This course introduces the types of cost estimation from the conceptual design phase through the more detailed design phase of a construction project. In addition, the course highlights the importance of controlling costs and how to monitor project cash flow. Students will work on a break-even analysis of construction tasks in a project.
Lean in Cost Control
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From the course by Columbia University
Construction Cost Estimating and Cost Control
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From the lesson
Lean in Cost Control
Sam Spata, Owner of Method Lean, presents this module on Lean In Cost Control.
Meet the Instructors
Ibrahim Odeh, Ph.D., MBAInstructor, Department of Civil Engineering and Engineering Mechanics, Columbia University
Director of Research and Founder, Global Leaders in Construction Management
Now if you've stayed with me so far, here's the good news.
Many of the things you've been doing as an estimator, apply in Lean.
We use these tools a little bit differently and
we use in a somewhat different approach.
But we can use a lot of the good thinking that you've done before.
When we talk about target value delivery, target value, design, TDD.
If you've done developer work,
if you had to do designs that penciled out early on,
then you are, absolutely primed for Lean.
Let's remind ourselves, what is Lean?
Lean is an operations strategy to deliver increased productivity
via flow efficiency.
Lean is a project delivery system that strips away unnecessary effort, time, and
cost in capital project delivery to deliver what the owner values.
That's why we spent a little time talking about value, and finally,
Lean is a design process, a creative process to prevent error and invent value.
When we talk Lean Estimating,
we're talking primarily about project delivery and design.
Now let's look at all the things that we talked about when we're
talking about Lean.
We can talk about theory, we talk about waste flow, and
value, and when we talk about flow we have to keep in mind that it has two flavors.
There is flow that has metrics, value stream that adds value step by step,
but there's also flow that is about a pleasurable mental state.
About using tools to deliver a project that put you in command of the process.
Remember, if money be not thy servant, it will be thy master?
We want to master money in Lean Estimating.
And that will be a flow of process and
a flow in terms of how we feel about the process we're using.
That comes together in that vision of three great interconnected opportunities.
Impeccable coordination, the project as a production system,
and the project as an effective collaboration.
The process that we use, when we look at vision and
theory, is encapsulated in integrated project design.
And often when we think of Lean, we think of integrated project delivery.
But let's think about integrated project delivery
as Lean being used to its most fulfilled state.
We can use Lean in many types of contracts.
Not necessary limited, in fact, not at all limited to integrated project delivery.
Because the processes pull planning,
set base design, TDD which is what we're talking about today.
Choosing by advantages and validation apply to any type of agreement.
The tools that we use start with percent promises completed,
PPC, the big room, the A3, value stream mapping,
continuous estimating, fishbone diagraming, batch thinking.
And we use certain habits that are used regardless of the type of contract and
whether we're talking design, or operations or delivery.
There's the plus delta,
there's the takeaway intent, Lean Coffee's, a form of brainstorming.
The PDCA, plan-do-check-adjust cycle and the breakdown declaration,
pulling the stock cord, so that the process when it goes off the rails is
stopped, and we figure out what do we do to get back on track.
Now, remember that slide a little earlier about the run-up to the Great Recession?
It was rising costs of construction that directly led to Lean and IPD.
The folks who created Lean were asked to fix a problem.
Where in central California healthcare design was escalating 1% per week,
that made it impossible.
The result of that was integrated project delivery,
the integrated form of agreement.
Cost was the driver that created a new and better form of project delivery.
We don't need to use IPD necessarily but
we can always use the processes, the tools, and the habits of Lean.
And those habits directly play off the theory.
If you understand waste and flow in value, then you understand why you do a plus
delta or why you do a breakdown declaration, they feed upon each other.
And when we're thinking in terms of Lean Estimating,
the key tools that we have here are the A3 continuous estimating, the batch thinking.
And the key processes are set base design TVD, choosing by advantages.
Integrated Lean Processes, validation, Target value design,
set based design, choosing by advantages.
The tools for Lean Estimating, A3 Thinking,
Batch Thinking, Continuous Estimating,
particularly at a parametric level and the Parametric Estimate itself.
Now, I don't want to discount the importance of the theory and
vision of Lean.
Understanding waste, flow and value and that vision of impeccable
coordination, collective enterprise, and a production system.
Lean is greater than simply its processes and tools.
The best use of the tools and
the processes comes from a grounding in the theory and understanding that vision,
regardless of the project type of delivery that you're using.
Validation is where we define value from the client's perspective and
in their language.
We understand the why and the what of their wants and needs.
I like to think of it as the value proposition,
a succinct statement by the owner.
Plus the information index, which is a half century old tool that still works.
You bring them together and you get the conditions of satisfaction.
So, remember that owner's value proposition from before?
We can begin with that but then we want to drill down.
