RETURN ON INVESTMENT IN CONSTRUCTION INNOVATION—A …

RETURN ON INVESTMENT IN CONSTRUCTIONINNOVATION—A LEAN CONSTRUCTION CASE STUDY

Andre Koerckel1 and Glenn Ballard2

ABSTRACT

The construction industry has frequently been criticized for not investing enough in innovation. Thisrelates to both the managerial changes and technological developments required to support this inno-vation. Extending Lean Manufacturing techniques into the production based environment on one ofEurope’s largest and most complex construction projects, Strategic Project Solutions, Inc. (SPS) hasworked in collaboration with the joint venture contracting group and the project client to establish newbusiness processes and implement web-based tools which enable workflow control (SPS ProductionManager) and management of materials (SPS Materials Manager) at the production level. Further, thisprocess innovation has been coupled with product management in the form of 3D digital prototyping.The outcome of this effort has demonstrated significant tangible and intangible benefits, outweighingthe initial investment and further establishing a movement toward innovation that can be extended toother projects across the continent.

This paper will act as a case study focusing first on the project challenges; physical, managerial, andcontractual. It will then outline the success factors for the implementation of production control,illustrating the process undertaken. Unique case studies within the project will be used to revealtangible results which exceed industry norms, and also to outline the intangible benefits thatcontribute to the overall results. These results will then be summarized into learning for theconstruction industry as a whole.

KEY WORDS

Innovation, Material management, Production control, Return on investment, Workflow.

INTRODUCTION

Even while the application of lean within the con-struction industry is gaining momentum, criticismstill exists due to the fact that innovations withinthe construction industry cycle through slowerthan in other fields. If necessity is the mother ofinvention, then we should look to the extremecases to see the future. Instead, the constructionindustry treats extreme cases as unique entitiesand instead focuses on benchmarking more tradi-tional projects to identify areas for improvement.

Through the introduction of production controltools such as the SPS Production Manager and 3Ddigital prototyping, the Channel Tunnel Rail Linkin London has seen groundbreaking returns thatgreatly exceed their investment in these tools.

This paper describes the implementation of leanconstruction within this project through the appli-cation of innovative systems. A brief descriptionof the project is provided, followed by a summaryof improvements made to date, a few of which aredescribed in detail.

CHANNEL TUNNEL RAIL LINK LONDON

The transformation of London’s St. Pancras Sta-tion will complete The Channel Tunnel Rail Link(CTRL), Britain’s first major new railway forover a century. CTRL Contract 105 consists ofnumerous inter-related portions of work focusedaround the refurbishment of the St. Pancras sta-tion. This work involves renovation of the exist-ing Grade-1 listed Station (the 8th most

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1 Implementation Leader, Strategic Project Solutions Inc., 1040 Battery Street, San Francisco, CA 94111, USA,Phone: 1-415-362-3200, email: [email protected]

2 Dr. Ballard is an Associate Adjunct Professor at the University of California, Berkeley; Research Director of theLean Construction Institute; and principal of Strategic Project Solutions Inc., e-mail: [email protected]

significant historic site in the UK), constructing a185m extension to the existing station providing13 new platforms for domestic and internationalservices, and a new underground Thameslink Sta-tion. These combined works will take place bothinside and outside of the existing operationalabove ground rail and underground metro station.These works are heavily dependent upon oneanother and occur on a highly congested site incentral London. Figure 1 shows an aerial view ofthe project site under construction.

BACKGROUND

In June 2003, CORBER (a joint venture ofCostain, Laing O’Rourke, Bachy, and EMCORRail) sought to incorporate many lean construc-tion principles and began piloting the use of SPSProduction Manager by Strategic Project Solu-tions (SPS) and 3D Digital Prototyping. Initialefforts were based around the Thameslink Box(TLB), an underground metro stop, to demon-strate the performance improvement it coulddeliver. Three key critical success factors wereestablished prior to commencing the pilot:

• Ensure effective reliability of workflow• Ensure that the best approach to product and

process are developed prior to commencingfabrication and installation

• Ensure that the right material and plant, in theright quantity, get to the right place at theright time, every time

• In order to meet these critical success factors,it was agreed that SPS would provide and im-plement the following:

• SPS Production Manager (aka “ProjectFlow”on CTRL Project) enabling systematic

scheduling, controlling, measuring and im-proving workflow throughout a project orproduction process in real time.

• Technical training and support in the use ofSPS Production Manager, as needed until alldesignated team members were effectivelyusing the system

• Facilitation for various team building andtraining sessions as needed to ensure that theCORBER team members working in theTLB become a high-performance team

Subsequently, CORBER instructed SPS toexpand the pilot to the whole of the Contract 105project.

