The New Order?
What will the future customer of the contract glazier look like? Though no one can know for sure, one thing is certain; that customer will look nothing like he does today. “The days of getting three bids and choosing the lowest one are pretty much gone,” said one such customer recently. Let me explain.
Mike Staun is the associate director of construction for Proctor and Gamble (P&G) and, as such, he oversees a construction budget of more than $1 billion a year, spent on P&G properties, including one of their newest ones in West Virginia.
Staun spoke last week at the IMPACT/Ironworkers Annual Convention in Las Vegas. He provided a thoughtful overview of how his company is changing the bidding and construction processes and workflows. This, is turn, gave me a glimpse into characteristics the customer of the future, such as Staun, will have:
- They will neither solicit bids nor always go with the lowest bidder. Staun’s company has moved from a traditional method of finding subcontractors to a lean one. “We don’t want a lot bids from all different sources; we want a select number of bids from the right sources,” he says. As such P&G spends an extensive amount of time pre-qualifying its contractors and evaluating their capabilities. “Our [pre-qual] methods are very comprehensive,” Staun says, adding that they are constantly honed to become even better.
- They are keen on LEAN. P&G employs the tenants of LEAN manufacturing and construction in almost all its projects. “We only want to work with contractors and subs who understand it and embrace the same principles.”
- Transparency is key. In a segment of the presentation that caused the most uneasy murmurs among the audience, Staun detailed how his company expects transparency in bidding and billing. “We expect to know your cost and to know your profit margins—and you are entitled to your profit. We want you to make money. Transparency allows us to focus on the project as a whole.”
- They will move from Design-Build to IPD. “Design-build seems almost old-fashioned compared to what we are doing now,” said Staun. “We are heavily engaged in Integrated Project Design (IPD).The American Institutes of Architects (AIA) addressed IPD in a 2017 paper saying “IPD is a project delivery approach that integrates people, systems, business structures and practices into one process. This process utilizes all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication and construction.
“IPD principles can be applied to a variety of contractual arrangements and IPD teams can include members well beyond the basic triad of owner, architect, and contractor. In all cases, integrated projects are uniquely distinguished by highly effective collaboration among the owner, the prime designer, and the prime constructor, commencing at early design and continuing through to project handover.”
On a practical level this means that resources are shared among participants. “We share a pool of rental equipment on many jobs,” says Staun. “The profit goes into incentives.”
“We also freely move work among trades as needed and when possible,” he adds, the whole goal being to bring the whole project in as economically as possible.
Staun says his company and its subs utilize TakT time management, a location-based scheduling system. It’s a practice of scheduling and structuring work around the pace the work occurs. ‘Takt time planning is one method for work structuring around a set pace of work. The goal of Takt time planning is to create a reliable plan, with the input of the entire team, which balances workflows for specific phases of work.
- The result? More shared risk. Staun uses the principles of LEAN manufacturing, transparency, TakT time management and Integrated Project Delivery to create a new way of doing business. Traditional fixed profit margin for contractors and their subs are gone and replaced by a LEAN and variable allocation of profit. “We are all about bringing jobs in at or under bid. If our contractors and subs can better that, be more efficient or buy better, the margins go up and they share in that savings.
Staun says that if the costs go higher, though, that eats into their profits and comes out of the profit of all those involved.
Staun’s presentation was a thought-provoking one. How many of us could succeed under this model today? Very few. In the future though, you just might have to.
P.S. I am back in Vegas this week for the Building Envelop Contractors (BEC) Conference being held at Caesar’s Palace. We will have reports from event. I hope to see you there.