Lean Construction Contracting

The lean approach to construction contracting may soon become an industry standard. In our opinion, it is the answer for operational excellence. Just as it is only a matter of time before the majority of companies adopt virtual construction, most contractors will adopt lean construction. Some contractors do it now, although they may not call it lean; they practice all the methods and attributes of a lean enterprise, having learned the most efficient ways of working.

How long will it take for lean methods to become common? Construction firms, in the second riskiest industry in the U.S., tend to be slower to adopt new ideas. Rapid changes can lead to unintended consequences, some life-threatening. It is reasonable for construction companies to do the rational thing and stay with the known, changing slowly only upon proven results.

What is lean?

Lean is about efficiently earning more return for the investment of energy, time, materials and talent. It is not a descriptor of fatness or overhead discipline. A firm can be lean, regardless of its size. We define lean as asset productivity, referring to current and fixed assets along with people. Productive assets mean a higher ROI, leading to a business’s financial health. Financial reserves allow a company to take a long-term view of their projects and the industry; lack of reserves restricts the company to a short-term view.

Asset productivity can be broken down into more familiar construction concepts:

1. Higher labor productivity
2. Less material waste
3. Increased equipment utilization
4. Higher overhead productivity
5. Safer workers
6. Trouble-free installations
7. Fewer call-backs and punch list items

To be clear, lean is a manufacturing approach and it does not apply exactly to construction contracting. It has to be adapted to the business and craft. Our consulting challenge has been to modify or interpret it to reflect the unique nature of construction companies. We don’t think using Japanese words helps people understand it any better. The concepts should be explained in English. Foreign vocabulary distracts people from learning.

What are the five steps?

(The steps in bold type are generally attributed to Toyota Motor Corporation; however, the interpretation is ours.)

1. Define value to the customer — Customers pay more for “timely production, safety and craftsmanship.” Customers pay for lower maintenance construction services that produce the desired work, while contractors want productivity. From our experience in the industry, we believe timely production is a value to the client.
2. Identify the value stream — The value stream goes right through field operations. Marketing, estimating, finance, etc., should support the field staff in building projects. Safety, craftsmanship and production all occur in the field, where the customer sees them. He or she wants these things and will pay more for them.
3. Flow — The ultimate lean idea here is “one-piece flow;” we call it one item focus. The idea is to have one person overseeing a process, from inception to completion. This allows that person to focus and deal with problems promptly.
   Another example is having all staff use a single electronic list of project duties. It is the singular focus of all employees, and this makes production of the work more efficient.
4. Pull — We define this as “work tasks are done when they are ready to be done in full.” Rather than doing a task halfway, which can cause problems, a task is only begun when everything is in place for it to be completed.
5. Seek perfection — We label this last step “compete against yourself.” Trying to achieve perfection, beating your personal best, can energize an organization, as well as achieving the best possible results. And this can apply to everyone in that organization, from the president down to a clerk.

Waste is the enemy in construction contracting

Any writings on lean include the keystone concept of banning waste, to which construction companies are already sensitive. Waste affects the cost-side greatly, whether it is:

• Bloated overhead
• Wasted materials
• Unproductive crews
• Costly software
• Unresponsive partners
• Other

These problems tend to grow if not managed aggressively and lean formalizes this, which makes it easier to teach others. As we try to bring along managers to be our replacements, lean provides a pathway.

Again, the Five S’s approach to waste removal clearly denotes a manufacturing approach. Construction is a service business that uses tools, equipment and materials as part of its process. Some interpretation here is needed to make this approach effective. (The Five S’s listed in bold type below is the creation of lean creator Ohno, but the descriptions are ours.)

1. Sort — We call this a “minimalizing” step; less clutter allows more efficient movements and less distraction.
2. Set in order — Place things in a physical place that is close to the task site. Wasted motion is a labor cost and that is the source of most cost overruns.
3. Shine — Attend to the condition of things. Preventative maintenance and cleaning is an example of this. Another is small spills which, unattended, can be hazardous.
4. Standardize — Determine one best way. Drive toward one best way and you have less variability of results.
5. Sustain — A qualified manager is used to keeping people motivated and focused over the long term. The field supervisor’s or project executive’s challenge is to keep people mentally engaged in improving their personal performance.

Future tense

Lean is a nuts and bolts process, emphasizing detailed understanding. Knowing details allows you to anticipate and “what if” potential problems, thus cutting them off earlier. Clients can see you’re savvy and it makes them smile.

Our consulting and subsequent documentation of process re-engineering is based on the lean approach. We focus on the business of construction contracting in the belief that any business benefits from lean. More exactly, our firm has interpreted lean thinking for construction contracting and it is part of our value stream for our clients.

If you have read any writings on lean as well as my book, Managing a Construction Firm on Just 24 Hours a Day (McGraw Hill, 2007), you can see the parallels. When I wrote the book in 2005, it was based on observation from my years in the construction industry. A few friends have suggested the book is “the practical lean approach to construction contracting.”

In the past four years, we have created and captured more than 300 lean steps and practices in our two online libraries: 1. The Work Smart Leverage Index; and 2. The Strategic Value Index. Many of our consulting clients are familiar with these and their value.

One construction-friendly concept is learning by doing. A contractor with field experience will have greater opportunities than others. Lean captures the knowledge of experienced contractors, which could otherwise be lost as they retire. It provides a base for others to build upon, increasing the professionalism of our industry.

So look seriously at the lean approach and read all you can. It is an established method, vetted by some of the greatest business people in the world. You can confidently apply it to your construction company as many others have before you.

Matt Stevens is a management advisor who works only with construction contractors. He has been doing so since 1994. McGraw-Hill published his new book, Managing a Construction Firm on Just 24 Hours a Day. His next book, The Practical Construction MBA, is available. He is pursuing his Ph.D. at the University of Florida’s Rinker School. His firm’s website is at www.stevensci.com. Matt may be reached at mstevens@stevensci.com.