The project now has 38 active civils, building,and supplier teams, including 337 users who haveentered over 55,000 tasks into SPS ProductionManager. The project teams now have approxi-mately 25 engineers trained for developing andusing 3D prototyping. They are currently usingboth the SPS Production Manager and 3D model-ing as tools to “engineer and plan their work”.

OVERALL RESULTS / RETURN ONINVESTMENT

A list of improvements and the savings they haveachieved is shown in Table 1. These results arelargely due to the new approach to planning andexecuting work.

Measurable savings to date are calculated at$3,509,971 against costs of $947,105, for a cur-rent return of 3.7 times the investment. Total sav-ings through the end of the project are estimated tobe $6,067,154 against costs of $947,105, for a netsavings of $5,120,409, a 6.4% budget underrun,and a return of 6.4 times the investment. Addi-tional savings are expected from initiatives stilltoo new to evaluate, and indirect benefits in suchareas as safety are also expected but not yet mea-sured. Benefits beyond cost savings have beenseen in stakeholder involvement, process trans-parency, collaborative planning, analysis andaction on reasons for plan failures including linksto the project’s Six Sigma initiative, and integra-tion of product and process design. These furtherunquantified benefits will be described later.

Proceedings IGLC-13, July 2005, Sydney, Australia

92 Return on investment in construction innovation—a lean construction case study

Figure 1: Channel Tunnel Rail Link Contract 105at St. Pancras Station

IMPLEMENTATION & ASSESSMENTMETHODOLOGY

The benefits described above were achievedthrough a continuous improvement strategyfocused on improving work flow reliability3, afundamental concept of lean construction.

The SPS software, SPS Production Manager, isa production management tool that enables com-petitive advantage by improving quality, safety,time and cost. It accomplishes this through sys-tematically scheduling, controlling, measuringand improving workflow throughout a project orproduction process. SPS Production Manager’ssingle database aligns workflow from productionto master level, eliminating the need for multipleschedules and related coordination problems. Itsweb-based user interface enables real-time updat-ing of workflow status, ensuring that the scheduledepicts the current situation. This allows users tomake faster and better informed decisions, allow-ing coordination across all specialists, both on siteand off site.

Enabling teams to successfully derive benefitfrom using the SPS Production Manager, requires

intimate knowledge of how to implement tools orsystems that require both process and behavioralchanges within an organization.

SPS PRODUCTION MANAGERIMPLEMENTATION

Prior to implementing the SPS Production Man-ager, it is essential to have a clear idea of theapproach or strategy to be followed, and the toolsto support implementation. Without a detailedstrategy or plan, the implementation effort willnot progress, and the project team, as well as theimplementation team, will quickly become frus-trated. Similarly, each stage of the implementa-tion process has a variety of support tools,techniques, and skills which must be commonknowledge for the implementation team. Withoutthis knowledge, the team will not be successful atguiding others through the implementationprocess.

Experience indicates that successful implemen-tation of the SPS Production Manager requires theintroduction of skills, techniques, and functional-ity in a specific sequence. It is essential for a pro-


Andre Koerckel and Glenn Ballard 93

Item Savings to Dec-2004 Future savings Total savings

Thameslink Box Productivity Improvements (CappingBeam Team) $2,221,908 $0 $2,221,908

Thameslink Box Productivity Improvements (Fleet Sewer &East Central Concourse) $378,842 $0 $378,842

Thameslink Box Fleet Sewer diversion & Orthotropic Deckinstallation $378,842 $0 $378,842

West Deck – Buildability in 3D prototype $94,710 $378,842 $473,553

West Deck – Improved productivity $94,710 $852,394 $947,104

Site Stores – Satellite stores initiative $151,537 $568,263 $719,800

Thameslink Base Slab – Labor saving $0 $0 $0

Thameslink Base Slab – Schedule $0 $284,132 $284,132

Concrete – reduced Ad Hoc orders, balance demand &supply $189,421 $473,552 $662,974

Reinforcement TBA TBA TBA

Self Certification TBA TBA TBA

Intangible Effects TBA TBA TBA

Total Savings $3,509,971 $2,557,184 $6,067,154

Investment to date (SPS & CORBER staff) ($947,105) $0 ($947,105)

Net Savings $2,562,866 $2,557,184 $5,120,049

Table 1: Summary of Returns from ProjectFlow Implementation

3 “Work flow reliability”, “production reliability”, and “commitment reliability” are used interchangeablyaccording to context

ject team to be fully competent in the use of theSPS Production Manager, and to have grasped theassociated concepts, prior to moving on to addi-tional modules such as the SPS Materials Man-ager. Typically, the implementation team will beresponsible for determining when a team is readyto progress, however, all project stakeholdersmust be aware of the natural progression of activi-ties, and understand that certain modules (such asthe SPS Materials Manager) will not be imple-mented until a solid foundation is first established.

