Thursday, March 26, 2020

April 2020 - Volume 8 Issue 1


COVID-19: Managing Challenges and Mitigating Risk

Managing risk in construction means managing the three Ms (Manpower, Money, and Material). The current socio-economic situation begs for even tighter management of the 3Ms. The highly fluid and continuously changing conditions due to the COVID-19 have increased the uncertainties of managing projects and companies. As the COVID-19 disease is advancing and spreading across the U.S. at an ever-increasing rate, state-wide lockdowns and quarantines are likely to intensify. Various industries and nearly all aspects of the supply chain will continue to be severely impacted, including the construction industry and its contractors.

Contractors face challenges on a daily basis and are used to managing unscheduled interruptions on the construction site. MCA’s data and more than 25 years of working experience with contractors across the U.S. indicate that interruptions and delays due to absenteeism, weather, or trade interference are common on today’s job sites. However, the challenges contractors will be facing due to this pandemic are multi-faceted and likely larger in scope. Contractors need to plan and prepare for the following challenges and risks the coronavirus will pose on their businesses from shut down, through revival, and all the way to final recovery:


Supply Shortage and Material Delays:
Interruptions and shutdown of national and international manufacturing facilities around the globe will cause sourcing issues and extended delays in product and material fulfillment due to supply shortage and logistics breakdowns.
Intensified Labor Shortage and Limitation to Perform Work:
Contractors will have to consider employees’ health, which might require difficult decisions regarding revenue or performance. The growing fear, number of infections and quarantines will leave employees unable to work, intensify the labor shortage issues for contractors, and ultimately slow down current projects. The expansion of precautionary measures taken by local agencies may even force contractors to shut down construction sites and entire businesses, effectively prohibiting contractors to perform work.
Project Delays, Delayed Payments, and Financial Risks:
Getting paid in the construction business is already a struggle, even without this current situation. As a result, as every party involved is going through this major disruptive event, payments will be delayed as far as possible, and delays will be passed down to the bottom of the chain of payments, where contractors will be squeezed the hardest, facing major cash and liquidity risk.
Legal Concerns and Disputes:
Both contractors and owners will be reviewing contracts to see what contractual rights and duties exist in light of the conditions caused by the virus' spread. While the coronavirus epidemic was unforeseeable, contractors may still be contractually responsible for delays or cost overruns on current projects.
Economic and Market Challenges:
Despite advantageous financing conditions, there is an increasing risk of higher construction prices, as financing opportunities may dry up, and project owners postpone or cancel projects. The current situation has certainly accelerated the expectations of an economic slowdown, and a serious downturn is more than ever a real threat for contractors. Most contractors might not see the immediate impact of an economic recession. Current backlog, especially in non-residential construction, will help them to bridge about 1 to 1.5 years before experiencing economic difficulties.

Contractors can expect significant project delays, schedule compressions, labor and material shortage, price fluctuations, as well as order and supply chain issues that will ultimately lead to higher project cost and lower profit margins. In a thin margin business like the construction industry, any kind of payment delays and project budget overruns can decide about staying in business and closing up shop. Contractors are urged to take action now and to begin planning and preparing for the challenges and risks in the aftermath of this epidemic. Contractors should evaluate their entire supply chain, identify its strengths as well as weaknesses, and look for alternative supply sources. Furthermore, should review their contractual rights and duties to protect themselves from the increased costs and supply chain delays and interruptions that are threatening the construction industry.

We are about you®, and we care about your business. MCA, Inc. offers a variety of online classes and webinars targeted to support you to mitigate the impact of the COVID-19 pandemic on your business. We will discuss and brainstorm what you should focus on, what you should look for, and which actions you should take now as a business to successfully make it through this tough time. We will prepare you for the entire journey from shut down, through revival, and all the way to final recovery. 

Visit www.mca-soft.com to learn more about the online classes and webinars to mitigate the impact of COVID-19 on your business.


Effective Labor Management and Profitability with JPAC®

If you ask most project managers how to maximize profits on a construction project, you might receive answers such as reducing overhead or leveraging vendor relationships to drive material costs down, etc.  They aren’t wrong, but why not start with the biggest cost driver: labor cost.  Smart contractors realize this and have started to shift their focus toward effectively managing their skilled labor.  This realization is important not only because of the labor shortage in the construction industry, but because labor still represents the single largest source of profit wasted on a construction site, and therefore represents the quickest source for improvement!
Figure 1: Correlation between Job Profitability and Change 

The fact is that the labor shortage, coupled with increasing competition and other driving factors has driven the need for contractors to not only pay close attention to labor productivity, they also have to manage how efficiently their labor is used as well.   Contractors simply can’t afford to have their highest skilled labor moving material, searching for tools or cleaning up job sites. The most important aspect of the project manager’s responsibility is to manage the job’s labor cost and to provide the right labor force mix for the job to allow for the most efficient labor utilization. In order to stay competitive, contractors must actively manage the overall composite rate and develop a deeper understanding of the effects of prefabrication and the use of lower-skilled labor for unskilled tasks such as material handling and other non-productive tasks.

