1. Project Delivery And The Changing Roles Of ContractorsBy
Awad S. Hanna, Ph.D., P.E.
Professor
University of Wisconsin-Madison
Department of Civil and Environmental Engineering
2320 Engineering Hall, 1415 Engineering Dr.
Madison, WI, 53706
Tel (608)
No part of this publication may be reproduced or transmitted in any form, or by any means, without written consent from Hanna Consulting Group Inc.
Copyright

2. Changing Project Delivery
Outlines:
Traditional Project Delivery (Design-Bid-Build or Single Prime)
Separate Prime Contractors
Single Source Delivery
Design-Build
Construction Management  CM “Pure” and
Others (Owner CM and Designer CM)
Lean Construction and Integrated Project Delivery (IPD)
Success Factors Ⓒ
Prof Awad S. Hanna

3. Traditional Method (Design_then _Build)
Also known as design-bid-build or single Prime Contractor
Has three sequential phase
design - bid - construction.
Architect-
Engineer
hired
Bid/Award
Design Phase
Construction Phase
Single Construction Contract Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

6. Hierarchy of Contract Document
Addenda
Special Conditions
General Conditions
Specification
Drawing

7. Definitions
Project Team (General Manager, Project Manager, Superintendent, Project Engineer, Foreman, )
Bonding
Liquidated Damages
Master Format
Workers’ compensation Insurance
Builder’s risk insurance Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

8. Contractors Needs for Design-Bid-Build
A complete Complete set of drawings
Specifications
Other contract documents
General conditions
Special conditions
Addenda
Others (soil report) Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

9. Single Source Delivery
1. Design Build
2. Engineer/Procure/Construct (EPC)
EPC model#1 ( CM agency “pure” )
EPC model#2 ( CM at Risk )
Others
3. Lean and Integrated Project Delivery Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

10. Fast Track or Phased Construction Method
CM and A/E or
DB hired
Concepts
Working Drawing
Design Phase
Construction Phase
Variable separate construction contracts Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

11. Level of Influence Time Project Cost Influence Ability to InfluenceⒸ
Prof Awad S. Hanna
Prof Awad Hanna

13. Advantages of Design & Build
Owner only has to communicate with one entity
Total project duration can be reduced because phased construction is easier to implement (Fast-tracking)
Integration of construction planning and design phases
Claims reduction (reduction of adversary relationships)
Innovation in design and construction can be encouraged
Risk assigned to party best able to manage that risk
Ability to react rapidly to change in scope Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

14. Disadvantages of DB for Owners
Fewer checks and balances, owner must rely on integrity of the design-build firm
All your eggs in one basket
Acceptance of additional project risk
Scope of work changes can be difficult to identify under DB/ fast track construction Ⓒ
Prof Awad S. Hanna
Prof Awad Hanna

15. Summary of average differences between project delivery systems (CII-133)Ⓒ
Prof Awad S. Hanna

16. Importance of Involving Specialty Contractors up front in the Project Development
Specialty works represent 60% to 70% of the project cost
Specialty works control the pace of construction
Integration of electrical and mechanical systems early in the design stage
Specialty works are labor intensive
(high risk for cost overrun) Ⓒ
Prof Awad S. Hanna

21. TYPES OF CONTRACT Ⓒ
Prof Awad S. Hanna

22. Types of Contract Single fixed cost or Lump-sum
Negotiated Cost-plus-a-fee contract
Guaranteed maximum price Ⓒ
Prof Awad S. Hanna

23. Single Fixed Cost or Lump-sum
Contractor agrees to perform the work for a predetermined price that includes profit.
Same as unit price contract Ⓒ
Prof Awad S. Hanna

24. Negotiated Cost-Plus-A-Fee Contract
Contractor agrees to perform the work for a fixed or variable fee to cover overhead cost and profit.
Fee can be flat dollar sum or % of cost estimate.
Incentive fees are now increasingly popular. Ⓒ
Prof Awad S. Hanna

25. Guaranteed Maximum Price
The contractor agrees for a fixed fee and profit at a cost not to exceed pre-established max. price.
Costs above the guarantee are absorbed by the contractor.
Savings may be reverted to the owner or in most cases shared by the owner and the contractor. Ⓒ
Prof Awad S. Hanna

26. Degree of Risk for Owner and Contractor
(No Change
in Contract)
(Some
Changes in
Contract)
Lump-sum
(many
changes)
Unit Price
Agreement
Guaranteed
Max Cost
with
Sharing
Clause
(50/50)
(25/75)
Cost-Plus-
Fixed-Fee
Percent-Fee
(or)
Cost-plus
guaranteed
max cost Ⓒ
Prof Awad S. Hanna

27. Lean Construction and Integrated Project Delivery
Outlines:
Defining Lean Construction and Single Source Delivery (IPD)
Driving Forces
Organization Structures and Decisions
Contractual Issues
Tools
Metrics
Success Factors Ⓒ
Prof Awad S. Hanna

28. Lean Production Goals Deliver the product, while…
maximizing value (give the customer what they need when they need it) and
minimizing waste (eliminate anything not needed for delivering value), and
pursuing perfection (never stop striving to better achieve the lean ideal)

29. What Is Lean?
Definition: A systematic approach to identifying and eliminating waste (non-value-added activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection.
Value Added: Any activity that increases the market form or function of the product or service. These are things the customer is willing to pay for.
Non-Value Added: Any activity that does not add market form or function or is not necessary. (These activities should be eliminated, simplified, reduced, or integrated.)

