“Every
construction project is different and you can’t compare one to another” –
but are they? While every project is somehow unique in terms of contractual obligations
and requirements, project characteristics, material requests, and sometimes
equipment needs, they might not be as much when it comes to the management of the actual electrical work as it appears at first glance. How work is laid out and
planned, and how a project is supported during and after the construction phase
can make a huge difference for the success of a project.
We examined two comparable size construction projects performed
by two different mid-size electrical contractors in the Midwest (see project
descriptions in Table 1) regarding their commonalities as well as the
differences from both an operational and financial performance perspective. In
particular, we investigated the impact of the depth of pre-construction
planning and the degree of implementation and usage of Agile
Construction® Principles and Tools,
such as Job Productivity
Assurance and Control (JPAC®), Short Interval Scheduling (SIS®),
job reviews, and continuous improvement strategies.
Although
winning those two projects may seem like a great position to be in but it also came
with significant downside risk for both contractors. Both projects were considered
large and both carried a significant amount of risk, however, the inherent
business and bankruptcy risk for each contractor was quite different: Project 1
was about 40% of the contractor’s annual revenue, while Project 2 represents about
140% of the contractor’s past annual revenue. By
taking on these large projects, both contractors faced obstacles with their supporting
infrastructure and their ability to service their existing customer base,
which the second contractor is now exposing their future revenue stream to the
risk of a mega project – a potential killer
job!
Table 2 provides an overview and comparison of the Agile Construction Principals and Tools used on both projects. After the buyout of the project, material costs for the project are essentially fixed, leaving the work and labor as the competing edge for every project. The main focus of Agile Construction® is managing the work and labor of a project. First, the work needs to become visible before it can be managed. Managing work also involves efficient labor usage, and to define Who does What, When, and Where!
Both
contractors started implementing Agile Construction® when both
projects were already in the construction phase. Contractor 1 started about 4 months into the
project, while Project 2 had been under construction for almost one year. While
Agile Construction® was a completely new concept to company 1, some
executives and project managers at company 2 had already experience with Agile
Construction® from prior companies they had worked for. Both
companies held individual training and workshops with the general foremen and
foremen on Agile Tool usage and to develop Agile Construction® Power
Users for not only for these specific projects but to continue implementing
Agile Construction® Principles across the company and future
projects.
Planning
on
Project 1 started with developing a partial Work Breakdown Structure™ for a few
cost codes while estimates were used for the remaining cost codes. Creating the
WBS™ helped significantly with making the work visible, which also led
to better labor management and higher labor productivity. During the
construction phase, the project team conducted weekly job review meetings to
get continuous feedback from the field and to review the tracked on-site
obstacles in SIS® as well as overall job and individual labor code
productivity. In addition to the weekly job review meetings, strategic planning
sessions were held to review, discuss, and plan money, manpower, and material
related topics for both parts of the project. Collected data in JPAC®
and SIS® brought issues with misplaced material as well as problems
with lighting and fixtures to the attention of the project team. Collaborative
actions were to improve the material process and to develop a fixture release
schedule along with specialty carts for safe and damage-free fixture
transportation to the job site.
On
Project 2, the on-site foremen started with developing a complete WBS™ for all
cost codes and project phases to break the project down into how they see the
work with no reference to the estimates. The field leads kept improving and
adjusting the WBS™ to accurately capture the status of the project (% complete)
and to reflect the work and effort needed for completion. In addition to weekly
job review meetings, the project team held regular project schedule reviews to
identify scheduling conflicts, to discuss a 5-week look ahead, to address labor
loading, resource allocation, crew mix, and material needs with the objective to
define a clear path for the crews on site. While absenteeism has been a major
issue just like on every other project, the issue exacerbated significantly with
the outbreak of COVID-19. Once COVID-19 hit and the progress of other trades got
impacted, the project schedule meeting’s focus shifted from a 5-week to a 2-week
look ahead.
SIS®
data immediately revealed that field personnel was spending an additional 1.5
hours/man/day to comply with the new health and safety requirements, totaling approx.
700 hours per week on the project. Quarantine requirements and closed work
areas due to deep cleaning after positive test cases further impacted scheduled
work and job productivity. It took about 5 months to recover and stabilize
pre-COVID productivity levels due to the size of the project. Regular strategic
planning sessions are used to develop clear action items that focus on what is
at hand and what is coming at the project team next. Active crew and composite
rate management together with monthly financial project updates helped to
proactively manage the money side of the project.
