american professional constructor journal - may 2011

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The AMERICANPROFESSIONALCONSTRUCTORJOURNAL OF THE AMERICAN INSTITUTE OF CONSTRUCTORS

in this issueAssessment and Improvement of Construction Project Closeout

Facility Condition Index for Asset Management at a Water Utility

Construction Contracts: From Zero-Sum to Win-Win

The Effect of Private Outside Space Quality on the Property Value of a Single Family Dwelling

General Interest Articles

Topic: Initiating a Culture of Lean Construction within the Firm

MAY 2011 VOLUME 34 | NUMBER 01

AIC 2011/2012Officers & Directors

PRESIDENTMr. Andrew J Wasiniak, CPCWalbridge777 Woodward Ave., Suite 300Detroit, MI 48226Work Phone: (313) [email protected]

VICE PRESIDENTTanya C Matthews, FAIC, DBIATMG Construction CorporationPO Box 2099Purcellville, VA 20134-2099Work Phone: (540) 751-4465Fax: (540) [email protected]

SECRETARYMatthew A Conrad, CPCThe Christman Company3011 N. Cambridge Rd.Lansing, MI 48911Work Phone: (517) [email protected]

TREASURERPaul W Mattingly, CPCBosseMattingly Constructors, Inc.2116 Plantside Dr.Louisville, KY 40299-1924Work Phone: (502) [email protected]

Journal of the American Institute of Constructors

PURPOSEThe purpose of the American Institute of Constructors is to promote individual excellence throughout the related fields of construction.

MISSIONOur mission is to provide:

A qualifying body to serve the individual in construction, the Constructor,who has achieved a recognized level of professional competence;

Opportunities for the individual constructor to participate in the process ofdeveloping quality standards of practice and to exchange ideas;

Leadership in establishing and maintaining high ethical standards;

Support for construction education and research;

Encouragement of equitable and professional relationships between theprofessional constructor and other entities in the construction process; and

An environment to enhance the overall standing of the constructionprofession.

AIC PAST PRESIDENTS1971-74 Walter Nashert, Sr., FAIC

1975 Francis R. Dugan, FAIC

1976 William Lathrop, FAIC

1977 James A. Jackson, FAIC

1978 William M. Kuhne, FAIC

1979 E. Grant Hesser, FAIC

1980 Clarke E. Redlinger, FAIC

1981 Robert D. Nabholz, FAIC

1982 Bruce C. Gilbert, FAIC

1983 Ralph. J. Hubert, FAIC

1984 Herbert L. McCaskill Jr.,FAIC

1985 Albert L Culberson, FAIC

1986 Richard H. Frantz, FAIC

1987 L.A. (Jack) Kinnaman, FAIC

1988 Robert W. Dorsey, FAIC

1989 T.R. Benning Jr., FAIC

1990 O.L. Pfaffmann, FAIC

1991 David Wahl, FAIC

1992 Richard Kafonek, FAIC

1993 Roger Baldwin, FAIC

1994 Roger Liska, FAIC

1995 Allen Crowley, FAIC

1996 Martin R. Griek, AIC

1997 C.J. Tiesen, AIC

1998-99 Gary Thurston, AIC

2000 William R. Edwards, AIC

2001-02 James C. Redlinger, FAIC

2003-04 Stephen DeSalvo, FAIC

2005-06 David R. Mattson, FAIC

2007-09 Stephen P. Byrne, FAIC, CPC

2009-10 Mark E. Giorgi, AIC

AIC 2011/2012Board of Directors

Robert W Arnold, CPCNational Director (Elected 2009-2012)ASCO Hardware Company, Inc1409 Osage Dr.Redfield, AR 72132-9526Work Phone: (501) 376-6858Email: [email protected]

Mr. Bernard J Ashyk, Jr.National Director (Appointed)Shook Inc. Northern Division10245 Brecksville Rd.P.O. Box 41020Brecksville, OH 44141-0020Work Phone: (440) 838-5400 x8005Email: [email protected]

Dennis C Bausman, FAIC CPC PhDNational Director (Elected 2011-2014)126 Lee HallClemson, SC 29634-0001Work Phone: (864) 656-3919Email: [email protected]

David J. Bierlein, CPCNational Director (Elected 2011-2014)TMG Construction CorpPO Box 2099Purcellville, VA 20134Work Phone: (800) 610-9005 x4499Email: [email protected]

Paul Michael Byrne, ACNational Director (Elected 2009-2012)6411 Lange CircleDallas, TX 75214-2443Work Phone: (214) 878-1634Email: [email protected]

Matthew A Conrad, CPCAIC Secretary The Christman Company3011 N. Cambridge Rd.Lansing, MI 48911Work Phone: (517) 482-1488Email: [email protected]

Mr. Allen L Crowley, Jr., FAICNational Director (Elected 2010-2013)COR Services16781 Chagrin Blvd.Suite 225Cleveland, OH 44122Work Phone: (216) 406-2364Email: [email protected]

Joseph DiGeronimoNational Director (Elected 2011-2014)Precision Environmental Co.5500 Old Brecksville Rd.Independence, OH 44131-1508Work Phone: (216) 642-6040

Email: [email protected]

Dr. Edward Terence Foster, CPC PhD PE FAICNational Director (Elected 2011-2014)University of Nebraska1014 N 67th CircleOmaha, NE 68132-1110Work Phone: (402) 554-3273Email: [email protected]

Michael Allen Garrett, CPCNational Director (Elected 2009-2012)BMF Construction Services, Inc.2060 Miles Woods Dr.Cincinnati, OH 45231Work Phone: (513) 515-9135Email: [email protected]

Mr. Mark E GiorgiNational Director (Elected 2010-2013)PresidentErie Affiliates, Inc29017 Chardon Rd., Ste. 200Willoughby Hills, OH 44092-1405Work Phone: (440) 943-5995Email: [email protected]

Mike W Golden, AIC CPCNational Director (Elected 2011-2014)PresidentMW GOLDEN CONSTRUCTORSPO Box 338Castle Rock, CO 80104-0338Work Phone: (303) 688-9848Email: [email protected]

Mark D. Hall, CPCNational Director (Elected 2009-2012)Hall Construction Co., IncPO Box 770Howell, NJ 07731-0770Work Phone: (732) 938-4255Email: [email protected]

Larry C Hiegel, CPCNational Director (Elected)10914 Panther Mountain Rd.Maumelle, AR 72113Work Phone: (501) 851-7484Email: [email protected]

John R Kiker, III, CPCNational Director (Appointed—Tampa)Kiker Services Corp1501 Missouri Ave.Palm Harbor, FL 34683-3642Work Phone: (727) 787-8877Email: [email protected]

Tanya C Matthews, FAIC, DBIAAIC Vice PresidentPresidentTMG Construction CorporationPO Box 2099Purcellville, VA 20134-2099Work Phone: (540) 751-4465Fax: (540) 338-9518Email: [email protected] W Mattingly, CPCAIC TreasurerBosseMattingly Constructors, Inc.2116 Plantside Dr.Louisville, KY 40299-1924Work Phone: (502) 671-0995Email: [email protected]

Hoyt Monroe, FAICNational Director (Elected 2010-2013)Vice PresidentClark Power CorporationPO Box 45188Little Rock, AR 72214-5188Work Phone: (501) 558-4901Email: [email protected]

Mr. Bradley T Monson, CPCNational Director (Elected 2010-2013)Tierra Group, LLC182B Girard St.Durango, CO 81303Work Phone: (970) 375-6416Email: [email protected]

Wayne Joseph Reiter, CPC CPANational Director (Elected 2011-2014)Reiter Companies110 E Polk St.Richardson, TX 75081-4131Work Phone: (972) 238-1300Email: [email protected]

Bradford L Sims, PhDNational Director (Elected 2010-2013)The Kimmel School of Constr. Mgmt. & Tec211 Belk BuildingCullowhee, NC 28723Work Phone: (828) 227-2175Email: [email protected]

Mr. Andrew J Wasiniak, CPCAIC PresidentWalbridge777 Woodward Ave., Suite 300Detroit, MI 48226Work Phone: (313) 221-1013Email: [email protected]

THE AMERICANPROFESSIONALCONSTRUCTORVolume 34, Number 01 May 2011

Articles

Assessment and Improvement of Construction Project Closeout ..................................5Schafer, D., Tim Mrozowski, and Abdelhamid, T.S., Rao, S., Singh, Y., Jain, S., Bhawani,

S., and Lung, S

Facility Condition Index for Asset Management at a Water Utility ..............................16Amarjit Singh, PhD and Stacy Adachi, MS

Construction Contracts: From Zero-Sum to Win-Win ..................................................25Ihab M. H. Saad, Ph.D., PMP

The Effect of Private Outside Space Quality on the Property Value of a Single Family Dwelling ................................................................................................32

Ifte Choudhury, Ph.D. and Somya Trivedi, M.S. (COMG)

General Interest Articles ..............................................................................................39from The AGC James L. Allhands Essay CompetitionTopic: Initiating a Culture of Lean Construction within the Firm

1st Place Essay ..............................................................................................................................39Andrew Talare, Purdue University

2nd Place Essay ..............................................................................................................................44Matthew Jones, Clemson University

The American Professional Constructor (ISSN 0146-7557) is the official publication of the American Institute of Constructors (AIC),P.O. Box 26334 Alexandria VA 22314. Telephone 703.683.4999, Fax 703.683.5480, www.professionalconstructor.org.

Subscription rates: This subscription includes 2 copies of The American Professional Journal in digital PDF copy for the year for$112.00 USD.

Published in the USA by the American Institute of Constructors Education Foundation, and copyrighted by the American Instituteof Constructors.

This publication or any part thereof may not be reproduced in any form without written permission from AIC. AIC assumes noresponsibility for statements or opinions advanced by the contributors to its publications. Views expressed by them or the editor donot represent the official position of the The American Professional Constructor, its staff, or the AIC.

The American Professional Constructor is a refereed journal. All papers must be written and submitted in accordance with AICjournal guidelines available from AIC. All papers are reviewed by at least three experts in the field.

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MAY 2011 — Volume 34, Number 01The American Institute of Constructors | 700 N. Fairfax St., Suite 510 | Alexandria, VA 22314 | Tel: 703.683.4999 | www.professionalconstructor.org

Assessment and Improvement of Construction Project Closeout

Schafer, D., Tim Mrozowski, and Abdelhamid, T.S., Rao, S., Singh, Y., Jain, S., Bhawani, S., and Lung, S

Keywords:Project Closeout, Closeout Management, Closeout Issues, Capital Projects

INTRODUCTION

The closeout phase is an often overlooked, neglected,and troublesome portion of large capital constructionprojects. The U.S Air Force’s Air Combat Command,which oversees more than $1.2 billion in constructionand waste cleanup work, reported that 90% of itsprojects came in late until special efforts were made tocombat the problem (Mrozowski et al 2008). A 2003FMI/CMAA survey observed that owners havedramatically increased attention to the closeout process.The momentum that propels project progress followingthe award of the contract, throughout the constructionphase, and to the point of substantial completion seemsto diminish at this juncture. Here, the owner is focusedon settling into the new facility and the contractor isrelieved to have met critical move-in dates. Only a fewseemingly unimportant tasks remain, such as the

punchlist, final documentation, and demobilization.Key project personnel, who possess knowledge aboutthe project, may be assigned to new projects andcloseout is oftentimes relegated to less experiencedprofessionals who are unfamiliar with the project’shistory, contract, and stakeholders. It is no wonder thenthat closeout often drags out a year after the certificateof occupancy is issued (Schaufelberger and Holn 2002)and in some cases much longer.

Construction closeout is generally defined as the phasewhere completion of all remaining construction contractrequirements following substantial completion isperformed. Items typically included in this phaseinclude, but are not limited to, punchlist items,documents such as operations and maintenance (O&M)manuals, as-built drawings, contractor verificationdocuments, final payment, resolution of outstandingand late change orders and claims and final inspections.Owners may have a different perspective and extendthis definition to include their internal administrativeand final project accounting process.

ABSTRACT: Extending construction project closeout can negatively impact project stakeholders in different ways.Inefficient closeout affects the owner’s move-in and start-up activities and diminishes opportunities for future work forcontractors by engaging resources and bonding capacity, as well as creating other difficulties. The overall goals of thisresearch are to comprehensively survey the relevant literature on closeout, identify views of project stakeholders regardingthis problem, and identify strategies and recommendations for improving closeout. More than 100 experiencedconstruction industry participants were interviewed or participated in the study. Additionally, statistical analysis of 39construction projects was conducted which revealed that closeout duration is largely independent of construction duration.Finally, several recommendations are presented. The researchers believe implementation of the recommendations canreduce delays, administrative time, problems, and costs associated with this phase of a project.

Schafer D. is a PhD Candidate in the School of Planning, Design and Construction at Michigan State University, East Lansing, MI48824-1323. Email: [email protected]

Tim Mrozowski is a Professor in the School of Planning, Design and Construction at Michigan State University, East Lansing, MI48824-1323. Email: [email protected]

T.S. Abdelhamid is an Associate Professor in the School of Planning, Design and Construction at Michigan State University, East Lansing, MI 48824-1323. Email: [email protected]

Rao, Singh, Jain, Bhawani, and Lung are Research Assistants in the Center for Construction Project Performance Assessment and Improvement (www.c2p2ai.msu.edu), School of Planning, Design and Construction, Michigan State University.

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In many instances prolonging this portion of the projecthas negative fiscal, societal, and psychologicalramifications that extend far beyond the project at hand.Additionally, the ramifications of a slow closeoutprocess have different implications for different projectparticipants. From the contractors perspective financiallosses and even financial ruin can be wrought by slowcloseout if retainage fees are held until final projectcompletion. For example, a subcontractor working ona large stadium renovation in the Midwest had $238,000in fees held for more than two football seasons afterwork was completed (Mrozowski et al 2008). Largepublic owners tasked with the responsibility ofspending public monies, may be denied the use offurther funds for needed projects until current work iscompleted and an audit is conducted certifying that thecontract was executed according to the prevailingregulations. A more difficult to compute secondary costis also incurred by contractors from lost opportunitiesto acquire additional contracts when monetaryresources such as bonding capacity are entangled witha partially-closed project. A third level of monetary loss,possibly incalculable, can be encountered when poorcloseout performance is used as a barometer for futurework, such as in competitive design-build awards.Owners, especially large public owners, are also fiscallyimpacted by slow closeout. Federal and state grantrequirements often have “hard” deadlines for contractclosure. Failure to meet these deadlines can impact thereceipt of future grants for public projects. Thus,prolonged closeout can hinder the development ofpublically financed projects such as airports, stadiums,and institutional buildings by needlessly constrainingthe flow of public monies.

Simply knowing the elements that need to beaccomplished in the closeout phase does not guaranteetimely closeout. The tasks used to accomplish timelycloseout are often well-defined in project specificationsand other contract documents. However, slow closeoutcontinues to occur. The literature, as well as anecdotalaccounts from industry professionals, indicates that theproblem of contract closeout is prevalent and hasserious consequences. Closeout delays can costadministrative time for owners, dissatisfaction frombuilding users, tension between project parties and cashflow problems for smaller contractors andsubcontractors.

There is no overarching reason found in the literaturefor poor contract closeout performance. The literaturesuggests that inefficient closeout processes result froma combination of factors and sources (e.g. poor design,slow contractor response to requests, and owner’s lackof attention). Pinto et. al. (1998) discussing closeout inall contracts and not just construction, describe thetypical project closeout scenario as anything butsmooth because team members are focusing on the nextjob and not the job at hand while problems exist in thecurrent project, resources are diminishing, and the needto produce documentation becomes critical.

A study by Busansky (2003) investigated contractcloseout on federally funded projects and identifiedseveral closeout problem sources which include:process friction, inadequate information technology,long-life contracts, personnel skill level, contractfinancial issues, management concerns, perceptions,timeliness, problem process steps, existing backlogs,inadequate manpower, and records and filedocumentation.

The literature on the topic of construction projectcloseout is sparse and mainly descriptive or anecdotal.In fact, few prior serious attempts have been made touncover commonalities and derive a sound theoreticalframework that can be of assistance in guidingpractitioners to successfully handle the challenges ofconcluding construction projects. The majority of theliterature on the subject is limited to recommendationson additional contractual language to incorporate andadministrative procedures for managing punch lists.Alternative project delivery systems, such as design-build and construction management, as well ascommissioning services are advanced as potentialremedies to the problematic phase of project closeout(Molenaar and Songer 1998). In addition,organizational forms such as partnering, valueengineering and information technology support haveall been suggested, developed, and pursued withmodest outcomes (Ballard and Koskela 1998).

The overall goals of this research were tocomprehensively survey the relevant literature,develop benchmarks to gauge appropriate closeoutintervals, and to identify effective strategies andrecommendations to improve closeout. The solutions


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proposed by research participants ranged from thesimple (e.g. “Start-early, stay on top of things”) to thecomplex (e.g. “Restructure the closeout process bycontractually integrating the project team.”). Thisresearch aims to be a starting point in a discussion to streamline and standardize the construction closeout process.

