Big Projects, Big Productivity:
Securing the Future of Megaprojects
Originally aired on 2/7/2023
59 Minute Watch Time
Good afternoon and welcome to this webinar, Big Projects, Big Productivity, Securing the Future of Megaprojects. This event is brought to you by Engineering News Record and sponsored by InEight. Hi, I’m Scott Seltz, publisher of ENR and your moderator for today’s webinar. Thank you for joining us. In March 1930, construction began on a project as mega as they come, the Empire State Building. Shortly over a year later, it was finished under budget. Why does this seem so impossible today? Through an analysis of more than one trillion worth of capital projects over the past five years, McKinsey has uncovered the trend, we simply stopped collaborating well.
In other words, there’s a direct correlation between increasing productivity and improving basic project management outcomes. It sounds simple, but the difficulty lies in how we tackle the challenge of productivity and with what tools. We’ll explore best practices in technology for improving productivity and how these can help better align the overall interest of capital project owners and contractors alike. Now, please join me in welcoming today’s presenters. AJ Waters is the Vice President of Industry Solutions at InEight, where he leads a team of engineers who work with customers to develop solutions that helps solve their greatest project challenges while increasing their profitability and agility.
AJ helps drive digital transformation in the industry by bringing together innovation, technology, and data. Dr. Theodore Weidner is Professor of Engineering Practice, Construction and Engineering Management at Purdue University. He’s made a career of developing and leveraging tools that improve communication between the owner and the design construction team and focuses on increasing the awareness of facilities as they contribute to the mission of the organization that they’re intended to support.
I’ll rejoin the presenters at the end to field your questions that come throughout the webinar, so please don’t forget to submit them in the Q&A section of the webinar console. And now, I’ll hand things over to AJ Waters to kick off today’s discussion. AJ?
Well, thank you, Scott. Good afternoon or good morning to you all, wherever you’re joining from. As Scott mentioned, we’re going to utilize a historic success story, if you will, as we go through this talk today and look at some of the things that may help with productivity, may help with securing the future of megaprojects. But if we take a step back real quick and just reset the stage, back in 1930, New York City was in a race for the tallest buildings in the world, and one of the largest projects to date was kicking off construction. What many people don’t understand is that the Empire State Building came in both ahead of schedule and under budget.
But it’s not just how much it came in under budget or ahead of schedule, but just how fast period the project went up. When you think of the largest building in the world, they started coming out of the ground early in 1930. And as they worked their way up, they topped out in the same year. If your screen is like mine, those dates at the top of each one of those little pictures are pretty hard to figure out, but that first one is actually June and the last one’s November of the same year. This building went up incredibly fast, at least if we think of how megaprojects are handled today. Of course, it still stands as one of the most recognizable buildings in the world.
It wasn’t that they skipped things and went fast due to quality issues. How exactly was this done? Well, first and foremost, they knew the date. They had a target. They wanted to hit revenue generation for the project by a certain date in order to fund the project. Without it, the project would never happen. With the date being known, the design of the building was shaped by that construction schedule. Upfront design already had a construction schedule. Also, they selected or partnered with a contractor based on their reputation for building fast. Simplicity was key. They didn’t want to reinvent the wheel.
They were going to use things that people understood how to build from the start. But these weren’t the only things that they did. They didn’t just pull in design. They also worked together more than maybe we’ve seen in recent years. They created what they called a board of directors that had members from all stakeholder teams on the project, and all the decisions happened in that collaborative environment. Again, we already gave away the punchline, but this project came in two weeks early. In 1930, $2 million under budget was quite a lot of money. That’s our case study that we’re going to use as we walk through today.
That’s our focal point for what we’re going to talk about. But to maybe line out what we’re going to say in what order, let me introduce Ted.
Dr. Theodore Weidner:
Thank you, AJ. Our goals today are to help you identify and establish a baseline of operational efficiencies that stem from improved communication, to lay the foundation for better planning and how getting it involved in construction and in the procurement phase of design is important. We want you to understand how advancements in planning tools are improving operational success. We will try to reveal the link between optimized processes and effective change management, and we’ll discuss how to empower project management teams with the right technology at the right time. Let’s begin. What do we really need?
