Agile Delivery of Capital Projects
by Brian Cavataio 04/14/2021
Traditional projects are performed in a single continuous flow, with sequential steps that include project initiation, project planning, project execution, and project closeout. Typical construction projects have an initiation/planning phase, a design phase, a construction phase, a testing phase, and a turnover to the user phase, followed by project closeout. There are more elaborate models with multiple phase gates and bid phases, but the main point is sequential nature, with user input happening primarily in the planning and or design phase. Another sequential work plan is put together during the construction phase, typically in a project schedule, built up by trade or geographic areas (e.g., floors, buildings, etc.). The typical large construction project has multiple contractors working for a general contractor, with a separate designer and a separate owner, and in some cases separate end users (tenants), with complex contracting methodologies in place.
In a perfect world, the construction schedule, planning, and execution processes would be detailed and robust enough to avoid project issues and delays. However, many projects, huge and complex ones, have delays and cost increases. Aside from material costs, the most significant cost element in a construction project is labor. Project labor costs increase from the baseline plan when delays occur. It may seem obvious, but to avoid delays, the project needs the right people, at the right location, with the right material and tools, and with the right work instructions.
Delays and overruns can result from not having the right material on hand at the right time, which may occur due to supplier backlogs, shipping delays, funding restrictions, and so forth. Delays can occur from not having adequate work instructions on hand at the right time (work packages), resulting from incomplete or inaccurate design and documentation, delays in decision making or instructions, or changing scope. Finally, delays from labor shortages can occur due to an inability to find the right trades, scheduling issues with vendors or contractors, and so on. There are, of course, also weather delays or other external events. These delays can result in contractor claims and counterclaims in typical projects, especially when blame starts to be identified. These legal issues can further delay the project and increase costs. The focus can quickly become more about individual project participants’ bottom line than the overall project’s success.
Traditionally, construction projects are thought of as poor candidates for an agile approach. They are typically very sequential in nature, and changes are expensive as projects move further down the life cycle. A change during design might cost $1, but during active construction will cost $100 to implement, so there is a strong incentive to fix the design as solidly as possible and then execute projects. Also, there is a concern that this approach would be unsuitable for highly regulated environments such as nuclear or medical.
McKinsey & Company wrote about how to make this approach work. There are other articles out there and Bain & Company, PwC, and Deloitte, but I thought McKinsey laid out the foundation better.