Figure 1
and Figure 2 show the monthly productivity trend since the first month
of Agile usage on the project. Despite absenteeism being a primary obstacle
during the entire lifetime of the projects, the application of Agile
Construction® Principles helped turn around the negative
productivity trend with improvement becoming visible shortly after starting
Agile usage. The achieved improvements and changes led to a financial recovery
on the projects to avoid significant losses and financial risk and stress for
the company.
 |
| Figure 1: Labor Productivity Trend - Project 1 |
 |
| Figure 2: Labor Productivity Trend - Project 2 |
By
using WBS™ for planning, SIS® and JPAC® for tracking
on-site obstacles and labor productivity, weekly review meetings, continuous feedback
from the field, as well as strategic planning sessions and regular financial
reviews, project teams can proactively manage their projects and can
immediately address any issues at hand. Agile Construction® enables
project teams to effectively and efficiently manage large projects, through
early detection and correction for successful and profitable project
completion. See also MCA
Inc.’s publication “Managing Large Jobs” for more information on how to successfully
run a megaproject.
COVID-19 – Impacts on U.S. Construction Market and
Electrical Contractors Reactions
COVID-19 has developed into a global
crisis affecting all countries and industry sectors worldwide. Evolving at high
speed and large scale around the world, no industry is immune, and construction
is for sure no exception. As one of the most cyclical industry sectors, the
construction industry is highly sensitive to economic expansion and
contraction, although for most subcontractors the impact from regular economic
cycles typically materializes 3 – 6 months later. The COVID impact was
different as the effect was rather immediate leaving construction companies and
contractors little to almost no time to react and adapt to the changing
construction market and the operational environment.
 |
| Figure 3: Pre- and Post-COVID Outbreak Market Developments |
Figure
3
shows the time trend of the annual value of construction put in place (CPIP)
from March 2019 until July 2020. Looking back one year from the time of the
COVID-19 outbreak in March 2020 and before the consequences for the society and
economy started to fully unfold in the U.S., the forecast for the annual
construction industry spending was approx. +7.4% higher than it was at the same
time in March 2019. However, since the outbreak, CPIP forecasts have dropped
significantly within the first three months, despite government and public
authorities’ effort to advance spending in infrastructure and public safety
projects. While both public and private construction spending show declines,
private residential and particular non-residential (commercial and industrial)
construction spending have both dropped below 2019 levels.
Despite strong pre-COVID growth
(+11.9), persistently low-interest rates and direct government support, high
unemployment rates, and unchanged economic outlook have caused annual private
residential construction forecasts to drop by more than -7% since March 2020.
Similarly, the data shows that the non-residential construction market
aggregate estimates (commercial and industrial) dropped by nearly – 4.5%, as most
businesses in these sectors, will continue to cut, defer, or cancel
investments, weakening prospects until the end of 2020, and likely into Q1 and
Q2 of 2021. Although the industry saw considerable contraction and is still
facing a less favorable market outlook, there is light at the end of the
tunnel! Positive signals for the industry come from annual construction
spending during July 2020 to be flattening out the annual forecasts along with the
reduction of unemployment rates in the industry from 16.6% in April 2020 to 7.1%
in September 2020.
 |
Figure 4: Risk Management System
|
Contractors
have taken efforts to react and adapt to the “New Normal” by developing
policies and procedures to mitigate the risks and impacts of COVID-19 for their
labor, their operations, and their business. Contractors managed to adjust their way of operation,
how to manage their job sites, and to perform their work. To help contractors to
plan, mitigate, and manage the business, operational, and health risks
associated with COVID-19, MCA, Inc. has started to offer COVID-19 Webinars shortly
after the outbreak and as the second wave continues to unfold to help contractors
share and build best-practices at both the business and operational level.
A
critical immediate action in response to a disaster event like this pandemic is
to quickly assess and quantify the risks, as well as the impacts on
construction work along the three dimensions: Effort, Work, and Time. Contractors
using Short Interval Scheduling (SIS®) and Job Productivity
Assurance and Control (JPAC®) were able to categorize and quantify the
impacts on scheduled work, additional effort, and labor productivity in a
matter of few days. National data on over 290
active construction projects and roughly 13.2 million man-hours reveal the
following impacts (Data from March to September 2020):
- Effort: Absenteeism more than doubled, 49% of
scheduled work is not completed, 52% of reported
impacted hours due to COVID
- Work:
30-60 minutes per day per labor to comply with CDC and company-specific
guidelines
- Time:
Significant delays, schedule compression, leading to higher peak manpower
loading
These
impacts also affected productivity. Figure
5 displays the aggregate productivity trend of jobs tracking COVID-19 impacts between February 2020 and September
2020. Industry-wide measurements show that after an initial loss of
productivity immediately following the COVID outbreak, on-site labor productivity
has increased by approx. 7% until September
2020. These overall trends appear reasonable given the
changes in the way contractors have adapted their operations in both the office
and on the job sites.