LITERATURE REVIEW

Despite the increased attention paid to post-construction activities by owners and the poorperformance record for closeout there have beenrelatively few studies on the additional length of timeand associated cost associated with closeout. However,the impact and ramifications of slow contract closeouthas been recognized by the U.S. Government, especiallythe Department of Defense (DoD), dating back to atleast the year 1985 (Valovcin 1995). Despite prescribedtimelines set by the FAR (NB the time to close dependson the contract type, ranging from 6 to 36 months) amajority of the contracts continue to be over aged, somereports even estimate that there is a six month backlogof over aged contracts at any one time (ranging fromone month to 14 years (Busansky, 2003)).

For U.S. Government acquisition purposes “contractcloseout” is the process by which contracts are verifiedcomplete and administratively processed for officialclosure. Generally, closeout is completed when alladministrative actions have been completed, alldisputes settled, and final paYyment has been made”(Busansky, 2003). The investigations of governmenttransactions with respect to contract closeout holdvaluable lessons for the large construction owner toabstract even though the contracts studied include non-construction related purchases. Busansky (2003)reports that prolonged contract closeout caused thegovernment to lose hundreds of millions of dollars ofcurrent year funds (including interest costs) to replacecanceled funds on improperly closed and unclosedcontracts. Valovicin (1995) characterized the contractcloseout process as “…detailed, lengthy, and time-consuming.” He reports that there are over 15 majorsteps required to close a contract regulated under themandated Federal Acquisition Regulations (FAR)(Valovicin 1995).

Contract closeout is a well-documented task in theproject-related literature and texts approach the taskfrom different perspectives. Fisk (2000) presentscloseout from the viewpoint of a resident engineer ona public construction project, stating that public projectsentail more complexity in the closeout processcompared to private contracts. Fisk identifies 17activities in the closeout process along with several sub-activities, depending on the nature of the contract andif claims have been filed against the project. Fiskdoesn’t identify reasons for slow closeout butprescribes several recommended courses of action forcloseout related to time. For example, setting liquidateddamages too low can act as a disincentive when the costof liquidated damages is lower than the cost ofaccelerating the work to finish on time. This underliesthe importance of inserting “time is of the essence”clauses in contracts. Inserting time clauses associatedwith the punchlist and final completion (as opposed tosubstantial completion) would legally bind contractorsto reach substantial completion ahead of contract enddate, and allow for punchlist items (Parker 2005). Thepunchlist is a primary area of concern in closeout. Fisk(2000) describes the time surrounding the punchlist bystating “There is probably no period during constructionthat is troubled with more time-consuming delays andthe resulting exasperation than the period involving thecorrective work prior to final acceptance.” Fisk promotesthe idea of checking work by all parties (i.e. contractorpersonnel, resident project representative, inspectors,and architect) as it is being performed and correctingdeficient work immediately instead of accumulatingdeficiencies until the end of the project. If it is notpossible to correct the work, the contractor shouldmaintain a written list of deficiencies as work progressesso that they are not overlooked. Fisk recommends thatcorrections be made before any particular trade isallowed to demobilize, doing so may promote delay ifthe trade contractor denies responsibility for thedeficiency. Additionally, the frequency of inspectionsshould be increased as the job becomes physically morecomplete and faulty work corrected.

Schaufelberger and Holn (2002) approach closeout fromthe contractors’ perspective. They maintain that timelyproject closeout should be pursued to receive the finalprogress payment, to receive release of retention, to beginthe clock on the warranty and guarantee, to closesubcontracts and purchase orders as soon as possible, to


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maintain good relations with the owner, designers, andsubcontractors, and to minimize project overhead costs.

OBJECTIVES AND RESEARCH PROCESS

Although the procedures and steps of closeout are well-known as outlined in various project management textsand often delineated in project manuals, there are noknown research studies that document the typicallength of time to closeout for either contractors orowners. Correspondingly there are no studies of whysome projects experience slow or speedy closeout orwhy this phase does not seem to be a problem for someprojects. This study aims to fill this gap by performingan exploratory analysis of project closeout operationsof a university with a large capital facilities program,where the owner perceived that closeout was lengthyon a significant number of projects.

RESEARCH METHODS

Work was completed under the auspices of anoversight committee consisting of key universityemployees involved with construction activity at thehost institution. A primary function of this group wasto suggest a list of candidate firms to interview thatwere familiar with the host institutions projects, toserve as a gateway to the intra-university personnelinvolved in self-performed work, to suggest a pool ofsister university contacts that would aid inbenchmarking, and to provide feedback on researchoutput. A literature review of peer-reviewed journals,conference proceedings, research reports, dissertations,and textbooks was conducted. Due to the lack ofcloseout subject matter, secondary literature sourceswere consulted such as industry articles, websites ofDivision One research institutions physical plantmanagement procedures and specifications,municipalities, and general project managementreferences from construction related associations.

Sources Selected For Data Collection AndSurvey Design

A pool of potential interviewees were selected fromemployees of the host university consisting ofconstruction management and administrative staff, keyfield personnel involved in self-performed work, andin-house design services. Twenty-one employees of thehost institution were interviewed. The subjects wereasked 30 questions consisting of demographics,assigned duties, organizational structure of theirindividual units and how it integrated into the largerorganizational structure, procurement and contractingpractices, existing closeout practices, project closeoutinvestigations, and strategies and suggestions forimprovement of closeout. The interviews wereaggregated and a content analysis was conducted toidentify general themes.

To gain an understanding of the industry perspectivetwenty-six individuals representing fifteen differentgeneral contracting, subcontracting, constructionmanagement, and architectural and engineering firmswere interviewed that performed work for the hostinstitution. Queries to this group consisted of theirperception of the host institutions closeout process,procedures, and execution, and to develop sense of thecloseout methods, best practices, and timeframes in theprivate sector as well as at other similar sized institutions.

In order to learn about best practices at other similarsized institutions firsthand the researchers traveled tofour universities and visited one systems operator thatmanaged construction at several universities to learnabout their closeout process, timeframes, and bestpractices. Key personnel were interviewed, and on twooccasions the entire department responsible forconstruction management participated in a roundtableopen-interview setting.

To gain the outlook of large owners in general, acollaborative work session was held among attendeesat the 2007 Construction Owners Association of America(COAA) Spring Leadership Conference in New Orleans,Louisiana. Participants of the workshop (39 attendees)included owners, architects, and contractors. In an effortto identify the most prevalent trouble spots and possibleremedies, an online survey was distributed to theCOAA community prior to the workshop.


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Finally, the host institution’s construction recordkeepingas contained in a summary database were examined toevaluate timeframes for closeout and to profile projects.Forty-eight projects were analyzed for compliance withthe scheduled date of substantial completion, length oftime from contractor’s substantial completion to finalcompletion (contractor’s receipt of final payment), andfrom final payment to internal closure of the project.Additionally, researchers developed short narrativedescriptions of closeout performance for each of the 48projects in the database. Some projects had incompletedata so the researchers used 36 projects with completedata for the analysis. To analyze the data, the researchteam sorted the data by project durations and createdspread sheets for analysis to compute average durationsand standard deviations. Results were correlated withthe host institution’s process map, the literature review,the interview data and the COAA workshop survey, andgroup responses to develop recommendations andidentify opportunities for improvements.

FINDINGS

Project Closeout Timeline Analysis

From the project data provided by the host institution(see Mrozowski et al 2008 for details), it wasdetermined that during fiscal year 2005-2006, 38% ofthe projects were completed early and prior to theirscheduled substantial completion date, 19% were ontime, 31% were late between 1-60 days and 13% of theprojects were delayed by more than 90 days. It wasclear that the period from substantial completion tofinal completion was frequently extended so that finalcompletion dates were longer than planned. Relative tothe scheduled final completion date, approximately25% of the projects were on time, 56% were 90 to 365days late and 19% were more than a year late.

In order to define and represent processing times thefollowing equation was developed by the researchers:

T1 + T2 = TTotalEquation 1

Where; T1 = time from substantial completion to finalpayment; T2 = time from final payment to owner’sclosing of all accounts; and TTotal = total time fromsubstantial completion to owner’s closing of all accounts.

T1 can be rewritten as:

T1 = max f {C1, O1} + OC1Equation 2

T2 can be rewritten as:

T2 = max f {O2SP, O2A}Equation 3

Where, C1 = Contractor’s closeout activities (e.g.completing punch list, furnishing O&M manuals andas-builts, and providing administrative items toowner); O1 = Owner’s T1 processing activities (e.g.Review and acceptance of completed punch list items,O&M manuals, as-builts, application for payment,retainage release, begin self-perform work);

OC1 = Contractor’s and Owner’s joint processingactivities (e.g. Negotiation and reconciliation of changeorders, define and agree on scope related change ordersnecessary to accommodate un-met end userrequirements identified at closeout or during T1 period);

O2SP = Owner’s self perform work (telecommunications,keying, and landscaping);

O2A= Owner’s T2 processing and accounting (e.g. Finalreconciliation of accounts, Owner’s administrativeprocesses and reports to funding agency, archiving ofproject records)

The expanded form of the equation therefore is:

T1 = max f {C1, O1}+ OC1 + T2 = max f {O2SP, O2A} = TTotalEquation 4

The following indices were also defined to allow for thetracking of metrics for a project as well as acrossmultiple projects:

I SC-FP = [max f {C1,O1}+OC1] / T1plannedEquation 5

I FP-PCO = max f {O2SP, O2A}/ T2plannedEquation 6


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Where; ISC-FP = Index measure of actual to planned T1performance; IFP-PCO = Index measure of actual toplanned T2 performance.

Note that:• ISC-FP < 1 Project ahead of planned target for final

payment• ISC-FP >1 Project behind planned target for final

payment• IFP-PCO < 1 Project ahead of planned target for

project completion• IFP-PCO >1 Project behind planned target for

project completion

Using statistical analysis to calculate means, standarddeviations and box plots the entire database showedthat the time to closeout projects (T1 + T2 = TTotal)averaged 531 days from substantial completion toowner internal closeout. The time from substantialcompletion to final payment (T1) averaged 284 daysand the average time from final payment to ownerinternal project closeout (T2 ) was 247 days.

When considering construction duration, the resultswere not much different from above. Projects with lessthan six months construction duration (short durationprojects) took on average 491 days (T1 + T2 = TTotal)from substantial completion to owner’s internalcloseout. For those projects with construction durationsfrom six months to one year (mid-term durationprojects) an average of 511 days (T1 + T2 = TTotal) wascalculated. Finally for projects with constructiondurations of more than one year (long durationprojects), the average closeout time was 596 days (T1 +T2 = TTotal).

Researchers had anticipated that long constructiondurations (which implied more constructioncomplexity) would have much longer closeoutdurations than short projects, but the variance was notas great as expected. To further substantiate the analysisa two sample t-test was conducted with a hypothesisthat ‘true average mean of closeout duration’ wassimilar irrespective of the length of the constructionduration of the project. Three tests were conducted forthe following three cases to compare the averagecloseout durations of projects across the three differentcategories (Mrozowski et al. 2008):

Case 1: Short and mid-term duration projects

The results for this test case indicated that there was nocorrelation between closeout and construction durationof projects falling under those two categories. Theanalysis was supported by a p-value of 0.790 (for anyrejection) which implies that we can be only 21% surethat there is a correlation between the T1 and T2durations, which is insufficient to establish a correlation.

Cases 2 and 3: Mid-term and long durationprojects; and short and long duration projects

The results for these two test cases indicated that therewas a slight correlation between the closeout andconstruction durations of projects when they fall in thelong duration category. The analysis resulted in p-valuesof 0.424 and 0.301, respectively, for the two cases. Thisimplied a 58% and 70% confidence, respectively, thatthere is a correlation between closeout and constructiondurations of the projects. In other words, closeoutdurations increased with the complexity of the projects.

None of the above three tests could establish asignificant correlation or dependency of closeoutdurations on construction durations, which wasinitially anticipated by the researchers throughobservation of the raw data. Time from substantialcompletion to contractor’s receipt of payment, T1,varied on average from 255 days for projects with lessthan six months construction duration, 255 days forprojects with six months to one year constructionduration, and 348 days for projects with constructionduration greater than one year. The owner’s internalprocesses from contractor’s final payment to owner’sinternal closeout, T2, also were fairly constant forprojects with less than six months constructionduration taking 236 days T2, projects with six monthsto one year construction duration taking 256 days, andprojects with construction duration more than one yeartaking on average 249 days.

In addition to average times, a considerable number ofprojects have very long closeout times (T1 + T2 = TTotal).Twelve projects with construction durations less thansix months took more time to closeout than for theactual construction work, with six of the twelve projectstaking three times the length of construction for


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closeout process (over 600 days). For projects withconstruction durations between six months and oneyear nearly one half had total closeout durations whichwere twice as long as the actual construction process.Finally, for longer duration projects, four of twelveprojects took over two years for total closeout with oneproject taking 1084 days to closeout.

Average durations from substantial completion to finalpayment time T1, from final payment to owner’sinternal closeout time T2, and total time fromsubstantial completion to owner’s internal closeout (T1 + T2 = TTotal) seemed lengthy to the researchers.The relative independence from project duration andcorresponding presumed project complexity impliesthat flow of information and internal processes may bethe major influencing factors in bringing projects toclosure. Figure 1 depict times T1, T2 and TTotal closeouttimes for all projects analyzed.

Figure 1. Closeout durations for all projects

There are many parties involved with project closeout.The contactor and subcontractor must complete theirwork, assemble documentation and properly submit it.The owner must receive the documentation, review it,approve it and process it. If there is owner “selfperform” work included in the project, that work mustbe performed. Claims and change order items must beresolved and finally, all project accounting must befinalized. Anyone of these parties or processes cancause a disruption in timely closeout.

The researchers were surprised to see closeoutdurations were only loosely related to constructionduration, implying that information flow and internalprocesses may be heavily influencing overall closeouttime. Therefore, the researchers examined ownerprocesses as well as contractor’s processes to look foropportunities for improvement.

The real impact of these extended closeout times isdifficult to quantify. As ongoing administrative timeand energy is spent processing this information for anextended period. But it is more difficult to tell if, andcertainly how, these processes impact overall projectcontract costs and relationships. Contractors’interviews revealed that the host institution is a goodowner with closeout processes and durations notatypical of other large owners. However, a number ofexternal parties indicated in the interviews that there is

an “Owner” factor incorporated into theirpricing and they had a number of practicalrecommendations for improving its processes.

Benchmarking

It is difficult to know whether the closeout timesreported are excessive when compared to othercomparable public organizations, because theresearchers believe that no research orquantitative construction industry benchmarkingon closeout has been published. In order toprovide some benchmarking insight intocloseout, the researchers in this study collectedbenchmarking information from researchparticipants. Few organizations have maintainedquantitative data on closeout, so what is reported

is perception. Some organizations particularly those whichare ISO certified were found to maintain and aggregatequantitative project data and interview responses fromthese organizations was particularly helpful.

Benchmarking- COAA On-line Survey

The web based online survey of COAA Conferenceattendees had 36 responses. The majority (31/36) of therespondents were owners, with three A/E firms andtwo constructors responding. The respondentsindicated involvement with the following type ofbuildings: 19% universities; 15% office buildings; 14%


12


dormitories; 12% sport complexes; and 12% hospitals.Among them, the respondents had an annualconstruction budget ranging from less than 25 milliondollars to greater than 1 billion. With few exceptions,respondents used more than one delivery method, butdesign-bid-build was used most frequently (40%)followed by CM-at-Risk (25%) and design-build (17%).

About 77% of the respondents indicated that theirorganizations have a formalized project closeoutprocess. The respondents varied on their judgment ofthe effectiveness of their adopted project closeoutprocess, with 50% indicating that it is only somewhateffective. In general, 79% (27/34) of the respondentsindicated their dissatisfaction with the time it takes tocloseout projects in their organizations.

None of the respondents were aware of any publishedaverage time for the project closeout process.Aggregated responses indicated average T1 closeouttimes varied with project length, When respondentswere asked to give an estimate of typical length ofproject closeout for projects lasting 2-months, 6-months,and 12-months respectively 85% of respondentsindicated that for a 2-month to 6-month project, thetypical time to close was 5 months or less. When 12-month projects were considered, only 60% of therespondents indicated that the typical time to close was5 months or less. Table 1 below shows the aggregateCOAA survey responses. The survey also revealed that65% of the respondents set internal goals or proceduresto facilitate speedy project closeout times which rangefrom 30 to 360 days after substantial completion.

Table 1. COAA Survey Closeout T1 Reported Closeout Time AveragesGoals - From Substantial Completion to Contractor’s Final Payment

Benchmarking- Contractor, Subcontractor,Architect and Engineer Interviews

Interviews of 15 external contracting consisting of 26individuals, construction management, subcontracting,architectural and engineering firms which do businesswith MSU were conducted for the study. The questionswere presented in an open ended format. Thequestions posed are available in Mrozowski et. al.(2008). Paraphrased responses were entered into aspreadsheet and content analysis was used to draw outgeneral indicators and themes.