A recent analysis conducted for a large size electrical contractor highlights the importance and immediate positive financial impact of managing a job’s composite rate on a project’s profitability. An analysis of 53 projects between 2017 and 2019 (see Figure 1) illustrates that reductions in the crew composite rates (relative to the estimated labor rate) immediately translate into higher project profitability. On the other hand, jobs that end up with higher than estimated composite rates are more likely to experience significant losses for the business. The data analysis suggests that, on average, for every $1 a company is able to save on its crew composite rate for a job, it can realize up to 1 percentage point increase in the project’s profit margin. The results demonstrate the large financial impact that effective labor cost management and management of skilled labor can have for contractors on maximizing profits on their construction projects and to mitigate restrictions imposed by the ongoing labor shortage! 


Recuperating Retainage using JPAC® Percent Complete

“Time is Money” and managing cash flow is a well-known struggle for all contractors. It is common in the industry for retainage to not be released on time or, in some cases, not released at all. Subcontractors are particularly prone to significant cash flow challenges and financial pressure because of their adverse position along the chain of payment, which in extreme cases can cause subcontractors to fall significantly behind on their debts. As a subcontractor, you should be thinking about how to have as little cash as possible tied up on a job for as short as possible. 

Figure 2: Retainage Law for Public Projects
(Data as of November 2019) (Click to enlarge)
Federal and state governments started passing laws regulating the maximum percentage of retainage allowed as well as the types of contractual provisions that subcontractors and general contractors can agree to. While most states limit the retainage percentage allowed on public projects to 5% or 10% (see Figure 2), retainage on private construction projects is widely unregulated across the U.S. (see Figure 3). As private projects represent more than 75% of the total annual value of construction put in place in the U.S. (U.S. Census Bureau), it is of utmost importance to pay close attention to the negotiated contractual requirements and rules.

Figure 3: Retainage Law for Private Projects
(Data as of November 2019) (Click to enlarge)
Retainage is typically released upon substantial completion of the work. However, some states like Alabama, Arizona or Georgia, for example, put rules in place that prevent GCs from withholding any additional retainage from future payments after the work is 50% complete. This is why using a proper percent-complete method of job tracking is so vitally important. The earlier you can prove that you are 50% complete on the project, the quicker you can stop having retainage withheld on your project. JPAC® is specifically designed to help you accurately document percent complete through immediate field-based feedback on the actual effort and work performed on the construction site. With the use of JPAC®, you will be able to prove the completion of your project’s percent faster, and start billing for your retainage earlier, thus, reducing the risk exposure of your cash flows and financial pressure for your business.

Visit www.wemsoftware.com to learn more about JPAC® and our services.


Using Labor Codes to Manage Work and Profitability

Figure 4: Industry Common Labor Codes
The terms ‘cost code’ and ‘labor code’ are used interchangeably, and both methods of grouping individual costs based on their nature, function or type of work.

In most accounting software, cost codes define types of costs, such as material, labor, subcontractor, or equipment. In construction, cost codes are broken down into further detail by creating, for example, individual labor codes for the overall labor cost code. An electrical contractor may use labor code “100” to assign and track any time spent and work done related to fixtures on a job. MCA’s research shows that there are between 7 and 15 common labor codes. Figure 4 depicts the frequently used labor codes in the electrical construction industry.
Figure 5: Reasons for using Labor Codes

Contractors use cost codes and labor codes for a number of reasons. A survey conducted by MCA (see Figure 5), asking where company labor codes originated, why they are used, and who in the company uses them revealed that the top reason for labor codes is to “Track hours spent”, followed by “Seeing if the estimate was accurate”, and to “See how much costs go to different tasks”. For more MCA research, click here

What many contractors don’t know, however, is that labor codes can be used not only to monitor hours after the fact but to get a real-time view of labor code performance throughout the job, so project managers and business owners can predict profitability more accurately.  JPAC® is the only software that follows the industry standard, ASTM E2691, and can monitor labor codes’ productivity and completion status. Project Managers using JPAC® are able to closely monitor critical individual labor codes and pinpoint issues faster on the job. The traditional method of percent complete relies on cost-to-cost or units of work performed, which might not provide an accurate picture of the progress towards the contract completion. For example, a project manager who sees in the accounting system that 15% of the budgeted hours have been spent, might assume that the project is 15% complete, and therefore bill for 15% of the contract volume, on a cost-to-cost basis. Proper use of JPAC® might uncover instead that the project is actually 30% complete, and the PM should have billed for 30% of the project revenue. Simple math tells us which method would leave us in a more advantageous position!