We need operational efficiency through communication. One of the challenges with any project is looking at how we have improved our efficiency over time. Were we efficient with the construction of the Empire State Building and has that efficiency improved? When we look at a graph provided by McKinsey and Company, we can see at least in this short timeframe from 1994 until 2012 when their study was published that operational efficiency in the construction industry really remained about flat, around $65,000 per worker. If you want to consider inflation, why we were getting worse. That’s unfortunate, because every other industry was getting better.
Manufacturing improved by a factor of almost 2.7 times. A significant improvement. When I look at some historical videos of other researchers trying to simulate the construction of a medieval castle, I see that the processes were generally the same. The only thing that’s really improved is the use of either electrical or internal combustion equipment that powers the equipment that does the lifting of materials. But otherwise, it’s pretty much the same. Not a very good story for us right now in construction. Why did construction fall behind? McKinsey’s study has some interesting information.
First of all, poor organization, essentially who does what and understanding what individual’s jobs are. Inadequate communication, and we’ve mentioned that already. Flawed performance management, essentially holding people to their responsibilities. Contractual misunderstandings, who’s supposed to be doing what. And that can be a big challenge for systems that involve multiple trades. Limited talent management, do supervisors really know how to handle the people that are working with them? And then there’s missed connections.
Things don’t show up when they’re supposed to, other problems show up on the project, and maybe there are missing links between different systems in the construction process. Then there’s short-term planning problems. Is there a good link between what’s happening today and what the overall construction schedule says? And then insufficient risk management. From my perspective, I call that identifying ways to prevent risk in addition to just managing the risk itself. But this boils down to two things, communication and planning. Maybe AJ can expound on those for us.
Right, Ted. I like that simplification of the whole thing is number one, communication, number two, planning. It’s funny, right, because we’re a technology company and we’re coming out of the gate telling you really some of the issues here are working with people. It’s how you communicate. It’s how you get along together. I even saw a story about this this morning in an article about how maybe a partnership is the right answer, right? Because megaprojects, they’re not a competition. They are a partnership between the owner and the contractor and the designer. Everybody wants the project to win.
Nobody sets foot on a construction project or megaproject and says, “You know what? We want to change order this owner until the sun comes home. We want to have the worst reputation for building possible,” and vice versa. The owner doesn’t want to sit there and have to hold the contractor to contractual terms the whole time. Everybody wants the project to go well. Why not look for ways to be more partner-oriented? Like the fact that we have all these contractual penalties all the time that hinder contractors from coming in late. But have we ever thought about putting some incentives in to come in early, or maybe just look at different ways to develop the contract?
We’re starting to see some of this now. A little bit of this is happening with alternative delivery methods. But maybe milestone payments aren’t the most accurate way to put together a contract. All this idea of partnering, of finding better ways to communicate, they really start by building a solid foundation. Right, Ted?
Dr. Theodore Weidner:
Everyone on the team agree to a standard reporting system. It’s also important to develop a regular cadence of reviews of what’s happening. And to some extent, that needs to be tied to the particular activity. Sometimes things in the project move faster, sometimes they move slower. Each part of the organization needs to have a clear regular cadence so they understand when things are going wrong, they know how to deal with them. Also, we need to understand how much time we’re willing to spend on delays.
When you think of a project that has 1,000 people working, getting paid 25, 30, well, maybe even close to $100 when you consider all the benefits and other associated costs per hour, how much does an hour of delay really cost? That can be a very big motivator for organizations to identify ways making of decisions quickly when they see a delay coming up and maybe even perceive the delay before it actually occurs. How was that done on a project like the Empire State Building? As AJ opened up, they had a board of directors, and the board of directors included the owner’s team, the bankers who were fronting the money, the real estate agents who were going to be selling the spaces in the Empire State Building.
