Hindsight 2020: Upfront Costs Bring Long-Term Benefits
This article is included in the Great Things: Issue 3 edition of the DPR Newsletter.
As much as the word “disruption” gets thrown around by thought leaders, we know this: customers don’t like surprises. Surprises in the course of a major construction project create disruptions that can ripple through a project and an entire customer organization. Surprises in the field can be costly and can affect project schedule.
Even while striving to deliver more predictable outcomes, surprises emerge in the field from time to time. Just as safety incidents can be mitigated through the proper steps taken prior to and during work, DPR believes many costly surprises in the field can be prevented.
By spending a little upfront, projects can often avoid spending more due to unforeseen issues. Too often, those costs look easy to cut in early project stages, leaving little recourse when something unexpected arises.
“Throughout the lifecycle of any project, there are a lot of unknowns,” said Rishard Bitbaba, DPR’s large project corporate service leader. “You wouldn’t want a doctor performing surgery without first looking at scans, using tools to evaluate the best approach and using data from similar situations to inform next steps. Contractors and their project partners have a similar set of tools to get rid of the unknowns before a shovel hits the ground.”
Four specific things can help get projects off to the right start.
Sometimes on projects, what you see isn’t what you get—but it can be easy to take existing conditions for granted.
“It’s inevitable that existing buildings, over years of operations, have made a variety of modifications and upgrades, large and small, to systems that may not be fully captured in operations manuals and the original drawings,” says Hannu Lindberg, DPR’s Virtual Design and Construction (VDC) leader. “But for all project types, at various stages, reality capture can be a great example of spending a little now to save more down the line.”
Reality capture methods like laser scanning of existing conditions involves time, labor and some equipment cost, but by setting the basis for the larger digital model – helping support preconstruction activities ranging from procurement to how the work will be phased – it has larger benefits. While many project teams see the utility of doing this before a project begins, that is often left until the end when it’s almost too late to adjust for the discrepancies. Doing so misses the real value.
“The main reason to keep scanning is to ensure quality and catch errors in the field,” Lindberg says. “If you spent the money to coordinate the building, you should ensure you’re following the coordinated design. And, when you crunch the numbers, the cost of upfront labor is far cheaper than rework, change orders and loss of productivity in the field.”
Consider scanning and as-built verification together on a given project. Weekly scans of work put in place for a period of four months could run $46,000 – exactly the kind of money that looks easy to trim on a line-item basis. What if each scan found 10 minor issues that could be quickly addressed before they became $80,000 in major rework costs over the same time period?
Similarly, it might seem like spending $22,000 annually for a drone to capture aerial progress photos for site mapping is unnecessary. The same task with five field crew members and equipment could end up costing upwards of $52,000.
“These things add up,” Lindberg says. “For things like scanning and aerial progress mapping, before work commences, it might seem like trimming $68,000 upfront is cost savings and a better short-term trade off. But, if that results in spending more than $130,000 later in avoidable rework… I’m not sure anyone wants to have to explain that to their supervisor…or owner, for that matter.”
Reality capture can also prevent surprise costs and increase ROI through better overall productivity, quality control, and by reducing waste (in both materials and processes).
Mechanical, electrical, and plumbing (MEP) scopes typically account for 25% to 40% of a project’s total construction costs and drive the operating costs during the facility’s life. Since MEP systems have a significant impact on project budgets, they are often the first scopes that teams look to reduce in the early stages, often without the guidance of a MEP professional.
“Too often MEP systems are taken for granted in early stages of a project,” says Joe Dillingham, one of DPR’s leading MEP coordinators. “We’ve seen assumptions about these systems during design and buyout that lead to costly redesign and rework during construction.”
Bringing MEP professionals into these early stages reduces project teams’ reliance on assumptions when making decisions that affect construction all the way through facility operation.
Often, project teams do not bring on MEP professionals until the commissioning phase, when addressing issues hampering a system’s performance adds cost that could have been avoided with more oversight from the beginning. Even during this late stage, MEP professionals frequently save expenses from hitting clients’ bottom lines.
Blair Calhoun, another MEP professional at DPR, recalls a time when a warehouse manager called him to voice safety concerns with a recently commissioned tenant improvement. Her staff had difficulty navigating almost a 1/4 of the space because it lacked adequate lighting. After some investigation, Calhoun discovered the owner’s recently departed PM had opted to save upfront costs by not replacing the preexisting lights and the project's coffers were tapped. Calhoun asked the electrical subcontractor who previously submitted a proposal to replace the outdated existing lights with contemporary, high-efficiency ones for an estimate of the energy saved with the new lights. The team ended up showing the warehouse manager that the $22,000 change order would be paid for in less than three years from the savings on monthly electric bills, a true win-win.
