The Value Analysis of Lean Processes in Design and Integrated Project Delivery

RESEARCH TEAM
Upali Nanda (Co-PI), Adeleh Nejati, and Sipra Pati
Zofia Rybkowski (Co-PI), Di Ai, and Nivedita Kalyanaraman, Department of Construction Science, Texas A&M University

COLLABORATORS
Department of Construction Science, College of Architecture, Texas A&M University and Akron Children's Hospitals

FUNDS
Academy of Architecture for Health Foundation (AAHF) Research Grant, HKS Inc., and Boldt

WHAT WAS THE AIM

The objective of this research was to 1) assess the value of applying lean process improvement tools in design and project delivery by conducting a plus/delta analysis, and 2) create an inventory of metrics to develop a foundational framework to aid future Return-on-Investment (ROI) studies. By undertaking the case study of a health care facility project that implemented Lean-IPD and TVD, our intent was to make components of benefit and cost that are currently implicit, more explicit.

WHY IS IT IMPORTANT

The healthcare industry is shifting from a volume-driven to a value-driven system. But how do we measure value? What information do we need to conduct a comprehensive Benefit/Cost analysis? Arguably consequences of decisions made during the design process can impact operational performance years after construction. What information should we be tracking at the design stage to make this assessment possible at construction and post occupancy?

WHAT DID WE DO | HOW DID WE DO IT

A detailed literature review was undertaken to understand the key components of the Lean-IPD process and Target Value Design (TVD). A case study was identified which followed the Lean-IPD process. The case study project is a 364,000 square foot, 100-bed (75 +25 future) hospital that is currently under construction and will be occupied in spring 2015. To study the process, and the development of metrics that assess this process in detail, an organizational chart was developed based on Hospital X’s team structure. Archival data from e-Builder, the portal for sharing information, was reviewed including the validation report, target value management logs, Success Metrics and A3s. A detailed Benefit Cost Analysis was conducted for first costs (analyzing data up to Dec 2013), taking into account the benefits (cost savings) and costs (additional costs) associated with the TVD process. To understand implicit benefits and costs and to make them explicit, the following was conducted:

a site visit to Akron Children's Hospitals
a series of interviews with seven members of the Project Leadership Team. Members not present were interviewed via phone.
a focus group with 16 members from the owner, architecture, construction, interior design, and various trade partner teams, who were present on site.
a smaller focus group with four members of the Design Team to understand the architect’s perspective.
a survey was sent out to 79 stakeholders, including members of the owner, A/E, construction, and trade partner teams. A total of 47 stakeholders voluntarily participated and completed the surveys, yielding a nearly 60% response rate.

WHAT DID WE FIND

Some of the key findings about the value of the Lean-Integrated Project delivery model are listed as:

1. Learning is a large implicit benefit that is not currently captured by any success metric. Not only do all the teams involved learn, but getting national experts to team with regional teams also allows a community to build its own expertise, that has an immeasurable value for the community, and stewards of the community.

2. The Mock-Up/ Workshop is the most successful lean strategy which was consistently rated higher than TVD, team weeks and co-location, by all stakeholders.

3. There were some concerns with the TVD process that pertained to 1) the accuracy of original estimate, and 2) the addition of value in the TVD process- analysis of design decision documents (A3s) revealed that for some decisions, reduced cost was also perceived as reduced value. The lack of a robust ROI tool which can address the operational implications of first cost decisions was identified.

4. Although a collaborative project, the level of influence of different stakeholder groups does vary (or is perceived as such) with Owner having the largest perceived influence in the process, followed closely by the GC.

5. There may be value in considering third party estimation and mediation, to address issues of bias and aid perception of a level playing field. They may also be value to include and co-lead with design teams.

6. The biggest advantages for Lean IPD were identified as:

Collaboration, team engagement and working towards common goals
Building positive professional relationships
User engagement and user buy-in
Learning & Education (of both the project teams and the larger community due to the large stakeholder engagement in the processes)

7. The biggest opportunities for improvement were identified as:

Inaccurate cost estimating
Perception of wasted time (too many meetings, too much time wasted in co-location without clear task or benefit)
Perception of imbalance of control/ influence, and need for facilitation which represents different points of view)
Difficulty in adaptation by team members (culture shift needed) Current measures of success still relate more to first costs, rather than quality, and improved outcomes after occupancy.

8. Quality is a key component of value but robust measures to access quality are lacking. Greater value can be a result of greater quality or same quality with lower costs. The true north objectives of the hospital are not currently captured in the project success metrics beyond a post occupancy survey.

9. Current evaluation of “value” is still primarily on first cost and does not take operational cost savings into consideration. This is something that needs to be developed.

10. To conduct a robust ROI for Lean IPD process vis-à-vis a traditional design bid build project, baseline data needs to be collected. Industry wide benchmarking is essential to accurately assess project value.

WHAT IS NEXT

A typical benefit and cost analysis model compares the cash flow between a defender project delivery process (DBB), and a challenger project delivery process, Lean-IPD. And then it calculates the delta (∆) between challenger and defender by using cash flow of challenger minus the cash flow of defender. Each project phase of DBB and lean-IPD is situated along a time axis, and the significant benefit and cost value for owners is recorded in the time axis. Once a framework is established, and actual data are entered, an initial ∆IRR can be calculated. In this research, we do not have a “defender” project - which would, in this case, be the traditional Design Bid Build project (DBB). Therefore the focus has been to develop the framework for analysis. In subsequent work, once baseline data is available for benchmarking a more thorough B/C analysis can be conducted with IRR.

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