There was the architect’s team, which also included the structural engineer and the mechanical engineer. They needed to work closely together in order to get the project designed in the timeframe that was available and to get all the parts working so that the building could be rented out quickly. It also required a contractor team and all the subcontractors and material suppliers. They had to be producing material and getting it to the site and then assembling it all in place so that the project moved ahead at a regular pace. As you can see, all of these people working together created a collaboration that made the Empire State Building a project of note at the time.
Essentially, they worked with stronger plans to integrate the design and make the project better. AJ, why don’t you tell us a little bit about some of the challenges we face with large projects?
Yeah. If you take a look back at the data that we’ve been studying from McKinsey, the state of megaprojects isn’t exactly pretty. What you tend to see when you peel all the layers back is it’s hard to ignore 98% of projects incurring either cost overruns and/or delays. 98%. At the same time, those cost overruns aren’t exactly small. We’re not talking about pennies here. The average cost increases 80% of the original value. And oh, by the way, the average slippage is close to 20 months. Or if you’re like me, almost two years, rounding that up. The question is starting to be asked.
When we look at megaprojects and we think about these extreme overages, we think about how late they are or how over budget they are, and you look at the complexity of these projects and you look at how they’re maybe first of their or only of their kind, one of the questions you have to ask yourself is, was the plan actually right to begin with? When you look at 98% coming in over budget or late, was the budget or the schedule just incorrect? That’s the questions we’re starting to ask ourselves, and that’s why we’re looking to integrate different teams into the planning phase. One of those, Ted, is construction and procurement maybe at design, right?
Dr. Theodore Weidner:
People with different expertise to be involved, because constructability is key. And in order to do that, you need the right people who have the expertise in a particular part of the project to be involved. It’s also important to recognize that there are many tasks that are repeatable in the project, and the goal is to identify efficiencies as you are repeating those tasks. When I teach that concept, it really gets down to the learning that the crew gets as they repeat the task over and over again, and they learn how to make minor improvements as they do the task over and over again. We also need to recognize that there are overlapping segments in the project that can be completed at one time.
For instance, there can be multiple work phases and have multiple crews, one on each work face, and speed the project along that way. And then there’s the identification of one-offs that are prime for modularization and offsite fabrication. These are frequently things that are very special and/or complex. They are best made in a controlled environment rather than at the construction site. One could think of large pieces of equipment that go into a project. You buy a chiller from the chiller manufacturer rather than building it on site.
Well, maybe you can build a large segment of construction that you would normally construct on site, but it’s easy to modularize and ship to the site all put together, so just final connections need to be made. Is there anything else that you can think of, AJ?
I mean, one of the main reasons to do a lot of this in the design phase is you can get out in front of those long leads. You mentioned the chiller. A lot of times those chillers or generators, those things are long lead items that you want to get in front of on a procurement schedule, or they could be the item you’re waiting for and you can’t close up some of the exterior of the building until you slide that modular piece in. Being able to secure those early procurement slots are vital for systems or equipment that could have volatile supply chains. But the same thing is true for just standard materials. Simple materials like a glazing system could create ripple effects in the entire project if the supply chain is a risk.
If you’re not out in front of the procurement of some of that, you’re not enclosing the facility and you’re not moving forward with some of the interior systems. And then lastly, if we go back to our case study, why not remove the specializations where possible? Again, some of these projects are first of their kind, and I understand that they might be reinventing a way to do a certain tactic. But when we look back at our historical reference point for today, no element within the Empire State Building was truly exceptional. The design fed the speed of construction. To do that, they helped shape the design through the schedule and made everything as simple as possible.
They went above and beyond to utilize systems and well understood construction methods that the trades folk that they were bringing onboard knew how to deliver. It wasn’t a matter of trying to teach anything new. This was especially true when it came to the exterior closure of the building. Right, Ted?