If you are interested in more information on JPAC®, click here.


Research Corner

New Research Projects

This past January, MCA had the honor to present two winning research proposals at the ELECTRI International Council Meeting. The research topics funded were:
  1. Industrialization of Construction: Signal or Noise? Threat or Promise?(Dr. Heather Moore)
  2. Estimating with and Pricing of Prefabrication for Electrical Contractors(Dr. Meik Daneshgari)
To get some impression about the session at the ELECTRI Council Meeting, and to see some of our members in action, please click here for a short recap video. 
  
The winning projects are just the next steps in shaping the industry through and towards the Industrialization of Construction®. In previous years, MCA has published four books for ELECTRI International on the following topics:
For more information on MCA’s research, click here
If you are interested in our most recent as well as past publications, please click here
Visit also ELECTRI International for additional industry-related research.

U.S. Market Development and Market Studies

The recent update of the U.S. Census Bureau on the U.S. construction market data indicates that the construction market has likely reached its peak. In 2019, the U.S. construction market experienced its first drop after a 9 year-long streak of impressive growth and recovery, surpassing pre-crisis market levels in 2007 and 2008. The value of total construction put in place (CPIP) in 2019 amounted to $1.306 trillion, and 0.1% below the amount spent in construction in 2018. 

The recent slow-down in the construction market is the result of two opposing trends in private and public construction. Lower spending in private residential construction (-4.7%, $514.3 billion) and stagnation of nonresidential private CPIP at $460.5 billion led to a decline in overall private CPIP in 2019.

Figure 6: U.S. Electrical Market Size
In addition to the impacts of the COVID-19 pandemic and the increasing risk of an economic recession, contractors will keep facing the challenges of an ongoing labor shortage, increasing pressure on cost and profitability, and trends toward fixed-bid projects. In 2020, the construction industry will have to focus on mitigating these challenges through improved operations and to identify the individual advantages within specific markets. Identifying and understanding your competitive advantages and disadvantages requires a profound knowledge of the characteristics of your local market. 

MCA has conducted hundreds of unique market studies for Chapters and IBEW locals of different trades over the past 15 years. Most recently, MCA has analyzed local markets for:
  • Electrical Contractors’ Association of City of Chicago (ECA Chicago)
  • Northern New Jersey Chapter NECA
  • Northern California Chapter NECA
  • Western Pennsylvania Chapter NECA


Spring Symposium 2020

Agile Construction® - A Path to Industrialization
A Symposium on Applied Project Management Concepts
May 15th, 2020, Omaha, NE

Mark your calendars! MCA will be in Omaha, Nebraska, May 15th, 2020 for our second part of the Project Management Symposium series as our industry continues its journey toward industrialization. The most competitive companies will be those applying Agile Construction® that support Project Managers through the project life cycle. The upcoming Symposium will offer a live Prefabrication tour. The topics for this session on data-based project planning will focus on:
  • How to set up your jobs for success through successful planning
  • Project planning, including identifying segmented work packages
  • Project Work Breakdown Structure
  • Financial planning and layout for your jobs including cash flow projections
  • Project scheduling, time and resources
  • Project integrated safety plan
  • Increasing profits

To register for MCA's Spring Symposium, please click here.

Looking forward:
  • 2020 Fall Symposium “Procurement and Logistics Management” (October 2020)

Customers On The Move
MCA and Customer involvement. What are they up to, goals and celebrations...Read more, here

Tuesday, November 19, 2019

November 2019 - Volume 7 Issue 3


JPAC® - Early Warning Signal, Lead Indicator and End-Of-Job Performance Predictor

When do you find out whether a project is a “winner” or a “loser”?  If you’re like most contractors, that answer varies widely, but through years of research, MCA has found that most construction companies cannot predict profitability reliably until close to 90% complete.  This is when the scrambling begins.  So what went wrong?  More importantly, when did these problems occur?  What if these issues were uncovered much earlier?  What would that mean for every project moving forward?  Agile Construction® Practitioners are using Job Productivity Assurance and Control (JPAC®), based on the ASTM Standard E2691, the only standard for measuring productivity in the construction industry, to accurately predict profitability as early as 20% complete. JPAC® is used to track productivity on a weekly basis and aids in risk management. This is the only tool that provides early warning indicators of issues on the job, allowing the project team to act immediately to get the project back on track. 