None of the respondents were aware of any publisheddata on industry average closeout times. Threequestions in the interviews targeted typical closeouttimes. The first sought typical closeout times (T1 timefrom substantial completion to contractor’s finalpayment) for their projects, the second asked abouttheir targets/goals for their portion of the closeoutprocess (C1 contractor’s closeout activity), and the thirdasked about typical length to receive payment afterfinal submission of contractor’s final submission andfinal application for payment.

Contractors, subcontractors, architects and engineersgenerally indicated that the time for closeout variedfrom 30 to 60 days and that some projects may take asmany as 270 days to two years (T1). Contractors andsubcontractors were in agreement that receipt of finalpayment after final submission by the contractor wasapproximately 30 to 60 days. Contractors andsubcontractors set internal goals for their portion of thecloseout process, C1, (Contractor’s closeout activity) ofthe T1 Time at 30 to 60 days, but may range from 45 to270 days for larger projects.

When taken together, goals for contractors (C1Contractor’s closeout activity) added to the typicalpayment time from owners of 30-60 days sets an overalltarget for T1 Time (from substantial completion tocontractor’s final payment) of 60-120 days. Theseinterviewees were not asked about T2 (time from finalpayment to owner’s closing of all accounts) or TTotal(total time from substantial completion to owner’sclosing of all accounts.)


13


Benchmarking –Other Universities

Project researchers conducted interviews withconstruction administrators and staff from 4 universitiesto benchmark and capture construction closeout processbest practices. The universities were selected fromamong several recommended by the oversightcommittee that were similar to the host institution instudent population, dollar volume of work completedper year, and physical characteristics (i.e. largeruniversities with mainly residential style maincampuses). Additionally, personnel from the centraloffice of a state-wide university system (representing 14campus locations throughout the state) which contractsmajor capital projects were interviewed.

Project closeout is an issue that is on the minds of all ofthe programs contacted, whether they agreed to aninterview or not. Every interviewee indicated thatcloseout is now a priority in their organization.However, this appears to be recent phenomenaattributed to shrinking capital project budgets andcloser scrutiny by owner fiscal auditors. Allinterviewees agreed that the time taken to closeout aproject is unacceptable. However, no interviewee knewof any published industry closeout benchmarkingstudies. Some appear to monitor progress better thanothers. Interviewees generally set goals for timelycloseout, averaging about 45 days after substantialcompletion, but admitted to rarely reaching these goals.

Causes of Slow Closeout

From all the research, it is clear that there are extremelydiverse reasons for slow closeout. All interviewees,survey respondents and workshop attendees indicateda number of possible causes. In all, well over 100possible causes were suggested. Each project has itsown particular set of circumstances, conditions, eventsand participants which influence the effectiveness andthe timeliness of closeout.

The Spring 2007 COAA workshop participantscollectively reported over 30 critical factors influencingcloseout. These factors were pared down to the ten mostinfluential and are indicated below in order of criticality:

• Unresolved construction issues • Lack of defined closeout procedures • Lack of monetary incentive • Punch list • Strength of contract agreement, quality of

documents • Change in project personnel• PM (Owner limitation) in terms of knowledge,

motivation and incentive• No urgency to final completion• Audit process identified at the beginning of the

project (accounting, funding)• Burn-out

The 39 COAA survey respondents seemed to suggestthat slow closeout and other project management issuesseem to be grounded in process issues where roles andmethods need to change as well as the project deliverymethods for capital projects. Generally, from all of theresponses, several broad classifications of reasons forslow closeout can be made. Unresolved constructionissues including punch list items, change orders ordocument quality, lack of closeout process definitionand standardized procedures, organizational andpersonnel commitment and personnel assignments, aswell as project characteristics including complexity,materials, equipment heavily influence closeout timesand process effectiveness.

An objective of the study was to explore effectivestrategies for managing closeout. Toward this end,researchers sought input for all interviewees along withsurvey and workshop participants regarding effectivecloseout processes. Interviewees, survey respondentsand workshop attendees indicated a range of effectiveorganizational traits and processes that can help.

Overall having a clear standardized process which waswell communicated to all parties and which hadmanagement commitment was seen as very important.Money is a prime motivator for contractors and includingspecific closeout activities in the contractor’s schedule ofvalues as well as use of retainage is seen as an effectiveapproach. Having the right staff, with adequateknowledge and time to effectively manage closeout wasseen important along with clear document requirements.


14


RECOMMENDATIONS AND CONCLUSIONS

Effective Closeout Processes

The researchers considered all data along with theliterature in order to identify general themes, uncoverproblems and strategies relevant both to the hostinstitution and other organizations and to establish abenchmarking perspective. From the data and analysisthe researchers identified recommendations forconsideration by the host institution. An excerpt of therecommendations and strategies are listed below.These recommendations are expected to havesignificant potential to reduce closeout times. Severalrecommendations are listed as “general”, and are at theorganizational level and encourage organizationalcommitment and standardizing processes.

General Recommendations

1. Develop and agree on organizational goals forcloseout and establish a “corporate commitment” tomeeting them at all levels. Department of Navy studieson closeout indicate that management emphasis onspeedy closeout from the top down is a major factor inimproving closeout performance (Busansky 2003). If theuniversity desires streamlined closeout, and is willingto allocate the needed resources, then this desire shouldbe clearly communicated to mid-level managers.

2. Standardize the closeout process as much as possible.Use checklists as part of the standardization. Every projectrepresentative should have the same organizationalsystem including administrative and fieldwork.

Standards are the foundation upon which processimprovement is based. An integral part ofstandardization is process mapping. Each personknows what they need to do and at what point it needsto be done. Contractors interviewed for this studyconveyed that it is sometimes difficult to plan closeoutactivities because the owner project representative haddifferent notions about how to carry out the ‘nut andbolts’ of closeout. Project specific checklists will aid inclearing confusion among project stakeholders and canact as a roadmap, along with the process maps, tosmoothly finishing the project.

3. Identify a single point of contact (POC) foraddressing contractor issues regarding closeout. Ensurethat the POC stays with the project from beginning toend. The closeout problem is amplified whenmisinformation occurs near substantial completion. Ifthe POC, who possess intimate knowledge of theproject, is reassigned to other projects, information vitalto speedy closeout must be researched, thus furtherextending closeout.

4. Implement a formal post-construction closeoutanalysis to document lessons learned in a centraldatabase. The literature suggests that a formal post hocanalysis of project performance is a vital, yet oftenneglected step in improving project performance ingeneral and closeout in particular. The analysis shouldinclude project stakeholders internal and external to theuniversity. The database should highlight both bestpractices and areas for improvement. This continuityof institutional information will help avoid repeatingcostly mistakes.

5. Develop an information technology strategy thatsupports the closeout process. This should includecollaborative software programs that share projectinformation to all stakeholders and hardware, such asPC tablets, that can be carried in the field toimmediately record punch list items and eliminate theneed to record data multiple time. Begin to movetoward a paperless process, including O&M manuals.

6. Include closeout performance as a line item on eachproject representatives annual evaluation reviews –reward good performance.

Improving closeout times will require a heightenedlevel of effort on the part of the project representative.Monetary or other financial incentives were not seen asa viable alternative by those interviewed in this studyto improve effort expended toward closeout. Includingcloseout performance on an annual review may serveto both stress the importance of closeout and to inspirethe career-minded individual.


15


CONCLUSIONS

Closeout of construction projects is an important anddemanding step in delivering a project, and virtuallyall organizations interviewed expressed somedissatisfaction with this phase of a project.Consequences of slow closeout can include lostadministrative time, perceptions by end-users of aninefficient operation, and increased project costs.

This research has attempted to understand the closeoutprocess by considering previous research, establishinga benchmarking perspective, determining causes ofslow closeout, identifying effective strategies andmaking recommendations for improving closeoutwithin organizations. While the focus has been onuniversity systems, and utilized cases studies from onehost institution, the researchers believe that otherowners can benefit by employing the recommendations.

Statistical analysis of the 36 projects studied reveals thattypical closeout times for larger projects may averageapproximately seven months from substantialcompletion to final payment of the contractor.Additionally, after the contractor has been paid, theowner may spend on average an additional sevenmonths on final accounting, documentation and self-performing work. These average times are believed tobe long but are not unusual for many large publicorganizations. While no published closeout data wasfound, the researchers considered interview data fromstudy participants in concluding that these averagetimes represent a fairly typical picture of the industry.

The possible causes for this slow closeout vary fromproject to project. Study participants suggested over 100different causes for slow closeout along with somestrategies to alleviate this inefficiency. Of the generalthemes of these recommendations from the studyparticipants as previously mentioned the researchersbelieve that, recognizing the importance of effectivecloseout and having a plan for its management arelikely the most important steps in improving this finalphase of a project.

ACKNOWLEDGEMENT

This research is made possible by funding provided tothe Center for Construction Project PerformanceAssessment and Improvement by the Office of the VicePresident for Finance and Operations at Michigan StateUniversity – a university funded center.

REFERENCES:

Busansky, M. D. (2003), “Contract Closeout Pathologies and Recovery Strategies” Master’s Thesis Report, NavalPostgraduate School, Monterey, California.

Ballard, G., and Koskela, L (1998). “On The Agenda ofDesign Management Research.” Proceedings of the 6thAnnual Conference of the International Group for LeanConstruction, 13-15 August 1998, Guaruj, Brazil.

Fisk, E. R. (2000). Construction Project Administration, John Wiley & Sons, New York.

Molenaar, K.R., and Songer, A.D. (1998). “Model for PublicSector Design-Build Project Selection,” ASCE Journal ofConstruction Engineering and Management, Vol. 124, No. 6, pp. 467-479.

Mrozowski, T., Abdelhamid, T. S., Schafer, D., Rao, S., Singh,Y., Jain, S., Bhawani, S., and Lung, S. (2008). Assessment andImprovement of Construction Closeout at Michigan StateUniversity. Unpublished Report, Center for ConstructionProject Performance Assessment and Improvement(www.c2p2ai.msu.edu), Michigan State University.

Parker, Neville, Baker, Robert F., and Kamga, Camille (2005),“Speed Project Closeouts and Streamline Local Financing”University Transportation Research Center, City College ofNew York.

Pinto, J. K. (1998). The Project Management Institute:Project Management Handbook, 1st ed., San Francisco:Jossey-Bass Publishers

Schaufelberger, J.E, and Holm, L. (2002). Management ofConstruction Projects: A Constructor’s Perspective, PrenticeHall, New Jersey.

Valovcin, James (1995), “Streamlining the ContractCloseout Process” Master’s Thesis Report, NavalPostgraduate School, Monterey, California.


16



Amarjit Singh, PhD and Stacy Adachi, MS

Keywords:Facility Condition Index, FCI, Asset Management, Water,Utility

INTRODUCTION

Water utilities are responsible for the operation andmaintenance of its infrastructure. This includes theday-to-day operation of the utility, maintenance of itsinfrastructure, and the replacement of assets that reachthe end of their useful life. Although most utilities arecapable of covering operation and maintenance coststhrough user charges, an estimated 29 percent of waterand wastewater utilities deferred capital maintenancebecause of insufficient funding (GAO, 2002). Inparticular, the rehabilitation and replacement of agingpipelines was deferred.

According to GAO (2002), deferring major and minorcapital improvements can actually result in higher coststo the utility, as the damage associated with the failureof a major asset that was not repaired when plannedcan incur additional costs. Aside from deferring

maintenance, GAO (2002) found that the actual rate ofrehabilitation and replacement in recent years were lessthan desired levels. This not only suggests that waterutilities will encounter an increasing number of pipefailures as pipes are aging, but will also incur additionalcosts as the rehabilitation and replacement of pipelinesare deferred.

As described in the White Paper on Rehabilitation ofWastewater Collection and Water Distribution Systemsby the U.S. Environmental Protection Agency (EPA),unless significant action is quickly taken, the problemis expected to worsen as the average pipe age continuesto increase without replacement or renewal. Also, witha commonly accepted design life of approximately 50years, the current rate of replacement (less than 1percent per year) and installation of new pipes, willeventually approach the design life in the year 2050(Sterling et al., 2009). Therefore, there is an urgent needto repair and replace drinking water infrastructure.However, a majority of water distribution mains andpipes are buried underground, where they are “out ofsight and out of mind.” Furthermore, utilities are faced

ABSTRACT: Asset management is necessary for water utilities as it assists the utility in making better decisionsregarding the operation, repair, and replacement of its assets. It was discovered that although water utilities are capableof covering operation and repair costs through user charges, the replacement of water mains was deferred due toinsufficient funding. As such, the prioritization of water mains for replacement is not only necessary, but crucial, asfunding is limited. Consequently, the purpose of this paper is to prioritize pipelines for replacement by measuring therelative condition of pipes of different materials and diameters using the facility condition index (FCI). The results of theanalysis are beneficial to the water utility as it notifies them of the condition of the pipe system by material and diameter.The results of the analysis showed that the overall pipe system is in a “good” condition. However, 20” CI pipes are in a“poor” condition; and 6” CI pipes, 4” GI pipes, non-standard size CI pipes, and all 6” pipes are in a “fair” condition.Thus, it is recommended that these pipes be considered for replacement first. In addition, it is recommended that thisprocess be repeated each year, as the pipe system is continually changing.

Amarjit Singh is a professor of construction and engineering management at the University of Hawaii at Manoa. He serves as thePresident of the International Structural Engineering and Construction Society, and is also currently President of the faculty senateat the College of Engineering, University of Hawaii at Manoa.

Stacy Adachi received her master's degree in Civil and Environmental Engineering from the University of Hawaii at Manoa, whereshe worked as a research assistant at the Water Resources Research Center. She currently works as a civil engineer at Austin, Tsut-sumi & Associates, Inc in Honolulu, HI.

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with limited funding, where revenues from usercharges are not enough to cover all maintenance needs,particularly the rehabilitation and replacement of waterinfrastructure.

Consequently, it is vital that water utilities practice assetmanagement by proactively replacing aginginfrastructure to prevent main breaks from occurring.However, because of limited funding, not all waterinfrastructures can be replaced or rehabilitatedimmediately; a prioritization scheme is thus necessary.As such, the purpose of this paper is to use abenchmarking approach to prioritize the replacementof water mains at a water utility.

A commonly used benchmark to measure the relativecondition of constructed assets at a specific point intime is the Facility Condition Index (FCI). The FCI isthe cost of deferred maintenance divided by the currentreplacement value (APPA, 2006; DOI, 2008):

(1)

The FCI is used generally used in facilities managementto compare the relative condition of facilities. Forinstance, at the Harvard School of Public Health, theFCI was used to assess equipment condition andidentify project prioritization to develop short- andlong- term goals for the implementation of projects ina timely fashion (Fortin and Beaudoin, 2005). Althoughthe FCI is primarily used to support asset managementinitiatives, the application of it is mainly directedtowards buildings, including universities and primaryand secondary school systems; studies focusing theapplication of FCI towards water utilities are limited.Thus, the objective of this paper was to compare therelative condition of pipes by material and diameterusing the FCI. The results of the analysis will benefitthe water utility as it will allow for the prioritization ofpipes for renewal based on its condition.

APPLICATION OF FCI TO HBWS

The FCI was applied to the water pipeline system at theCity and County of Honolulu, Board of Water Supply(HBWS), in which the relative condition of pipes bymaterial and diameter were compared. However,before the FCI could be calculated, an assessment of thecondition of the facility was essential in order to obtainthe cost of deferred maintenance and the currentreplacement value of the pipe system.

HBWS Pipe System and Replacement Cost

Figure 1. Percent of total length of all pipes by pipe type in FY 2008

In fiscal year (FY) 2008, the pipe system at HBWSconsisted of, in order of prevalence, cast iron (CI),ductile iron (DI), polyvinyl chloride (PVC), concretecylinder (CC), asbestos concrete (AC), galvanized iron(GI), copper (Cu), unknown pipe types (UNK), andsteel (STL) pipes, as illustrated in Figure 1.

Although CI pipes accounted for 47 percent of thepopulation of pipes in FY 2008, they are no longerinstalled in the system. In fact, the installation of CIpipes was discontinued in FY 1979 and is replaced withDI pipes whenever a replacement is necessary.However, in FY 2003, a policy was implemented


For instance, at the Harvard School of Public Health, the FCI was used to

a

Although the FCI is primarily used to support asset management initiatives, the a

Thus, the objective of this paper was to compare the relative

c The results of the analysis w

In fact, the installation of CI pipes was

d However, in FY 2003, a policy was implemented requiring the installation of

a cathodic protection system in conjunction with all installations of DI pipes (Jamile, 2 The addition of a cathodic protection system made DI pipes cost prohibitive c

In particular, HBWS is reluctant t

18


requiring the installation of a cathodic protectionsystem in conjunction with all installations of DI pipes(Jamile, 2003). The addition of a cathodic protectionsystem made DI pipes cost prohibitive compared toPVC pipes; hence PVC pipes are installed wherepossible instead of DI pipes due to the non-corrosiveproperties of PVC pipes. In particular, HBWS isreluctant to use PVC pipes for high pressure mains andfor mains installed in petroleum contaminated soils (M.Domion, personal communication, December 13, 2010).As high pressure mains are usually in sizes greater than12”, it was assumed that pipes 12” and less would bereplaced with PVC piping; pipes greater than 12”would be replaced with DI piping.