Dr. Theodore Weidner:
Yeah, they were able to simplify steel fabrication with secondary support systems for stone, which now seem to be a standard thing we do. Stonework was thinner thanks to flush windows, which would’ve been opposite of the norm at the time, but is indicative of a curtain wall construction that we have right now. And then the other thing was that stone was not continuous, so that vertical piers were able to reduce cutting onsite. Again, removing things from onsite work and bringing components that could easily be assembled helped make things move faster.
Overall, it removed interdependencies of building systems to the greatest extent possible. And that really does require a lot of thought about both the design and the construction so everything works together well. In order to work together well, we also need to advance our scheduling and take advantage of better tools and better information to improve our scheduling. Scheduling is more than just an independent piece of software that helps us keep an eye on the project. We can take advantage of communication and scheduling information using the cloud. Right, AJ?
Yeah. One of the things that we’ve started to see across the board, regardless of who the provider is, is scheduling and planning systems are moving to the cloud. Why are they doing that? Well, it’s like we talked about before, they’re enabling that collaboration between more parties at the front end of the planning process. It’s not anymore about one person looking at a set of plans and trying to determine durations and sequencing, and then printing that out and walking it around and getting some colored markup.
It’s about getting everyone involved in the plan and seeing the bigger picture sooner, seeing the critical path from both the design aspect, the construction aspect, and the procurement aspect. And really getting everyone in the team involved in the planning process, not just siloing that out for the contractor to figure out at the end of the day, but bring in the engineer, bring in procurement, and you can probably guess the last one, right? Bring in construction. Hence, a change in even some contracting methodology that we’ve seen of late, because these three key parties are so integral in the success of delivering a project.
But when you start to leverage things like the cloud and you start to leverage collaboration and multiple parties’ experience, there are other advancements in technology that you can start to leverage. Now more than ever, we’re seeing the result of artificial intelligence, whether it’s writing high school papers or it’s coming up with an image for you. Artificial intelligence is starting to make a difference, and it can help in creating more accurate schedules, because we have in our history benchmark costs. Especially for the contractors, you have historical rate libraries that you estimate off of all the time.
Why not do something similar with durations, with sequencing? Artificial intelligence allows you to mine the data across all your schedules in your knowledge library to start to build up more accurate systems. You can lean on that machine learning to suggest things instead of just having to build off of what you know yourself. I know when I was estimating as a new engineer, this would’ve been huge for those first couple of times that I didn’t realize you needed form work on both sides of a retaining wall. I thought you could just dig it up against the hill. It’s not how it works, but a suggestion would’ve been helpful.
Because what that artificial intelligence allows you to do is it allows you to augment the human expertise. At the bare minimum, it gives you a reference point to filter your decisions through, and then you can utilize that to look for opportunities to leverage automation in those repeatable tasks. But the last thing that today’s planning systems are looping into the scheduling, and this again has happened in the past with Boltons, but now with the clouds, it’s intermingled and that’s risk management, allowing you to take the risk analysis, like we looked at in the early findings from McKinsey, and combine that into the schedule to create more realism.
You’re seeing teams that can do a comprehensive risk analysis within the schedule and not only lean on experts, but also run those simulations to truly understand how certain they are and what kind of contingencies they want to carry. Because like we said at the front end, maybe the plan wasn’t exactly right to begin with. Once we are able to interlock that risk assessment with the planning methodology, you can start to have true confidence in what kind of dates you’re seeing.
If you have a nice detailed collaborative plan, the schedule that you’ve put together with a risk analysis and everybody’s on board in collaborating, well, it’s a lot easier to see change coming, because everybody’s already bought into the plan, everybody’s collaborating, everybody’s communicating on risks. All of a sudden, you’re setting yourself up from the get-go with a collaborative environment and that process of communication. That sets a precedent, doesn’t it, Ted?
Dr. Theodore Weidner:
Yeah. I’d like to emphasize that when you are collaborative and your partners, including the modularization team, as well as the onsite team, when the modularization might be moving slower, the onsite team understands that a delay is occurring and they can make some plans on how to adjust to that delivery delay. It’s most important to know how you need to react when there is a delay. Along those lines, something like the Boy Scouts with their motto “be prepared,” no pride project is perfect. Change is inevitable.