Figure 1: JPAC® Labor Productivity and Trend Monitoring 

Figure 1 shows JPAC®’s weekly productivity trend monitoring that provides immediate feedback on how your job is doing. It even allows you to track labor productivity for individual jobsite activities (cost codes) to identify, discuss and resolve the root causes of productivity deterioration with the field, which will help make your projects and labor management visible and better manageable. Agile Construction® Practitioners use JPAC®'s early warning signals and lead indicators to uncover and correct profit killing causes for a job as early as possible. No more waiting until the job is almost complete to know where profits stand. 

Figure 2: JPAC® Productivity Differential vs. Final Gross Profit @ 25% complete  
Figure 3: JPAC® Productivity Differential vs. Final Gross Profit @ 75% complete
Figure 2 and Figure 3 show that there is a direct correlation between labor productivity and a job's final financial performance (solid line). Figure 2 shows the relationship at 25% complete while Figure 3 shows the relationship at 75% compete.  At 25% project completion, JPAC® reported that the current labor productivity is more than two times less productive than estimated. With each red dot representing a real job, all jobs below the dashed line ended up earning less than expected profit, while jobs above the dashed line made more. With the information that JPAC® provides, project teams can utilize these early warning signals to prevent issues and improve job performance, and therefore increase profits. 

Both figures illustrate the direct relationship between labor productivity and a job’s final financial performance, i.e., the more productive the labor, the better the financial performance of the project. As projects make progress and most of the work has been completed, the financial impact of labor productivity, whether it be better or worse, becomes clearer and more direct, Figure 3. As the only industry standard for measuring productivity, JPAC® is able to predict how good or bad your job will do at the end in early project stages. It will help you manage your jobs more effectively and more efficient by providing early warning signals and reliable lead indicators for jobsite issues at early project stages that were previously not visible. On larger jobs, this may add months or even years to your opportunity to regain losses, improve cash flow and earn your estimated profits. Having your jobs using Agile Tools and following Agile Construction® Principles helps you predict and mitigate your business risk and push the financial success of your company. 


How do you know how Agile your projects are? 

MCA is happy to announce that its upcoming Agile Construction® Project Rating will help you answer this question. In becoming Agile Certified, your projects will continuously undergo a standardized and rigorous screening and assessment of the processes and procedures in place - from job setup to project closure, from procurement to installation, cost reporting, billing, etc. Being Agile Certified will give you the opportunity to not only benchmark jobs and identify hidden Agile Champions within your company, it will also allow you to benchmark and compete with your industry peers. Stay ahead of the industry and prepare for the Industrialization of Construction® in becoming Agile Certified, which will be your competitive advantage to succeed in this industry of increasing competition, challenges and risks for contractors.


Impacts of IPD in Subcontracting and Utilizing WBS as a tool

Integrated Project Delivery Construction (IPD) is becoming more apparent in this industry. If managed properly, these projects can offer a very high reward. What differentiates IPD Construction from the typical construction? IPD projects require a collaborative alliance of people, systems, and business structures to work together throughout the entire process. With all parties collaborating, the project will have optimal results, increase value to the owner, reduce waste, maximize efficiency through all phases of design, fabrication, and construction, and solve problems of low productivity and quality issues. Although IPD offers high reward, it also poses challenges for subcontractors. If any single stakeholder is unwilling to fully embrace IPD, doesn’t understand what IPD requires, or has a negative performance, the entire team will be disrupted and the project can suffer. IPD requires subcontractors to be involved in the early stages of conceptualization, design, and construction. 

Subcontractors should utilize Work Breakdown Structure (WBS) as a tool for connecting between subcontractor and General Contractor IPD requirements. Once the trades have defined their scopes of work and the effort required, they can work collaboratively to translate the WBS into an integrated project schedule. The WBS is built on a sequence of WORK and therefore is a ‘forward pass’ of the work that will happen onsite from our perspective as the skilled trade. The GC schedule will only provide a sequence of TIME for when certain activities need to happen, as a ‘backward pass’. Both schedules need to be taken into account and once integrated, that will yield a very useful schedule because it can be used for communicating the conflicts and ensuring proper coordination. MCA offers WBS services in person and through webinars, in addition to other scheduling services:
  • 3 Week Look Ahead Scheduled Planning
  • General Contractors Scheduled Planning
  • Electrical Contractors Scheduled Planning
The 3 Week Look Ahead Scheduled Planning provides insight on labor needs, material & equipment needs, tool needs, and takes into account the schedule of values. MCA offers additional tools that provide real time data directly from the field, Short Interval Schedule (SIS®) and Job Productivity Assurance and Control (JPAC®). Subcontractors can use data from SIS® and JPAC® to prove common causes and direct feedback of jobsite conditions so the GC can take action to avoid schedule delays. 

