Thursday, May 28, 2020

SOTI Special Issue (May 30th, 2020)

Disaster Plans and Preparation – What did the COVID-19 pandemic reveal for your business?

No doubt that it is an unprecedented and unique time for all of us. We have all been impacted by the recent events of the COVID-19 pandemic in various ways, either personally, professionally, or even both. The uniqueness of the current situation is its global and world-wide impact. It’s not any different than any other significant events that would strike locally, regionally, company- or even project-specific. When such events hit, many businesses suffer not because of the symptom of the event but rather because the root cause has existed long before. The strengths and weaknesses of your business become scarily visible during such events. Perspective is critical during such times and it is important to resist the urge to victimize yourself.

The truth is, the possibility of such extreme events is always there, no matter how unlikely. We deal with uncertainty every day when making decisions. However, unless we deliberately think about these scenarios, our choices tend to be based on experience, leading to underestimating or even ignoring such rare events and their impact. Planning has always been a challenge in the construction industry. While most contractors are great at what they do as a craft, many lack experience and knowledge on how to plan and prepare for disaster events, or how to apply the preparation to the business environment. The ability to plan and prepare to mitigate the risk and impact of such disasters is always under your control. Proper planning is becoming the norm - it requires deliberate thinking and the investment of your time.

Figure 1: Work Breakdown Structure to Minimize the COVID impact

As soon as COVID-19 appeared as a looming impact on construction, MCA, Inc. began working to help contractors prepare to mitigate the impacts on their businesses. For over two months, we have developed plans and collected information from more than 100 companies virtually every week to aid the industry’s recovery. MCA, Inc. developed a ‘Minimize the Impact Breakdown’ for contractors to be able to focus on one phase at the time. Figure 1 shows a high-level breakdown that separates out 4 main phases:

          1. Ramp down                 2. Stay at home                 3. Reopening                 4. Recovery 

Figure 2: Risk Management System (Swiss Cheese Model)
Each phase has a unique focus and requires managing different risks. To mitigate the risk and to prevent adverse impact, it is important to follow a structured approach, like FMEA (Failure Modes and Effects Analysis), to identify potential failures that may exist within your business at different layers (see Figure 2). To address these failure modes, standardized written policies and guidelines, checklists, and How-To’s or work instructions for the current work environment need to be developed and aligned with employee training. Further, a clear communication structure and responsibilities for the field and the office need to be established using existing or new technology to facilitate quick and frequent exchange of information.

For the Reopening Phase after COVID-19, items to consider might for example be:
  • What policies and procedures do we need to keep our employees safe and healthy?
  • What is needed to comply with the new additional regulations?
  • What are the additional direct and indirect costs associated with COVID-19?
  • What additional planning effort is needed to manage the projects and work?
    • Manpower plan (Distancing requirements, Management of absenteeism, etc.)
    • Material plan (Material delays, alternative sourcing, reducing vendor contact)
  • What equipment and technology are needed to ensure efficient project and office operations

This year’s disaster was the COVID-19 pandemic, but what is the next unexpected event that could put your business at risk? Next time it might be regionally or locally like a hurricane or a flood. Taking deliberate actions to put a risk management system for disaster planning and preparation in place will help you sustain and prevent the impact of the next disastrous event for your business. Doing so will provide you a competitive advantage and the opportunity to expand, when others struggle. Be prepared!

Quantifying the Impact of COVID-19

“Measurement is the first step that leads to control and eventually to improvement.” 
~ H. James Harrington

As you start to reopen and bid for new projects to fill your backlog, you should first start to measure and quantify the impact to date and create a solid understanding of the additional costs that your projects and business are facing and need to manage. This requires consistent tracking, documentation, and measurement process that will house and quantify the impacts allowing you to adjust for the “new normal”. Failure to do so can be disastrous for current and upcoming projects.

Knowing the Ins and Outs of your projects and business is important. The importance becomes even more visible when unexpected events like the COVID-19 pandemic hit, which call for quick and informed actions. With obstacle tracking and labor productivity tracking systems like SIS® (Short Interval Scheduling) and JPAC® (Job Productivity Assurance and Control) in place, Agile Construction® Contractors are able to instantaneously track, document, and measure the additional effort needed as well as the immediate impact on productivity. To quantify the impact of COVID-19, MCA, Inc. has also created and published Agile Construction® Measurement Guidelines on MCA’s Agile Construction® Forum to provide all construction companies with best practices in tracking, documenting and measuring the COVID-19 impact.

The following three items are critical:

  • Quantify the Effort Impact: Detailed reasons and impacted time (with SIS®, Figure 3)
  • Quantify the Work Impact: Track the extra work needed on-site to comply with the new requirements and capture it as part of the actual work in the Work Breakdown Structure (WBS) of your project (with JPAC®)
  • Quantify the Time Impact: Add a summary task and related COVID-19 activities to your schedule, and connect them to your obstacles (SIS®) to capture schedule delays
Figure 3: COVID-19 impact measured through SIS®

Figure 4: COVID-19 Impact Examples
MCA Inc.’s proprietary data collected from COVID-19 impacts on job sites of Contractors across the U.S. using SIS® and JPAC® reveals two interesting findings: First, productivity for the actual planned work on-site has actually been continuously increasing, showing that on-site labor got more efficient in what they were doing. This might sound like a surprise but is fairly easy to explain. Fewer people and trades on-site immediately translate into less crowded job sites with less interference and obstacles, reducing the wasted time, which can otherwise only be accomplished by Externalizing Work® (Prefabrication), and the use of vendor services. Second, despite the increase in productivity, total reported accounting hours actually exceed pre-COVID-19 levels reflecting the additional effort needed on-site to comply with COVID-19- related prevention measures and restrictions (see Figure 4). Overall, jobs are using more labor hours, and projects will ultimately lose money on activities that were not expected when the project was estimated, planned, and the expected work was broken down and visualized in the Work Breakdown Structure (WBS).