In addition, HBWS no longer installs AC, GI, and CCpipes. GI pipes, which are typically 4” and smaller, arereplaced by Cu pipes; and AC pipes, which aretypically 4” and larger, are replaced by either PVC orDI pipes. The last CC pipe project was in the late 1990s;due to the extensive repair time and cost of CC pipes,the installation of CC pipes is being phased out.

Therefore, when determining the material to replace thecurrently existing pipe in the system, several designassumptions were made, as listed in Table 1, fromwhich it is evident that the replacement pipe type isdependent on the diameter. Although different pipetypes can be used, the exact pipe type to be installedcannot be predetermined. In addition, the cost of thepipe can fluctuate for various reasons such asavailability. Hence, for purposes of determining areasonable replacement cost, the design assumptions asgiven in Table 1 was adopted.

Table 1. Replacement pipe types

An estimate for the replacement cost per linear foot (LF)that is used by HBWS for planning purposes is givenin Table 2 (Pipeline replacement cost, 2009). This is the

installation cost for any pipe, including materials, labor,and equipment, of a pipe based on its diameter, notincluding design costs. As the pipe type is dependentupon the diameter, this is a fairly accurate estimate forthe replacement cost per LF. For pipes less than 4” indiameter, it was assumed that the replacement cost perLF is the same as for 4” pipes. This not only serves as a cushion against future price increases, but it also makes the analysis less complicated. Thus, theeight different pipe types in the pipe system wasreduced to only three different pipe types – a greatimprovement in pipeline maintenance and inventorymanagement efficiency.

Table 2. Pipeline replacement cost by diametert

Current Replacement Value

The current replacement value accounts for the cost toreplace the assets in its current state, withoutmodification or improvements. For the water mainsystem at HBWS, this was taken as the amount it wouldtake to replace the entire length of pipes in the ground(LIG). Obtained from inventory records (Age of main,2009), the LIG was grouped by pipe type and diameter,as summarized in Table 3.


If diameter is Replace withless than 4" Cubetween 4" and 12" PVCgreater than 12" DI

Cu = Copper; PVC = Polyvinylchloride; DI=Ductile Iron

Pipeline replacement cost by diameter

Pipe diameter(in.)

Replacement pipe type

Replacement costper linear foot

($/LF)Less than 4 Cu 325

4 PVC 3258 PVC 350

12 PVC 40016 DI 50020 DI 55024 DI 65030 DI 70036 DI 75042 DI 800

19



Diameter Leength in G Groundd (LIG ) b by pipe typ type, lftAll pipes(in.) AC CI CC Cu DI GI PVC STL UNKAll pipes

< 4 430 62,359 -- 165,223 435 235,924 407 2,496 541 467,817

4 51,090 255,610 -- 382 148,167 8,025 72,521 769 990 537,554

6 17,296 729,055 -- -- 30,303 6,158 8,959 296 141 792,208

8 373,220 2,258,222 45 20 1,223,797 124 852,274 15 1,797 4,709,513

12 149,683 1,201,258 8,802 -- 666,740 25 357,467 433 5,736 2,390,143

16 71,508 300,445 85,665 -- 216,592 -- 92,664 -- -- 766,873

20 4,524 91,506 95,119 -- 92,511 -- 28,603 168 808 313,239

24 -- 142,909 110,065 -- 64,172 -- 16,779 75 -- 334,000

30 -- 24,333 183,284 -- 9,080 -- -- -- -- 216,696

36 -- 3,486 188,511 -- 17,558 -- -- -- -- 209,555

42 -- 39,325 90,857 -- 17,744 -- -- -- -- 147,926Non-standard/unknown sizes 1,845 49,188 -- -- 4,086 -- 36,236 -- 3,275 94,629

Total LIG 669,596 5,157,697 762,347 165,625 2,491,185 250,255 1,465,909 4,252 13,289 10,980,154

AC = asbestos concrete; CC = concrete cylinder; Cu = copper; DI = ductile iron; PVC = polyvinylchloride; STL= steel; UNK= unknown

Diameter R Replacem ment value ( ue (RV) b by pipe t type, $All pipes

(in.) AC CI CC Cu DI GI PVC STL UNKAll pipes

< 4 139,750 20,266,675 -- 53,697,475 141,375 76,675,300 132,275 811,200 175,825 152,040,525

4 16,604,250 83,073,250 -- 124,150 48,154,275 2,608,125 23,569,325 249,925 321,750 174,705,050

6 6,053,600 255,169,250 -- -- 10,606,050 2,155,300 3,135,650 103,600 49,350 277,272,800

8 130,627,000 790,377,700 15,750 7,000 428,328,950 43,400 298,295,900 5,250 628,950 1,648,329,550

12 59,873,200 480,503,200 3,520,800 -- 266,696,000 10,000 142,986,800 173,200 2,294,400 956,057,200

16 35,754,000 150,222,500 42,832,500 -- 108,296,000 -- 46,332,000 -- -- 383,436,500

20 2,488,200 50,328,300 52,315,450 -- 50,881,050 -- 15,731,650 92,400 444,400 172,281,450

24 -- 92,890,850 71,542,250 -- 41,711,800 -- 10,906,350 48,750 -- 217,100,000

30 -- 17,033,100 128,298,800 -- 6,356,000 -- -- -- -- 151,687,200

36 -- 2,614,500 141,383,250 -- 13,168,500 -- -- -- -- 157,166,250

42 -- 31,460,000 72,685,600 -- 14,195,200 -- -- -- -- 118,340,800

Non-standard/unknown

sizes

922,500 24,594,000 -- -- 2,043,000 -- 18,118,000 -- 1,637,500 47,314,500

Total RV 252,462,500 1,998,533,325 512,594,400 53,828,625 990,578,200 81,492,125 559,207,950 1,484,325 5,552,175 4,455,731,825

Table 3. Length of pipes by type and diameter

Table 4. Replacement cost of pipes by type and diameter

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The replacement value was computed by multiplyingthe LIG and the replacement cost per linear foot (LF).For instance, for 8” CI pipes, the replacement cost wascomputed as:

(2)

Similarly, the replacement value for each pipe type anddiameter was computed. The results are given in Table4. The total replacement cost for each pipe type wascomputed by summing the replacement cost for eachdiameter of that pipe type. For pipes of non-standardand unknown diameters, the replacement cost per LFwas taken as the median value of $550/LF.

Deferred Maintenance

Deferred maintenance included any work that was notperformed when it should have been or when it wasscheduled due to insufficient funds; it excluded normalmaintenance that was already scheduled, planned, orfunded within the current budget. At HBWS, thisincluded pipelines that were omitted from their capitalprogram due to insufficient funds. Although many pipesare in need of replacement, the budget for capitalimprovements is limited; water system improvementprojects are therefore prioritized based on several criteria.

The replacement of water mains at HBWS is prioritizedbased on: (1) the condition of the pipe; (2) public impact;(3) fire protection; and (4) project coordination (WSIP,2008). Generally, the condition of the pipe is assessedby field crews; in addition, the frequency of main breaksand predictive indicators of condition deterioration,including the soil type, pipe size, and material, arelooked at. Aside from the pipe condition, mains locatedon major roadways, serving large number of people, orserving providers of essential services such as hospitals,are given higher priority for replacement. Areas in needof system upgrades to improve fire protection are alsoprioritized for replacement. Finally, projects may moveup in priority if the opportunity exists to coordinate thewater main replacement with another project, thusresulting in significant cost savings and minimal impacton area residents.

The cost of deferred maintenance for a pipe is the costto replace it, as HBWS does not rehabilitate pipes. As aresult, the cost of deferred maintenance is increasedbecause replacement is costly compared torehabilitation. A major reason for the replacement ofpipes at HBWS instead of rehabilitation is thatrehabilitation requires the pipe be taken out of servicefor a period of time, thus requiring a temporary systemto maintain water service for residents. In addition, fireprotection is an issue because rehabilitation requires aninterruption of water service; in pipe replacement,water is not discontinued for any extended period oftime. As a result, all pipes at HBWS are replaced, ratherthan rehabilitated, when they reach the end of theirservice life.

There were 39 water system improvement projects thatwere deferred from the 6-year capital program atHBWS for the period between 2006 and 2012 (DeferredMaintenance, 2010). The projects were subgrouped bypipe type and diameter; the length of pipe that wasdeferred is summarized in Table 5. When pipes areselected to be replaced, upgrades are sometimesnecessary to comply with regulatory requirements.Thus, although an existing pipe is a certain size, thenew pipe may have to be larger or smaller dependingon the needs of the system. Therefore, the replacementsize is also listed for each deferred pipe in Table 5.

Using the replacement cost per LF given in Table 2, thecost of deferred maintenance was calculated. Forinstance, for 8” CI pipes, the cost of deferredmaintenance was computed as:

Similarly, the cost of deferred maintenance for eachpipe type and diameter was computed. The results aresummarized in Table 6.


RV8,CI =

The r The total replacement cost for each pipe type was computed b For pipes of non-s

Areas in need of s Finally, p

As a result, the cost of deferred maintenance is increased because

r A major reason for the replacement of p

In addition, fire protection is an issue because rehabilitation

As a result, all pipes at HBWS are replaced, rather than

r

The projects were subgrouped by pipe type and diameter; the length of pipe that

w Thus, although an

e Therefore, the replacement size is also listed for each deferred

p

DM8,CI = ==$33,276,625

The r

(3)

21



Diameter (in.)Deferredd length b by pipe typ type, lft

Diameter (in.) AC CC CI Cu DI GI PVC All pipesRReplace with 2"h 2" pipes

2 -- -- 690 350 -- 275 -- 1,3154 -- -- 175 -- -- -- -- 175

Total -- -- 865 350 -- 275 -- 1,490RReplace with 2.5"h 2.5" pipees

2 -- -- -- -- -- 700 -- 7002.5 -- -- -- 305 -- -- -- 3053 -- -- 175 -- -- -- -- 175

Total -- -- 175 305 -- 700 -- 1,180RReplace with 4"h 4" pipes

1.5 -- -- -- -- -- 175 -- 1752 -- -- 175 175 -- 2,870 -- 3,2204 -- -- 5,600 -- -- -- -- 5,6006 -- -- 175 -- -- -- -- 1758 -- -- 1,655 -- -- -- -- 1,655

Total -- -- 7,605 175 -- 3,045 -- 10,825RReplace with 8"h 8" pipes

1.25 -- -- -- 175 -- -- -- 1751.5 -- -- -- 350 -- -- -- 3502 -- -- 525 2,670 -- 2,432 -- 5,627

2.5 -- -- 350 2,250 -- 175 -- 2,7753 -- -- 965 -- -- 525 -- 1,4904 -- -- 5,890 -- 350 460 -- 6,7006 -- -- 48,330 -- 1,200 -- 50 49,5808 10,270 -- 91,825 -- 3,695 -- 2,625 108,415

10 -- -- 700 -- -- -- -- 70012 850 -- 8,975 -- -- -- -- 9,82514 -- -- 1,000 -- -- -- -- 1,00016 -- -- 2,100 -- -- -- -- 2,10024 -- 1,000 -- -- -- -- -- 1,000

Total 11,120 1,000 159,260 6,845 5,245 3,592 2,675 189,737RReplace with 12"h 12" pipees

2 -- -- -- -- -- 175 -- 1756 -- -- 2,455 -- -- -- -- 2,4558 -- -- 1,500 -- -- -- -- 1,500

12 4,455 -- 33,505 -- -- -- -- 37,960Total 4,455 -- 37,460 -- -- 175 -- 42,090

RReplace with 16"h 16" pipees12 -- -- 1,500 -- 800 -- -- 2,30014 -- -- 1,440 -- -- -- -- 1,44016 -- -- 3,640 -- -- -- -- 3,640

Total -- -- 6,580 -- 800 -- -- 7,380RReplace with 24"h 24" pipees

20 -- -- 7,835 -- -- -- -- 7,835Total -- -- 7,835 -- -- -- -- 7,835

Grand Total 15,575 1,000 219,780 7,675 6,045 7,787 2,675 260,537

Table 5. Length of pipe deferred for maintenance by pipe type and diameter

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Facility Condition Index

The FCI was calculated for each pipe type and diameterusing Eq. (1) and Tables 4 and 6, which summarizes thetotal replacement value and the cost of deferredmaintenance, respectively. As an example, the FCI for8” CI pipes was computed as:

The FCI for each pipe type and diameter was computedusing the same method. The results are given in Table7. Because there was no value for the LIG of 10” and14” pipes of any type in the system, it was assumed thatthe 10” and 14” deferred pipes were of non-standardsizes for the calculation of the FCI.


Diameter CCost of deeferred mainntenance (D (DM) by piipe type, $All pipes

(in.) AC CC CI Cu DI GI PVC

All pipes

< 4 -- -- 982,000 2,175,500 -- 2,472,700 -- 5,630,200

4 -- -- 3,938,375 -- 122,500 161,000 -- 4,221,875

6 -- -- 17,954,375 -- 420,000 -- 17,500 18,391,875

8 3,594,500 -- 33,276,625 -- 1,293,250 -- 918,750 39,083,125

10 -- -- 245,000 -- -- -- -- 245,000

12 2,079,500 -- 17,293,250 -- 400,000 -- -- 19,772,750

14 -- -- 1,070,000 -- -- -- -- 1,070,000

16 -- -- 2,555,000 -- -- -- -- 2,555,000

20 -- -- 5,092,750 -- -- -- -- 5,092,750

24 -- 350,000 -- -- -- -- -- 350,000

Total DM 5,674,000 350,000 81,917,375 2,665,500 2,235,750 2,633,700 936,250 96,412,575

Facility Condition Index (FCI) by pipe type and diameter

Diameter (in.)FCI b by pipe typ ype

All pipesDiameter (in.)AC CC CI Cu DI GI PVC

All pipes

< 4 -- -- 0.048 0.041 -- 0.032 -- 0.037

4 -- -- 0.047 -- 0.003 0.062 -- 0.024

6 -- -- 0.070 -- 0.040 -- 0.006 0.066

8 0.028 -- 0.042 -- 0.003 -- 0.003 0.024

12 0.035 -- 0.036 -- 0.001 -- -- 0.021

16 -- -- 0.017 -- -- -- -- 0.007

20 -- -- 0.101 -- -- -- -- 0.030

24 -- 0.005 -- -- -- -- -- 0.002Non-standard/unknown sizes -- -- 0.053 -- -- -- -- 0.028

Total 0.022 0.001 0.041 0.040 0.002 0.032 0.002 0.022

Table 6. Cost of deferred maintenance by pipe type and diameter

Table 7. Facility Condition Index (FCI) by pipe type and diameter

As a result, all pipes at HBWS are replaced, rather than

r

The projects were subgrouped by pipe type and diameter; the length of pipe that

w When pipes are selected to be replaced, upgrades a Thus, although an e

Therefore, the replacement size is also listed for each deferred p

FCI 8,CI =

The r

(4)

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Because the FCI is a ratio of the cost of deferredmaintenance to the current replacement value, a lowFCI value indicates that the condition of the pipe is“good”, as opposed to a pipe with a high FCI value.The condition ratings, as suggested by NACUBO (1990)and APPA (2006), is summarized in Table 8.

For most pipes, the FCI value was less than 0.05,showing that the condition was “good”. In fact, theoverall pipe system had an FCI value of 0.022, showingthat the condition of the entire pipe system was “good”.There were, however, four instances where the FCIvalue was between 0.05 and 0.10, signifying that thecondition was “fair”. These were for 6” CI, non-standard size CI, 4” GI, and all 6” pipes; however, thecause for the “fair” condition of all 6” pipes was owingto the FCI value of 0.070 in 6” CI pipes. Finally, therewas one FCI value of 0.101 for 20” CI pipes, showingthat the condition of 20” CI pipes was “poor”.

Table 8: FCI condition rating (NACUBO, 1990; APPA, 2006)

DISCUSSION

Based on the results of the FCI, HBWS should aim onreplacing 20” CI pipes first, as the condition was ratedas “poor”. In addition, 6” CI, 4” GI, and non-standardsize CI pipes should also be monitored for replacement.Once 6” CI pipes are replaced, the FCI for all 6” pipesshould be upgraded to a “good” condition.