Once a project team achieves a certain level ofcompetence, they will be required to progress theimplementation of the SPS Production Managerwithout the support of the implementation team.This requires the efficient transfer of skills overtime from the implementation team to a self sus-taining project team. It is this transfer of skills thatenables implementation across an entire project,either large or small.

Progress against the implementation plan ismeasured through regular assessments with theproject leadership and teams. The frequency ofassessments at CTRL has been established on afortnightly basis, with regular meetings held toreview implementation progress, make transpar-ent strategic & tactical issues, and mutually agreeremedies to ensure successful implementation.The SPS Production Manager ImplementationAssessment Form and SPS Production Managerperformance reports are used for this purpose.

As outlined in the implementation sequenceabove, teams begin by holding daily productioncontrol meetings to review and commit to a pro-duction plan for the day and to record completionsand non-completions for the previous day. The“work flow reliability” for the project, shown inFigure 2, has improved from 70% to 80% over an18 month period. Notable also is the reduction invariation.

In addition to measuring work flow reliability asshown in Figure 2, reasons for not achieving workas planned are collected and categorized. Thisdata allows Six Sigma experts at CTRL to identify

improvement areas that directly affect productionactivities. Figure 3 shows the Reasons Summaryreport.

As a result of root cause analysis, teams under-took efforts to plan collaboratively with otherteams, including the detailed planning of criticaland repetitive operations using digital prototyping(3-D computer modeling) and process mapping.In addition, the SPS Materials Manager wasimplemented to control offsite supply and deliv-ery. This will be discussed for the delivery of con-crete later in this report.

RESULT EXAMPLES

Below are reports on performance improvementand return on investment for CORBER teamsresulting from controlling production throughSPS Production Manager and using 3Dprototyping.

THAMESLINK BOX—CAPPING BEAM & EXITSTRUCTURES

Since April 2003, the SPS Production ManagerImplementation team has supported the construc-tion teams to improve the project delivery perfor-mance. Initially this work focused on theThameslink Box.

The Thameslink Box Capping Beam workshowed considerable productivity improvements.In April 2003, the productivity metrics wereshowing a serious potential overspend. Thesevalues were based on the production rates beforethe implementation of SPS Production Managerand 3D Digital Prototyping, but follow severalmonths of work. Consequently, we assume thatany learning curve improvements had alreadyoccurred.

In column D of Table 2, the actual hours perunit were significantly higher than estimatedallowances. Based on a conservative estimate oflabor rate including all costs of employment,overtime, management supervision, facilities and



Figure 2: CTRL 105 Production Reliability Graphto 05 April 2005

Figure 3: CTRL 105 Reasons Summary Graph to 05April 2005

plant of $37.88/hour, the project was facing anoverspend of $2,083,631 above the estimated costrepresenting a budget overrun of approximately70%.

In December 2004, the Capping Beam teamcompleted the works on time. The actual laborcost saving between the performance pre-SPSProduction Manager to the completed work wasapproximately $2,221,908 (note that the totallabor value for the capping beam works is$3,220,157). This is without apportioning thebenefit from avoiding non-productive overtime,acceleration or damages from late completion ofthese critical works.

WEST DECK EXTENSION—COMPARISON TOEAST DECK (KPIS)

The West Deck team has a target production ratewhich is more aggressive than the completedsymmetrical East Deck. It is difficult to comparebecause, while the structures are similar, differ-ences exist in that the West Deck has the addedcomplication of the critical Thameslink Boxworks beneath it.

In order to achieve these rates, the team is striv-ing to understand their work better in advance ofproduction on site to reduce the number ofrequests for information (RFI) raised on site,which could significantly delay the works. Using3D prototyping, the engineers have identified 16specific RFIs (Site Queries in the UK) that wouldhave held up the works had the issue been leftuntil the works had been constructed.For instance: Site Query ref: 02553

“The reinforcement for the Long Beams arepre-fabricated in a yard and placed on tablesoffits for casting. Only after first stage ofpour, (trackwell slab), are the platform starterbars fixed. In order for the position of thesestarter bars to be in accordance with thedesign requirements, the lap lengths of the topmain beam bars in the beam cage need to be tothe side. Standard fixing would lap these bars

to the underside. This however, would preventthe correct fixing of platform starter bars. As aresult of the modeling we were able to get thecages prefabricated correctly to suit thestarter bar detail.”