Problem-Seeking is a technique invented back in the 1960s,
it still works, particularly for complex buildings.
We look at function,
form, economy and time in classic problem seeking, in the classic information index.
I've added sustainability because it is so important to think about sustainability,
it needs to be considered at it's own fifth major element.
We ask why?
What are the goals?
Why are you doing this project?
What is the intent?
Then what's it all about?
What are the facts that are driving your project?
For that developer,
the facts were a specific piece of land in Midtown Manhattan on the east side.
What concepts do you have in mind?
Many owners, and
certainly constructors with whom you're working, will have some ideas in mind.
Some concepts about how you might solve the problem,
you want to flush those out early.
Needs are a little bit different than concepts,
they're what you really, really need.
An essential part of target value design, when we're designing and
deciding and constructing to a budget.
All that comes together in a problem statement,
it's a conditional direction, very important.
Conditional in the sense that we typically express it as since you have such and
such a need, therefore the project should do the following.
That's important because over the life of a major project conditions will change.
And you've made good decision-making,
you've gotten great information with the information index.
As those conditions change, you want to be able to come back and
say it changes the problem that we're trying to solve.
This is a form for doing that, a form for
doing that it's almost bulletproof in terms of providing information to
others who want to know why are you doing what you're doing.
Whoops, sorry about that.
The conditions of satisfaction are really what the needs and
the problem statement are about.
So, take a laboratory, the typologies we looked at earlier.
The function is summarized needs in a room data sheet.
The form is driven by a space program, which will drive some of those things that
are outside of program area, like is it spacious in circulation, or is it austere?
The economy is the allowable cost, the time is a master schedule.
We talked about schedule, and Lean scheduling.
And sustainability, things like your energy usage index.
These are specific needs, they are measurable, so
they form criteria that we can use, when we are using choosing by advantages,
which is a key tool in TVD and Lean Estimating.
Cost is an ongoing consideration from the very beginning.
When we're talking from goals, to facts, to concepts, and
needs, to a problem statement, we are thinking about cost.
We don't want to leave cost to a milestone, get an estimate, and
realize that we have to undo our work through value engineering.
So to recap, the validation that takes that value proposition, you add
an information index to drill down, and you up the conditions of satisfaction.
Validation sets the baseline or the big four processes, pull-planning,
target value design, set based design and choosing by advantages.
These are the big four processes of Lean.
Pull-Planning is a subject of Lean Scheduling, we won't go into that today.
Target Value Design is that big four Lean process that uses several Lean tools.
But the process itself understands what's the allowable cost, and
set it below market cost.
That's a forcing function, aim for a cost lower than the market says it should be,
after you've benchmarked and after you've normalized.
Continuously estimate on a parametric basis, think of batches and
clusters, swim lanes of good, better and best systems.
Use constructability as a design factor from the very beginning,
not something to be applied at the end.
Design Assist allows us to get constructability thinking very early on.
And decide design and build to budget.
What's the strategic intent?
What are those conditional problem statements telling us
about what the project really needs to be?
And can we maybe tweak some things to stay on, or much below, budget?
So target value design, we're going to set cost targets.
The market cost is greater than the allowable cost,
we want to come under the market.
We want to design, and we want to decide to budget, we use set based design,
the parametric estimate, choosing by advantages.
And then we want to construct a budget,
pull-planning plays a very important role in that.
And we use all of these steps that we've talked about before.
To set the allowable cost below market, we need to parametric estimate,
we want a benchmark system, we want to normalize.
Understand the value proposition, understand the conditions of satisfaction.
So that if we look at cost as a vertical and the project over time,
in terms of its design, we determine, okay, there's a market cost.
And we might say let's come in 15% lower.
Let's come in allowable cost,
not more than 15% less than what the market says something is worth today.
And typically the curve of value is we start off, we add cost, and
quickly, quickly, from validation to cost to find ways of working as a team.
How do we bring that cost down?
We develop savings.
How those savings get shared is a form of contract and integrated project delivery.
It's pretty well defined, but there are other ways to define that savings.
That's separate from how we use Target Value Design, which is the subject here.
Savings, though, could be something that the owner agrees will be shared
in a proportional basis with designers and builders.
So set based design is where we look at different systems that might meet
the conditions of satisfaction.
So we look at building systems in batch thinking.
We segment site, base-building, fit-out, we do it holistically.
We're parallel thinking about systems.
I'm going to give you an example of that.
And then as we learn pull-planning,
we're choosing them by advantages, we make a decision at the last responsible moment.
And it's the decision for which system we actually use.
So Uniformat is a from the United States Department of Commerce in IST,
that's a great source, that's Uniformat thinking.
These major categories here,
may be all you need in a validation phase to think about your project.
You may want to go to the next level of detail but early on in the project,
you do not want that highly detailed estimate.
You do not want to over process cost data too soon.
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