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Fixing the Construction Industry
 

Fixing the Construction Industry

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This presentation walks through the drivers of waste in the design and construction process. It shows how to change these drivers to create a trust-based, turnkey solution that lowers cost, shortens ...

This presentation walks through the drivers of waste in the design and construction process. It shows how to change these drivers to create a trust-based, turnkey solution that lowers cost, shortens the schedule and improves the quality.

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    Fixing the Construction Industry Fixing the Construction Industry Presentation Transcript

    • A new way of looking at an old problem. Thursday, January 21, 2010
    • Thursday, January 21, 2010
    • A Day In The Life • Margin Erosion • Conflict & Litigation • Talent Loss • Commodity Perception • Low Bid Procurement • Third Parties • Risk & Liability • Challenge of Selling Value-Add • Increasing Costs • Experience is not Valued Thursday, January 21, 2010
    • Thursday, January 21, 2010
    • Perception Can Be Reality • Contractor: A gambler who never gets to shuffle, cut or deal • Bid Opening: A poker game in which the losing hand wins • Bid: A wild guess carried out to two decimal places • Low Bidder: A contractor who is wondering what he left out • Project Manager: The conductor of an orchestra in which every musician is in a different union • Critical Path Method: A management technique for losing your shirt under perfect control • Completion Date: The point at which liquidated damages begin • Liquidated Damages: A penalty for failing to achieve the impossible • Auditor: A person who goes in after the war is lost and bayonets the wounded • Lawyer: A person who goes in after the auditors to strip the bodies Thursday, January 21, 2010
    • The S-Curve and Architecture’s Mono-culture “Unfortunately…many of the services and project delivery technologies – as well as the prevailing economic business model – used by architecture and engineering matured long ago. Firms cling to their tried-and-true methods with the mistaken belief that somehow things will turn around…” “The lack of business model diversity among architectural and engineering firms has left the entire population at risk.” Kyle Davy, Value Redesigned Thursday, January 21, 2010
    • Client’s No Longer Trust • Current Message: • Pay more now for long-term benefit • Current Triadic Trade Off: • Price, Quality or Schedule (Pick 2) • Current Context: • We don’t trust you • Opportunity: • Pay less now, get higher quality AND long-term benefit through Integration Thursday, January 21, 2010
    • Who we are so far… Thursday, January 21, 2010
    • What mindshift is… A thought leadership group of multi-disciplined individuals related to the construction industry. Formed in 2007 Mindshift is dedicated to evidence based development of: •new delivery models and philosophies for the built environment •elimination of waste •holistic business case drivers •highest performance through trust based teams, early collaboration, integrated design and delivery and shared risk/reward incentives Thursday, January 21, 2010
    • Thursday, January 21, 2010
    • What we have learned… • THE CURRENT SYSTEM CREATES BUILT-IN WASTE THAT GENERATE UNNECESSARY FRICTION, DYSFUNCTION AND COST • THERE IS A TREMENDOUS WILL AND ABILITY AMONG STAKEHOLDERS TO CREATE BETTER RESULTS • THE KEY? INDIVIDUALS, ORGANIZATIONS, PROFESSIONS AND THE INDUSTRY AT LARGE ACCEPTING THE HARD FACTS. THEN CHANGING BEHAVIORS, RELATIONSHIPS AND PROCESSES IN ORDER TO DRIVE NEW RESULTS • THOSE WHO HAVE EMBRACED THESE FACTS AND MADE THE SIGNIFICANT CHANGES ARE REALIZING SUPERIOR RESULTS • OWNERS, CUSTOMERS AND END-USERS WANT MORE THAN THEY ARE USED TO RECEIVING • WE NEED TO ENGAGE OWNERS WHO ARE THE ULTIMATE DRIVER FOR CHANGE Thursday, January 21, 2010
    • Thursday, January 21, 2010
    • More Evidence for Fundamental Change Thursday, January 21, 2010
    • Acknowledging the Elephant in the Room Project DNA: •Complex •Require trust •Relational •Need tight coordination •Fluid •Interactive •A system •A Discovery Process Thursday, January 21, 2010
    • Artificial Project Structure •Fragmented •Silo’d •Linear/Sequential •Hierarchical Owner •Adversarial •Scope Based •Anticipates Litigation •Low Price / Bid Thursday, January 21, 2010
    • The Bid Game vs. Project Success Factors •The bid ≠ the business case •Negative correlation between low bid and final cost •Dilution of commitment •Winner’s curse •Bidding is not apples-to-apples •Cost of bidding gets recouped •Fallacy of value engineering •What does the bidder actually win? Thursday, January 21, 2010
    • The Bid Winning Game vs. The Building Game Examples • Campaigning vs. Governing • Romance vs. Marriage Two Structures - Two Outcomes • Limited information • Low price bias • Game the system • Win to reprice Thursday, January 21, 2010
    • A Tale of Two Teams 2004 2008 Thursday, January 21, 2010
    • Phased Ignorance •80% of the Knowledge •80% of the Cost •All Key Decisions Made •Cost of Change is High “All of the big mistakes are made on the first day.” Big BIM little bim Thursday, January 21, 2010
    • Leaks Happen at the Intersection of Contracts Thursday, January 21, 2010