(For more information on MCA services, click here.)


A Perfect Time and Place for Agile Construction® Collaboration


Staff Electric and their subcontractor have teamed up to work on one of the largest construction sites in Wisconsin. They are bringing their individual company and jobsite talents to the table to lay groundwork for this $10 billion project, with the temporary power infrastructure.  Figure 4 shows images of the jobsite.

Figure 4: Images of the very large jobsite in Wisconsin
Both companies are using and collaborating on this project with Agile Construction® tools including JPAC®, SIS®, and prefabrication.  Figure 5 shows the results to-date which are better-than-expected productivity rates for both companies and the job overall.

Staff  Electric and their subcontractor project teams worked together early on to provide critical input to an aggressive project schedule, both coming up with means and methods of supporting the pace, and at the same time using their field’s input through Work Breakdown Structure (WBS) to identify what work was truly feasible in the timeframes.

With this very large project and the overall construction footprint still in its infancy, we hope to see more results like this for our practitioners, which can translate to on-time, on-budget and high quality outcomes for the Taiwanese company’s investment in our country’s construction.


Figure 5: Productivity Trend of Staff Electric and their subcontractor, and combined companies as measured with JPAC®


Staff Electric is also taking the additional step of using Agile Procurement® to optimize material and logistics planning.  Figure 6 shows a sample of how wire was delivered and offloaded for large feeder pulls by Staff’s vendor partner – Werner Electric.  Werner themselves has worked hard on improving their understanding of Agile principles and their applications to better support reducing overall project delivery costs.
Figure 6: Werner Electric support of Agile Procurement®, with a 15-feed pull conducted in 15% of the planned time, due to the planning efforts of Staff's project team


MCA’s Market Study Method to quantify Data Center Market Size


The change in IT infrastructure usage and the growth in cloud-based solutions across major industries have led to high investments into green and brownfield data center construction across the U.S. Together with the increasing demand for Green Data Center facilities, the U.S. data center construction market is projected to witness significant growth, which will provide higher revenue and market share opportunities for construction contractors and sub-contractors. 

While most calculation methods provide estimates for the overall U.S. market volume, MCA’s unique market study methodology has the ability to capture and quantify the available market size in the data center market segment in your specific geographical area. This methodology has been recently applied in a market study conducted for the Chicago area to estimate the data center work available for electrical contractors.


Agile Classes Highlights

MCA is known in the industry for its research as well as Agile Construction® classes and workshops. Since January of 2019, MCA has conducted more than 35 official trainings and educational events. Over the last year, MCA has expanded the Course and Workshop offerings and is excited to announce that 2019 has been the first year MCA’s Agile Construction® Workshops went online, taught remotely, and accessible from everywhere via the internet.
Online modularized Workshops, Figure 7, are now available and are being held on a regular basis, which makes it possible for companies all over the world to benefit from the MCA deliverables in their own facilities without the costs of travel. MCA has also expanded the Agile Construction® Series. In addition to the 101 Workshops, Figure 8, MCA now offers Agile Construction® 201 classes for basic Agile Users to extend their knowledge and usage of the Agile Principles.
 
Figure 7: Agile Construction® 101 Webinar Series

Figure 8: Agile Construction® 101, Omaha, NE
In 2020, MCA will be offering multiple newly developed classes and workshops on Change Order Management, Prefabrication and Externalizing Work® and Agile Procurement® and many more.  MCA is happy to announce that Agile 301 Classes will be offered to the public in 2020. We are looking forward to welcoming you to our classes and workshops all across the U.S.: New York, Portland, Atlanta, San Jose, Seattle and many more.

