(Essay) HRO & Lean 6 Sigma

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"How to avoid rework phenomena in construction projects by maintaining a reliable organizational profile? The application of LEAN-6 SIGMA methodology minimizes time variability in construction phase."

"How to avoid rework phenomena in construction projects by maintaining a reliable organizational profile? The application of LEAN-6 SIGMA methodology minimizes time variability in construction phase."

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  • 1. UNIVERSITY OF TWENTE. “How to avoid rework phenomena in construction projects by maintaining a reliable organizational profile? The application of LEAN-6 SIGMA methodology minimizes time variability in construction phase.”Course: Markets, Organizations and Innovation (195810100)Instructor: Professor dr. ir. André DoréeProgram: MSc. Construction Management & EngineeringDocument type: End-assignmentStudent: Dimitrios Kordas / s1231901(Main text: 3887 words) Enschede, 19-3-2013
  • 2. Contents1. Preface ............................................................................................................................... 32. Introduction ....................................................................................................................... 33. Organizing for reliability .................................................................................................... 54. Time variability: Non-excusable delays ............................................................................. 55. Towards Lean & 6 Sigma ................................................................................................... 76. Challenges and barriers ..................................................................................................... 86.1 Lean Construction .............................................................................................................. 86.2 Resilience engineering ....................................................................................................... 96.3 The role of 6-Sigma .......................................................................................................... 107. Conclusion ....................................................................................................................... 108. References ....................................................................................................................... 12 2
  • 3. 1. PrefaceThe following essay thrives to make transparent the connection between time variability inconstruction projects approached as a rework symptom and to argue on why projectmanagers if applying Lean Six Sigma will eliminate time variations in constructionoperations.Countries in both the developed and developing world have seen a constant negativecharacteristic in their national construction industries. Time overruns have been commonproblems in every construction project. Numerous factors such as utility and weatherdamage delays can cause the costs of construction to exceed the budget and extend projectschedule. Understanding the specific causes of cost and time overruns due to changedinternal or external working conditions can help to control cost and time extension onprojects. They may be related to external or internal factors that may cause the constructionof a project to delay.The core of this effort is structured on building two main understanding dimensions. Firstly,to give a picture of the construction industry’s performance measured on Quality Time Cost(QTC) criteria which still remains insufficient and away from the initial targets of the EganReport (Egan, 1998). The industry still fails to complete the majority of projects on time andbudget and meet the needs of the consumers, not offering best value for clients and taxpayers alike. Why is this reality even now, regardless of the type and scope of civil projects?Which are the factors and parties affecting the time performance of construction crews?Why modern projects still suffer from time overruns and time variations in their internal orexternal processes?The second part builds on the need to mitigate with the emerging risk of rework. Timedelays are approached as a symptom of rework which calls for thinking and acting in areliable operating environment during the whole life cycle of construction projects.Unforeseen or unexpected changes are seen as the key-driver behind this planning drama;thus they have to be minimized. Lean production model is proposed to be applied as aphilosophy of eliminating all the time-related correction activities and the Six Sigma is usedas a statistical tool which will enable project managers to count systematically their pastperformance in order to avoid the previous rework phenomena.2. IntroductionLooking back to the storyline of Sydney Opera house; this landmark was planned to bedelivered in 1965 and finally opened in 1973 followed by an acceptable cost escalation. TheElbphilharmonie Hamburg is still one the most time failure projects in Europe. The projectwas scheduled to be opened in 2010, and now is under construction and planned to open in2015. Giving a deeper glance outside Europe, it is also seen that housing industry is notreliable enough in delivering projects on time.(Chan & Kumaraswamy, 1997) had identified that the construction industry in Hong Kongsuffers from high ‘subjectivity’ influences of the three main stakeholders (clients,consultants, and contractors). All three groups of practitioners in the industry opined that“poor site management and supervision”, “unforeseen ground conditions”, and “low speedof decision making involving all project teams” are the three most significant factors causingdelays in local building works (Chan & Kumaraswamy, 1997, p. 577). They also found that“The clients and consultants appear to assert that the main source of delays is due to a lackof contractor experience in planning and supervision on site, but the contractors controvert 3
