Lean Culture BuildingContinuous Improvement

Deep discussion: construction industry structural problems and how to solve them

By Howard Ashcraft summarized by Dan Fauchier

Deep thinking based on research does NOT have to be DRY. Our job here is to make it lively and engaging.

Look, in a market where we don’t have enough skilled labor, supply chains are unreliable, individual project processes are fatty with waste, suicide rates are the highest of any industry (double), and we waste $1.6 Trillion annually (half the cost of the whole world’s infrastructure needs), how dare we not get smarter and do much, much better?!

Howard Ashcraft – a well-known, highly recognized attorney expert in Lean and Integrated Project Delivery (IPD) – just completed an authoritative study of our industry’s structural problems of low productivity and poor project outcomes, especially in mega-projects which often end up costing DOUBLE their original price (high speed transit, anyone?).

Construction Industry Dilemma
Ashcraft’s summary of our dilemma is compelling in its numbers alone:

  • This universal dissatisfaction with infrastructure performance is compounded by the size of the problem. The World Economic Forum estimates that the total annual revenue for the construction industry is almost USD 10 trillion and accounts for 6 per cent of the global gross domestic product (World Economic Forum, 2016). Estimates of non-value activity exceed 30 per cent (Egan, 1998Miller et al., 2009). Labour productivity studies indicate that construction productivity has fallen approximately 20 per cent during the same period where manufacturing productivity has improved by 250 per cent (Teicholz, 20042013). McKinsey Global estimates that the productivity losses account for USD 1.6 trillion—essentially half the cost of the world’s infrastructure needs (McKinsey, 2017). Even assuming some error in estimating waste and productivity loss, the size of the problem is staggering.

Rampant failure might suggest insoluble problems,” Ashcraft posits, “but industry analysts have long recommended the elements required to achieve improved outcomes. For example, the Egan and CURT reports seek to transform the industry by creating fully integrated and collaborative project teams with shared risk-reward aligned to project outcomes. These solutions are echoed by studies and recommendations from CURT, AIA, AIACC, the World Economic Forum, and McKinsey Global Institute.”

Collaborative approaches to project delivery offer an opportunity to transform outcomes by creating incentives in an environment that incentivizes high performance,” Ashcraft concludes.

The Research Summarized

The full paper is worth your reading. Ashcraft reviews the range of project delivery methods from Design-Bid-Build to Design Build to CM at Risk. He charts the elements of Integrated Project Delivery (IPD) both structural and behavioral. He summarizes 16 major studies of IPD (all on one page).

project value (design plus construction cost) was USD $102,250,333 and the largest completed project was valued at USD $1,500,000,000.”

The Conclusion

“The totality of the research supports using collaborative project delivery and IPD. The subjective comparisons, case studies, indices, and simulations favor IPD over competitive project delivery systems, and the quantitative comparisons are less definitive but provide some support for IPD. No study had suggested that IPD is less effective than other systems. In addition, IPD’s underlying precepts are consistent with research correlating projects success with team integration and cohesion.”

Read the full paper HERE

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