Whether it’s change that occurs as soon as you stick a shovel in the ground, or change that occurs when you uncover something behind a wall for a renovation, there will be problems that are problems that arise and you need to have a plan in place to address those things. The plan also needs to have a consistent response on how you handle those surprises, who you communicate with, how you handle that communication so everybody understands how they’re supposed to react. You can have stringent change management processes that help save disputes during the construction.
That doesn’t mean you do everything lockstep, but you have a clear process that spells things out. Because collaboration is key to having good speed on the project and having access to all the most recent project information is important as well. You need to have all team members being aware of what’s happening. They don’t necessarily have to do anything with it, but they have to be aware. Because delays in decision will end up breaking down trust between parties on the project and they’ll lead to additional delays which will hurt the project delivery. Again, make people aware and have them work together.
Also, we need to have a clear way of executing short-term plans. Big projects have big plans and you only break them down let’s say by month or by week, but it’s important to them break them down further, the further down you go within the organization and your planning schedule. Having timely and consistent feedback for individuals working on the team is important. All of this comes from operating with a single source of truth for the project. Have a single place where all the information is stored, likely in the cloud, likely in a consistent plan that you update, but that’s your single source of truth that is shared widely.
You want to make sure that you overinvest in short-term planning. When you don’t plan for the short-term, it has an adverse effect on the overall long-term planning schedule. You also want to strengthen your scenario planning and go through somewhat if analyses to see what would change if something occurs. But again, always share progress for everybody and make sure that everyone else knows how everyone else is progressing. Produce a report that talks about what has occurred. That’s a great way of incenting some people so that there’s maybe a little bit of competition on the site, friendly competition to see who’s getting the job done at the speed that it was all planned to be done.
Overall, we want to make sure we’re maintaining an overall lifecycle perspective. As with any project, construction is a finite phase, but we have to make sure we maintain a good sense of what the big picture is. We don’t want to lose the forest by looking at the trees. One way of doing that is to recognize, in the example of the Empire State Building, that our overall process has led to an icon. With the Empire State Building, they were erecting the building at a rate of almost one floor per day. It went up fast. However, there was hardly a detail issued without builder input. It was very important. Each level was designed for one month of fabrication beforehand.
One way to keep everyone on task and paying attention to what was going on was that the construction team decided they needed to build cafeterias to keep progress moving. They located them on several different floors in the building. That helped keep the workers productive and it kept them happy, because they all wanted to eat partway through the day. If we kept them on the job site and close to the work, it made the work go faster. All this goes into an overall empowerment of project management, having the right tools in the right place at the right time. What are some of those tools that we can apply now, AJ?
See, that’s a really loaded question, because one of the things that I personally am tired of hearing, and Ted, maybe you’re in the same boat, is that construction is behind when it comes to digital transformation. There is no shortage of digital items running around a job site. If you were to go out to a construction site today, you’re going to see drones. You’re going to see tablets. You’re going to see backpacks with scanners on them. There is no shortage of tech out there. The problem is that sometimes the tech isn’t where it needs to be, or in some cases, the tech’s in the way. Really the way to empower teams in today’s digital age is to get the data collection at the work phase.
As you were mentioning earlier, there could be multiple work phase locations, so multiple data collection points. That’s why a lot of times you see the tablets out there. Because if we can get more accurate data and we can get that data faster, what happens is you begin to close those communication gaps. Now, the Empire State Building had one good thing going for it. It was confined to a single city block. There wasn’t a lot of room to spread. Today’s remote world is a little bit different when it comes to communicating and collaborating. The designer, the procurement team, some of the construction management folks may not even be in the same state, let alone the same city block.
The quicker that you can communicate and close those gaps with more accurate and timely data collection, the better you can make your collaboration, the better you can make your change management, the better you can make a more informed decision of what to do next based on your project’s actual status. Being able to come together and empower those folks with the tools that will help them collect data faster and, most importantly, at the work phase is really step one to empowering those teams. But there’s a second step to that.