Although most pipes were rated as “good”, thecondition of each pipe is highly dependent upon thecost of deferred maintenance. While there were 39water system improvement projects that were deferredfrom the 6-year capital program at HBWS, there is apossibility that there are more water mains in need ofreplacement. After all, as pipes are underground, theircondition is difficult to assess.

Thus, the results of this analysis are beneficial to thewater utility as it provides an image of the condition ofthe pipe system by material and diameter, which wasnot performed thus far at HBWS. Overall, it isrecommended that this process be repeated each year,as the pipe system is constantly changing.

CONCLUSION

Deferring maintenance due to limited funds results inhigher costs to the utility, as the damage associated withthe failure of a major asset that was not repaired whenplanned can incur additional costs. While deferringmaintenance commonly occurs at many utilities andfacilities, it needs to be addressed in order to measurethe condition of the utility or facility. In assessing thecondition of the utility or facility, improvements can bemade. One way to measure the relative condition ofconstructed assets is to use the Facility Condition Index(FCI). For this paper, the relative condition of pipes atthe Honolulu Board of Water Supply (HBWS) wascompared by pipe type and diameter using the FCI.This benefits the water utility as it assesses thecondition of the pipe system by material and diameter.

The FCI is the cost of deferred maintenance divided bythe total replacement value. An FCI of less than 0.05indicated the condition of the pipe was “good” and anFCI of 0.10 or higher indicated the condition of the pipewas “poor”; an FCI between 0.05 and 0.10 indicated a“fair” condition. The results of the analysis showed 20”CI pipes are in a “poor” condition as the FCI value was0.101. There were four occurrences of a “fair”condition; these were for 6” CI, non-standard size CI,4” GI, and all 6” pipes. Overall, the condition of thepipe system at HBWS was “good”. Based on the resultsof the analysis, it is recommended that HBWSconcentrate on replacing the pipe types rated as “poor”and “fair” before replacing other pipe types. Thisprocess should be repeated annually because the pipesystem is continually changing and updatedinformation is useful to asset managers.


FCI Range Condition RatingUnder 0.05 Good0.05 to 0.10 FairOver 0.10 Poor

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ACKNOWLEDGMENTS

The authors acknowledge with thanks Grant No.6HQGR0081, MOD 4 of the United States GeologicalSurvey, Department of the Interior. Thanks are alsoexpressed to the Honolulu Board of Water Supply forsharing their data, and Jason Takaki and MichaelDomion, in particular. Prof. Chittaranjan Ray served asco-PI on this project.

REFERENCES

Age of main summary (2009). Excel data, Honolulu, HI:Board of Water Supply.

APPA (2006). APPA Facilities Management EvaluationProgram: University of Hawaii at Manoa. Alexandria, VA:The Association of Higher Education Facilities Officers.

Deferred Maintenance (2010). Excel data, Honolulu, HI:Board of Water Supply.

DOI (2008). Policy on Deferred Maintenance, CurrentReplacement Value and Facility Condition Index in Life-CycleCost Management. Washington, D.C.: United StatesDepartment of the Interior.

Fortin, J. W. and Beaudoin, D. O. (2005). Energy and AssetManagement 101 Comes to Harvard. Engineered Systems.Retrieved April 2, 2011 from http://findarticles.com/p/articles/mi_m0BPR/is_1_22/ai_n8697048/

GAO (2002). Water Infrastructure: Information on Financing,Capital Planning, and Privatization. Washington, D.C.:United States General Accounting Office.

Jamile, C. S. (2003). Revision to the Water System ExternalCorrosion Control Standards, Vol. 3, Dated 1991. WaterSystem Standards, State of Hawaii, 2002; Honolulu, HI:Board of Water Supply.

NACUBO (1990). Managing the Facilities Portfolio.Washington, D.C.: National Association of College andUniversity Business Officers.

Pipeline replacement cost (2009). Honolulu, HI: Board ofWater Supply.

Sterling, R., Wang, L., and Morrison, R. (2009). White paperon rehabilitation of wastewater collection and water distributionsystems. Washington, D.C.: United States EnvironmentalProtection Agency.

WSIP (2008). Water System Improvement Projects. Honolulu,HI: Board of Water Supply. Retrieved October 20, 2010 fromhttp://www.boardofwatersupply.com/files/08%20Water%20System%20 Improvement %20Projects%20Hand%20Out.pdf


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Ihab M. H. Saad, Ph.D., PMPUniversity of Cincinnati

Keywords:Transactional Contracts, Relational Contracts, IntegratedProject Delivery, Risk Sharing, Incentives.

INTRODUCTION

The construction industry is a large contributor to thedevelopment of societies. In 2008, the volume of theworldwide construction industry was $4.8 trillion (CII2008). Any small improvement in the performance ofthe industry results in huge savings to the nationaleconomies. Contract administration (CA) is one of theessential tasks of project management, and can bedefined as the process of systematically and efficientlymanaging contracts creation, execution, and analysisfor the purpose of maximizing financial andoperational performance and minimizing risk.Contract administration is an integral part of the supplychain management, which is in turn part of the widerarea called procurement management (PMI 2004).

One of the main elements of contract administration isthe monitoring and control of risk allocation amongproject team members, with risk being defined as anyuncertainty that might result in adverse financial effectson a project objective (PMI 2004). Contracts are

generally drafted by one of the project team members(Owners, Architects, Contractors, ConstructionManagers), and have been known to cater for theinterests of the drafting party. Widely utilized standardforms of contracts (FIDIC, ACE, EJCDC, AIA, AGC)enjoy a rich case history and hundreds of precedents incourt-ruling resulting from an inevitable side effect ofthe way they are drafted; litigation. New trends inconstruction contracting look at the revival of ideasemerging from the 1980’s and 1990’s, integrating theseideas with the state of the art technology in projectvisualization and proven trends in projectmanagement, with a special focus on thestandardization of construction operations andproviding a more equitable risk allocation and sharing.

Traditional Project Delivery and ExistingConstruction Contracts

The predominant form of project delivery is still thehighly fragmented Design-Bid-Build (DBB) method,where the project is conceived by an Owner orDeveloper, whether public or private entity, thendeveloped into a design by a series of designprofessionals representing different disciplines

ABSTRACT: Construction contracts are multi-faceted legal documents binding different project parties; Owners,Designers, Construction Managers, and Contractors for the purpose of accomplishing a project or a program. Thesecontracts can be considered as a subset of the supply chain management, which in turn is a subset of procurementmanagement. Traditional construction contracts have always tended to be one-sided or biased, caring primarily for theinterests of the party that drafted them. This has led to an adversarial relationship, which often resulted in a zero-sumgame, where there is one winner and one or more losers. The new trend in contracting is transforming the transactionalnature of construction contracts into a relational agreement, where the parties share the risks and the rewards of theproject in a more equitable way. This paper addresses the existing situation, displaying its disadvantages and failures,and compares it with the new trends in contracting, resulting in better project performance.

Dr. Ihab M. H. Saad is an Associate Professor of Construction Management at the College of Engineering and Applied Science in theUniversity of Cincinnati. He has consulted nationally and internationally on several projects and is currently a senior consultant tothe Public Works Authority in the State of Qatar in the Gulf region. His areas of research and consultancy include construction sustainability, project management systems, and project scheduling. Dr. Saad’s e-mail address is [email protected].

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(Architectural, civil, structural, mechanical, electrical,etc), then followed by the procurement of the servicesof a professional constructor to convert the developeddesign into a real project. Different forms of award canbe applied to DBB including open bidding, selectivebidding, and negotiation. The basis for payment canalso follow different practices ranging on one extremefrom firm lump sum, to the other extreme of cost pluspercentage. Figure 1 shows the spectrum of projectprocurement methods, whereas figure 2 shows the riskallocation among the two primary parties to thecontracts (Owner – Contractor) under the differentbases for payment.

Figure 1. Project Procurement Continuum (AGC)

Figure 2. Contract Risk Distribution

Problems with the Traditional Project Delivery

The traditional project delivery follows a sequentialdevelopment cycle, where the project formulation andthe definition of its primary features, the decision ofGo/No Go, and the project’s detailed design are mostlyfinalized without any input from the most experiencedconstruction party; the Contractor. This lack ofparticipation of the contractor causes severaldrawbacks during the construction phase, the mostnotable among which are:

• Lack of thorough value engineering• Change and variation orders resulting in

claims and disputes• Waste and delays resulting from design

changes• Experienced contractors assuming the

worst, adding risk contingencies thatmight end up raising the price for Owners

• Inexperienced contractors underestimatingthe risks, leading to lowest bid andexcessive defaults.

These factors lead to a less than optimalproject delivery for the Owner. The lack ofinformation and trust / confidence, and theshort term rather than long term planningexacerbate these problems and diminish thechances of benefits from lessons learned. Thiscombination of factors leads to an inequitablerisk allocation resulting in what is known as azero sum game, where each of the two mainparties to the contract (Owner and Contractor)assume that they can only achieve gainsthrough the other party’s loss. Figure 3 showsthe interaction of the abovementioned factorsleading to project problems.

Figure 3. Factors leadingto inequitable riskallocation


The lack of information a

These efforts first

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The nature of current construction contracts, alsoknown as transactional contracts where exchanges aremade for goods and services, creates what is known aslocal optimization, where each project team memberattempts to maximize its own interests and gains fromthe project with little or no regard for other parties’financial gains, while minimizing their own riskexposure by shifting it to other parties or by addingcontingencies.

Attempts at Reform

Design-Build

Over the past twenty years, the construction industryhas witnessed several attempts at producing a morebalanced contractual agreement, resulting in severalrevisions to the standard forms of contracts, and moreprogressive risk consolidation and risk sharing. Theseefforts first manifested in a growing trend of design-build, consolidating the design and construction effortsinto one party, and allowing for the incorporation ofconstruction experience at the early phases of design,which resulted in reduced project schedules throughfast tracking and limited changeorders leading to a lower overallproject development cost. Changes ininsurance and licensing requirementshad to be developed to adapt to thebusiness nature of the designer-builder. Songer and Molenaar (1997)found that some of the success criteriafor design-build projects necessitateda well-defined scope, a sharedunderstanding of that scope, higherowner construction sophistication,adequate owner staffing, and anestablished budget early enough in theproject development effort.

Partnering

Other efforts were made addressing the issues of localoptimization, short term commitments, and limitedcommunication among project parties. These effortsresulted in a new form of agreements called Partneringagreements, allowing for more cooperation andcoordination between the Owner or Developer and thedesigners / contractors they are partnering with. This

new form of agreement was based on three particularelements; trust leading to information sharing,continuous communication, and long termcommitments. These elements yielded positive resultsmanifested in the form of better risk sharing, which inturn reduced project cost and time, and allowed for thetransfer of lessons learned from one project to anotherin the long term relationship. Chan et al. (2004) reportedthat some of the essential factors for the success of apartnering relationship include the establishment andcommunication of a conflict resolution strategy, awillingness to share resources among projectparticipants, a clear definition of responsibilities, acommitment to a win-win attitude, and regularmonitoring of the partnering process. Figure 4represents the effect of improvement in informationsharing on the learning curve, and resulting in areduction in the amount of information loss duringtransition from one project phase to another caused bythe lack of transparency and information sharing amongproject participants. The implementation of this newscheme for information sharing leads to lower cost andproject development time.

Figure 4. Effect of improved information sharing

Construction Management

The Construction Management (CM) approach addsanother professional entity in the contractualrelationship. The Construction Manager is an agent ofthe Owner providing construction expertise and

COnSTrUCTIOn COnTrACTS: FrOM ZErO-SUM TO WIn-WIn

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coordination. CM services can start as early as theplanning phase helping the Owner formulate projectobjectives and oversee the studies leading to a Go/NoGo decision. The CM can also assist the Owner in theA/E or designer selection, and provide constructionexperience to the design professional throughconstructability reviews and value management. TheCM services can also include assistance in bidevaluation, contract negotiations, constructionsupervision, and project commissioning uponconstruction completion. These services can be in theform of Agency Construction Management (ACM),which primarily include coordination and supervision,without any additional liabilities for schedule delays orcost overruns. Another form is the ConstructionManager at Risk (CM @ Risk), whose role, in additionto supervision and coordination, parallels the role of aGeneral Contractor, being responsible for the time andcost aspects of the project.

This approach presents an improvement over thetraditional DBB approach, yet it introduces anadditional layer in the contractual chain.

Public-Private-Partnership

Other attempts included financing options for publicprojects through private partnerships, and yielded thetype of cooperation known as Public-Private-Partnership (PPP) or Private Finance Initiative (PFI).Existing examples of PPP include privately financedroads, bridges, and other elements of the infrastructure,allowing the public entity (Government, City,municipality, etc.) to move forward with a project basedon private financing, and recouping of thedevelopment, construction, and operation coststhrough long term leases (Robinson 2009). Designservices can be part of the agreement in what is knownas DBOOT (Design-Build-Own-Operate-Transfer).These contracts provided incentives for privatedevelopers while sharing the risks between public andprivate entities (Yuan 2009). Li, Akintoye et al. (2005)concluded that some of the factors leading to successfulimplementation of PPP projects include better projecttechnology and economy, greater public benefit, publicsector avoidance of regulatory and financialconstraints, and public sector saving in transactioncosts, whereas some of the challenges that arose out ofthe implementation, and due to the inexperience of the

involved parties included over-commercialization ofprojects, and high participation cost and time.

Integrated Project Delivery

The fact that the PPP approach is limited to publicprojects, and does not offer the same accommodationsfor fully private projects, generated the next iteration inrelational contracts, also known as Integrated ProjectDelivery (IPD) and sometimes referred to as EarlyContractor Involvement (ECI) or Contractor Design-Assist (CDA) (Song et al. 2009). This approach has beenused extensively in the manufacturing industry(Thomke and Fujimoto 2000) and has been graduallygaining ground within the construction industry.

IPD is a project delivery method in which the interestsof the primary team members are aligned in such a waythat the members can be integrated for optimal projectperformance.

Under the newly formed scheme for cooperationbetween Owners/Developers, Designers, andContractors, the contractor is chosen around the sametime a designer is selected, thus benefiting from thecontractor’s input during the design phase, andoffering value engineering input progressively asdesign is developed, leading to better time and costperformance. It shifts the major design andconstruction decisions earlier in the projectdevelopment cycle, allowing for changes to be madewith minimum impact on the project schedule and cost(AIA 2007). The contractual relationship among partiesis a relational contract, eliminating local optimizationthrough focusing on the project team members (PTM)rather than the individual project participants, andwhere the relationship takes on the properties of “amini society” with a vast array of norms beyond thosecentered on the exchange and its immediate processes.Figure 5 represents an illustration of the IPD approachleading to a higher effort on the front end of projectdevelopment, and resulting in a better understandingof the project requirements and deliverables, andleading to lower waste and better project performanceas reported by Matthews and Howell (2005). This newapproach seeks to answer questions about the “Who”and the “How” early enough in the projectdevelopment process allowing for the introduction oflean construction methods and techniques aiming at


29


eliminating project waste while resolving anydesign/construction technical conflicts before theycause a negative impact on the project (Saad, 2010).One of the tools assisting with IPD is the introductionof Building Information Modeling (BIM)which can clearly assist in resolving anyinterference, particularly betweenstructural, mechanical, and electricalsystems. Such interferences are a commoncause for project redesign leading to timedelays and cost overruns. Under IPD, 2major principles govern the teamrelationships:

• With an IPD project, whether jointventure or team-member-led, all PrimaryTeam Members (PTMs) are responsible forall provisions of the prime contract withthe Client. • Primary Team Members share the riskand profit for total project performance.

Specific forms of contracts have been developed to caterfor the new arrangement, including the IntegratedForm of Agreement (IFOA) and Consensus Documents(ConsensusDocs 2010). A single contract binds the IPDteam to the client. The prime contract may be any oneof a number of standard forms that are available andspells out the commercial terms while defining thescope, schedule and cost of the project. One entity signsthe prime contract (Team Member or Joint Venture).The most applicable form of available contracts to beused on IPD is the Guaranteed Maximum Price (GMP)with sharing in savings, where each member isreimbursed for all verifiable direct costs that he/sheincurs. Profit is calculated at the project level at the endof the project and divided based on the sharingformula. Under this approach, local optimization iseliminated, as all members of the IPD agreement havea mutual goal, and work for the best interest of theproject.

A joint risk assessment committee reviews the projectmonthly, focusing in a proactive way on such areas asthe team's performance, any indications of a teammember problem, change orders and claims initiatives,payment history of the Client and any trends that mayneed correcting. This proactive approach aims ataddressing potential problems before they arise, or at a

very early stage of their development, rather than beingreactive and trying to find “after-the-fact” solutionsresulting in exchange of blame and finger pointing.

Figure 5. Traditional Versus IPD Development Cycle (AIA)

It is fairly easy to introduce a specialty contractor intoa project as a member of the team either by:

• Bringing them in early and negotiating a price at theappropriate time

• Inviting them to become a full member of the teamfor a particular project sharing cost with the rest ofthe Team.

