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Emerging Best Practices for Hospital Projects
Getting Leaner and More Efficient
By Joseph A. Cleves, Jr. and Brian Perlberg

FAILURE. According to the US Bureau of Labor Statistics, the design and construction industry is the only industry that has actually become less efficient and productive since 1964 . Albert Einstein said that doing the same thing over and over again and expecting different results is the definition of insanity. Up until recently, Einstein might have said that the A/E/C industry fits this definition. Fortunately, the industry is trying new things, and hospital design and construction have been at the leading edge of the change. The change comes from searching for a better way of doing things. And that better way is through collaborating... really collaborating.

Hospital projects involve some of the most complex and expensive per square foot construction that exists. Some would say it was also the most broken in delivering projects. Perhaps that is why hospitals were the first to try new delivery methods. Hospitals have adopted collaboration through the use of design-build over the past 20 years. And starting with the Sutter Health hospital system 10 years ago, hospitals have been among the earliest to adopt integrated project delivery (IPD) and implementation of the lean construction processes. Other sectors like biotech, sports complexes, and life sciences are notably moving towards IPD, but today it remains most prevalent in the hospital market.

What is IPD?
The essence of IPD is integrating owners, designers and builders into one contract and collectively aligning everyone’s interests with the overall best interests of the project. IPD employs methodologies that emphasize the use of collaboration to achieve the owner’s objectives. In fostering a team mentality, it stands wholly apart from the separation of design and construction, and the adversarial relationships that epitomize traditionally-delivered projects.

IPD avoids the pitfalls of the traditional delivery model by bringing key members of the construction team into the design process. At the beginning stages of design, the owner selects the general contractor and key trade contractor(s) based on qualifications and pricing. Such players have a unique insight into the process of construction often not available to members of the design community. Their early involvement in design results in (1) elimination of design gaps or oversights, (2) a more informed (and efficient) design with better solutions, (3) elimination of overproduction by the designers, and (4) a speedier design and construction process. These improvements eliminate waste and decrease costs.

Some projects aspire to use IPD principles, but ultimately default to a more traditional methodology that includes early contractor involvement with design assistance and high levels of collaboration. This is called IPD-lite. The Associated General Contractors of America (AGC), Construction Owner Association of America (COAA), and the National Association of State Facilities (NASFA) published a joint paper that discusses and encourages the use of a progressively more collaborative delivery, regardless of whether pure IPD is ultimately employed. The paper, “Integrated Project Delivery for Public and Private Owners,” exalts IPD as “an effective project delivery choice for the industry” based on its “principles of trust and mutual respect, mutual benefit and reward, collaborative decision-making, early involvement of key project participants, early goal definition, intensified planning, and open communications.”

What is Lean?
Lean is embedded with six sigma principles and brings the “Toyota manufacturing process” to construction. The concepts employed in “lean construction” were developed over the last 20 years. The Lean Construction Institute (“LCI”), along with select academics and a few construction companies, have been the primary incubator in the field. Building on the work known as “lean manufacturing,” LCI has developed and refined the tools used to implement lean construction.

The primary goal of lean is the elimination of the abundant waste embedded in traditional construction through better coordination. Key concepts used to achieve this goal are close collaboration, improved communication, reliable commitment among team members, and accountability for failing to meet commitments. Achievement of these concepts results in improved reliability of workflow. Studies have shown reliable workflow to be the critical component in elimination of waste. The tangible byproducts of removing waste are cost savings and schedule benefits.

Fulfilling scheduled tasks each week by the team is one of the hallmarks of lean. According to a study by the LCI, traditional projects have an average success rate of 54% in completing their weekly work plans. IPD and lean increase that percentage to between 85% and 100%. Improved project work flow resulting in maintaining schedules and elimination of waste are the significant outcomes of this process.

An IPD Contract Form
As anything that emerges new in the construction industry, there is confusion regarding terminology. When using the term “IPD,” some refer to pure IPD which includes an integrated form of agreement (IFoA). The IFoA includes at least the owner, design professional and builder into one agreement. The first standard IPD contract was the ConsensusDocs 300 Standard IPD Agreement, based on an early version of Will Lichtig’s IFoA that was used at Cardinal Glennon Hospital in St. Louis, Missouri. ConsensusDocs has just published a comprehensive revision in January of 2016 as well as issued an expansive Guidebook commentary that includes different Risk Pool Plans templates. The 2016 edition provides the latest best practices from lessons learned on IPD projects, harmonizes terminology used in IPD, and makes IPD more easier-friendly for new entrants to IPD and lean practices. ConsensusDocs is the only standard IPD agreement that contractually addresses all three elements that are critical in effectuating IPD successfully – process, commercial terms and team organization. The new ConsensusDocs 300 IPD Agreement has already been signed for a $55 million project school addition in which the signatories are Michigan State University, FTCH (Fishbeck, Thompson, Carr & Huber of Grand Rapids Michigan, and Clark Construction Company of Lansing Michigan are core group signatories. The ConsensusDocs 396 also just published a new standard IPD joining agreement and LMN of Seattle, the AIA design firm of the year, is anticipated to join as a core group IPD member and signatory through a joining agreement.

ConsensusDocs is a coalition effort of more than 40 construction organizations that identify and incorporate best practices in standard design and construction contracts. The coalition publishes 100+ contract documents, and the ConsensusDocs 300 IPD agreement is the coalition’s signature contract, because it embodies the collaboration that the coalition encourages to achieve better project results.

The Results
The first notable project in the U.S. that used IPD and lean was a Sutter Health Hospital project. The results were astounding. Studies concerning IPD show similar results. For instance, the 2012 University of Minnesota study shows that IPD delivers significant value to owners.

ConsensusDocs website publishes project histories that include several hospital projects using the ConsensusDocs 300 IPD contract. Of note, Universal Health Systems (UHS) has three projects that have saved significant cost and time using ConsensusDocs IPD contracts and incorporating lean. UHS reports that the Temecula Valley Hospital is reported to have saved 30% to 40% in costs and to have been 30% more efficient than any systems best- performing facility in the average California hospital. In addition to boasting such cost-savings and efficiency, the Temecula Hospital project was the fastest to market from design to construction. Also of note, the ConsensusDocs site posts a history of the first pure IPD project by a public institution, which was done by Michigan State University

Lesson Learned So Far
IPD is not a passing fad. Time and money savings are being demonstrated for owner, design professionals, and constructors. In the near term IPD-lite, with focus on incorporating early contractor involvement, deeper collaboration, lean, is emerging as a preferred choice for large and complex projects, especially in the hospital market.

Outlook
IPD and lean have led to the following quantifiable changes: significant (50% or better) reduction in work injuries, elimination of rampant waste, improved quality, completion on time or ahead of schedule, and significant cost savings (up to 20%). We have witnessed in the past few decades impact of technological changes, lean manufacturing, six sigma, and other practices revolutionize other industries. The stage is set for a sweeping transformation of the construction industry through IPD and lean.


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