    • Has it Sunk In? Abstractions or Emotionally Felt • $500 billion annual WASTE (buildingSmartAlliance) • 50%+ Waste in the System (buildingSmartAlliance and Lean Construction Institute) • 70% Over Budget and Late (Egan report) • 48% of Green House Gases (Energy Info Admin Statistics and Pew Climate report) Thursday, January 21, 2010
    • Have We Connected the Dots? • Labor = 50% @ 30% efficiency = 35% waste • Materials = 40% @ 70% efficiency = 12% waste • QTO = 10% of the cost • Bidding = 5% of the cost of a project • Change orders = 10% of the cost • Fluff factor built into pricing? • 3-7% is lost in project cost reduction by not maximizing Construction Tax Planning Thursday, January 21, 2010
    • How Do We Find a New Value Proposition? • Removing Waste • Client Defined Value • Upstream Strategies • New Knowledge • New Numbers • New Narrative • Trust • Early Collaboration • Integration Thursday, January 21, 2010
    • Nine Keys (4 Principles, 4 Tools,1 Hidden Opportunity) • Trust-based turnkey teams • Early collaboration • Built-in sustainability (quality) • Transformational leadership • Big BIM (Building Information Modeling) • Integrated Project Delivery • Shared risk/Shared reward • Leverage Offsite Fabrication • Improve Workplace Performance! Thursday, January 21, 2010
    • The ROI of Trust • LogicaCMG study of 1200 contracts: 20% to 40% difference on service, quality & cost • Profitable Partnering for Lean Construction: strategic partnering delivers up to 30% in cost savings of construction • Speed of Trust: distrust creates a 50% tax on work • Edelman Trust Barometer: 20% higher ROI over a 10 year period • Warren Buffet: Handshake deal for McLean Thursday, January 21, 2010
    • Trust: From Deficit to Dividend Trust Tax -80% -60% -40% -20% Environment Hated Toxic Stressful Worry Focus Conflict Escalation Pre-emption Process Relationships Anger Hostile Disrespect Indifferent Process Open defeat Sabotage Hidden agendas Chain of command Behavior Punish Micromanage CYA Do my job Outcomes Grievance or Law-suit Gotcha Politics Slow Systems Disintegrated Dysfunctional Distracting Hassle Ethics Your ruin Your harm Self-interest Compliance Trust Dividends Neutral 20% 40% Environment No worries Positive Uplifting Focus Scope Outcome Mutual success Relationships Cordial Cooperative Collaborative Process Task at hand Keeping promises Making it easier for others Behavior Respect Partnering Transparency Outcomes Efficient Learn from mistakes Improve Systems Does not get in the way Supportive Adaptive Ethics What is expected What is right What is good Thursday, January 21, 2010
    • REAL Results Early Adopter Aardex - Signature Center Golden, Colorado LEED Platinum $3/sqft less than conventional 21% lease premium - 45% Tenants reported increased productivity Thursday, January 21, 2010
    • REAL Results Brand Promise Guaranteed Price Guaranteed Move-in Date No Change Orders 2-Year Warranty 1 Page Contract Thursday, January 21, 2010
    • Emerging Tools & Practices • Building Information Modeling (BIM) - The Technology • Integrated Project Delivery (IPD) - The Team Structure • Lean Construction - The Process • Shared Risk/Reward Incentives - Financial Alignment Thursday, January 21, 2010
    • Financial Alignment: Outcome Based Incentives Thursday, January 21, 2010
    • REAL Results Fed Up 10% under budget $1 million a bed 6 months early $1000 per square foot 6 change orders for MEP Thursday, January 21, 2010
    • Value Propositions Examples of client based criteria Freemium - free BIM work for gain sharing Free green retrofit for performance compensation Cutting original move-in timeline by 70%, with guarantee = big bonus Achieve under 5 year payback for high performing green retrofits Equity stake as part of the compensation Tie design model through to CAFM and create new role as BIM integrator Partner with steel fabricator to design a pre-fab rebar frame for shotcreet walls. Cuts 16 weeks and $750k in general conditions Thursday, January 21, 2010
    • Paradigm Obstacles Yes but... Who owns the drawings? This is outside our scope as an architect What if someone on the team sandbags? How do we recover our higher cost using BIM? Creating high performing sustainable buildings requires an up front premium Collaboration dilutes our role and position as an architect Sharing risk means the architect will get screwed Our goal is to shed risk not take on more Thursday, January 21, 2010
    • Change: Outside the Comfort Zone Off Road Innovation Comfort Zone Learning Zone Adventure Zone Panic Zone Transformation Thursday, January 21, 2010
    • Call To Action •Educate ourselves and owners about the impacts of the current system (i.e. sustainability) •Collect new stories •Free ourselves from the constraints of the current system and focus on outcomes •Develop new value propositions (look upstream) •Find early adopters and “fed-ups” to create POC projects •Build social capacities along with technical skills •Build alliance networks for integration •Prepare for the culture shift and brain rewiring (be the change we want to see - Ghandi) Thursday, January 21, 2010
    • Thursday, January 21, 2010
    • rex@rexmiller.net 214-498-3055 •Off Road Leadership Skills •Designing New Value Propositions •Market Repositioning •Creating Integrated Alliances •Business Development •Educating Owners •Change Management •Training •Speaking Thursday, January 21, 2010