One of the most valuable aspects of training with MCA is that we not only own the product development, we are the originators of the methodology.  It is this expertise that makes such a difference for our clients.  Many companies can train on the “How” to use a product.  MCA makes it our mission to help our clients understand the “Why” behind tracking labor productivity and how to actually interpret the data.  The results are clear, proper use of JPAC® and SIS® will put more money in our customers’ pockets on every project as long as they understand what is being measured and what to do about it. For more on classes and workshops, click here


Nick Alosio and WEM®

WEM® is proud to announce Nick Aloisio as its Director of Sales. In an effort to bring the revolutionary productivity boosting software JPAC® and SIS® to the masses and further the Industrialization of Construction® happening in the Construction Industry, WEM® has officially launched its sales division. Nick brings with him close to 20 years of experience in the software and construction industries. He is, first and foremost, a problem solver and will stop at nothing to understand and satisfy his clients’ needs. Nick fully understands the issues within construction industry and he believes in hard work, accountability and will stop at nothing to solve his clients’ problems. WEM® is fully committed to Making Productivity Visible to Everyone® and we are excited to help our clients in their mission to gain visibility and boost profitability on their projects!

Please follow us on LinkedIn and visit us at www.wemsoftware.com .
For information on the latest release of JPAC® and SIS®, please email us at info@wemsoftware.com 


Fall Symposium 2019 Update

Agile Construction®: A Path to Industrialization
Tools for Successful Project Management – Data is King
Chicago, Illinois
October 17, 2019

MCA’s Fall 2019 Agile Construction® Symposium in October was a great session. This Symposium was the first of a five-fold Symposium series on Customer Needs and Value Transfer to the Customer. This series will be based on the four major project phases, i.e., planning, procurement, installation and closure, discuss the three main dimensions of a job, i.e., work, effort, and time, and explain why it is important to distinguish and manage them separately. 
Speakers of the Symposium included:
  • Kevin Lytle, Vice President of Pre-Construction at Electric Company of Omaha spoke of how he uses data from Agile tools, such as JPAC® and SIS®, to predict and reduce the business risk on his jobs. He also emphasized the importance of planning and gave additional insights on challenges to establish a culture of prefabrication through Externalizing Work® 
  • Jeff Rechlicz, Vice President of Operations at Staff Electric, pointed out the power of the Agile tools and the available data and information for managing projects. He discussed how the data and information in MCA’s Agile Report helps him document and make visible how obstacles and delays in process, caused by the General Contractor, and the resulting schedule compression impact the overall job productivity. 

SAVE THE DATE:

  • 2020 Spring Symposium “Project Start-Up and Holistic Planning”
    (April 30, 2020 Omaha, NE)
  • 2020 Fall Symposium “Procurement and Logistics Management”
    (October 15th, 2020, TBD)
Register for the 2020 Spring Symposium here!
For sponsorship opportunities, click here

Back issues of The State of the Industry Reports are available to read online at…
http://mca.net/resources/state-of-industry-report/






Wednesday, July 10, 2019

July 2019 - Volume 7 Issue 2

Large Projects Disturb Construction Ecosystems…but Agile Construction® Brings Resilience. 


When a large project comes to town, everyone gets excited. There are a lot of reasons that we need to pay careful attention to the large projects, even if we are small contractors, or didn’t have the winning bid for work on that project. Large projects impact everyone in the market, large projects impact market share, they impact everyone’s available labor, they impact material inventory levels locally, and for those contractors that are directly involved with the large project work they represent an extreme level of financial risk that must be mitigated from the start.
Mega projects are what we call these large scale and transformational endeavors that have substantial impact on the construction community, environment and workforce in their surrounding area.  MCA conducted a series of studies to show the impact of mega projects on a region’s signatory electrical contractor market size and market control. In addition, MCA’s experience implementing Agile Construction® Principles on large projects continues to support that agility and project visibility is required to manage the technical, business and integration risks that accompany projects large in size and complexity.  
Let’s take a look at these impacts using a specific mega project. An example of a mega project is the SOO Green Renewable Rail (SGRR), led by developer Direct Connect Development Company (“DC DevCO”).  This innovative underground transmission solution project is expected to cost $2.9 billion and will carry renewable energy from Upper Midwest wind farms to Eastern US Markets through a 349-mile-long electrical transmission line. Construction of the project will begin in 2022, creating 600 temporary jobs in Iowa and Illinois. This project will indirectly create more than 200 permanent jobs to maintain and operate the wind farms and the transmission line post-construction. The overall construction of the project is anticipated to take three years. 
Figure 1.  Market Size & Control Comparison with Mega Project
Market Size and Share Impact

The results of a market study conducted by MCA convey the impact that mega projects, similar to the SOO Green Renewable Rail, have on the surrounding community, Figure 1. From 2010-2015, a mega project within the studied region led to an increase in market control, the amount of work done by signatory contractors, for the area. Market size, or the amount of available work, also increased within the region. Without the project, the area would have experienced a decline in both market size and market control for the signatory contractors.  A concern with projects of this magnitude is that they can have a vacuum effect in the surrounding areas, drawing in the higher skilled workers and creating a skill void to support other projects. This labor drain affects all contractors, not only signatory contractors.  Often the union contractors will bring in traveling labor. While the non-union contractors are dependent on having available labor and training programs that can fill this void on short notice. This difference enables the union contractors an opportunity to grow market share when mega projects enter the market. However, both union and non-union contractors face the unknown and uncertain productivity impacts in the market.

