if not most, construction projects are launched with too little certainty about the challenges they will face and the resources needed to meet those challenges. Unlike TVD projects, it is common for the estimated cost to increase as the design becomes more detailed. Far from establishing a maximum amount that clients/owners might pay, the sum of bids for construction packages is actually the least a client/owner will pay. Better methods for setting and steering to project targets are needed. Setting Targets and Deciding what Project to Build The process for setting targets for what is wanted, and for conditions of satisfaction on the delivery of what is wanted, is outlined in Figure 3. Note that allowable cost is what the client/owner is both willing and able to spend to get what they want (benefits in use). Note also that these two (what is wanted and allowable cost) are two sides of one coin. A change in either should always trigger recalculation of the other. If the expected cost of what is wanted cannot be reduced to fit within the allowable cost, what is wanted must be changed. If what is wanted changes, the allowable cost must be recalculated Figure 3. Project Definition Process (adapted from Ballard & Pennanen, 2013) Both possibilities are illustrated in Figure 3. Once what is wanted and its allowable cost are determined, the next step is to compare allowable cost with expected cost. Common methods for estimating expected cost are unit pricing (cost per square metre, cost per hospital bed) and benchmarking against similar facilities. Unit pricing can be plus or minus 40% from cost at completion. Benchmarking can be closer to cost at completion, but how close depends on both the abilities of the estimator and the quality of data that can be used. A third method for conceptual estimating (estimating cost at completion prior to design, from programmatic data) is to first model the building and then cost it. More common on industrial projects than in building projects, this method, based on engineering logic, is used by Haahtela, a Finnish project and cost management consulting firm based in Helsinki (www.haahtela.fi ) in its management of building projects. The average difference between conceptual estimate and cost at completion for Haahtela’s most recent 32 projects is -1.0%, with a standard deviation of 5%. Regardless of the cost estimating method used, decisions about keeping a project moving forward have to be made with limited information and some degree of uncertainty. That is a bit like trying to decide if to “hold’em or fold’em” in bidding games. If the difference between allowable and expected cost is so great that it seems unlikely that the gap can be closed, what is wanted must be revised. If there is reason to hope that the gap can be closed, the next step is to fund a feasibility study. In the pr ivate sector, fai lure to al ign bus iness requirements and allowable cost can even result in projects being abandoned. That can also happen in the public sector but can be more challenging because projects are initiated to deliver service value to the public as well as wider social and economic benefits – and may do so even when project scope must be sacrificed. Feasibility studies can be done by client/owner personnel, by appointed external professionals, or by the key players that will deliver the project if funding is secured. The feasibility study consists of producing a plan for project execution, then testing that plan against potential risks and opportunities. What counts as acceptable risk is always the primary client’s decision. Three factors drive the superior performance of TVD projects: 1. The Lean Construction philosophy and methods. 2. Organisational integration – downstream players participate in upstream processes and vice-versa. 3. Shared risk and reward. They are listed here in order of importance. The philosophy is absolutely necessary. Organisational integration is highly advisable. The ‘one team’ attitude can be promoted by shared incent ives and by reminders that commercial success of each player is dependent on how others perform, not only their own performance. While collaborative contracts such as Project Alliancing and Integrated Project Delivery (IPD) undoubtedly help, other contractual structures, especial ly those that al low ear ly contractor involvement, can fit with TVD. Such contractual arrangements can also be put in place for public sector contracts too. The feasibility study may recommend funding or revising the project. If funded, targets will have been set for both what is wanted (functions to be performed, capacities needed for their performance, facility performance specifications) and conditions of satisfaction (cost, time, social impacts, environmental impacts).