 |
| Figure 5: Productivity Impact for Projects Tracking COVID Impact |
- 92%
have changed work procedures to increase social distancing
- 39%
have asked project owners to adjust work/delivery schedules
- 34%
adjusted employee salaries furloughed or laid-off employees
- 8%
have adopted more automation to enhance social distancing
Further,
many contractors believe some changes to their business are here permanently,
such as:
- Adjustments
to safety procedures and work processes
- More
remote meetings/use of collaboration tools
- Force
Majeure Clause to avoid liability for extraordinary events and circumstances
- Increased
attention to site/office sanitation
To
reduce the risk for further impacts and business disruptions, contractors
recognize the importance of taking steps to build their backlog, diversify
types of work, and build relationships with customers. By understanding their
market, and available types of work around them as the industry evolves,
contractors are better able to get ahead and make data-driven decisions on
where and how to diversify. MCA, Inc.’s unique market study methodology can
help to allow contractors of any trade to understand and evaluate the overall available
market size in any geographic area of interest as well as a breakdown into residential,
commercial, and industrial segments, and further trade-specific detailed market
categories. Contractors must stay aware of the changes happening in the
industry and their specific markets, as well as how the changes they are making
in their business and on their job sites are impacting their project labor
productivity.
Research Corner
MCA, Inc. was
established as a research company in 1990. For more than 20 years, MCA, Inc.
has been involved with ELECTRI International, providing innovative research and
expertise to the construction industry, and financial investment to the
Foundation. Dr. Perry Daneshgari and Dr. Heather Moore were interviewed on the
interaction of research and financial investment by ELECTRI.
Read the full
interview on “Research and Investment can go Hand-In-Hand”!
- Industrialization of Construction®: Signal or Noise? Threat or Promise?
The three-phase research project is
currently underway. This
research project investigated how Industrialization will continue to unfold in the
construction industry and provided ELECTRI and its members a means of getting
and staying ahead. The first phase of the research, completed this summer,
focused on understanding the current state of the industry and providing a
means for contractors to evaluate themselves in terms of how industrialized
their company is and assess the gap between their current state and the
industry. During the 2nd phase of the research, MCA, Inc. developed
a guidebook for contractors to use to move the needle forward in their company,
working with three electrical contractors to test the applications, collect
their results, learning, and feedback. The 3rd and final phase of the
research is currently underway, as MCA, Inc. develops a full framework for the
future of Industrialization of Construction® across the industry,
including collaboration among associations and standards-setting regulatory
bodies.
- Estimating with
and Pricing of Prefabrication
This ELECTRI research project was targeted
to identify electrical contractors’ current prefab usage as well as the practices
in pricing with prefab, and to help electrical
contractors move forward and to accelerate the industry-wide usage of
prefabrication by developing a practical calculator tool to quantify the
aggregate labor savings potential and composite rate (crew mix) impacts from
Externalizing Work®, including Prefabrication and Vendor Services, and
a method for “pricing” their estimates with prefabrication.
In addition to
completing two ELECTRI research projects, we have put a special focus on MCA’s
publications. Over the past five months, we have published 7 brand-new articles
in EC&M Magazine and Construction Financial Management Association (CFMA)
on Industrialization of Construction®, Externalizing Work®,
Prefabrication, and Modular Construction, Integrated Project Delivery (IPD),
and Jobsite Intelligence Gathering. We are proud to share the latest
experience, insights, and trends on these topics to help you and the industry
advance and progress. Progress and change might be even more important and
needed than ever, particularly during or because of these difficult and
uncertain times.
Visit www.mca.net/resources/publications/ to view and read
all of our latest articles and publications (and more)!
- Recently published articles
§ The Operational Model for Modular Construction
§ From Jobsite to
Garage: Changing the Mindset of Prefabrication & Modular Construction
§ Industrialization:
Is Construction Next?
§ COVID-19: Another Tectonic Shift in Business Operation Models
§ The Ins and Outs of Integrated Project Delivery
§ Make Data Work for
You
§ The Key to Gathering Job-Site Intelligence
Release Announcement
MCA, Inc. is proud to announce the release of 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
Outreach
Corner
MCA Symposium 2020 Highlights
2020 was the first year ever that MCA’s symposiums
went virtual and with great success! In our Spring as well as Fall Symposiums,
MCA was able to provide the connection between several contractors across the
United States to exchange on the great benefits of Agile Construction®
usage, in particular during this unprecedented time. In 2020, we held two out
of our series of four symposiums on Agile Construction® – A Path to Industrialization:
Data-Based Project Management. In our 2020 Spring Symposium, we focused on the
Planning phase of a project while the 2020 Fall Symposium dealt with the issue
of Data-Based Agile Procurement®.
