It Starts At the Top

Editor's Note: This article is taken from the print edition of the March/April 2011 issue of St Louis CNR.

James Scott, construction lawyer at Greensfelder, Hemker & Gale, argues that the design and construction industry is rife with waste and inefficiency and beset by squabbles over risk and payments.

How does the industry reduce waste and conflict and improve efficiencies to make the design and construction process better?

"It starts with the owner," said Ryan Ellen, manager of enterprise risk and project management in the corporate planning group at Ameren.

Starting with the owner is both practical advice - the owner has to have an active role in the project - and a frame of mind - the success of a project is defined by the owner's experience.

"A successful project is one that meets or exceeds the owner's expectations; supports the owner's business objectives; provides best value in terms of scope, cost, and quality; and is completed on schedule and within budget," said Ken Cates, co-founder and principal of Northstar Management Co.

To get there, "the owner has to be the leader," said Doug Sitton, president of Sitton Construction Group. "The owner has to make key decisions, has to be timely, and has to be clear about objectives," he said.

That leadership starts with planning ahead and establishing the goals and objectives for the project, he said.

Leadership starts with planning, because the beginning is where the opportunities to affect the project are the greatest, said Steve Bannes, program director for graduate studies in construction management at Washington University in St. Louis.

And advance planning that reconciles the program and the budget, and breaks the project into its components before the design phase begins, is rare.

"More often than not, an owner asks for a building, gets a design and then has to change his operations to fit the building. Issues arise or something doesn't work out, and he gets mad at the architect or general contractor," said Zachary Hamilton, vice president, Kwame Building Group.

When SSM Healthcare began considering the construction of a new hospital in Jefferson City, MO, the company engaged in a process Cates calls functional programming before they made the decision to build. Cates, who guided the process, said, "it is a lot like the internal planning that most business do for their business, but is rarely done in construction projects."

The typical challenges in a construction project, he said, include defining a project's scope of work; co-ordinating design and construction; getting the right mix of expertise and experience among project team members; responsible estimating, value analysis, and budgeting; scheduling, sequencing and phasing of activities; and efficient and effective communication.

With functional programming, "you start by defining the basis or purpose of the project - the project objectives," he said.

"You look at the business case for the project; the operational models the owner could use; applicable codes and standards; and space needs.

Then you look at the choices regarding building systems, materials, equipment, and furnishings. From that you develop expectations regarding cost and schedule, which allows you to create a budget. All of this is done before the project is approved. Once you have the budget, you then go to the owner or board of directors for approval of the project. If approved, then you begin design and specifying scopes of work," Cates said.

Architects, contractors, and vendors have to be involved in the programming process to get good information about choices, costs, and time frames for ordering materials and equipment.

"You pay them a consulting fee to get good ideas from them, but everyone knows there isn't a project yet and if it is approved, there will be a selection process by the owner. If it moves forward, the intent is to use them on the project, but they are not guaranteed a job," he said.

"With all the new choices out there, particularly with regards to technology and sustainability, it is exciting and all the more reason to have a team that can give you the pros and cons of each choice early," said Michael Perry, president of HBD Construction and 2011 chairman of the AGC of St. Louis.

Cates, said, "working on the Jefferson City hospital project, we hired an architect - a joint venture of The Lawrence Group and HGA - to plan the amount of space needed; an engineer - Heideman Associates - to develop the choices of M.E.P. (mechanical, electrical, and plumbing) systems for the different functional areas and the pros and cons of each; and a construction manager - Alberici - to help us understand the complexities of the site and pricing in the marketplace. We had 25 people in the room, including M.E.P.. subs, a structural guy, a code guy, and medical equipment vendors.

"The functional program we developed will serve as the basis of the budget and the basis of design. Everything will be checked back against it. It cost $2 million for a project that we estimate will cost $220 million, but it is where you save money. Changes are ten times more expensive to make in design than they are in planning, and once you are in construction, where you are locked in, changes are 100 times more expensive to make," Cates said.

