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26 Constr. Law. 25 (2006)
The Integrated Agreement for Lean Project Delivery

handle is hein.journals/conlaw26 and id is 129 raw text is: I CONTRACT FORMS/PROJECT MANAGEMENT The Integrated Agreement for Lean Project Delivery William A. Lichtig Traditionally, facility own- ers have been presented with a standard set of project delivery options: design-bid- build, construction manage- ment (agency or at-risk), or design-build. Despite this range of options, many own- ers remain dissatisfied: proj- ects take too long, they cost too much, and the work fails to meet quality expectations. William A. Lichtig In addition, construction projects continue to present serious safety risks, with near- ly 1,500 accidents and four deaths per day.1 This article explores a different project delivery opportunity--one that seeks to address some of the root causes that potentially limit the effectiveness of other models. The proposed method involves a contractual combination of lean project delivery and an integrated team. The Integrated Agreement for Lean Project Delivery offers improved proj- ect performance both from the owner's perspective (reduced cost and time, improved quality and safety) and from the viewpoint of the designers and contractors (increased profit and profit velocity, improved safety, and employee satisfaction). While the jury is still out, early results are very promising. Traditional Responses to Owner Dissatisfaction with the Status Quo Over the past 100 years, the design and construction industry has become increasingly fragmented. Each spe- cialized participant now tends to work in an isolated silo, with no real integration of the participants' collective wis- dom. As construction practitioners, we are familiar with the most common industry responses during the past thirty years. Postdesign constructability reviews and value engi- neering exercises, together with partnering and contrac- tual efforts to shift risk, have been the most prevalent. However, these solutions do not attack the problem at its root cause; rather than working to avoid the problem, pro- viding higher value and less waste, these attempts merely try to mitigate the negative impact of the problems. With due respect, they are well-intended band-aids. After a heavy investment of time, money, and ego in a proposed design, the inertia against considering the full range of solutions that might be offered by deep value analysis or con- William A. Lichtig practices construction law with McDo- nough, Holland &Allen, PC., with offices in Sacramento and Oakland, California. structability reviews becomes quite strong.2 In reality, project success requires that this fragmenta- tion be addressed directly. A study by the Construction Industry Institute exploring the impact of different project delivery systems on cost, schedule, and quality found that: Projects are built by people. Research into successful projects has shown that there are several critical keys to success: 1) A knowledgeable, trustworthy, and decisive facility owner/developer; 2) A team with relevant experience and chemistry assembled as early as possible, but certainly before 25% of the project design is complete; and 3) A contract that encourages and rewards organi- zations for behaving as a team.3 What Is Lean? In the United States, the terms lean production and lean manufacturing largely derive from the Toyota Production System (TPS).4 At Toyota, TPS represents only part of a broader business philosophy, known as the Toyota Way. Although a number of tools have been developed that are often identified with TPS, the underlying philoso- phy and its context are important in this discussion of the use of an Integrated Agreement for Lean Project Delivery. Stated generally, the goal and philosophy of TPS are to pro- duce value, as defined by the customer, without producing waste. To understand TPS, one first must understand its under- lying principles and the context in which it was developed. Toyota has its industrial roots as a loom manufacturer. Its initial innovation was to power the looms with a steam engine. Powered looms presented a new dilemma-the loom would continue to run even if the thread broke. Toyota devised a system that would automatically shut down the loom when the thread broke. This system eliminated the waste that would occur if the loom continued running and producing defective material. This principle of autonoma- tion or self-regulation (shutting down production in the face of a defect) was carried forward into TPS as what is often referred to as one of the two pillars of TPS. Toyota Motor Company was formed in the late 1920s and was only marginally successful. After a visit to the United States, Toyota's chairman challenged the chief engi- neer to meet U.S. productivity levels (a tenfold improve- ment) within three years. Toyota did not have the capital, supply chain, or infrastructure to support a level of produc- tivity comparable to Ford and GM. Demand for cars in Japan was not constant, and consumer demand was more THE CONSTRUCTION LAWYER Summer 2006