Figure 2. Market Share Example
Figure 2 above shows that from 2010-2013, the example market share from the same study would have dropped nearly 30 percentage points without the mega project. Market share is a measure of the performance of an organization when compared to its competitors in the industry.  With the mega project, the market share for the electrical contractors in this study increased 4 percentage points for this region. While the project may appear to stabilize the market share, it is important to consider long term factors affecting the area. Because of increased labor shortages that can result from mega projects, contractors are often obligated to hire less skilled/experienced people to meet their labor requirements. As contractors try to take advantage of the uptick in the market share, with limited labor availability, projects are often not completed on time or within budget, having a devastating impact on project owners and their business.
A market’s size and its characteristics have been primary indicators of an industry’s health since the early 20th century. It is important to be able to quantify a project and the impact it has on the market because it can be an early indicator of future conditions of the economic environment and workforce. With the size and length of mega projects like the SOO Green Renewable Rail, monitoring the project progress becomes increasingly important in the effort to avoid overage on timing and budget. (For more information on market share studies, visit http://mca.net/resources/research/)

Labor and Labor Productivity Management

            Over the past few decades MCA has worked with hundreds of companies to introduce and improve effective tools for monitoring and aiding in the management of labor productivity by providing early identification of the factors that are actually impacting our productivity and the impact these factors are having on our expected profitability.
Managing a project of any size through the phases of development, construction, and operation should be supported by tools that make productivity and obstacles both visible and quantifiable.  This becomes especially important for large projects given the complexity and risk that comes with size.  Work Environment Management (WEM®) is used to manage the integration risk throughout these mega projects. WEM® relies primarily on Job Productivity Assurance and Control (JPAC®) and Short Interval Scheduling (SIS®) which are based on the ASTM Standard E2691, and is the construction industry standard for measuring productivity. JPAC® is used to track productivity on a weekly basis and aids in risk management and tracks change management. SIS® is used to schedule work and track obstacles on the jobs. Both give early warning indicators of issues on the job so project managers can pinpoint and address issues. They also provide real time quantification of the impact of changes enabling the team to manage resources and project plans accordingly. (For more information on WEM®, visit http://mca.net/products/).

MCA has implemented Agile Construction® Principles on several jobs between $25 million and $650 million over the past decade (See Table 1). Other Agile Implementation services for Large Project Support Include:

  • Schedule Management
    • 3 Week Look Ahead Scheduled Planning
    • General Contractors Scheduled Planning
    • Electrical Contractor Scheduled Planning
  • Work Breakdown Structure (WBS)
  • Vendor Managed Inventory (VMI)
  • Contract Status and Financial Review Process
  • Change Management Process and Protocol
  • Procurement Management


Table 1. Large jobs that used Agile Construction® tools and principles
Managing any project requires change management but on mega projects, there is always more risk present. Without change order management, the job is at higher risk for losses due to unrecovered labor costs, labor profitability loss due to losses on productivity, and labor opportunity loss. On these large mega projects even very large contractors have been put out of business due to lingering and unresolved disputes over productivity impacts. The most effective way to avoid, or if needed to combat these types of conflicts is to have SIS® and JPAC® in place from the start of the project. The information provided allows you to know and to document exactly what is happening, when it is happening, and how it is impacting your work. Because the combined JPAC® and SIS® tools provide a picture that is not available by any other software and is the most effective way to project future results based on these impacts, you will be in control of your project and your profitability throughout the project. (For more information on Change Order Management, visit https://mca-soft.com/classes/ for upcoming classes)
Mega projects are exciting ventures that can reshape an area’s infrastructure, workforce, and economy. With all factors considered, the SOO Green Renewable Rail will surely bring changes to the upper Midwest and Eastern US Markets over the next six years. Close monitoring of the market share and job performance will allow contractors to identify and adapt to changes early on in a project where they can have the most impact on project team success.

(For more information on Managing Large Jobs click here.)

