LEAN construction cost estimating

Introduction – LEAN construction cost estimating, planning,  procurement, and project delivery, drives optimal performance for the numerous repair, renovation, maintenance, sustainability, and new construction projects encountered by real property owners, facilities managers, and their service providers.

Eighty percent (80%) of all construction projects are late, over-budget, or incorrectly completed. The vast majority of failures can be traced back to a poorly defined and poorly communicated scope of work. Currently available robust LEAN construction estimating, procurement, and delivery processes, services, and tools, make it possible to consistently deliver quality projects on-demand, on-budget, and on-time.

Simple Guide to LEAN – Before we even get to improving Scope of Work (SOW) processes, it’s valuable to first understand the basic concepts of LEAN construction. Like most things these days, LEAN construction is a simple concept that has been complicated by hype, ignorance, and/or the well-intentioned but potentially misguided. Put aside anything you have heard about Last Planner(TM), TPS, Six Sigma, belt-belt, et al. These are not LEAN construction delivery methods.

LEAN construction delivery is simply a focus upon best value outcomes for all participants and stakeholders, from concept through end of life.

LEAN construction delivery is a process-based framework that shares the following components, all of which are requirements for all participants.

1. Early and ongoing participation
2. Shared risk/reward
3. Common data environment
4. Mutual trust respect
5. Initial and ongoing training
6. Written operations manual and/or execution guide
7. Continuous improvement
8. Global oversight and leadership with local empowerment.

Integrated Project Delivery, IPD, for major new construction, and Job Order Contracting, JOC, for repair, renovation, and minor new construction are two fully vetted forms of LEAN construction delivery.  Both maintain a program versus project orientation.

Scope of Work

The Scope of Work (SOW) defines all of the tasks be completed to execute and deliver the project per owner requirements. Put another way, a scope of work is division of construction items to be performed under a contract or subcontract in the completion of a project, typically broken out into specific tasks with deadlines.

From the above, it is clear that an work items that a missing, inaccurate, or poorly defined will directly and likely significantly impact the estimated cost as well as overall project timeline and level of general success.

A LEAN approach to construction cost estimating therefore requires the development and sharing of detailed line item cost estimate using locally researched and verifiable unit price construction cost line items. This information is develop by the owner and/or the associated AE’s and builders. Based upon the size of the project, there is great value for an owner to develop an internal detailed line item estimate to compare against a builder’s estimate. In some cases an independent owner estimate may even be a requirement.

A detailed line item construction cost estimate is part of Scope of Work for any LEAN construction procurement and delivery process by default. The following information is provided, as appropriate for each individual construction task:

1. Standardized data organization of each construction task/line item – CSI MasterFormat
2. Full Task Description – Clear description of work in plain English
3. Unit of Measure – Each, Square Foot, Square Yard, Cubic Yard, etc.
4. Labor – Description of crew and hourly labor cost per defined output.
5. Material Cost – Description and cost of materials associated with specified task.
6. Equipment – Description of equipment required for associated task and associated cost.
7. Modifiers – Adds or deducts to line items costs to account for location, quantity, or other defined factors.

Adoption of LEAN construction cost estimating assures that costs are based upon correct items and associated costs, and enables more efficient review of all content, including quantities. The use of a locally researched unit price book (UPB) can greatly increase the speed of developing a detailed line item estimate as well as serve as a check and balance. Remember that a cost estimate is NOT then same a price estimate. Thus costs estimates should first be prepared WITHOUT including OVERHEAD and PROFIT. The latter is so inconsistent that a cost estimate is critical in monitoring, if not controlling, associated volatility.

It’s no surprise to anyone that errors and omissions are largely the cause of cost creep, change orders, and general dissatisfaction. Furthermore, it should be surprising that lack of collaboration and information sharing, and the failure to use standardized, commonly understood tasks and costs in an early and ongoing basis is the primary cause of errors, omissions, change orders, and ultimately, project failure.

LEAN Process, Plus Experience, Experience, and Experience

Any and all owner, AE, and builders cost estimate must be prepared by a cost estimator experienced in line item construction cost estimating. These are professionals with decades of experience and fully knowledgeable about means, methods, trades, prevailing labor rates, materials, and equipment. Experienced line item construction cost estimators play their part in the preparation, review, and final approval of any project.

Historical Costs and Lump Sum Subcontractor/Contractor Quotes

While storing historical estimates and actual project costs are important in terms of fiduciary responsibility, their is no role of historical projects costs in creating new estimates, other than comparison and some information reuse purposes (information reuse is limited to line time descriptions). Not everyone is skilled in estimating labor, materials, and other variables that need to be part of the final cost estimate. It is required than an experienced estimator be involved with the estimating effort.

Summary and the Path Forward

The absence of leadership, competency, and associated LEAN best value strategy is the inherent roadblock to measurable gains in productivity across the Architecture, Engineering, Construction, Owner, Operator sector(AECOO). A certain degree of change management is also present. Some individuals, organization, or groups, may find it easier than others to adopt LEAN methods. While the associated processes and workflows are far from complicated, the day-to-day methods of doing things differs.

Front end planning and resource allocation is greater for LEAN adoption and implementation, however, the major benefits gains far outweigh any investment.

All the tools, information, data sets, and services are readily available to enable the consistent delivery on quality, on-demand, on-time, and on-budget repair, renovation, and construction projects. Are you ready?

via Four BT, LLC – Efficient Construction Procurement and Delivery Solutions