MCA Inc.’s data further reveals that each worker spends on average up to one hour per day on additional required tasks to comply with the COVID-19 safety requirements, such as temperature checks, filling out medical screening forms, sanitizing equipment, tools, carts, and work areas, or social distancing requirements that alternate the planned workflow, on-site movement, material delivery, or other logistical tasks. Contractors can’t expect customers to take the cost of additional time, delays, or impaired productivity. Instead, contractors have to improve productivity through the increasing use of prefabrication and vendor services to compensate for the additional hour of COVID-19 impact just to remain at par in the short-term. However, in order to meet future objectives, contractors will have to increase the effective installation time from now 4 hours per worker per day to at least 5 in the long-term. 

To help contractors draw a financial picture for their businesses, MCA, Inc.’s has developed a customizable recovery calculator, which allows contractors to determine their annual financial projection based on the company-specific cost impact due to COVID-19, any granted PPP or other Cares Act loan, as well as various levels of productivity improvement. Once you have quantified the impact and challenges you are facing, and you know what you can control, you can start creating a plan for improvement and to prepare for reopening and recovery.

Successful Reopening and Disaster Recovery 

There is no question: every construction company has taken a hit. The loss is there, now it’s time to pick ourselves up, and plan for effective reopening and recovery! After having quantified the impact and the additional cost, it is important to understand and plan for what needs to be done from a business, medical, and social perspective to master a successful reopening of your company as well as the whole economy that will bring your business back on track.

Figure 5: Reopening Plan Structure
As tempting as it might sound given the current situation, but lowering restrictions and reopening does not simply mean getting back to the job site and continuing as before. Getting back needs planning and adjustment for the “new normal” in construction. The bad news is it doesn’t happen by itself. It requires a structured reopening approach with clearly defined company-wide, job-specific, as well as work-area plans, policies, guidelines, checklists, and procedures in place to successfully manage manpower, money, and material (see Figure 5).

Figure 6: Breakdown of Extra Work due to COVID-19 (exemplary)

The impact that new COVID-19-related restrictions pose on construction sites will carry on and will force contractors to change the traditional workflow, logistics, and material delivery, as well as on-site interaction and project coordination processes. PPE requirements and preventive measures such as health checks, cleaning, and sanitizing tools and equipment, access, and site movement restrictions, as well as spacing requirements, will require and consume additional non-installation time (see Figure 6). 

MCA Inc.’s proprietary data from jobsites of contractors across the U.S. shows that the direct impact of new tasks to comply with the COVID-19 preventive measures, such as health checks, cleaning and sanitizing, as well as completing required paperwork, adds up to almost one hour per person per day. This does not even include the time or productivity loss due to on-site manpower limits, material delays, delivery restrictions, additional site movement, and coordination, etc. This will likely vary across contractor, location, and type of work, so it’s important to track and measure the effort and impact for your specific situation. Not only for the current projects but to know your true cost when estimating and bidding new projects.

Figure 7: Dimensions of Work (Who does What, When, Where)
Once you have quantified the impact, MCA, Inc.’s recovery calculator will help contractors to estimate the additional annual financial burden for their business that needs to be covered during and most likely beyond the reopening phase. This is an additional cost and lost labor productivity that contractors should not expect to be compensated for beyond what they bid and are awarded in new contracts. Without change, this will cause significant cash flow problems as well as profitability losses and will put your business even more at risk. The most sustainable solution to get back on track, and at least restore the expected productivity at your projects is to rethink and breakdown your work in a way consistent with the dimensions of MCA’s Work Cube (“Who” does “What”, “When”, “Where”) to visualize and identify improvement opportunities (see Figure 7). 

You don’t have to be overly creative, innovative, or need to invest in expensive software and technology to achieve this – stay on the road to Industrialization of Construction®. Agile Construction® Principles and Tools, such as project visibility, work breakdown and planning, productivity measurement, and tracking using WEM®, Externalizing Work® through prefabrication, as well as vendor support in logistics and services will all help lower your cost, improve productivity and profitability.

We have all taken a hit, but our perseverance is what separates the good form the great companies. Focus on reducing your cost and planning your jobs to improve productivity and profitability. Breakdown, plan, and identify as much work as possible that can be taken away from the jobsite to expand your level of Prefab and VMI. The cost and productivity improvements you will see from these actions will not only help compensate you for the financial and productivity impact you are feeling, but they will turn into a competitive advantage for your company in the long run once they become ingrained in your culture.

Research Corner

MCA Inc. is proud to share the recent publications and industry media coverage:

Release Announcement

MCA, Inc. is proud to announce the release the 2nd Edition of our best-selling book “Agile Construction® for the Electrical Contractor”.

What is new?

 -  Work Breakdown Structure (WBS) Deep Dive
 -  Additions on Project Planning & Project Management 
 -  More Details on Externalizing Work® through Prefabrication 
 -  Agile Construction Tools® updates and new features 
 -  Updated Safety Study for the Construction Industry

Pre-Order the new edition now at a discount for $79.00/ea. (+ tax & shipping)

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