  • 4. that many delays arise from insufficient design experience of the consultants.” The Nigerianconstruction industry according to (Aibinu & Jagboro, 2002) suffers from client-relatedchanges. As they had noticed; “A major source of deficiency identified as significantlyresponsible for this is clients’ continuous issue of design information/variation orders.”In Saudi Arabia, (Assaf & Al-Hejji, 2006) conduced a research about construction projectdelay for different types of projects in the state. It was concluded that 70% of projectsexperience time overrun.Why spending time on reworking and fixing out damages and defects that could be foreseenis still a repetitive phenomenon especially in the construction stage of building facilities?Looking the insight part of the construction sector it is seen that several stakeholders areinvolved in different ‘arenas’. Various key-players are intervening in the main threefunctional areas the so called; the “knowledge and attitude” arena, the “frameworks” arena,and the “project” one (Barrett, 2005) who often change the scope and the processes(business/project) of working practices. A negative perception by stakeholders can severelyobstruct a construction project. Inadequate management of the concerns of stakeholdersoften leads to conflicts and controversies about the implementation of a constructionproject (Olander & Landin, 2005).The construction industry is mainly project-based and various complexities are inherent inthe construction projects. Reworking is a phenomenon identified in all basic stages of aproject’s life cycle (initiation, planning, execution, closure, maintenance and operations)which often affects the progress of the activities resulting to continuous changes. Changes,regardless of their nature and causes, lead inevitably to variations in building performance.Mainly rework and wastages take the form of a waste in time, cost and thus quality. Reworkand wastages as (Alwi, Hampson, & Mohamed, 2002) had stated; are considered as non-value adding endemic symptoms that seriously affect the performance and productivityaspects in construction projects. The rework occurrences in construction projects are mostlyderiving from the unnecessary redoing/rectifying efforts of incorrectly implementedprocesses or activities (Love P. , 2002).The highway paving sector is not an exception in the pain of rework. Several delays havebeen observed by the Florida Department of Transportation. (Vidalis & Najafi, 2002) hadconcluded that; delays arise when design drawings are changed because of inadequate orunclear details caused by inadequate data collection or survey prior to design. Design errorsin highway construction projects result in extra work such as earthwork, drainage, bridgepilings, road resurfacing, re-paving, and widening. Design problems mostly occur whendesign plans are not carefully reviewed.The Durand Centre case is a really clarifying case of how time overrun can emerge evenwhen initial planning looks effective and sufficient. The Durant centre; a shopping mall inLondon (1990) which was initiated based on traditional contractual form where the generalcontractor held contracts with each of the subcontractors and did not self-perform work.The procurement nature of the project and the insufficient supply chain design influence theproject’s execution speed. On the Durand Centre project there was a delay to steelfabrication that resulted in a six-week delay to steel erection on-site and additional tradecosts of £231 thousands. This delay was not anticipated and did not become apparent untilit occurred on-site (OBrien, 1999). As steel was a critical path activity, this delay causedserious problems to following subcontractors (OBrien W. , 1995). 4
  • 5. The research question so to be answered is: “How could project managers minimize timevariability in construction operations?”3. Organizing for reliabilityAlmost all the cases are deteriorated by time overruns which lead towards thinking whybetter planning did not take place from the initiation of the projects. Why constructioncrews were not proactive enough regarding unexpected changes? The public opinion aboutschedule escalation in building projects beliefs that it is only the bad technical planningwhich pushes back the delivery line. The lack of a resilience management philosophy or highreliability measures aggravates the final outcome. As (Lekka, 2011, p. v) had identified in herHRO-literature review, there are six dimensions that allow higher and more efficientutilization of complex systems like construction projects. These principles imply thatcontainment of unexpected events, effective anticipation of potential failures, ‘just culture’,learning orientation, and mindful leadership will empower planners and construction crewsto nurture a collaborative, quality (value)-driven continuous improvement. The next sectionswill outline how these principles can be put into action combined with lean benefits tominimize all time delays.4. Time variability: Non-excusable delaysConstruction projects continue to suffer delays. Things go wrong and the project’scompletion date gets pushed back, with someone to be blamed for it. In