SIS® 5.1 Release 

MCA is proud to announce the upcoming release of SIS® 5.1. This release includes the new features of the Reason Code and Detailed Reason Code Dictionaries that companies can integrate and customize for their users. The streamlined codes will provide consistent codification of worksite obstacles across the company leading to better quality data and more accurate reporting.

For more information, contact your Agile Coordinator.



MCA Publishes The Industry’s First and Only Handbook for Prefabrication



Prefabrication Handbook for the Construction Industry (Pre-Order)

Agile Construction® Application through Externalizing Work®
by Dr. Perry Daneshgari and Dr. Heather Moore

This book is a hands-on, practical, and scalable guide to prefabrication. It applies if you are starting from ground zero, or if you are at the 3% mark and trying to get to 50%. The book is not about “benchmarking” or “best practices”; it is grounded in the reality of what other industrialized industries have passed through, which will happen in construction sooner or later. We can learn from history and the science of work (Industrial Engineering), to move faster and with fewer mistakes, rather just comparing to the status quo of “best practices” in today’s construction environment.
Maximum prefab requires a culture of prefab, by understanding the true benefits of prefab which are way beyond saving “hours”. Benefits include risk reduction, increased reliability and predictability of the outcome; reduced uncertainties from the jobsite, an opportunity to train manpower in a controlled environment. Monetarily, the benefits are best quantified as composite rate savings, which reflects a better managed crew ratio and overall productivity improvement.
Purchase of this book includes a three-month complimentary subscription to the MCA Prefab Forum.

Click here to Pre-order you copy today!


2019 Spring Symposium



MCA Inc. Presents
Agile Construction®: A Path to Industrialization
Symposium on the Tools & Processes Needed for Success
Friday, May 17, 2019
The Crowne Plaza,
Northbrook, Illinois


MCA’s Agile Construction® Symposium in May was a huge success. There was an impressive, forward-thinking lineup of speakers and panelists for sessions covering Prefabrication, Vendor Relationship Management, Work Breakdown Structure, and Productivity Measurement. MCA also introduced Agile Construction® Chapters, with the purpose of connecting industry leaders and Agile Construction®Practitioners, focusing on designing the future of Agile.

Speakers of the Symposium include:


·       Adam Heon of Applied Software Technology, Inc., introduced symposium guests to eVolve Electrical.  A Revit add-on, designed by contractors, aids in design and fabrication by increasing drawing speed, and providing quick build drawings and schedules as well as easily exportable bills of material.  
·      Tobias Hogan, Director of Agile Construction® from Aldridge, provided his experience of culture shift in Aldridge with the help of MCA and using Agile tools to build credibility and keep the jobs visible.
·       Oscar Koebel, General Foreman from Staff Electric, spoke about managing large jobs and utilizing the Work Breakdown Structure.
·      Tom Bruce, Vice President of Operations for Staff Electric, covered the development of Staff’s organizational structure as a means to identify rank and relationship as well as chain of command which was a key enabler for Staff to focus on Roles and Responsibility and assess team member capability as they work toward full implementation of Agile Construction® Principles.
·       Peter Hardt, Vice President of Hardt Electric Inc., walked the group through Hardt’s transformation of making the work visible so both field and office could see the whole picture.


MCA, Inc. will launch our Inaugural Agile Construction® Chapter very soon. The Chapter will focus on designing for the future of Agile. 

Strategy:
   Establish Agile Construction® Centers of Excellence
  Productivity (WBS, JPAC®, SIS®)
  WEM® as the operational database
  Prefabrication
  Procurement & Logistics
   Focus on Outcomes & Measurement
   Provide a Training & Certification
   Support True Implementation Testing of Principles
   Connect Practitioners and provide a forum to identify and solve problems
   Create an environment for applied research

If interested, please contact: Melissa Harper, Director of Outreach mharper@mca.net


Thank you Applied Software for sponsoring MCA’s 2019 Spring Symposium.  For more information on eVolve Electrical and to request demo, please visit: evolvemep.com

SAVE THE DATE:
Fall Symposium, October 17th, 2019
As our Industry continues its rapid move towards Industrialization the most competitive companies will be those that best have, understand, and use their available data to run work.

Our Fall Symposium will focus on...

•  Using Productivity Measurement to recognize hidden changes on the job
•  Using Productivity Measurement to plan and manage vendor services and prefabrication
•  Increasing and improving the connection between Project Managers and Field Operations
•  Large jobs and difficult relationships; preparing for the worst case

MCA Contact information
MCA Office Phone: (810) 232–9797

Melissa Harper, mharper@mca.net