Because as we mentioned, there’s tech running all over the job site today, but a lot of times those solutions are provided by different companies, and that could lead to its own problem. Right, Ted?
Dr. Theodore Weidner:
…between the companies, as well as on the work site and get everyone talking together, and that requires that we break down silos. One way of doing it is to have a consistent communication system, a construction process or progress status system and so on to provide instant access to all kinds of data that exists on the construction site. I like to say that we need to begin with what’s called a RACI approach for all the necessary information. RACI stands for responsible, who’s responsible for the information, who’s accountable for it, who might be consulted with that information, and then who just simply needs to be informed.
When you integrate all of those things together, everyone on the team understands whether they are responsible, accountable, consulted, or informed, and they work together better. This comes about through the consolidation of tools that help allow more time for analyzing key information and less time for hassling over different reports, one that says where the construction is, one that says where the schedule is, one that looks where the budget is. You want them all combined together. Get your building information model as extended as much as you can within the different dimensions of the construction project.
You also want to make sure that you have real time metrics, regardless of where they’re collected or by whom. From my perspective, you want the lowest level. Who’s responsible for gathering the information to provide it? Don’t ever have it rekeyed, have all going into the same location so that the information is recorded as soon as it’s available. And then overall, utilize the power of building information solutions to connect the project reporting across multiple solutions. The software you’re using really needs to integrate across everything that’s being used in the enterprise. You don’t want to have individual pieces of software that somebody has to look at in order to figure out what the big picture really is.
And that means we need to work on changing the narrative in order to make an improvement. Can you show us how that might happen, AJ?
Yeah. At the end of the day, it all goes back to this chart that we saw to start things off. This is the narrative that we’re hoping to change. This is what empowering teams with the right tools at the right time could evolve. This is what better collaboration could evolve. This is what better planning could evolve. This is securing the future of megaprojects is moving that blue line. When you look at this, it’s dollars in the thousands per worker. It’s been flatlined. This is for a 20-year span, but you could argue that it still relatively flatlined for a lot of folks even before 1994. It had been flatlined since about the late ’70s, early ’80s if you really look at the data on a macro level.
But what we’ve been hearing companies that are adopting some of these principles that we’re talking about today, in fact, we’ve been working with one specifically, their revenue per FTE grew 30% last year alone. In fact, not just last year, but it has grown four of the last five years in a row, so back to 2017. All of a sudden, instead of that flat line with maybe just a little bit of a negative trajectory to it, we’re starting to change that narrative. We’re starting to see production in the construction industry take the turn, at least in the dollars per person, or the not do more with less, but do more with the same.
It’s not that we’re trying to cut jobs, it’s that we’re trying to increase production. And that’s what we’ve been talking about today, and that’s where all this kind of leads us back to the end goal. And that is first and foremost, we’re looking to help guide operational efficiency. But that’s not about technology, that’s about people first. And that’s improving communication. Now, technology can enable that process, but really first and foremost, it’s a foundation built on partnership. And with that, it’s that board of directors mindset, that collaborative team within the project itself that’s making those decisions ahead of schedule.
Dr. Theodore Weidner:
It’s also setting a foundation for better planning and involving the construction and the procurement teams and remote fabricators into the design phase, what can be done, what can be more efficient, more cost effective, and creating realistic plans based on the combined experiences of everybody who should be involved in the construction project.
One of the ways to do that is maybe leverage some of the advancements that we’re seeing in technology today. The way that we can collaborate better, that we can analyze risks better, that we can create that realism is through those cloud softwares that enable collaboration at the deepest level that leverage AI, that leverage machine learning.
Dr. Theodore Weidner:
One of the things that we get when we tear down silos is we are able to reveal links of different things in the overall construction process that can be optimized and help create more effective change management, getting more people involved, get more ideas, and they get vetted as long vetted. As long as you can do it quickly and you have clear targets and goals, you can address those problems. It also helps you prepare for the inevitability of changes that have to occur because something got delayed, it rained one day that you weren’t planning on, things like that.
