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Improving construction productivity as a source of competitive advantage

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In the April edition of Contractor Magazine, Partners in Performance's Capital Practice Manager Sally Glen writes how, in the current environment of shrinking workloads across construction, creating or keeping competitive advantage is key to sustaining profit margins

By definition, projects are temporary ventures and there is a tendency for teams to take a transactional approach, not transferring best practice, consistency or efficient processes from one project to the next.

When a capital project blows out its schedule or budget as they frequently do, contractors feel the most financial pain because of the generally limited size of their balance sheet relative to the size of the contract in hand (compared to the owner’s). However, these same teams can equally achieve great projects that come in ahead of schedule and under-budget or recovering delays. 

These highly productive projects are often achieved by working on productivity directly with front-line contractors, including subcontractors and fabricators. This work recognises a gap in the current approach to performance management in construction and requires leadership at all levels to be willing to recognise patterns and change behaviours. As a sector, do we have the will to learn from these excellent teams, embed their behaviours and drive a productivity transformation across our industry?

This article discusses two key aspects of excellent construction productivity—performance and materials management—and provides two recent case examples to highlight the magnitude of productivity improvements available.

Across the execution phases and phase transitions, the key questions are: do our plans cause the frontline to work on the right things, at the right rate, to the right level of quality? Do the front-line craft know what they have to do today?

Performance Management

Implementing performance management at the front-line involves a few key steps to enable critical path acceleration or recovery. Establishing readiness to start construction, adopting short-interval control to monitor and correct progress, and implementing a series of visual tools that facilitate communication up and down the line are critical. Most frequently, the approach involves working directly and on a shift–by–shift basis with the contractors to diagnose, coach and correct behaviours that affect performance on the critical tasks. The featured case example highlights how two powerfully simple initiatives contributed to a rapid schedule reduction without tradeoffs.

Case study: 20% critical path reduction in one region with costs held

An international telecommunications enterprise was rolling out major network infrastructure and the installation was running late and missing targets for completions. The contractor was regularly being interrupted by late delivery of designs to the construction management team and construction time per area was well above the rate needed to meet targets. Contractor disputes were arising because of unclear commercial and incentive agreements.

Rapid identification of the primary drivers and bottlenecks on the critical path, as well as creation of simple top-down metrics for consistency and ease of problem solving, were completed with the owner and major contractors. Key initiatives embedded included installing critical intervention teams in key bottleneck areas to rapidly get high risk areas back on track, and building standard operating procedures (laminated visual sheets with pictures) to show crews what good looks like.

The result was a 50 percent increase of construction capacity using the existing work process and with resource levels held, which fed the overall reduction in construction time of 20% for a single region (without costs increasing). For the contractor, embracing the integrated and short-interval review approach with their front-line crews meant that a forecast 30% shortfall mid-construction was avoided and future problem identification and interventions were immediate.

Materials Management

Most projects are a massive logistics exercise and a key reason for construction phase schedule slip is fittings, equipment and materials not arriving on time, in the required volume or to the correct quality. Most projects will have three streams of materials management—inventory, big ticket items and unique design elements—that each require unique materials management solutions. An effective materials management approach manages each materials stream effectively and efficiently to the work front. In our experience, the early stages of the construction phase are high risk for materials availability as the owners and contractors have more than likely been focused on commercial agreements rather than the task of jump starting the supply chain.

Case study: “Materials are no longer holding us up”

An independent energy company was constructing a gas gathering system that employed multiple contractors and was experiencing delays at the work sites. Supply of construction materials at the work fronts and a lack of completions progress were key areas of focus, along with an investigation of key supplier’s ability to deliver the required materials, on time, in the right sequence.

We worked directly with contractors, designers, estimators and planners to identify purchase order mismatches with the materials takeoffs and to highlight immediate material shortfalls and root causes. Design changes also increased the materials management complexity. The lack of detailed progress data to and between the contractors across E, P and the front line crews did not allow for problem identification or corrective actions.

The work with procurement, engineering and construction supervisory functions involved diagnosis, establishing variance reports and detailed action plans, implementing wiring changes to ensure the new way of working could be used into the future, and regular reviews using visual boards with shiftly data. Following work to assure delivery capability in the supply chain, the result was that all materials shortfalls were addressed and minimal gaps existed between design, materials orders and deliveries to site. The contractors achieved a substantial reduction in the materials issues in the field to the point where contractor feedback was “materials are no longer holding us up”.

Competitive Advantage

The size of the productivity pie is big and step-change performance improvements are being achieved by contractors around Australia now. There are multiple other powerful levers in addition to the two discussed here and in difficult economic times, the opportunity to be transformational is in front of many of us. What can you do to embed highly productive behaviours from day one of your next project and ensure they get transferred to future projects?


More info: Sally Glen brings 18 years of extensive experience in consulting, benchmarking and project management, and has evaluated hundreds of capital projects in the resources, refining and chemicals sectors. Each of these projects has involved multiple contractors, all of whom are critical to a thriving construction sector. Prior to working at Partners in Performance, Ms Glen headed the Australian operation for Independent Project Analysis, Inc. and was a Project Manager with Rio Tinto. She has a Civil Engineering degree with honours from The University of Melbourne.

About the authors

Aoife Murphy