Communications between the contractors andsubcontractors with the owner are direct under thisform of contract, rather than going through the mediumof the A/E. The following clauses reflect that shift incommunication mode, putting the Owner at the centerrather than the A/E from the AIA A201 #4.2.4 (2007):

“Except as otherwise provided in the contract documents orwhen direct communications have been specially authorized,the Owner and Contractor shall endeavour to communicatewith each other through the Architect about matters arisingout of or relating to the contract...”


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Whereas the ConsensusDocs from 240 #3.1.4 (2007):

“Except as provided in this agreement or unless otherwisedirected by the Owner, the Architect/Engineer shallcommunicate with the Contractor and Subcontractors onlythrough the Owner...”

IPD takes another step forward through theConsensusDocs document series 300 Tri PartyAgreement for Collaborative Project Delivery, #3.2, theby stating that:

“The parties agree that the Project Objectives can be bestachieved through a relational contract that promotes andfacilitates strategic planning, design, construction andcommissioning of the project, through the principles ofcollaboration and lean project delivery. This approachrecognizes that each party’s success is tied directly to thesuccess of all other members of the Collaborative ProjectTeam and encourages and requires the Parties to organizeand integrate their respective roles, responsibilities, andexpertise, to identify and align their respective expectationsand objectives, to commit to open communications,transparent decision making, proactive and non-adversarialinteraction, problem-solving, the sharing of ideas, tocontinuously seek to improve the Project planning, design,and construction processes, and share both the risks andrewards associated with achieving the Project objectives.”

CONCLUSION

There is a growing movement to shift away fromtransactional contracts with their local optimizationand adversarial relationships towards more open andcooperative relational contracts. This shift is primarilyenabled by Owners and Developers aiming atimproving the chances for project success throughinformation sharing and equitable risk distribution.Key performance indicators (KPI) have to beestablished beforehand to ensure the alignment ofdifferent project parties’ interests in the project, whileproviding incentives for improved performance. Largepublic and private owners and developers carry theresponsibility of initiating such innovative forms ofcontracts through changes in the legislation andbidding laws, rules and regulations. Performance

specifications and design-build practices allow formore creativity and incorporation of the builders’experience in formulating project deliverables. Pilotprojects, both at the public and private sectors, will bethe vehicle to introduce these new concepts to the localmarket. Joint ventures between local and internationalfirms can expedite the acceptance of such new trendsin contracting. The incorporation of BIM and leanconstruction principles enhance the projectdevelopment process.

REFERENCES

American Institute of Architects (AIA), Integrated ProjectDelivery: A Guide, Version 1, AIA and AIA CaliforniaCouncil, (2007).

Best Practices in Contract Management: Strategies forOptimizing Business Relationships, Aberdeen Group (2008)

Chan, A., Chan, D., Chiang, Y., Chan, E., and Ho, K.,Exploring Critical Success Factors for Partnering inConstruction Projects, Journal of Construction Engineeringand Management, (Mar/Apr 2004)

Consensus Docs, Form 300, Standard Form of a Tri-PartyAgreement for Collaborative Project Delivery,ConsensusDocs.Org, (2007)

Li, B., Akintoye, A., Edwards, P.J., Hardcastle, C.,Perceptions of Positive and Negative Factors Influencing theAttractiveness of PPP/PFI Procurement for ConstructionProjects in the UK: Findings from a Questionnaire Survey,Engineering, Construction and Architectural Management,Vol. 12 Issue 2, pp.125 – 148, (2005)

Matthews, O., Howell, G., Integrated Project Delivery as a nExample of Relational Contracting, Lean ConstructionJournal, Vol. 2 Issue 1, (April 2005)

Project Management Institute (PMI): A Guide to ProjectManagement Body of Knowledge (PMBOK Guide, ThirdEdition, 2004)

Robinson, H., Scott, J., Service Delivery and PerformanceMonitoring in PFI/PPP Projects, Journal of ConstructionManagement and Economics, (February 2009)


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Saad, I., Management of Sustainable Projects; Tools andApproaches, Proceedings of the 6th InternationalEngineering and Construction Conference (IECC 6), ASCE,Cairo Egypt, (2010)

Song, L., Mohamed, Y., AbouRizk, S., Early ContractorInvolvement in Design and Its Impact on Construction SchedulePerformance, Journal of Management in Engineering, Vol.25, Issue 1, (January 2009)

Songer, A., and Molenaar, K., Project characteristics forSuccessful Public-Sector Design-Build, Journal of ConstructionEngineering and Management, (Mar/Apr 1997)

Thomke, S., Fujimoto, T., The Effect of “Front-Loading”Problem-Solving on Product Development Performance, Journalof Product Innovation Management, Elsevier Science Inc.,Issue 17, (2000)

Yuan, J., Zeng, A., Skibniewski, M., Li, Q., Selection ofPerformance Objectives and Key Performance Indicators inPublic-Private Partnership Projects to Achieve Value for Money,Journal of Construction Management and Economics,(March 2009)


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Ifte Choudhury, Ph.D. and Somya Trivedi, M.S. (COMG)

Keywords:Residential, Single Family, Property Value, Outside Space

STATEMENT OF THE PROBLEM

A reliable estimate of property value is required for thepurpose of buying or selling a house. People take intoaccount both physical and environmental attributes of ahouse when they want to buy one. Physicalcharacteristics include the size of the dwelling, numberof bedrooms and bathrooms, and lot size; environmentalcharacteristics include the quality of the neighborhoodas well as the immediate outdoor spaces of the dwelling,defined in this study as private outside space.

Landscape of private outside space is a very significantpart of an urban environment. Well-designed and well-maintained private outside space of a single-familydwelling adds not only to the aesthetic aspects of theresidence but also enhances the quality of aneighborhood. While both front and back yards areparts of the private outside space, generally front yards

are visually accessible to outsiders. Curb appeal of ahouse is usually dictated by the quality of front yard.

Primary purpose of this study was, therefore, toempirically measure the effect of the quality of privateoutside space, specifically the front yard, on theproperty value of single family dwellings in auniversity town in Texas. A secondary goal was to findout whether this effect continued to be statisticallysignificant in the presence of physical attributes of adwelling, such as number of bedrooms and bathrooms,total built-up area, and lot size.

It was hypothesized that:

1. Property values of single family dwellings in auniversity town in Texas are affected by the qualityof private outside space (represented only by thefront yard).

ABSTRACT: The purpose of this study was to ascertain whether the quality of private outside space has any effect onthe property value of a single family dwelling. Private outside space in the study was defined as the immediate outdoorenvironments of single family, detached dwellings. The quality of private outside space was measured by the level ofmaintenance of yards and territorial personalization of such spaces. Some known predictors of property value of a single-family dwelling, such as total built-up area, number of bedrooms and bathrooms, and lot size were included in thestatistical model used for the study. A sample of 100 single family dwellings from four neighborhoods was randomlyselected for the study in a university town in Texas, USA. Data related to all the variables included in the model wascollected. Statistical technique used for data analysis was a multiple linear regression. Results indicated that at least oneof the aspects of private outside space, territorial personalization measured using territorial markers, has a statisticallysignificant effect on the property value of single family dwellings.

Ifte Choudhury is an Associate Professor in the Department of Construction Science at Texas A&M University and has extensive ex-perience as a consulting architect working on projects funded by the World Bank. His areas of emphasis include housing, alternativetechnology, issues related to international construction, and construction education. He is also a Fulbright scholar.

Somya Trivedi grew up in India and completed her bachelor’s degree in Civil Engineering from University of Rajasthan, India. Shereceived her Masters from Texas A&M University in Construction Management. Somya is presently working as a Senior Estimatorfor a construction company in Houston, Texas.

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2. Effect of the quality of private outside space(represented only by the front yard) of a singlefamily dwelling in a university town in Texascontinues to be statistically significant in thepresence of other physical attributes of thedwelling.

Definitions

Private Outside Space: the open outside spaces,extending up to the property limit, surrounding a singlefamily dwelling. The open outside spaces, generallytermed as front yard, was taken into consideration inthis study to represent private outside space.

Single family dwellings: a detached house, completelyseparated from neighbors, constructed with a capacityof being used for living by a single family.

Property value: the current market value of a propertyin monetary units, based on the financial analysis ofthat property by a qualified evaluator or an appraiser.

REVIEW OF THE LITERATURE

Open spaces

Open space often plays an important role in theprovision of “public goods.” Public goods are non-excludable and non-consumptive. Non-excludablegoods are those that cannot be prevented from beingused or viewed by anyone; non-consumptive ones arethose that do not diminish in value by one person'senjoyment. Since the ability of producers to excludepotential users typically prevents the development ofmarket allocation systems for public goods, easilyobserved measures of market value of such goods donot exist (Fausold & Lilieholm 1999).

The term “open spaces” includes spaces that are publicas well as private. Public open spaces might containplaces for recreation like public parks, specialty parksand forest land while private open spaces mostlyconsist of farms and yards (front yard and back yard ofhouses). Proximity of a property to these open spacesis a very important deciding factor for the buyers. This

implies that the relationship of the residents with thedwellings and the surrounding outside open space isan important factor to be considered and an interestingfield to explore (Lawrence 1981).

Neumann (2005) suggests that direct benefits resultwhen individuals experience the positive services ofopen space as a result of their physical location. Forinstance, effective manipulation of an open space oftenproduces an amenity that is capitalized intoneighboring property values.

Importance of private outside space

A vast majority of American housing consists of singlefamily dwellings on private plots of land. Historically,the private outside space of these dwellings has been atool in the hands of its residents for maintaining,adapting, modifying the immediate surroundings inways that are satisfying to them. It not only provides aplace for outdoor enjoyment, but also indicates thesocial standing of the resident. People feel a sense ofaccomplishment when their yards look equal to orbetter than their neighbors (Choudhury 2001).

Attributes of private outside space that are generallyconsidered as predictors of residential satisfactioninclude the quantity of space, maintenance level ofyards, adequacy of such space for activities, andterritorial personalization. Territorial personalizationbecomes tangible through adornment of the spaces bythe residents. Higher levels of such personalization,achieved through marker components, are associatedwith increased level of residential satisfaction. Thisprocess of personalization also results in improving thecurb appeal of the houses. An increased curb appeal, inturn, possibly results in an increased property value.

An informal survey of real estate professionals byRodriguez & Sirmans (1994) reveals that homes withvisually attractive front yards are preferred to the oneswith rather plain front yards. Even though there is noformal premium to sellers of homes with “good views”,but quite often such homes sell for 5 to 15 per cent morethan homes without “good views.”

A survey of realtors in 10 states by Arbor NationalMortgage, Inc. (USA Today 1994) indicates that trees


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play a major role in determining property value.Participants were asked to rate the effect of trees onproperty value for single family dwellings. Surveyresults showed that a majority of real estateprofessionals felt that the presence of healthy shadetrees contribute to a large extent to a home's “sell-ability” by adding to the curb appeal.

Quality of private outside space

Measuring the quality of private outside spaces doesnot consist of simple calculation. It is a complexproblem under which several factors have to beconsidered and measured in order to obtain ameaningful value. However, territorial personalizationof one’s immediate outdoor environment enhances thelevel of pride and, consequently, satisfaction with one’sresidential environment. The use of territorial markers(such as bushes, flowerbed, trees, water fountain, birdbath, etc.) for such personalization is considered bysome real estate professionals as considerably goodmeasure of outdoor space quality.

Another measure according to real estate professionalsis the maintenance level of yards. One of the maincomponents of the yards of a single family dwelling isgrass. Grasses have been utilized by people forgenerations to enhance their living environment. Beard& Green (1994) report that apart from many functionaland aesthetic benefits, grasses also contribute toincreased property values (see Table 1).

A lush green and well-maintained lawn enhances thevisual quality of a house. A majority of Americanhomeowners believe that investment in lawns increasesproperty value. A study by Behe et al. (2005) shows that

sophistication of landscaping of the yards has an effecton perceived sales prices. Proper and well maintainedlandscaping adds about15 per cent to a home's valueaccording to buyers (Roman Empire Landscaping 2009).

METHODOLOGY

Study Population

The study population consisted of 100 single familydwellings in four randomly selected residentialneighborhoods in a university town in Texas. Twentyfive dwellings were randomly selected from eachneighborhood.

Data Collection Procedure

Data related to physical attributes of the dwellings wasgathered from the database of related appraisal district.Current property values of the units were obtainedfrom a real estate site that was accessible online. Dataon private outside space attributes was gathered bypersonal visits to the site. Use of territorial markers andlevels of maintenance of front yards were observed andrecorded during the visits. Photographs of the sites(with prior permission of the owners) were also takento supplement personal observation.

Variables

Quality of private outside space (represented by thefront yard)


Functional Economic Aesthetic

Soil erosion Low cost surfaces Quality of lifeDust prevention Increased property values Mental comfortHeat dissipation Social harmonyNoise abatement Community prideGlare reduction Spectator entertainmentAir pollution control Complimentary to landscape

Table 1. Benefits of turfgrasses

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Territorial personalization (TP): This is the observedmodification and adornment of the front yard by ahousehold. This was measured through identificationof territorial markers (trees, flowerbeds, bushes, birdbaths, fountains, etc.). In order to provide equalweightage, presence of each marker was given a valueof 1. It was the sum of the value of all territorialmarkers present on the front yard.

Maintenance of front yard (MAINTAIN): This is theobserved level of maintenance of the front yard. It wasmeasured by observing the level maintenance on a five-point scale, ranging from 1 (very poorly kept) to 5 (verywell-kept).

Physical Attributes of the Dwellings

Number of bedrooms (BR): It is the total numberbedrooms in a single family dwelling. It was measuredsimply by counting the number of bedrooms.

Number of bathrooms (BATH): It is the total numberbathrooms in a single family dwelling. It was measuredsimply by counting the number of bathrooms.

Built-up area (BUILT): It is the total built-up area of asingle family dwelling. It was measured in square foot.Lot size (LOTSIZE): It is the size of property on whicha single family dwelling has been constructed. It wasmeasured in square foot.

Property price (PRICE): It is the appraised value of asingle family dwelling along with the lot on which ithas been constructed. It was measured in US Dollars.

Location (LOCATION): It is the neighborhood where asingle family dwelling is located. This is categoryvariable consisting of four locations. The locations wereidentified as 1, 2, 3, and 4.

ANALYSIS AND RESULTS

The data was analyzed using two statistical procedures:(1) Pearson's Correlation and (2) General Linear Model.Pearson's Correlation technique was used to test thefirst hypothesis:

(1) Property values of single family dwellings in auniversity town in Texas are affected by the qualityof private outside space (represented only by thefront yard).

Results of the analysis are shown in Table 2.

The results indicate that both the quality variables ofprivate outside space have statistically significantrelationship with property price. This means thatproperty value is affected by the quality of privateoutside space of a single family dwelling.

A General Linear Model (GLM) was used to test thesecond hypothesis:

(2) Effect of the quality of private outside space(represented only by the front yard) of a singlefamily dwelling in a university town in Texascontinues to be statistically significant in thepresence of other physical attributes of the dwelling.

In order to allow for an estimation of nonlinear effectfor property variables, a situation that generally holdsgood for real estate variables, the continuous variableswere converted to their natural logarithms (Ln) andused in the following model for analysis:

LnPRICE = β0 + β1LnBR +β2LnBATH + β3LnBUILT +β4LnLOTSIZE + β5LnTP+ β5LnMAINTAIN+ LOCATION

(1)


Correlation Correlation Coefficient (R) Significance (p-value)PRICE and MAINTAIN 0.387 <0.0001PRICE and TP 0.460 <0.0001

Table 2. Relationship between market value and quality variables of private outside space

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WhereLnBR = natural logarithm of the number ofbedrooms (BR),LnBATH = natural logarithm of the number ofbathrooms (BATH),LnBUILT = natural logarithm of the total built-uparea of a single family dwelling (BUILT),LnLOTSIZE = natural logarithm of the size ofproperty on which a single family dwelling hasbeen constructed (LOTSIZE),LnTP = natural logarithm of the observedmodification and adornment of the front yard by ahousehold (TP),LnMAINTAIN = natural logarithm of the observedlevel of maintenance of the front yard(MAINTAIN),LOCATION = a category variable identifying thelocation of a single family dwelling,β1 = intercept, and β1, β2, etc. = regression coefficients.

Results of the analysis are shown in Table 3.

The model, which is derived from empirical data, needsto be checked for its predicative efficacy. A widely usedmeasure for checking the predicative efficacy of a

model is its coefficient of determination, or R2 value.Perfect relation is said to exist between the dependentand independent variables, if R2 is 1 and norelationship exists between the dependent andindependent variables, if R2 is 0. Predictive efficacy ofthis particular model was found to be quite high withan R2 of 0.916, and an adjusted R2 of 0.908. This meansthat 90 percent of the variances in property price areexplained by the variables included in the model.

The F-value of the model was found to be 109.229which is statistically significant at less than the 0.001level. It indicates that the model as a whole accountsquite well for the behavior of the predictor variables.

