Get Your Contracts Lean — It’s Better than Dieting
I recently took the AGC Lean Construction Educations Program Units 1-7. After studying diligently, I’m happy to say that I passed the exam and earned my CM-Lean credential. Surprisingly, this makes me the first attorney to earn this distinction out of over 1,200 CM-Lean holders. So why is a construction attorney learning about lean? After all, this was my first exam in 20 years since I took the bar.
Well, according to McKinsey Global Institute, construction actually became less productive from 1995 through 2009. When it comes to efficiency, construction still lags significantly behind the manufacturing sector and the overall economy. Construction contracts – what we sign and the way in which we negotiate them, or lack thereof - is a principal reason why construction productivity is stagnant.
Contracting under an integrated lean project delivery method (ILPD) and incorporating Lean construction tools is the most powerful means to increase efficiency and add-value to owners. Owners are the client’s end-users of construction projects. ConsensusDocs has taken a leadership role in publishing the first standard ILPD contract which is an integrated form of agreement (IFOA). The ConsensusDocs 300 Integrated Project Delivery (IPD™) provides an off-the shelf solution to contract utilizing lean tools. Not every owner can or is comfortable using an IPD approach. Consequently, ConsensusDocs produced the ConsensusDocs 305 Lean Construction Addendum last year to provide an option for contracting for lean on Construction Management at-Risk and design-build projects. Some people call this approach IPD-lite or IPD’ish. Some disfavor such terms, because those terms have been used loosely on projects that aren’t very Lean.
What are some of the fundamental characteristics of a lean contract? Lean contracts fundamentally attempt to:
• Align individual party’s financial success (and risks) with overall project success, rather than individual protection
• Create a two-way conversation, rather than a detailed list of mandates and dictates assumed at contract signing with incomplete information
• Pull (schedules and the supply chain), rather than push
• Focus on adding value to the owner, rather than lowest first price
• Pool risk by allocating it to the core team, including the owner, rather than push risk to individual parties (who may be in the weakest to avoid or to manage the risk)
Having gone through the AGC lean curriculum, I can say that it provides the building blocks necessary for all experience levels to transform their projects and their companies towards incorporating Lean construction. There is even a free introductory course online. The exam and earning the credential provide a realistic assessment of the knowledge and understanding of concepts.
The knowledge gained by taking these courses will help equip me to continue to work with the ConsensusDocs Coalition’s volunteer leaders. The Coalition’s associations collectively represent over 300,000 company and individual members in the A/E/C community. Much has been accomplished to date but much still needs to improve in the area of construction contracts.
About the author: Brian Perlberg, Esq. CM-Lean is Executive Director and Senior Counsel of ConsensusDocs. He has been recognized by ENR as a Top Legal Voice and featured in Who’s Who in Construction.