And really the key to all of that is empowering those project teams with the right tools at the right time, giving them the ability to connect real time and break down those silos regardless of where they’re at so that we can secure the future, so that we can tackle that productivity challenge, and so that we can continue shaping communities and companies with these megaprojects. With that, Scott, we’ll turn it back over to you and see if there are any questions that have come in throughout the session.
Thank you, AJ and Ted. That was great information you shared with us. And yes, we do have some questions to present you. But before I do, I want to remind our viewers that we’d love their feedback. If they can, please take our webinar survey now, which is on their screen, or they can take it at the end of the presentation. Let’s jump into these questions. This first one I think is a pessimist. The viewer asked, do you think that it will ever be possible to return to norm of under budget projects?
Dr. Theodore Weidner:
I say yes.
I’m with you, Ted. That’s a good question. Again, it kind of goes back to are the plans right to begin with? I think we can get back to under budget, but maybe we need to be a little less optimistic with our budgets and ground them a little bit. Who knows?
Dr. Theodore Weidner:
Well, and it also comes with, again, going back to some of the discussion we had earlier of having people with the right expertise at the right part of the project. I was talking with a colleague last night who talked about wanting essentially to construct some kind of a dam lock setting. The designer was saying, “Well, two inches tolerance for the foundation is okay.”
But when they started pulling all those dimensions up to the top to the lock system in the canal, they said, “Hey, we can’t survive with two inch tolerance at the foundation because it’s going to throw things way off 50, 100 feet up in the air. You’re going to be feet apart as opposed to inches apart or expect that to get closed up.” A lot of awareness has to be planned upfront when looking at the constructability of the project.
Great. Another viewer asked, given the importance of digital systems to effective building management, for example, HVAC, maintenance usage, shouldn’t the systems design and integration team be part of the planning phase?
Dr. Theodore Weidner:
Absolutely. In fact, if you know the people who are going to be maintaining those systems as well, they should be involved. I can think of times when I’ve been in charge of facilities and maintaining things where the designer may have been a slim person and they left a slim space to get through and to maintain the equipment, but I did not have slim people on staff to maintain that equipment. It was a bit of a challenge for them to take care of something that was a good design otherwise, but you couldn’t get to it.
AJ, do you have anything to add?
No, I’m in total agreement with that. Constructability is key.
Another viewer is asking a really good question on this one. Innovation costs money. Often the form of contract does not support extensive collaboration amongst designers, GCs, and trade contractors alike. Where should the incentives come from to drive collaboration and innovation?
Dr. Theodore Weidner:
Who benefits? The owner benefits and there needs to be some discussion in advance with the owner. What are you willing to pay for? Are you willing to pay for more change orders, or are you willing to pay for good technology applied upfront? One of the things that I’ll tell students is if you have enough time to fix something on the punch list, then you obviously should have enough time to do it right or install it correctly the first time.
I would agree with that, especially the who benefits. It goes back to our example from today, the Empire State Building. They selected a contractor that had a reputation for being able to build fast and build fast well. What I think more than anything we’re going to start to see, especially with the megaprojects, is a transition away from low bid or lowest number wins. And that does take a mindset shift because innovation does cost money, but are you willing to come in on time for a little bit more? If you ask the typical owner, the revenue generation is worth that much more to them that it’s not a comparison when they ask to pay a little more to be on time.
Another viewer asked, have you witnessed positive movement from owners towards this design-build approach?
Dr. Theodore Weidner:
I teach a class on design-build, and whether you call it design-build or EPC, yeah, that gives an opportunity for the designers and the constructors to sit down together with the owner to make important decisions and to have those discussions about, how much faster do you really want this project and what’s it worth to you? In the case of a production facility, it could be worth $1 million a day and the added cost to the construction process is maybe only $100,000 a day. Think about the cost benefit at the very beginning with the owner.