Recently, DPR’s MEP and data groups began analyzing nearly 40,000 “Requests-For-Information” (RFIs) related to MEP trades from over 1,700 projects. Fundamentally, an RFI indicates an unwanted break in the flow of required and accurate data. The disruptions in data flow often lead to lost production time and pose threats to the quality and predictability of project outcomes. The groups are planning a rigorous analysis to find insights to shine a light on issues affecting MEP upfront costs that ultimately lead to lower total costs for clients.
Things like a truly engaged owner, project partners co-located in a “Big Room” and more were among the nine key indicators DPR identified for executing successful healthcare projects. Another is having the right team who exhibits the Lean principle of “Respect the Individual.” The traditional, more siloed approach to project delivery, where a contractor comes into the process after design is finalized and many key decisions have been made, though, puts the teambuilding starting blocks farther back. In doing so, things like design management fall by the wayside and there isn’t proper time to organize both the design and building team members.
“On a large project – half a billion dollars, say – success depends on organizing a large team up front and how they will make decisions,” said DPR’s Chris Dierks, one of the company’s Lean leaders and a project executive. “The larger a project, the larger potential issues could be if they’re not tackled early on. So, we always recommend getting the teams together early and spending some time and money upfront to not only properly organize as one team but also to focus on developing relationships to head off anything down the road. Strong relationships directly tie to strong trust.”
You can’t implement a successful Design Management process without this sort of team. High-level discussions that combine the customer’s goals, the designer’s vision and the contractor’s knowledge of what is constructible can only benefit from high levels of trust. What’s more, one of the most effective tools for cost control strategy is Target Value Delivery (TVD) and how projects organize and manage the design and preconstruction efforts. The value can be initial cost, total cost of ownership and user experience, which then informs design decisions, means and methods, project sequencing, and cost priorities with accountability to all parties to maximize value in a quantifiable way.
“TVD presents unique challenges over the course of a long project planning effort including ambiguity about timing of decisions, and a tendency to revisit previous decisions when the value is not clear and quantifiable,” Dierks said. “It’s really shifting costs. It’s heavier upfront, but the payoff, ‘the value,’ comes from implementing the right strategies and processes to identify and bring resolution to arising issues so they never materialize in the field.”
The departure from “typical” project startup costs can be a barrier and overcoming it takes an honest appraisal of the stakes in the field.
“I get it. If you’re a customer, you hear ‘teambuilding event’ or ‘building a Big Room’ and you think, ‘sounds like a lot to spend upfront for … what, exactly?’” Dierks said. “It takes seeing how it unlocks the full toolbox of Lean concepts and processes to make the entire project more efficient. [Efficiency] meaning where trust is so high that everyone is aligned and wrinkles are ironed out quickly, with quality in mind, to deliver that cost certainty, again ‘the value,’ ultimately desired by the customer.”
The root of all of these, however, is the long-standing ways construction has been procured and the traditional relationships among project partners. To take advantage, a perspective change is required on all parts.
“Our industry has been called ‘slow to change’ when we’re actually seeing more tools and technologies that can change project outcomes in positive ways,” Bitbaba said. “What has been slow to change is the traditional model of construction so we can properly leverage these new tools.”
Behavior change may not have a dollar cost, but there is certainly a mental cost. No one likes change, but more than enough projects using alternative delivery setups – ranging from design-build to more robust integrated project delivery agreements – to show the way.
“Too often, the new ways of working are being assumed to just work under the traditional, more siloed ways of working,” Bitbaba said. “Owners have to have a mind shift to where they seek to be more engaged early and not be afraid to get into the details, rather than questioning some of the details.”
Bitbaba recalls times when customers wondered why so many superintendents’ hours were needed in preconstruction phases or that terms like TVD were just something a contractor would do.
“The engagement makes the difference,” Bitbaba said. “It’s easy to look at worker hours or assume it will all go to plan, but when a contractor submits the RFI that a wall in a design wasn’t included in project budget, are you going to wish you had considered more engagement upfront? Likely so.”
Which is why Bitbaba likens the entire process of “knowing the unknowns.” Essentially, when all project partners are aligned and working together, using all available tools from VDC to field expertise to working in new ways, it allows projects and the people that make them happen to be more nimble when outside forces are thrust upon us.
“We can’t control the rain,” Bitbaba says. “Let’s work together early on in projects to control the things we can so the only surprises are if the weather forecast is wrong.”
Posted on April 29, 2020
Last Updated August 23, 2022