The results suggest that at least one of the qualityvariables of private outside space, territorialpersonalization, has a statistically significantrelationship with property price at a p-value of lessthan the 0.001 level. It is reassuring to find that itremains significant even in the presence of otherphysical attributes of a single family dwelling.

As expected, all the independent variables belongingto physical attributes group (except bedroom) havestatistically significant positive relationship with


Variables Intercept Regression Coefficient

t-value p-value

Intercept 6.391 11.957 <0.001LnBR 0.071 0.483 0.630LnBATH 0.624 5.131 <0.001LnBUILT 0.439 6.273 <0.001LnLOTSIZE 0.184 3.977 <0.001LnTP 0.152 2.641 0.010LnMAINTAINN -0.012 -0.128 0.899LOCATION 1 0.153 3.089 0.003

2 -0.64 -1.269 0.2083 0.231 3.611 0.0014 0*

F = 109.229p-value: <0.001 1

Model R2 = 0.916 Adjjusted R2 = 0.908

* This parameter was set to zero by the statistical program because it was redundant.Table 3. Summary of GLM procedure of property prices

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property price. The reason for the number of bedroomas not being identified as a predictor of property priceis probably because the total built up area also acts as aproxy for this variable. It is also possible that a dwellingwith a lower number of bedrooms may have a higherbuilt up area, if the bedroom sizes are large.

CONCLUSIONS AND FUTURE RESEARCH

There are many factors that affect property value of asingle family dwelling. They include both physicalcharacteristics and quality attributes of a dwelling. Thepurpose of this study was to find out empirically theeffect of private outside space quality of a single familydwelling property value. It was also investigatedwhether the quality of private outside space continuedto be determinant of property value in the presence ofother predictors of housing prices such as built-up area,lot size, and location.

The results of the study provide moderate support tothe hypothesis that property values of single family areaffected by the quality of private outside space. At leastone of the measures of private outside space quality,territorial personalization, continues to have astatistically significant effect on property values in thepresence of physical attributes of single familydwellings. The other measure, level of maintenance ofprivate outside spaces, has a statistically significantcorrelation with property price as a stand-alonevariable. However, it doesn't remain significant in thepresence of other predictors of property price.

This study was limited to four residentialneighborhoods in a university town in Texas, using asample size of only 100 single family dwellings. In viewof the small sample size, the findings of the studyshould be viewed with caution. Use of a larger samplesize is advisable for future research in this area.

REFERENCES

Beard, J. B. & Green, L. R. (1994). The role of turfgrasses inenvironmental protection and their benefits to humans.Journal of Environmental Quality, 23(3), 1-16.

Behe, B. et al. (2005). Landscape plant material, size, anddesign sophistication increase perceived home value.Journal of Environmental Horticulture, 23, 127-133.

Choudhury, I. (2001). Qualitative correlates of privateoutside space satisfaction. Journal of Construction Education,6(1), 139-145.

Fausold, C. J. & Lilieholm, R. J. (1999). The economic valueof open space: A review and synthesis. EnvironmentManagement, 23(3), 307-320.

Lawrence, R.J. (1981). Connotation of transition spacesoutside the dwelling. Design Studies, 2(4), 203–207.

Neumann, B.C. (2005). Is All Open space Created Equal? AHedonic Application within a Data – Rich GIs Environment. AMaster's thesis. Orono: The University of Maine.

Rodriguez, M. & Sirmans, C. F. (1994). Quantifying thevalue of a view in single family housing markets. AppraisalJournal, 62, 600-603.

Roman Empire Landscaping (2009). Benefits of well-maintained lawn. http://relandscaping.com/Well%20Maintained%20Lawn.htm. Retrieved March 21, 2010.

USA Today (1994). Trees enhance property values. July, 1994.NY: Society for Advancement of Education Society forAdvancement of Education. http://findarticles.com/p/articles/mi_m1272/is_n2590_v123/ai_15594486/?tag=content;col1 Retrieved on March 21, 2010.


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General Interest Articlesfrom

The AGC James L. Allhands Essay Competition

Each year the Associated General Contractors Education and Research Foundation (AGCERF) sponsors the JamesL. Allhands Essay Competition. The competition is named for (and funded by) the late James L. Allhands, afounding member of the AGC who spent his career as a prolific writer of construction related books. The essaycompetition is open to any senior level student in a four or five year ABET or ACCE accredited universityconstruction management or construction related engineering program.

This year’s topic, ‘Initiating a Culture of Lean Construction within the Firm’, generated submissions from acrossthe nation. Judging was conducted by AGCERF board members who are among the most esteemed leaders in theindustry. The top three essays were described as “fine examples of the type of writing within the constructionindustry that typified the work of Mr. Allhands” by Foundation Director Melinda Patrician. All three essays canbe found on the AGC Foundation web site, www.agcfoundation.org. The first place selection was Andrew Talarekof Purdue University, second place was awarded to Matthew Jones of Clemson University, and third place wentto Daniel Scott of Missouri State University.

The 2012 competition will open in July, 2011 and essays are due by November 1. First place winners and theirfaculty sponsors are awarded cash prizes of $1,000 and $500, respectively, and will be invited as guests (all expensespaid) of the AGC Foundation to the March, 2012 convention. The second place winner is awarded $500 and thirdplace, $300.

With AGC’s permission, this issue of The American Professional Constructor is featuring the 1st and 2nd place essaysin our general interest category. We trust that our readership will enjoy reviewing the work of two top performerswho will soon be graduating and starting their construction careers.

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1ST PLACE ESSAY

Initiating a Culture of Lean Construction within the Firm Andrew Talarek

INTRODUCTION

The derivative of Lean Construction is LeanProduction. Lean production methods have been usedand perfected in the world’s manufacturing facilitiesfor years. Most see Toyota’s “Just-In-Time” production(providing the necessary parts for the car when it isneeded rather than storing them) as the monumentalachievement of Lean Production (Malloy, 2002). Sincethe success of Toyota in the manufacturing world,many industries are trying to translate those methodsinto their own, including construction. So, what is themain goal of Lean? For a process to be Lean it mustshorten the timeline between a customer order andwhen the customer finally gets that order while stillmaximizing value (Abdelhamid, 2004). Five LeanConstruction principles have been chosen to lay thefoundation for a cyclical plan to initiate a culture ofLean Construction within the company.

PRINCIPLES

Today, “Lean” is being applied to every industry andpractice where the methods seem practical, creating aseemingly infinite web of knowledge. Just like there aremany ways to apply “Lean,” there are many differentprinciples and methods that can be created along theway. For our purposes, the best way is to create rulesfor the construction industry that translate to aheightened level of planning, time reductions, andmaximized value to the customer. The five principlesdiscussed in this paper give a foundation for creating aplan for implementation into company culture.

1. Continuous & Productive Workflow

There is something to be said for how much time canbe wasted by trying to figure out what to do next on ajobsite. These stoppages in work can add up veryquickly and cost the company money. Having a wellthought out plan for each day can help crews workcontinuously without question on what to do next.Also, a backlog of work not on the critical path toperform when sudden critical path delays occur cankeep a working crew from coming to a grinding halt(Strickland, 2010). When these efficiencies prove toincrease productivity, the company will be able to claima competitive advantage that can ultimately be passedon to the owner.

2. Reduced Material & Equipment Inventory

Materials and equipment that are not in use get in theway of employees trying to work and drive down theefficiency of crews. Having a lot of material andequipment on site can be a liability to your productivityand profit margins. Damage can occur, double handlingof materials, and higher equipment rental expenses are

ABSTRACT: Lean Construction is defined by adding value, reducing cost, and eliminating waste and redundancy forthe client and construction partners. Five principles of Lean Construction have been chosen as part of a program to beinitiated within a company: Continuous and Productive Workflow, Reduced Material and Equipment Inventory,Collaborative Scheduling, Commitments and Accountability, and Continuous Improvement. This program will beexecuted on a continuous cycle to become embedded in company culture through five major phases with definableobjectives: Plan for Success, Communicate and Market the Plan, Education and Training, Execution, and Evaluate.

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some of the drawbacks that can affect the company’sbottom line. A well thought out material logistics plancan allow material to show up when it is needed andplaced where it will not need to be constantly movedto get to other materials or equipment. Combating thisproblem in the planning stage can be solved by addingmaterial and equipment approvals to the schedule sothat the time allotted for those materials and equipmentto be on site is carefully monitored.

3. Collaborative Scheduling

Scheduling is one of the most important principles inLean Construction. The other principles involve sometype of extensive and creative planning to make themtake effect properly. There are a few guidelines that canmake scheduling more effective and thus impact theother principles in Lean Construction as a whole.Collaborative scheduling is getting everybody, nomatter what level of employment they are in, involvedin the planning and scheduling of the project. Thepeople who know most about the material going into aproject are the people who work with it every day; soget the field involved in pre-construction scheduling.Create scheduling teams to work on different aspectsof the schedule with knowledgeable representativesfrom the field. Also, include key milestones in yourschedule, such as “topped out”, “shelled in”, and“roughed in” that trades can easily identify with, sothey all know what the project should start to look like.

4. Commitments & Accountability

Commitments and accountability deals with makingsure the plan the company created is being carried outin the correct manner and that employees andsubcontractors are adhering to the plan. In order to getthe plan to function properly, people need to feelresponsible for upholding the different guidelines thecompany has laid out. When people feel like they arepart of a group they do not want to be the “weak link”that lets the group down. Measuring team membersuccess is crucial to know who is contributingpositively to the team. A publicly issued commitmentreport can show who is sticking to the rules and whomay need a little help with the plan.

5. Continuous Improvement

Continuous improvement is a principle that reallycreates a culture of Lean Construction within acompany. It is the point where a company goes fromdoing what every other company is doing to turning itinto their own unique plan. When problems arise orinefficiencies occur they need to be evaluated,improved upon, and, if necessary, a part of modifyingthe overall plan. Some problems may be immediatelynoticeable through every day operations that warrantan immediate change to the policies. However, a bulkof unknown information and historical data can comefrom evaluation of completed projects. It is beneficialto review projects for “lessons learned”. Conductcloseout interviews with subcontractors, reviewproduction numbers, and solicit ideas from all levels ofemployees.

As one can see, a lot of these principles ‘feed’ off of oneanother. The result of a good plan can lead to otherLean principles coming into effect and saving time andultimately money for the contractor and the client.However, you can also see the negative effect of a badplan that will subsequently affect the possibilities ofapplying Lean principles to the rest of the project.

STEPS TO IMPLEMENT LEAN CONSTRUCTIONWITHIN THE COMPANY

Implementing a culture of Lean Construction, using theprinciples discussed above, can be a beneficial additionto policies for the company and the client. A plan toestablish Lean Construction can be created to maximizethese benefits and provide a competitive advantage.Part of creating a culture is to embed the plan into thecompany’s every day procedures and make acontinuing effort for improvement. See Figure 1. Inorder to create this culture, the steps discussed beloware to be utilized as a cycle. Once the cycle has beencompleted, an allotted amount of time needs to beestablished to start the cycle over again such asquarterly or yearly. Use this plan as a guideline to start permanently seeing the benefits of Lean Construction.

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Plan for Success

It cannot be said enough,planning is the root of all theprinciples of LeanConstruction and it shouldbe the root of implementingthe program as well. Thebest plan comes from thepeople best suited to createit. A strategic committeefrom front line managers toexecutive leadership should be formed to lay the roadmap for the company’s LeanConstruction initiative. Having a team that isdiversified by different levels of employment allowseverybody in the company to have a say in the newplan. Once the team is formed, a list of short term (1 year) and long term (5 year) goals needs to be created.“Experts recommend using the SMART principle whensetting goals, which specifies that goals be Specific, Measureable, Attainable, Relevant, and Timely” (Dray,2010). In order to achieve the goals, the team mustcreate procedures for employees to follow. Proceduresmake it easy for employees to understand the directionthe company wants to go with the new initiative andhow the tasks need to be performed. However,employees should be aware they are not locked into aspecific procedure; they should be encouraged to voicetheir good ideas to the company for altering methods.A river of ideas flowing from all employees to thecompany utilizes the diversity of the organization as awhole in a unique way.

Communication & Marketing the Plan

Now that a plan has been agreed upon by the LeanConstruction committee, it is time to communicate andmarket the plan to the rest of the company.Communicating the plan makes everyone aware ofwhat the company is about to propose and gives them

time to adjust to what willbecome a new set of policiesand principles. Roll out thenew plan seeking input andfeedback from all levels ofemployment. As wasmentioned earlier, thiscreates a pool of ideas thatcan be used to put thepolishing touches on theplan and help bring to lightany problems that mayhave been initially missed.The marketing of the planneeds to have a “top-down”approach. Employees aremore willing to accept newprocedures if the Presidentof the company states that

he or she supports the new plan and understands theemployee struggles that may accompany theimplementation of new procedures (Marks).

Education & Training

Education and training is one of the most importantsteps in initiating any new procedure into a company.Employees need to know exactly how the companywants them to perform and what is expected of them.Begin by training key people at a variety of levels tobecome “Lean Experts”. These will be the “go-to”people for anything and everything Lean Construction.For additional support, provide your employees witha “Lean Library” both on the company website (virtual)and in hard copies of books kept in the office. The“Lean Library” will provide employees with a place tolearn more about Lean Construction, the company’sprocedures, how to become a “Lean Expert”, andattempt to answer any questions employees have aboutLean Construction. Also, a great addition to the “LeanLibrary” would be a link to the AGC Lean ConstructionForum; a place where Lean Construction ideas arediscussed and shared by industry professionals. Oncethe “Lean Library” has been established and thecompany has created “Lean Experts”; team training canbe used to show all members of the organization howthe company, the client, and the employees themselvescan benefit from the techniques of Lean Construction.

1st Place Essay

Figure 1.

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Most companies already have teams established andemployees should be trained in these teams or withwhom they will be working with the majority of their workday.

Execution

Now that the plan is in place, it must be regulated andcultivated to ensure maximum execution. Follow upwith teams to assess their performance and gainfeedback on procedures. Regulate the plan byestablishing commitments and accountability with the entire project team, including architects, engineers,contractors, suppliers, and subcontractors. Measurehow well employees are sticking to their commitmentsand hold them accountable; nobody wants to be theperson who let the whole team down. With theirstandard cost reports, have each team provide amonthly “Lean Summary”. Evaluate the LeanSummaries and provide team leaders with feedback onhow to improve their statistics next month. Companiesmay also see a need to provide incentives for a positive Lean Summary each month.

Evaluation

In order to create a culture in a company, the culturehas to continually improve and reevaluate itself tobecome a unique technique within the company. Thisis where a company goes from ‘doing what everybodyelse is doing’ to creating a competitive advantage.Every plan needs to be evaluated to see if the goals setin the planning stage were met, and if not, why theyweren’t met and if they were attainable in the firstplace. In each evaluation, new goals will then need tobe set to build off the ideas from the previous period.Since this is a company culture we are creating, then theideas need to come from the company as a whole.Welcome ideas from all levels of the company. Therecould even be a program in place for “The LeanConstruction Idea of the Week”. The employees wouldall submit their ideas and the CEO would choose thebest idea to be “The Lean Construction Idea of theWeek”. A system like this, with incentives to submitideas, such as gift cards or other perks, allows thecompany to brainstorm as a whole to create a uniqueculture. Also, completed projects need to be evaluatedto search for “lessons learned” and how the company

can improve in the future. To be effective, performcloseout interviews with subcontractors to get theirpoint of view of the project.

Creating a company culture is a never ending process;in fact, every company has a culture within it already.Lean Construction would be a new idea to inject intothat culture and without the right plan and process anew addition to the culture can die as quickly as it wasproposed. The key to making sure Lean Constructionbecomes an integral part of the company is to turn theplan into a cycle where all steps are repeated at a certainperiod of time in a year or multiple times in a year. Itmay be necessary to increase the frequency of thesecycles when the plan is first implemented, but as time goes on; the plan should become steadier and anembedded part of the company culture.

CONCLUSION

Lean Construction is a new concept to the constructionindustry derived from old concepts in themanufacturing industry. It is gaining steam in theindustry due to the need for increased profits, long-term relationships with clients, and to provide morevalue for the clients. Principles can be created toanalyze different aspects of the construction process inwhich to evaluate for better efficiencies and eliminate“waste” to save time (cut cost) without any loss of valueto the client. These principles can be developed into a program to be implemented into the company. Carefulplanning, effective communication, proper educationand training, a plan to execute the program, and ameans of evaluation will allow a stable and smoothtransition of new policies within a company. Withsuccessful implementation of a Lean Constructionprogram, a company will be more effective and efficientin operations resulting in a higher Return OnInvestment (R.O.I.).

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BIBLIOGRAPHY

Abdelhamid Ph.D., Tariq. “4th Lean ConstructionInstitute Academic Forum”. 14 Feb 2004. Michigan State University. 15 Oct. 2010. <https://www.msu.edu/~tariq/Forum_4th.pdf>.