practice, attemptsare made to identify the causes of delays and schedules are modified to incorporate revisedduration and new project time (Alkass, Mazerolle, & Harris, 1996). Delays are the directresult due to time variations in the performance of construction teams.Delay is a situation when the contractor and the project owner jointly or severally contributeto the non-completion of the project within the original or the stipulated or agreed contractperiod. There are two types of delays; non-excusable delays and excusable delays (Al Hadi-Tumi, Omran, & Kadir Pakir, 2009). A non-excusable delay is delay caused by the contractoror its suppliers, through no fault by the owner. The contractor is generally not entitled torelief and must either make up the lost time through acceleration or compensate the owner.Therefore, non-excusable delays usually result in no additional money and no additionaltime being granted to the contractor. Excusable delays are divided into two: compensableand non-compensable delays. Compensable delays are caused by the owner or the ownersagents. While non-compensable delays are caused by third parties or incidents beyond thecontrol of both the owner and the contractor. These delays are commonly called “acts ofGod” because they are not the responsibility or fault of any particular party. Figure 1. Types of delay (Hamzah et al, 2011) 5
  • 6. So what lies beneath non-excusable delays? While construction takes place raw materials,equipment (machinery), workforce (manpower) and working practices (methods) are thefour columns supporting the activities of crews under construction. Do all crews follow thesame patterns of proactive building on-site? The answer is quite obvious negative.(Mitropoulos & Cupido, 2009) have already proved that construction practices are playing apivotal role in reducing the rework symptoms; thus less time is spent in fixing faulty usuallyhigh-risk activities when high-reliability process (Weick, Sutcliffe, & Obstfeld, 1999) arefollowed in combination with high experience which facilitates the teamwork.The materials constitute perhaps the hottest topic in the beginning of a project. Probablythe most important decisions in the effort of integrating and optimizing a supply chain is theallocation of decoupling points and the design of the supply chain strategy(buy/make/assemble-to-order, make-to-stock, ship-to-stock). Resource allocation must befrequently revised to minimize any possible raw materials waste. Nothing has to be wasted,especially in the construction phase. This calls for a lean production model to be applied. As(Naim & Barlow, 2003) had notified; the perception amongst house builders was that thelogistics of house building make it hard to organize just-in-time delivery of materials and itsimpact on profitability was unclear. Furthermore, the transfer of risk down the productionchain to subcontractors reduced the incentive to introduce leaner supply models for housebuilding. House builders tended to rely on subcontractors to act to reduce waste. The case ofDurand Centre is ideally depicting this necessity for a turn towards lean principles.Exploring better the following Ishikawa diagram, what should be pointed out is the nature ofthe unexpected changes which affects the timing and importance of the emerging non-excusable delays. The core categories of changes as (Chan & Kumaraswamy, 1997) hadnoticed are; (1) project-related; (2) client-related; (3) design team-related; (4) contractor-related; (5) materials; (6) labor. The diagram used aims to visualize how contractor,materials, and labor changes affect the time performance of construction crews.Figure 2: Causal model - the routes of variability waste of construction crews’ working time(adopted from (Arthur, 2007)) 6
  • 7. 5. Towards Lean & 6 SigmaTimely completion of a construction project is frequently seen as a major criterion of projectsuccess by clients, contractors and consultants alike. (Newcombe, 1990) noted that therehas been universal criticism of the failure of the construction industry to deliver projects ona timely fashion. If “being on-time” is so crucial in delivering civil engineering projects, whyproject managers cannot avoid rework conditions and eliminate this time-related waste?Here, it is suggested that the integration of leanness and six sigma (6σ) is the answer to thisbattle towards eliminating correction efforts and creating an organizational proactivememory on past lessons learned.Leanness production theory brought a radical shift in the pursuit of minimizing all the seventypes of waste when organizations move through the internal chain of Transformation –Flow – Value (TFV) of materials.These two main action plans have been introduced in the construction industry for morethan 10 years. Lauri Kosleka has explored the effects of TFV production model since 2000.Transformation stands for the transition from inputs to outputs by utilizing all the rawmaterials, information, and financial assets. Flow step describes the flow of a materialcomposed of by transformation, inspection, moving and waiting. Value generation is theprocess where value for the customer is created through fulfillment of his requirements(Koskela, 2000). The action plan which is described by the above mentioned process isdeveloped throughout the next stages:  Eliminate waste: count non-productive time cases and act proactively following step by step the five High Reliability processes. o Review drawings as the number of involved consultants increases.  Specify precisely the value from the perspective of the ultimate customer: Communicate to all working teams what are the end-customer’s requirements. o Develop goals before planning.  