The project delivery method is the last piece of the plan, he said. "We promote integrated project delivery, but even if the job is hard bid, the functional program keeps the scope constant so you really are comparing apples to apples," he said.

Two other local owners who believe strongly in advance planning are Ameren and Solutia.

"We start at the conceptual phase and really focus on nailing down the scope. We feel that is going to drive the other areas: cost, schedule, risk, and quality," said Ryan Ellen, manager of enterprise risk and project management in Ameren's corporate planning group and also a member of the Best Practices Committee of the St. Louis Council of Construction Consumers.

"Research from the Construction Industry Institute has been very helpful, especially the Project Definition Rating Index," he said.

The Project Definition Rating Index (PDRI) is a simple tool for measuring the completeness of a project scope definition. The PDRI offers a comprehensive checklist of 64 scope definition elements in an easy-to-use score sheet format that is supported by detailed descriptions of these elements. Each element is also weighted based on its relative importance to the other elements, and the checklist makes it easy to isolate high risk areas for further work. Research has shown that a PDRI score of 200 or less greatly increases the probability of a successful project.

There are three main sections of the PDRI - basis of project decision, basis of design, and execution approach - each of which is broken down into a series of categories, which in turn are further broken down into elements.

"We get stakeholders in a room for four-to-six hours to discuss the front end planning effort using the PDRI. We're even using the PDRI on small projects. It really identifies the gaps in our planning," Ellen said.

"Front end planning, nailing down the scope, and deciding how to manage changes are the key decisions for owners to make," he said.

"Front end planning is one of those important Construction Industry Institute Best Practices that we strictly adhere to at Solutia," said Greg Kanteres, worldwide engineering major project manager and chairman of the St. Louis Council of Construction Consumers' Best Practices Committee.

Kantares breaks front end planning into two parts.

One part, which he calls "alignment," is making certain that all individuals and companies involved on a project know the overall objectives of the project and how their part is essential to the overall project success.

That is a part that Scott Wittkop, central division president of McCarthy Building Cos., said is often is missing.

"It has amazed me just how poor communication has gotten between owners, design teams, contractors, and subcontractors, despite the electronic age and everyone copying everyone with everything," he said.

And, it is not just about the parties talking at each other. "You have to ask, 'Mr. Architect, what did you hear me say?' or 'Mr. Contractor, what did you hear me say?' to be clear," Wittkop said.

It is far too common for teams to overlook that step, "and get four months into a project and find that the owner, the architect, and the contractor aren't on the same page," he said. "That is wasting money," he added.

The other part of front end planning is pre-project planning.

"At the onset of a project, a team must make many very important decisions. One of those important areas is documenting the execution strategy - what type of contract strategies will be used, who is doing what, when, why and where? ... No single strategy is going to work for all projects," Kantares said.
Kantares said Solutia uses the Construction Industry Institute's PDRI or Independent Project Analysis' Front End Loading Index to help corporate teams understand if they have completely defined the work that is to be done. They use the Construction Industry Institute's Project Delivery and Contracting Strategy tool to help determine the most appropriate contracting strategy for a project.

Many owners, however, are not the savvy consumers of design and construction services that Ameren and Solutia are. They may hire an architect, construction manager, or designer/builder and rely on them to take the planning process in hand.
Often, they make uneducated decisions, "because they lack the appropriate knowledge," said Lauren Talley, commercial project manager at Kozeny-Wagner Inc

.A good owner's representative can help educate an owner as to the owner's responsibilities, help clarify the owner's vision, and help the owner clarify internal lines of decision-making authority."I would bet that any owner's rep out there would be able to prove their worth at the end of the job by saving at least twice their fee just by asking the right questions. It creates a clear line of communication and facilitates decision-making," she said.Regardless of who the owner hires, the owner should provide enough time for planning. "Technology makes us think that everything can happen fast, but good design and construction takes thought. Real constructive analysis needs an appropriate amount of time," Bannes said.

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