Dray, Sarah. “Why Set Goals & Objectives?” E-How. 17 Oct. 2010. <http://www.ehow.com/about_5112963_set-goals-objectives.html>.

Malloy, Jim. “Lean Production”. 14 Mar. 2002. SearchManufacturing ERP. 15 Oct. 2010.<http://searchmanufacturingerp.techtarget.com/definition/lean-production>.

Marks, Mitchell Lee. “In With the New”. 24 Mar. 2010.Massachusetts Institute of Technology. 18 Oct. 2010<http://sloanreview.mit.edu/executive-adviser/articles/2010/2/5222/in-with-the-new/>.

Strickland, John and Kirkendall, Bob. “Applying LeanProduction Principles to the Construction Industry”. 16 Oct. 2010. <http://www.idc-ch2m.com/Papers/IDC2001%20leanproduction.pdf>.

1st Place Essay

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2ND PLACE ESSAY

Initiating a Culture of Lean Construction Within the FirmMatthew Jones

INITIATING A CULTURE OF LEAN CONSTRUCTIONWITHIN THE FIRM

The world is a constantly evolving system of activity.The components that make up this system arecontinually growing and evolving to become better attheir intended purpose. The construction industry is noexception to this rule. Over time the industry mustchange to meet the new demands of our clients,workers, and society as a whole. This simple concept ofcontinual improvement forms the foundation for whatis known as lean construction.

Lean construction is a relatively new concept that isbeginning to gain traction within the constructionindustry. While the lean concept is relatively new to ourindustry, the underlying principles are based in themanufacturing industry. Ford Motor Company was oneof the first companies to implement a lean process formanufacturing goods. By carefully reviewingworkflow, standardization of activities, and wastereduction, Ford was able to achieve high efficiencylevels in production while still manufacturing a qualityproduct.

Ford’s system of lean manufacturing worked relativelywell up through World War II. During the post war era,Toyota Corporation began researching ways to improve upon the lean processes now being utilized by all of thelarge American automakers. After extensive researchand analysis of Ford’s system, Toyota implemented theToyota Production System.

Toyota’s lean production system is based on five keyprinciples: Create value for the customer, conduct valuestream analysis of processes, optimize the flow ofproduct, utilize pull production, and continuallyimprove the processes of production (Smith, The 5 LeanPrinciples). These principles are utilized heavily in themanufacturing industry.

Although these principles were developed for themanufacturing industry, they can be easily interpretedand applied to the construction industry.

1. Create value for the customer

One of the most important principles for leanconstruction is creating value. Value to a client does notnecessarily mean the lowest price. Contractors must besensitive to what their individual clients value in theirfacilities. Every client is unique just as every project isunique. In order to maximize value to their clients,contractors must focus on fostering communicationand collaboration between themselves, the client, thedesigners, and subcontractors. Contractors cannotsimply listen to what their clients value; they must beable to integrate their values into the project. In orderfor this to happen effectively, the entire project teammust be open to new ideas whether they come from alaborer working on site or an engineer in an office.

ABSTRACT: The construction industry today is plagued by rising costs, large amounts of waste, and declining clientsatisfaction. Lean construction is the answer to these problems. Companies can seek continuous improvement of theirdelivery process by focusing on five key principles: create value for the customer, conduct value stream analysis ofprocesses, optimize the flow of product, utilize pull production, and continual improvement. Once focused on theseprinciples, contractors can follow this five step process for implementation of lean construction: educate, identifychampions, evaluate common processes, implement new techniques, and encourage innovation. These simple steps canenhance customer value and lead a contractor down the long road of increasing levels of success.

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2. Conduct value stream analysis of processes

Constructing a facility involves many hands-onactivities and processes. The goal of value streamanalysis is to evaluate these processes and determineareas of high waste and eliminate those areas from theprocess. Waste can be broken down into the followingcategories:

• Unproductive Workers: According to Dr. RogerLiska’s study on productivity quoted in TedGarrison’s article Improving Productivity andProfits, “The average construction craft worker[is] only about 40 percent productive.” What thisfinding suggests is that during a 40 hour workweek, 24 working hours per worker are beingwasted due to low productivity.

• Defects: Any work that is found to be defective isconsidered waste. Defective work takes time toinstall, remove, and reinstall correctly. Byeliminating defective work a contractor can avoidtwo of these three remedial steps.

• Excess Movement: Any extra motions that are notessential to the task being performed cost time ona project. These movements range from a workerhaving to return to their truck for another tool tosomething as simple as having to bend down andpick up material off the floor instead of it beingat waist level.

• Material Handling: Double handling is a source ofhigh waste on a construction site. Materials aredelivered to the site and unloaded into a laydownarea to await installation. They are thentransported to the work site for installation.Contractors utilizing just-in-time deliveryeliminate this waste by delivering materials whenthey are needed, straight to the work area.

• Inefficient Processing: This form of waste occursprimarily in the office environment. It could beanything from slow shop drawing review to alengthy method of processing pay applications.This type of waste adds unnecessary time toproject schedules.

3. Optimize the flow of product

There are many ways to optimize the flow of productin the construction industry. In order for this principleto be fully implemented in the construction practice,professionals must focus on optimizing the wholeprocess instead of focusing on individual pieces of thewhole. Contractors must work collaboratively withsuppliers to optimize product movement from thebeginning of production through final assembly.Processes should be developed during the design phaseof a project that allows products to move seamlesslyfrom production through installation.

Once on the site, contractors should organize and placethis material in the most efficient manner possible.Materials should be placed as close to their intendedplace of installation as possible and then sorted andorganized for easy access. Another area that canimprove product flow is jobsite cleanliness. Bymaintaining a clean and clutter free site, workers canmove about more efficiently.

4. Utilize pull production

Pull production in construction does not apply toprojects as a whole, but instead applies to the individualassemblies and systems that make up the project. Onekey tool that can be used for implementing a pullproduction system is the Last Planner System. Utilizingthis system, a specific work item on a project doesn’tbegin until all prerequisites of that work are completed.The planning of this type of schedule is conducted byall of the major suppliers and installers on a project. Theschedule is set up so that a specific trade does not startuntil they can do the entire job without interruption.This system creates a more efficient schedule for all ofthe trades on a project, which in turn reduces the timeneeded to complete the project.

5. Continuous improvement

Continuous improvement is the final and mostimportant principle of lean construction. Contractorsmust seek to attain perfection in what they do.

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Improvement cannot be achieved by only a select fewindividuals. In order for a lean culture to developwithin a company, each and every worker must striveto become better at their respective tasks. Without thedrive to continually improve, workers will fall into therut of doing things the same inefficient way that they have always done them. A successful lean constructionfirm is able to instill the drive to improve in its workersand ultimately create an environment of change withinthe firm.

When a contractor decides to go lean, they are makinga commitment to become a better asset to their clients.The success of a lean construction contractor dependson the willingness of the firm to embrace change fromwithin. There are five steps that a company’s topmanagers can take to push their firm towards a leanculture: Educate, appoint leaders, evaluate commonprocesses, implement new techniques, encourageinnovation.

Education is one of the most powerful tools availableto business professionals in today’s world. The pursuitof lean construction must always be focused on gaining knowledge of new principles and processes. In orderfor top managers of a company to push towards leanconstruction they must first have an understanding ofthe underlying principles mentioned previously. Byfocusing on the five principles top managers candevelop a business plan and mission statement that willnaturally turn the company in a lean direction. Theeducation process will lead top managers into the nextstep towards establishing a lean culture; identifyingchampions within the company.

Managers must choose individuals who show a highinitiative towards the lean principles to be thechampions within the company. The champions thatare chosen by top managers must have the ability tolead their fellow employees towards a lean culture. Itis essential that the champions are leaders and notmanagers. Leaders and managers approach situationswith a different attitude; “The manager administers[but] the leader innovates” and “The manager acceptsthe status quo [while] the leader challenges it” (qtd. inAmbler, Leaders vs. Managers). A successful leanconstruction operation is dependent on innovation andchallenging the status quo. In order to be successfulwith the fifth principle of continuous improvement,

innovation must come from every employee at thecompany. The leader’s job is to keep each individualwithin the firm focused on improving themselves, aswell as the processes that they are involved in.

The leader’s job extends beyond the employees of theirparticular company. The leaders must be able tocollaborate with designers and subcontractors andmotivate them to assist in reaching the lean goals oftheir company. With the collaboration of every workeron a project, the leaders can then focus on evaluatingthe common processes on the jobsite.

Once the leaders have gained the respect of their fellowworkers, they can begin evaluating the processes thatgo into assembling a project. In order to accomplish this task efficiently, it may help to establish a team of peopleto evaluate suggestions offered by the various workers.With each worker evaluating the tasks they perform itoffers an opportunity to gain a large amount of input.A team approach is the only way to avoid bias inevaluating this large amount of worker input.

Once evaluation of the initial ideas is complete, thoseideas that reduce waste or improve efficiency can beimplemented. Making changes that are suggested bythe workers who are performing the tasks ensures thatthese changes will be embraced by those workers.Certain changes may require workers to significantlyalter the way they perform some of their tasks. Withoutthe cooperation of these workers, implementationbecomes difficult or even impossible. Each worker mustbelieve that the changes being made are going toimprove the task they are performing.

After implementing the initial changes to the commonprocesses within the company it is time to encouragecontinual improvement. As the five principles pointout, every project is unique. This means that changeand improvement on each project is necessary for a leancontractor to succeed. Innovation must be encouragedto satisfy the client’s value driven needs. Collaboration,communication, and a constant flow of new ideas willhelp a lean contractor to continually improve over time.Through this continuous improvement contractors canseek perfection of the whole as well as the individual.

Lean construction has built its foundation on the valuesof “collaboration, communication and mutual respect”

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(Garrison, Lean Construction, Maximize Value andEliminate Waste) amongst all parties of a constructionproject. While the principles and terminology of leanconstruction are fairly new, the ideas and practices havealways been utilized. Many contractors follow the leanprinciples without even realizing it. Every contractor’sgoal is to reduce cost and waste within their company.Lean construction, however, is much more than simplyreducing cost and waste. It is a company widecommitment to improvement and excellence. Byimplementing the five principles of lean construction,contractors can encourage collaboration, reduce waste,and most importantly, increase value to their clients.

WORKS CITED

Ambler, George. “Leaders vs. Managers….. Are they reallydifferent?” The Practice of Leadership. 8 Apr. 2008. Web. 8Nov. 2010. <http://www.thepracticeofleadership.net/2008/04/08/leaders-vs-managers-are-they-really-different/>.

Garrison, Ted. “Improving Productivity And Profits.”Modern Contractor Solutions. N.p., Nov. 2007. Web. 8 Nov.2010. <http://www.moderncontractorsolutions.com/articlesdetail.php?id_articles=156&id_artcatg=10>.

Garrison, Ted. “Lean Construction: Maximize Value andEliminate Waste.” Constructionbusinessowner.com. N.p.,Apr. 2007. Web. 8 Nov. 2010.<http://www.constructionbusinessowner.com/topics/general-management/lean-construction-maximize-value-and-eliminate-waste.html>.

Smith, Mikkel. “The 5 Lean Principles.” Your Lean Forum.28 Oct. 2006. Web. 8 Nov. 2010.<http://yourleanforum.blogspot.com/2006/10/5-lean-principles.html>.

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The American Institute of Constructors

Reviewer/Publication Interest Survey

The American Professional Constructor is a refereed journal published two times a year by the American Institute ofConstructors (AIC). Each author’s manuscript submission is given a blind review by three AIC members. to evaluate the contentand style, and appropriateness as either a general interest or scholarly publication. Based upon the decision of the reviewers,each article is accepted or rejected for publication. Acceptance can be predicated upon incorporation of reviewer comments.

Approximately 10 articles are annually published. At present, 60% of the articles submitted are rejected by the referees. Tomaintain the high standard of published articles in the journal. AIC requires 50 to 60 reviewers annually. Members areperiodically polled to express their willingness to serve as a reviewer or referee. For each member that is willing to providethis valuable service, it is necessary for them to identify their area(s) of expertise or interest. If you have served as a reviewerand wish to continue doing so, or if you have not served as a reviewer and would like to do so, please take five (5) minutesto complete the survey below. If you would like to publish a manuscript in the Journal of American Institute of Constructors,the similar topic areas given consideration is provided here also. Please submit the reviewer’s interest or submit yourmanuscript to:

Dennis C Bausman, FAIC CPC PhD

Professor and CSM Endowed Faculty Chair

Clemson University

Department of Construction Science and Management

126 Lee Hall

Clemson, SC 29634-0001

Work Phone: (864) 656-3919

Email: [email protected]

Fax (864) 656-7542

Please place a mark beside each keyword that is a topic area indicating your expertise or interest. Thank you, in advance, for serving as a reviewer for The American Professional Constructor.

Name: ______________________________________________________ Member No.: __________________________________

E-Mail: ______________________________________________________ Phone No.: ____________________________________

Address: ___________________________________________________________________________________________________

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

Topic Areas� Computer Applications

� Construction Safety

� Estimating

� Financial Management

� Personnel/Human ResourceManagement

� Contract Law and Legal Applications

� Materials and Methods

� Project Management

� Steel Construction

� Concrete Construction

� Design-Build Construction

� Mechanical Construction

� Contract Documents

� Strategic Planning

� Planning and Scheduling

� Site Management

� Marketing and Sales

� Community Planning

� Labor Relations

� Quality Management

� Productivity

� Cost Control

� Undergraduate Education

� Graduate Education

� Wood Construction

� Masonry Construction

� Heavy/Highway Construction

� Electrical Construction

� Residential Construction

� International Construction

� Architecture

� Real Estate and Factors AffectingContractors

� Housing and Related Issues

� Procurement

� Bonding

� Bidding

� Ethics

� Commercial Construction

� Industrial Construction

� Utilities Construction

� Institutional Construction

Other______________________________

___________________________________

___________________________________

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American institute of ConstructorsConstructor Code of Ethics

The Construction Profession is based upon a system of technical competence, management excellence

and fair dealing in undertaking complex works to serve the public safety, efficiency, and economy.

The members of the American Institute of Constructor are committed to the following standards of

professional conduct:

I. A Constructor shall have full regard to the public interest in fulfilling his or her responsibilities to

the employer or client.

II. A Constructor shall not engage in any deceptive practice, or in any practice which creates an unfair

advantage for the Constructor or another.

III. A Constructor shall not maliciously or recklessly injure or attempt to injure, whether directly or

indirectly, the professional reputation of others.

IV. A Constructor shall ensure that when providing a service which includes advice, such advice

shall be fair and unbiased.

V. A Constructor shall not divulge to any person, firm, or company, information of a confidential

nature acquired during the course of professional activities.

VI. A Constructor shall carry out responsibilities in accordance with current professional practice,

so far as it lies within his or her power.

VII. A Constructor shall keep informed of new thought and development in the construc-tion process

appropriate to the type and level of his or her responsibilities and shall support research and

the educational processes associated with the construction

Why Become Certified?

Benefits to the Constructor

• Provides an internationally recognized certification of construction management skills and knowledge. • Provides an analysis of individual strengths and weaknesses in the subject areas tested. • Enhances the Constructor image as a professional to their employer, their clients, and the public. • Provides a marketable credential that sets you apart.

Benefits to the Employer

• Provides an independent assessment of an employee’s skills and knowledge, based on a comprehensive national standard. • Provides a recognized credentialing within your company that improves marketability to clients. • Provides assurance that employee will continue to hone their skills, through the required Continuing Professional Development

program.

Benefits to Owners:

• An increased level of assurance that their projects will be managed more effectively. • Could use the qualification as a means to prequalify contractors • Knowledge that their contractor management team will be more professional.

Click to view our nationwide testing locations: http://goo.gl/ztnLC

Visit www.professionalconstructor.org or email [email protected] for more information.

The Constructor Certification Commission

“Building the Professional Constructor”

Take the next step in your career, become a Certified Professional Constructor!

Join the over 12,000 professionals who have sought the Certified Professional Constructor (CPC) and Associate Constructor (AC) designations.

Mark your calendars for our next examination on November 5, 2011. Online registration will open on July 15th, more information regarding registration and certification can be found at www.professionalconstructor.org.

Candidate handbooks are available upon request, email [email protected] to request yours. Upon registration candidates can download the digital PDF study guide.

Examination Fees

• Level 1 (AC) Applications $155.00

• Level 2 (CPC) Applications: AC Upgrade (Current AC's applying for the CPC exam) $405.00

• Level 2 (CPC) Applications: AC Exemption (For Level 2 applicants not AC certified) $535.00 Applicants receive a PDF study guide via email after registration is completed

For more information contact us at [email protected]

http://www.professionalconstructor.org/PROFESSIONALCONSTRUCTOR/PROFESSIONALCONSTRUCTOR/UploadedImages/AIC_Journal_Author_Guide_2011.pdf

american professional constructor journal - may 2011

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