Identify clearly the process that delivers what the customer values (the value stream) and eliminate all non value adding steps: Break down all the components of each operation and allocate them with previous rework failures. Assess the present project based on past database. o Review design and supply chain-related design problems. In the case of Durant shopping mall there was no supply chain analysis before the steel orders were given.  Optimize the flow step: calculate the lead times and predict how client’s demands can change the initial planning. o Use customer’s feedback and Value Engineering/Management methods to optimally integrate all the intermediate construction stages. In Nigeria, the construction sector has to be reorganized on this step and the next two.  Let the customer pull – don’t make anything until it is needed, then make it quickly: Organize the supply base and the chain of actors as much as responsive as it is needed. o Develop innovative procurement methods (e.g. competitive dialogue).  Pursue perfection by continuous improvement: Re-assess all the steps taken and re- confirm the decisions to the final outcome by comparing Time – Cost – Quality (TCQ) initial target and achieved ones. o Perform constructability reviews. 7
  • 8. The missing bond now in this application is how one could increase the accountability anddata reliability of the mistakes tabulated. For this reason the Six Sigma is believed that ifcombined with the aforementioned six lean principles will improve the businessperformance of construction crews and thus, of firms correspondently. The objective of a SixSigma process is to reduce process variation, so that it will result in no more than 3.4 defectsper million opportunities (DPMO) in the long term. This defect rate is calculated based onthe assumption that many processes are prone to shift of 1.50 standard deviations due tounavoidable assignable causes or degradation mechanisms (Feng & Kapur, 2007).The tool is based on five simple steps which are the following:  Define: The goal of the project: In (Mitropoulos & Cupido, 2009) we saw that the crew’s B foreman had clearly defined the goal of his team; “eliminate the rework”.  Measure: Map down the present situation: the Elbphilharmonie Hamburg started when even the contactors had several legal conflicts with the owner. If previous experience was measured and quantified in terms of time costs, the past lesson would have helped engineers to avoid this planning disaster.  Analyze: Find measures to reach the goal: the Florida Department of Transportation had experienced several time delays due to design changes. In this case, an performance-based contract with clear PIs statement could have minimized the time variability in the paving operations.  Improve: Implementation of measures: Poor site supervision and coordination through this stage can be ameliorated by counting the on-site mistakes on specific activities (e.g. joints connections, floor slab assembly, truss erection, asphalt mixing, etc.) and thereafter structuring databases with Risk Priorities Numbers for each past delay.  Control: Assure permanent improvement: Applying systematically lean tools to minimize materials; over-ordering/over stocking and machinery; time expenditure when equipment ‘waits’ to be used, related waste. Establish an organizational memory so flexible and modular that will enable project managers and thus building crews to foresee, act and respond based on past scenarios. These scenarios should imply that the boundaries for acceptable performance would become manifest during training. The last implication opens however the challenges of growing in a resilience engineering environment. In the Nigerian construction industry case, the use of these scenarios could be significant as client-driven design changes can be collected and assessed in terms of elements or interfaces that are most frequently modified.6. Challenges and barriers6.1 Lean ConstructionSeveral tools and techniques have been developed in order to apply lean principles, as(Salem, Solomon, Genaidy, & Luegring, 2005) have listed these are;  Last Planner System (LPS): pull-system scheduling technique and team planning  Increased Visualization: photos and documents of the implementation process  Daily Huddle Meetings: meeting minutes and the results of interviews  First Run Studies: videos, photos, recommendations for productivity improvement from workers and staff, field observation data for crew productivity study, working procedures, and estimated and actual unit costs for the studied items  The 5s Process: photos, meeting minutes and the results of interviews 8
  • 9.  Fail safe for quality: SPA, photos, recommendations for quality improvement, the counter measurement of specific items that apply to this project, and the results of interviews.All the lean tools above require some core changes in the organizational level; from self-assessment until continuous stakeholders’ collaboration.Training and education is perceived as the main booster in implementing a lean philosophywhich goes far from just an emotional decision because competitors or potential marketenterers will apply it. Judging and reevaluating the business and the project processescompatibility (Gann & Salter, 2000) is necessary to investigate to which extent value-addingservices are in line with core technical activities.Are costs and productivity measurements understood in depth? Are the performancemetrics from past mistakes allocate to benchmark