30. Lean Project Goals
Achieve the shortest possible (project) cycle time by streamlining the work flow.
Achieve the highest appropriate quality the first time without defects and rework.
Achieve lowest possible cost by eliminating waste in the workflow.

31. Definitions
Lean Project Delivery System (LPDS): A systematic approach to produce “value”, as defined by the customer and eliminating waste (non-value-added activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection
Integrated Project Delivery (IPD) is a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication and construction.” AIA 2007

32. Definition: What the “Bible” Says:
Philosophy (Long-Term Thinking)
Process (Eliminate Waste)
People and Partners
(Respect, Challenge
and Grow Them)
Problem
Solving
(Continuous
Improvement
and Learning)

33. Forces Driving Change Waste/Lack of Productivity
Technological evolution (BIM)
Owner demand (Cost and Time)
Sustainability (Lean and Green)
Lean design and construction

34. Waste and Lack of Productivity: Current practices are not working

35. The End of Excess

36. Waste Examples
1 – Overproduction 2 – Waiting – Material waiting 3 – Unnecessary transport or conveyance - Material 5 – Excess inventory 6 – Unnecessary movement - Workers 7 – Defects / Rework – Materials may become damaged while waiting

37. Waste Example: (Hospital Project)
Surgeon with a specific need
[Have complexity appear from basic three circles]
Surgeon needs specific temperature control in operating room.
What do you think the odds are of that request being implemented correctly?
How the complex structure affects communication.
A temperature control need may have been stated by a user (e.g. a surgeon) that is ultimately acted on by a sub- subcontractor. The link between need and action is tenuous at best, manifested by questions like: "Why the hell would they need that?" . It may be that we never get the controls sub and the surgeon in the same room but through collaboration, the link can be much closer (and the data more likely to arrive unadulterated) and more individuals will be aware of why. There will be more opportunities to optimize the response.
The conventional contract didn't anticipate the now highly complex structures of Owners, designers and contractors
This contractor must meet the need
Electrical
Controls

38. “Integrated Lean Delivery”
Organization Structure (The leadership Team)
“Integrated Lean Delivery”
Customer
Providing continual assistance and support of architect’s design development process which critiques constructability and updates cost estimates to maintain budget with a true team approach
A/E
GC/CM
Leadership Team
Subs
Other
Partners

39. Have an Effective Core Team
Small
Owner
Designer
Constructor and key subcontractors
Authorized
Speak for their respective organizations
Are the “deciders”
Fair
Timely
Consistent
Thorough
Open

40. Contractual Principles
Key participants bound together as equals
Key participants sign one contract
Shared financial risk and reward based on project outcome
Liability waivers between key participants
Fiscal transparency between key participants
Early involvement of key participants
Intensified design
Jointly developed project target criteria
Collaborative decision making

41. Contractual Principles
Key participants bound together as equals
Key participants sign one contract
Shared financial risk and reward based on project outcome
Liability waivers between key participants
Fiscal transparency between key participants
Early involvement of key participants
Intensified design
Jointly developed project target criteria
Collaborative decision making

42. Tools Used in Achieving IPD Value Propositions
Establishing baseline metrics
Co-location of entire project team
‘Big Room’ concept
Virtual Design and Construction (VDC)
Leveraging the use of new technologies
Continuous cost modeling
Reliable promises
Early Trade Involvement Packages (ETIP’s)
Joining Agreements
Reverse phase scheduling
Use of third party consulting
IPD contingencies

43. Metrics (Targets) Minimizing Waste in PM Control Systems
Target Reduction in RFI’s (2 RFI/$Million)
Target Reduction in Re-submittals
Target Reduction in Field Conflicts
Target Reduction of Scoping Issues
Target Reduction of Deficiency Issues
Targeted Final Punch List
Lost Time Injuries = zero
Kaizen Event = once/month

44. Commit to Reliable Promising
Measure weekly hit rate of promises kept
> 90% Excellent
> 80% Good
< 70% or Missed Major Milestones –
Change Something or Someone
Watch for warning phrases (what it isn’t):
“I’ll do my best”
“It’s on my schedule”
“I told my staff”

45. Change The Risk Proposition!
Allocation vs. “aversion.”
Ability to manage vs. benefit
Owner
Contractor
Designer

46. Success Factors A knowledgeable owner
An experienced team assembled as early as possible
A contract that encourages and rewards organizations for behaving as a team
A Very Front End Loaded Effort
This is Not Business as Usual
Let the Experts be Experts
Trust and Transparency are Key
Metrics are Key
Requires a “New Vocabulary”
Owner Controlled Insurance Program (OCIP)