We’re seeing that transition to EPC. It’s becoming more prevalent every single day. Like you said, Ted, whether you call it design-build, you call it EPC, it depends on what industry you’re in more or less or what market segment. But I do think that that growth is helping to guide a lot of this in that delivery method. It will help to guide more innovation. Even with design-build projects, like design-build projects can go horribly wrong too. It takes collaboration up front. It takes working together as a team.
Because if, in fact, the owner hires the designer under one contract and the contractor under another, but calls it design-build, you could get some drastically different designs than what you have budgeted for construction wise. It still comes back to that collaboration story and making sure that the team is aligned upfront for the most positive outcome.
Another viewer asked, how does labor productivity affect these delays and additional costs?
Dr. Theodore Weidner:
Well, what is the labor productivity? The labor productivity is a measure of how much is getting done in an hour of labor time. But what are you really measuring? Are you measuring the amount of time that the labor was on site and standing around waiting to perceive instructions? Or are you measuring the time when the labor was actually doing the work, which is probably what you were planning on when you put your cost estimates together and you put your schedule together.
But you really need to go back and look at the big picture. And that gets to where I would argue that integrating your plan together and knowing what the overall expectation is, understanding the awareness of delays is going to demonstrate that your labor is as productive as you had planned on.
That’s why you’re seeing some of the advancements in things like Advanced Work Packaging is moving along because time on tools is so important. If you’re going to go out and try to start work on a package that doesn’t have all the constraints removed, that means you’re going to have to stop at some point because you’re waiting on something. You see these alternative planning methodologies like AWP or Advanced Work Packaging saying, “Hey, make sure you remove all these constraints first before you even set foot out there other, because your time on tools will be dependent on people being able to not stop when the operation begins.”
You’ve really hit a cord because there’s like three viewers with the same question. I’m going to take their one question. It’s asking your thoughts. What are your thoughts on Integrated Project Delivery as a delivery method where the owner, architect, GCCM are stakeholders with a negotiated financial stake in the project?
Dr. Theodore Weidner:
There needs to be awareness upfront. A good friend of mine was great with design-build and understood what it meant to force one party or another to cooperate and to do the job, but then got involved in an Integrated Project without fully understanding how it affected him and he ended up paying for somebody else’s mistake. It wasn’t what he was planning on. There needs to be clear awareness. Yeah, the owner benefits from the project overall. The owner needs to have a stake in things that go wrong, as well as things that go right. The rest of the team needs to have a stake in the things that go wrong and the things that go right.
I think that’s one of the keys when you look at the drive away from Low bid. Because traditionally speaking, low bid, you bid what was there. You bid what you had. And if it wasn’t there, you knew you were getting paid for it down the line, right? Even if you were smart enough to know something was missing, you left it out of the number or you weren’t getting the job. What these alternative delivery methods do, what something like Integrated Project Delivery does is it removes that.
It says, “Hey, my expertise knows something’s missing here. Because we’re all a part of the team, I’m going to up front tell you that. We’re not going to have to figure out how to pay for it later. We’re going to solve this issue now, and then move forward,” instead of, “Hey, it wasn’t there. I didn’t bid it. Because if I would have, would’ve never been low and we wouldn’t be here to start with,” so on and so forth.
I think that’s one of the key aspects that owners really need to understand is that the lowest number is hardly ever the cheapest, even in that low bid concept. But the more that you can bring in the experts, the people who have built the work, because the traditional owner maybe hasn’t built as much work, the more you can bring them in to support you, the better off long-term you’re going to be with that experience and the better experience you’re going to have with that project.
Well, unfortunately, that’s all the time we have for questions today. Please join me again in thanking AJ Waters and Dr. Theodore Weidner for their presentations, as well as today’s sponsor, InEight. If you have any additional questions or comments or we did not get to your questions that you posed, be sure to click on the email us button on your console and we’ll share those with our presenters so they can respond to you directly. If you didn’t have a chance to fill it out earlier, do please take our webinar survey, which you can access through the survey widget on your console. We look forward to hearing how we can make our programs work better for you.
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