From the team’s experience on the East Deck,each Site Query raised on site would stop the workfor an average of 4 days. The effects of this onproduction for a crew of approximately 8-12 are:

• Downtime to re-plan (estimated 2 hours percrew)

• Unplanned work (less productive, say 1/3less productive)

• Potential non-productive overtime to repair(estimated 75% of unplanned work)

• Unplanned work for other teams• Upstream / Downstream effects• Material waste (estimated 50% of labor

waste)• Make do with materials to hand for new area• Potentially less safe work, as it is unplanned• Incorrect plant for new work• Lower probability of “right-first-time” qual-

ity (estimated 10% labor for re-work)Therefore each Site Query raised and solved inadvance of the work results in a potential on-sitesaving of approximately $18,942. It is expectedthat 25 of these Site Queries will be raised there-fore saving the Project $473,552.

On top of these individual items, by using SPSProduction Manager & 3D prototyping toimprove their control of the works and their shortterm planning on a daily basis, the West Deckteam has targeted a 10% productivity improve-ment over the East Deck.

Based on a conservative estimate of labor rateincluding all costs of employment, overtime,management supervision, facilities and plant of$37.88/hour this equates to a productivityimprovement of 25,000 hours or $947,000. Thisrepresents approximately 10% of the total laborbudget for the West Deck Extension works.



A B C D E F

Pre-SPSProduction

Manager & 3DProduction

Rate(to Apr-03)

UnitEstimatedProduction

Rate

Hoursabove

Estimate

PotentialAdditional

Hours

Post SPSProduction

Manager & 3DProduction

Rate(from Apr-03)

Concrete Placing 9.28 Hrs/m3 2.00 + 7.28 41,986 1.76

Reinforcement Fixing 17.00 Hrs/ton 12.50 + 4.50 10,919 12.48

Formwork fix & strike 5.22 Hrs/m2 4.00 + 1.22 2,061 3.35

Table 2 – Capping Beam Productivity Rates

THAMESLINK BOX—FLEET SEWER & EASTCENTRAL CONCOURSE

The Fleet Sewer and East Central Concourseworks were constructed using the same crews asthe Capping Beam team. The Fleet Sewer teamhas used the SPS Production Manager to managetheir processes and has achieved all their schedulemilestones.

Without using the SPS Production Managerthese structures could have reasonably assumed tohave been delivered using the methods responsi-ble for the “initial production rates” experiencedby the Capping Beam team. Therefore, we conser-vatively estimate that the project has saved 10,000man hours assuming that they are performing atsimilar productivity levels to the Capping Beamteam. This is an approximate cost saving of$378,842.

In completing the Fleet Sewer diversion withinthe allocated rail possession times before theextended 35 week blockade period, the teamensured that this technically difficult work com-pleted over a live railway was completed withoutany adverse effect to the schedule. This was only

made possible by the team modeling in 3D detailthe work which they were required to complete,and testing an installation sequence with theinvolvement of all the stakeholders includingforemen, suppliers, client and third partyrepresentatives.

In the SPS Production Manager, the team usedthe date of the possession as the milestone andworked back to ensure sufficient time wasallowed for all paperwork and approvals to be inplace before the work started. Daily productionplans were then created to monitor and control theworks as they proceeded.

While checking the design for constructabilityin the 3D prototype, an inconsistency was foundwith the original design details. This is illustratedin Figure 4 above. The left figure shows a sectionthrough the steel orthotropic deck shown on thedesign drawings. The right figure is the same sec-tion taken from the 3D prototype and portrayswhat was actually fabricated.Once the error was noticed, the fabrication wasquickly amended and did not affect the construc-tion schedule. Without using the 3D Prototype toidentify this problem, the construction team may



Figure 4: Section as detailed by designer (right) and after building digital prototype (left)

Figure 5 – Fleet Sewer Possession works in 3D (left) and during construction (right)

not have noticed it early enough and would haveincurred the $378,842 cost for the 7 sections of theorthotropic deck twice. This is without factoringin the delay costs and the fact that this was the lastpossession available before the blockade. Per-forming this sensitive work during the blockadecould have potentially delayed the entire CTRLschedule.

The 3D Prototype also highlighted a clashbetween the steel deck and the capping beam. Theearly identification of this clash enabled the teamto carry out remedial works in advance of the pos-session, saving the potential calling off of theworks. Figure 5 captures the 3D image alongsidethe actual construction works.