profitable versus loser projects?Pioneering is a prerequisite also from the executive leadership in order to enhance andsustain commitment to sustainability (6σ) and profitability (Leanness).The biggest challenge however is located at the capability building in identifying non-addingvalue activities to customers and to organization. Planning the personnel’s management canbe time consuming, and on the other hand making scenarios for its optimal utilization inspecific-task positions can be much more valuable in long terms.In the end, leanness calls for re-planning the teams organization is the highest collaborationrequired aiming to deliver a predefined amount of value and not just doing the job. If thirdparties, like suppliers, are not willing to participate in this new window of value creation andwaste elimination then fragmentation and poor coordination will remain as a route ofpitfalls leading to time variations in the actual execution of a project.This last challenge relies on the supply chain side, where things are calling for constantoptimization. Often the relationships between buyer and supplier are not mature enoughand this increases lead times. A modern challenge for project managers emerges here, asthey are now obliged to reassess the maturity and the flexibility of their supply base andeliminate all the potential relational or contractual obstacles. Innovative procurementmethods such as competitive dialogue or performance-based contracts will be required tobe developed.6.2 Resilience engineeringAs (Ballard, 1999, p. 282) had stated we can assume that there is a ‘natural’ variability ofproduction capacity even when methods, technology, and conditions are fixed. Further,there is the difficulty of accurately estimating even average capacity when there are changesin these variables or when the type of work changes or there is some change in crew orsquad composition. Even manufacturing is plagued with variability. Since we don’t makeidentical products in controlled conditions, capacity variation is a fact of engineering andconstruction life. Current production management techniques ignore this fact, as is evidentin loading practices.The solution against time variations is the creation of a resilient firm-system. Anticipation,attention and response are seen as key qualities of a resilient system (Hollnagel & Woods,2006) improvisation embraces these by “thinking in action” (Cunha, Cunha, V., & Kamoche,2002). 9
  • 10. Is it always a soft-skill task the development of improvisation and its enhancement into thecrews’ psychology? According to (Adamski & Westrum, 2003) “requisite imagination” is amandatory principle for resilience. Consequently a hidden barrier for project managersinitially and after for the foremen is the tough effort they have to make on building ateamwork spirit with high task-related construction quality provided by real timeinformation.However before being committed to resilience, builders have to adapt with all the previousreliability principles of (Weick, Sutcliffe, & Obstfeld, 1999). This implies that machinery,materials, methods and manpower have to be re-planned under a scope of changemanagement or ongoing adaptation. Adaptation is a central part of resilience. Adaptationcomprises knowledge in terms of anticipation (what to expect), attention (what to look for),and response (what to do) (Hollnagel & Woods, 2006, p. 350). These three elements;anticipation, attention, and response are challenging nowadays more than ever projectmanagers as they will have to found a new “thinking in action” and thereafter transfer it toexecution crews.6.3 The role of 6-SigmaThe 6σ has to be used one step further than just a statistical package or ERP software. Sowhat has to be reengineered when using 6 Sigma?The underlying concept is the holistic approach of improvisation. (Grøtan, Størseth, Rø, &Skjerve, 2008) had distinguished a triple-way of improvisation working through theadaptation process. Adaptation by sensemaking is the core of this approach which leads tothe required preparedness for building a highly responsive ability to map, understand, andreact to unforeseen changes.According to (Weick, Sutcliffe, & Obstfeld, 2005) sensemaking is not a conscious humanprocess, but a process that will come into play as an intuitive reaction (e.g. to unfamiliar orchaotic situations). (Weick, Sutcliffe, & Obstfeld, 2005, p. 405) define sensemaking as beingabout “the interplay of action and interpretation rather than the influence of evaluation andchoice.”Here exactly lies the new role of 6σ as the tool is not used as an accounting machine only. Itis assumed that the more frequent the use of 6σ the higher the possibility of planners toincrease the sensemaking of crews and eliminate their subjective interpretation of pastfaulty performance due to time delays.7. ConclusionUnfortunately, the entire idea behind the final organization’s picture has snags. Including theaforementioned risks, learning mitigation time and time to forget will be two parametersthat project managers and foremen will have to define and communicate to theconstruction teams (Fig. 3). To sum up, the suggested methodology is not an accounting-driven remedy, but a production philosophy applicable to construction operations.Hopefully, this writing increases the awareness of engineers and builders on how toreorganize day-to-day construction operations in order to minimize time variability in theirperformance. 10
  • 11. Figure 3: Stock and flow structure of incident learning (Cooke & Rohleder, 2006, p. 226) 11
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