If you are interested in our next 2021 Spring/Summer Symposium
on Data-Driven Installation Phase, make sure to reserve your spot and sign up
here: MCA
Symposium
Agile
Classes Highlights and Upcoming Events
We
have been successfully expanding our online workshop and seminar offerings
during 2020 with great success. With travel limitation in place and social
distancing, we were facing this year, MCA successfully expanded the virtual
workshops into three to four-hour seminars as well as one-hour webinars. Besides,
MCA has worked hard to simplify registration for our online seminars as well as
workshops! We offer a large number of classes regularly multiple times each
year as well as individual company workshops. All courses and workshops can be
found in our new addition to our MCA-soft website – our Course Catalog.
Make sure to visit our Course Catalog
and check out all MCA’s course offerings - ranging from Agile Construction®,
Procurement, and Prefabrication to Project Management and Business Development! Hundreds of contractors have already participated in our
Agile Construction® Events in 2020. While most of our offerings have
been virtual, breakout sessions, active involvement of participants, and
discussions among contractors are still a focal point in all training and
educational classes. Information about the latest ways on how to deal with the
increasing time crunch on job sites, how to ensure you get paid for your change
orders, as well as how to continuously improve your communication with the
General Contractor are just a few of the long list of discussed topics. Our
next upcoming events are:
New Website
MCA has been working hard to develop an easier way for
you to interact with us and benefit from our products. We are proud to announce
that our redesigned website www.mca-soft.com
is finally live! You will find our latest books, publication, create your
shopping cart for complimentary reading material, and for purchasing MCA’s
books, as well as an all-new sign-up process for our workshops, classes, and
online seminars. Visit MCA-Soft.com, and take a look!
Customer Corner
Dixie Electric
has devoted 2020 to fully emerging itself into Agile Construction®.
The company is implementing Agile Construction® throughout the
entire company with the help of Process Implementation Teams. Focusing on
increasing usage of Agile Construction® Tools, increasing
application of prefabrication, and improving processes through their Design
Teams, Dixie is prepared to repeat and build upon their success from 2019 along
with setting a foundation for years to come.
Electric
Company of Omaha (ECO) recently conducted a project
audit/review session on their largest project to date, with the project
reporting continued gains in productivity for 11 weeks straight, despite the
significant impacts of COVID-19 on the job.
By implementing Agile Construction® on this project and
across the company, the project team can make visible the obstacles they are
encountering daily and proactively allocate the resources to address them. Besides, ECO has added about 20 new projects
to Agile and continues to learn and expand on the processes to support Agile
through their two Design Teams led by Kelsey Ahl and Glenn Biehl. Year-to-date, ECO have
had 10 graduates from Agile 101 Class and additional 6 participants attending
each three Agile Basics Training Sessions.
Lemberg Electric has
made great headway this year in expanding Agile Construction®
throughout their company. This summer, Lemberg completed successfully several
fast-paced projects, and despite impacts from COVID-19 that left no job
untouched, Lemberg completed these projects with high productivity. As Lemberg
takes on new work, project teams are practicing Agile Construction®
across Construction and Data jobs, allowing project teams to pro-actively
respond to job-site obstacles and improve labor productivity on the job site. Effective November 2nd, 2020, the Board of Directors has appointed Mark Chappel as the new President and Tim Scheid as the Chief Executive Officer (CEO) of Lemberg Electric.
Staff Electric
has been taking full advantage of the opportunities provided by the pandemic to
focus on internal development as well as positioning themselves financially to
make 2020 a benchmarking year. Design
teams held Kaizen events to address productivity struggles with some high
project impact labor activities and developing checklists to help push labor
productivity up by 5% to 15%. Project
managers began incorporating the WEM® process from project schedules
to do an accurate 3-week look ahead to allocate manpower on the job, which
became essential as COVID-19 was impacting not only productivity but the
overall availability of labor. Committed to Agile Construction®,
to-date Staff has had a total of 95 graduates from Agile 201 Classes. Besides, Staff
became the first customer to use Agile Construction® Tools to
visually track their annual departmental budget and expenditures.
Aldridge has
crossed the mark of 400 active users and over 60 active jobs tracked in the
Agile Construction® Tools. Aldridge is continuing to embrace and
benefit from the Agile Principles. Aldridge is taking the Agile use to the next
level. With MCA’s help, Aldridge has been focusing on expanding and improving
its Prefabrication Process, as well as expanding the focus of WBS in its
Drilling business operations to improve mobilization and overall job planning
and visibility from the field. Looking into 2021 MCA and Aldridge will focus
even more on developing a Strategy for company-wide utilization of Agile
Construction® principles and tools, including Externalizing Work®
through prefabrication and a company-wide Procurement and Logistics strategy.
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