CONCRETE – REDUCED AD HOC ORDERS,BALANCED DEMAND & SUPPLY

There are a number of initiatives of which the ben-efits have not been fully measured. One exampleis concrete deliveries through the SPS MaterialsManager. As workflow reliability at the produc-tion level increased, CORBER engaged SPS tohelp define and design the system and tools toenable concrete ordering through their productioncontrol tool, the SPS Production Manager. Com-munication between site and the supplier werebetter understood as a result of the site teamsbetter planning and control. With a clearly definedplanning process using the SPS Production Man-ager coupled with the integration of concreteordering system through SPS Materials Manager,over time the project should see a reduction in thenumber of expensive overtime pours.Initial estimates from the project indicate a signif-icant reduction in man hours (see Table 3). Thiswas measured over the 12 weeks from when theteams began entering concrete orders into SPSMaterials Manager up until the holiday break inDecember 04. Based on a conservative estimate oflabor rate including all costs of employment,overtime, management supervision, facilities andplant of $37.88/hour this equates to a productivityimprovement of 5000 man hours or $189,400.

Assuming that the calculated average produc-tion rate will continue to be achieved over theremaining concrete forecast of 33,500 m3, this

equates to an additional forecast productivityimprovement of 12,600 man hours or $473,552.

Data will need to be continuously collected andused as verifiable evidence that this trend is beingsustained.

Having the data on concrete orders and supplyupdated in real time has enabled the teams toreview and analyze their improved orderingsystem and focus on continued improvements tothe process. Figure 6 shows concrete supply,demand and overall reliability to take concreteorders per day.

INTANGIBLE BENEFITS

There were also intangible benefits from the leanconstruction initiative. These initiatives have notbeen quantified, but they have undoubtedly con-tributed to the overall return on investmentyielded from the implementation of lean tools andconcepts at CTRL.

All the 38 teams using ProjectFlow are involv-ing the relevant stakeholders in the short termplanning processes and regularly collaborate toagree on workstreams and processes. Thisinvolvement has been critically important atCTRL due to the complexity of the project and thenumber of people involved in the work.

Other stakeholders benefiting from the tools arethe client, and our suppliers. For instance,Figure 7 is a detail of a structural connection. Themodel gives a far better representation of thespace and requirements of the connection,enabling faster and better informed decisionmaking.



A B C D

Rates Unit Quantity Placed(m3)

Total Hours perRate (Hrs)

Concrete Placing Tender Production Rate 2.00 Hrs/m3 13,352 26,704

Concrete Placing Calculated AverageProduction Rate 1.62 Hrs/m3 13,352 21,664

Table 3: Concrete Productivity Rates – Mid-September 2004 to Mid-December 2004

Figure 6: Concrete Reliability(Ordered/Delivered by Day)

CONCLUSION

Concepts and techniques of lean constructionhave been explained and an implementation strat-egy based on the application of production control(through SPS Production Manager and SPS Mate-rials Manager ) to construction has been pre-sented. The CTRL case study illustrates thebenefits and the quick and attainable return oninvestment from application of these concepts,strategies and tools to construction projects.These benefits are not only being achieved onCTRL but across the globe for many clients.

Further development and application of innova-tive tools, such as those presented will aid toembed Lean Project Delivery as standard practice.The authors expect future implementations togenerate even greater value for customers andstakeholders.

REFERENCES

Arbulu, R.J., and Koerckel, Andre (2005) “Link-ing Production-Level Workflow with Mate-rial Supply”, Proceedings of the ThirteenthAnnual Meeting of the International Groupfor Lean Construction, IGLC-13, Sydney,Australia. In review.

Ballard, Glenn (2000). “The Last Planner Systemof Production Control.” PhD thesis, Dept. ofCivil Engineering, University of Birmingham,Birmingham, U.K., June, 2000.

Ballard, G., Koerckel, A., Arbulu, R.J. (2005).CTRL Concrete Ordering throughProjectFlow. Project document publishedAugust, 2004.

Choo, H.J., Arbulu, R.J., and Zabelle, T.R. (2005)“Real-time Production Control”, Proceedings

of the Thirteenth Annual Meeting of the Inter-national Group for Lean Construction, IGLC-13, Sydney, Australia. In review.

Koerckel, Andre (2005). CORBER CTRL 105Production Control Implementation Returnon Investment Review. Project document pub-lished January 25, 2005.



Figure 7: Boot Permanent Tie Detail (roof arch—wall connection)

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RETURN ON INVESTMENT IN CONSTRUCTION INNOVATION—A …