Repair, Renovation, & Construction Project Cost Management
Prioritize and Budget Requirements
Every real property owner is face with aligning organizational requirements with facilities repair, renovation, and construction needs as well as available current and projected multi-year resources. Focus upon best value outcomes deliver superior achievement in this regard. Mapping facilities physical requirements with budgets and schedules is not a trivial task, as evidenced by the fact that 80% of all construction related projects are over budget, late, yield poor quality, or result in in legal disputes. Adopting robust LEAN process can change this pervasive problem and assure that 90%+ of all repair, renovation, and construction process are consistently procured and delivered on-time, on-budget, and per specification.
LEAN Processes Embed Transparent Costs and Project Cost Management
Project cost management and efficient project delivery are core capabilities enabled by the OpenJOC(TM) Job Order Contracting (JOC) Solution. Proper design, implementation of an OpenJOC Job Order Contracting Program ensures that the numerous repair, renovation, and minor new construction projects encountered by real property owners and facilities management teams are successfully completed within an approved budget.
Project Cost Management Processes
The policies, procedures, data sets, tools, and documentation used for planning, executing, and controlling project cost are included with a LEAN OpenJOC enterprise system.
Developing a detailed scope of work and associated line item cost estimate using a verifiable and current locally researched unit price book (UPB) is a mandatory component of a LEAN construction delivery approach. The UPB consist of a granular listing of all the construction tasks with breakdowns for associated labor, material, equipment, and productivity. Thus usage of a UPB virtually assures a mutual detailed understanding of the scope of work required and also serves as a method to validate contractor and subcontractor quotes. A properly developed UPB is written in plain English and organized using the industry standard CSI Masterformat data architecture. Since the primary reason for most construction failures is improper definition or communication of work scope, and general lack of collaboration and teamwork, the value of UPB can easily be understood. In simple terms, a project proposal using a UPB establishes a clear, detailed, baseline for work requirements, timelines, and costs.
Monitoring and Controlling Projects
Best value can only be achieved via a properly conceived and implemented program and project management strategy. To date, the only robust program and project management strategies proven to deliver superior outcomes on a consistent basis are the LEAN processes of Integrated Project Delivery, IPD and Job Order Contracting, JOC.
Monitoring and controlling of construction related projects is a process of developing, tracking, reviewing, and regulating progress versus performance objectives in proposal and associated LEAN construction delivery workflow.
Consistent, yet flexible collaborative workflows are essential in managing program and project success. An example of this type of workflow is shown as follows:
With proper LEAN construction delivery training and adoption, the collaborative dynamics are established to enable teams to avoid common failures.
Elements such a collecting, measuring, monitoring and distributing important information are easily accomplished throughout program and project duration due to the LEAN framework of processes and tools. For example, comparing owner project estimates with contractor estimates, comparing planned scope, cost, schedule, resources, performance, and values against initial plans are all commonplace activities.
Another important of LEAN construction procurement and project delivery is integrated change control relative to both scope and costs. Procedures and tools are in place to readily identify original requirements and planned modifications. All changes must be formally approved and documented per the defined program operations manual and/or execution guide.
In order to properly manage outcomes, the following information is a sampling of information that is required as well as associated processes:
- Standardized organization and definition of programs/projects
- Progress and status of programs/projects
- Progress and status of project deliverables
- Start status and completed status of program/project activities
- Budgeted versus committed costs
- Budgeted versus actual incurred costs
- Resource utilization detail
- Standard procedures for changes, including change request, change evaluation/approval
- Definition of change types and associated factors
- Full document management capabilities – document check-in/check out, version control, archival of versions/changes, permission/access levels
- Document packages and approvals for each workflow stage
- Locally researched detailed unit price book organized using CSI Masterformat
- All costs in UPB should not include profit/overhead and only detailed line item costs should be the basis for repair, renovation, or new construction project approvals versus, order of magnitude, conceptual, preliminary, square foot, or systems level costing. Evaluating individual work items/activities and summing them for a project total is the most accurate form of estimating and also provides a clear communication of the required scope of work.
Training and Change Management
The combining of good people, processes, information, and enabling technology drives optimal outcomes. Far too often training is overlooked and processes lack the requisite attention an focus of all parties involved. Also, technology is sometimes improperly viewed as a solution, when is reality is it just a tool for embedding processes and helping to lower implementation, execution, and monitoring costs.
LEAN construction services procurement and project delivery is dramatically different from traditional methods such as design-bid-build, design-build, etc. Each of the following characteristics are shared by any form of LEAN construction delivery method, and not all owners, AEs, or builders may be capable of their adoption:
- Required collaboration
- Financial transparency
- Shared risk/reward
- Mutual trust/respect
- Common information/data environment, including terms and definitions and a locally researched detailed UPB inclusive of modifiers and separate demolition line items.
- Enabling technology
- Required initial and ongoing training
- Continuous improvement via monitoring and information sharing
As detailed cost estimating is a critical component to improving construction outcomes, the following issues are noteworthy:
- There is no substitute for experience when it comes to creating current, actionable detailed construction cost estimates. Assure that owners and service providers are equally skilled in detailed line item estimating.
- Historical performance is not a good predictor when it comes to construction estimating
- Cost estimates are highly perishable. At minimum cost estimates should be reviewed quarterly.
- Estimating and pricing are not the same things. The later includes the builders overhead, profit, and contingencies.
- Schedule, performance, scope, value, and resources are controllable using detailed line item estimating as a baseline.
- A time base or system-based WBS (work breakdown structure) should be supported by line item estimates.
- Attempting to deploy Earned Value Management (EVM) or LEAN without line item estimating is foolhardy and will result in failure.
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