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Contracting Strategy for
Lean Construction
Steve Knapp, PE
Lean
Contracts
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Lean Project Consulting, Inc.
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Operating System
© Lean Construction Institute & Baker Concrete, 2010
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First – A History of Lean Construction
•  Lean Construction Institute (LCI) – founded late ‘90’s,
academic, seminars, some contractors as members,
very few owners or architects
•  Seminars discussed similarities and differences
between Lean Manufacturing and Lean Construction
•  Many ideas for improving construction were rejected
because of “contract issues” – selection of
subcontractors, working with suppliers, integration of
subs, relations with owners, payments
•  LCI was left with Last Planner© System of Production
Control
Last Planner® System
Should-Can-Will-Did Planning
As Needed Master
Planning
Should Pull
Planning
Can MakeReady
Planning
Weekly Will Weekly
Work
Planning
Did Learning
•  Milestones •  Master Schedule •  Establishes promise of project •  Phase Schedule •  Collabora9vely built plan •  Focus on handoffs •  Look-­‐ahead Plan •  Make work ready -­‐  Iden9fy constraints -­‐  Commitments to remove constraints -­‐  Constraint Log •  Weekly work plan •  Reliable promising •  Daily coordina9on •  PPC •  Rapid learning Crea9ng and maintaining reliable workflow © 2009 Lean Project Consul9ng, Inc. 2
More Lean Construction
•  Last Planner is not contract dependent
•  Action in the field – 5S (Sort, Straighten, Shine,
Standardize, Sustain), JIT (Just-in-Time), 3D-CADD
(Clash detection), Big Room
•  5 Big Ideas
–  Collaborate, really collaborate
–  Increase relatedness among all project participants
–  Projects are networks of commitments
–  Optimize the project, not the pieces
–  Tightly couple learning with action
The Breakthrough
•  Tri-party Agreement
•  Relational not transactional
•  What does an Owner buy?
‒  The design of a facility
‒  The construction of a facility
OR
‒  A team to design and construct a facility – working
together with the Owner to solve problems as they
arise, adding value and minimizing cost.
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IPDA/IFOA
CONSENSUSDOCS 300
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AIA CONTRACT
NO TRI-PARTY AGREEMENT
•  Parties accept Operating Principles from an IFOA
•  Can be a formal written agreement or verbal
understanding
•  Typical for projects with long standing relations between
Owner, Architect & Contractor
•  Signing an IFOA is an “education” not a “negotiation”
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OPERATING PRINCIPLES
1. General
2. Relationship of the parties
3. Formation and functioning of the core group
4. Collaboration and integrated preconstruction services
5. Project planning and scheduling
6. Adding trade contractors, suppliers and consultants to
the integrated project delivery team
7. Owner provided information
8. Budget and cost modeling
MORE OPERATING PRINCIPLES
9. Development of design documents
10. Value engineering, constructability and work
structuring
11. Guaranteed maximum price proposal and contract
time
12. Financial responsibilities and project contingencies
13. Incentives
14. Architect's administration of the contract
15. Shop drawings, product data and samples
16. Requests for information ("rfi's")
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EXAMPLES (PERSONAL)
#1 Hospital – IFOA
#2 Hospital (Big) – IFOA with Program Mgr
#3 Hospital – IFOA with Trade Contractors
#4 Hospital (Big) – IFOA with Trade Contractors
#5 Office/Lab – No Contract – Virtual IPD
#6 Hospital – No Contract – Serious Owner
#7 Renovation – No Contract – Issues
#8 Hospital – CSD 300 – Not Awarded
FINAL THOUGHTS
•  IFOA is the best choice (personal opinion)
•  Chemistry, chemistry and more chemistry
•  BIM is becoming a vital part of IPD
•  Consider carefully the need for a GMAX Price
•  Consider even more carefully an incentive package
•  Confirm the team’s estimating capability
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