by Jeffrey C Kadlowec, Architect
Abstract
Lean construction provides tools for planning projects and prioritizing work flow to improve productivity. Declines in performance and rising costs of materials and labor over the past decades necessitate reconsideration of the drivers of economic growth and means for sustainable development. Various concepts from the related industry of manufacturing offer benefits in measuring, evaluating and enhancing productivity. Contractual relationships, managerial process and workplace policies must promote quality and value. Training and labor skills, worker motivation and overall competence are essential factors towards better performance.
Keywords: lean construction, labor productivity, contractor performance, project management
Construction Productivity
1. Lean Construction
The construction industry produces enormous amount of waste with low levels of productivity and efficiency resulting in substantial rework. Many of the problems can be attributed to non-value adding activities and traditional delivery methods. The Last Planner System (LPS) is a key tool of lean construction (LC) for prioritizing work flow and processes to address variability in construction projects [Power 2021]. The role of an LPS Facilitator is crucial to implementation of LC and instrumental in improving construction productivity. Enhancing productivity promotes economic competitiveness, allowing for sustainable growth.
Low productivity is a direct result of poor planning, resulting in unfinished tasks leading to schedule delays. Planned percent complete (PPC) is a measure of workflow for tracking progress on various tasks and work packages to achieve scheduled milestones. LPS promotes collaboration between trades creating a social dynamic for developing skills and competencies through the interaction of human networks to achieve higher performance in design and construction [Power 2021]. The planning process engages team members to build trust and commitment resulting in reliable and predictable results.
2. Measuring Productivity
Construction is one of the main drivers of economic growth contributing around 4.4% of total gross output in the United States and employing 6–10% of the workforce. Activity in the related industries of manufacturing, mining, agriculture, transportation, and infrastructure remain interconnected to the complex business of construction [Assaad 2020]. Productivity relies on information from estimating, scheduling and budgeting reflected in company performance, industry trends and market fluctuations. Construction is prone to disruptions caused by inclement weather, labor shortages and supply chains issue leading the schedule delays. Evaluating, modeling and predicting productivity, identifying factors for improvement, developing strategies and practices, and examining effects of different methods must be taken into account by project managers given the interdependency of these dynamic variables.
Research into productivity typically falls into micro-level study of construction technologies and macro-level analysis of national input-output ratios. The percentage of new construction has declined since a peak of 65% in 1973, due to a major hike in oil prices. Civil engineering has fluctuated with a share between 25% and 32%, peaking around 43% in the early 80’s and 90’s. Maintenance and repair of buildings has more than doubled from 17% in 1966, to 41% in 2014 [Haugbølle 2018]. This trend will continue with the rising cost of materials and labor, along with the growing availability of commercial real estate.
The built environment accounts for 66–90% of all manufactured wealth making it the largest asset and an essential part of other market sectors. For that reason, improving productivity is at the core of government policies and industry agendas [Vogl 2014]. Enhancing performance and efficiency begins by defining benchmarks for modeling labor productivity, then comparing results and examining causal relationships between various factors. Average labor productivity (ALP) is a simple and common measure of output derived from the amount produced per laborer and number of hours worked. The Organization for Economic Cooperation and Development (OECD) provides data for price comparison by conversion through exchange rates between countries known as purchasing power parity (PPP). Data envelopment analysis (DEA) allows for further comparison of financial data, while key performance indicators (KPIs) were established as metrics of performance. Identifying and monitoring factors of construction productivity guides industry heads and policy makers towards improved performance.
3. Improving productivity
Low productivity continues adding costs to construction projects without increasing earned value, decreasing expected profits, lengthening timelines and jeopardizing successful completion. The large majority of construction companies are small businesses employing few than 20 people [Seadon 2019]. The highly fragmented nature of the industry translates to a lack of standardization, greater uncertainty, more conflicts, and less control over desired outcomes. Market solutions being superior to further regulations and government control, and more training opportunities and apprenticeship programs should be provided. The net benefits would include an increase in the size available workforce and improvements in quality of work and labor performance, leading to greater total productivity and economic growth.
With construction generating 4% of the national GDP that employs 8% of the population and another 2% in related services, productivity throughout the industry significantly impacts the economy of a country. Instituting improvements is complex due to involvement by multiple stakeholders, conflicts of interest, resistance to change, unreliable data, and uncertainty of outcomes [Seadon 2019]. More activities running simultaneously translates into slower progress with greater cross-relation between trades. Modifications, variations and design changes cause further delays and rework. Poor documentation, non-compliance with code requirements, and slow material procurement result in worker overtime or employment of additional resources. Understanding building lifecycle (see Fig 1) and leveraging the interconnectivity of various tasks and processes provides opportunities for maximizing productivity.
Figure 1. Basic life cycle of a building [Seadon 2019]
Construction documents include plans, specifications, instructions and client contract which make up 80% of the information required for a project. The other 20% must be supplied by the client, vendors and governing authorities at indirect costs to general contractors and subcontractors [Stevens 2024]. The distant and fragmented structure of project stakeholder relationships affects communication and coordination (see Fig 2). Proper transfer of information and knowledge is vital to project success and the reduction of errors or rework. The most profitable contractors are planning and productivity driven with a focus on efficiency over meeting schedule and production targets through resource utilization.
Figure 2. Project relationship structure (revised) [Stevens 2024]
4. Analyzing productivity
Research in construction labor productivity (CLP) includes influencing factors, methods and technology, improvement, trends and comparisons, modeling and evaluation, effects of changes, and benchmarking. Fault tree analysis (FTA) used in safety engineering and reliability testing can be employed as a framework for determining defects and weaknesses in a system [Shoar 2018]. The logic diagram illustrates cause and effect relationships of related events beginning with a top event branching downward in a tree (see Fig 3).
Figure 3. Fault tree structure of labor productivity [Shoar 2019]
After identifying a system failure or undesired event, intermediate events and basic events can be defined or described, then broken down to determine the root cause(s). Fuzzy logic can be applied by utilizing relative importance indices (RIIs) when reliable data is unavailable or insufficient in the analytical process.
The weight of each factor is defined by the value w, with A being the highest weight and N as the number of factors. Summary of the most common factors of multiple studies is shown in Table 1.
Table 1. Productivity factors based on relative importance index (revised) [Shoar 2018]
Fuzzy FTA can be further developed and utilized to understand any of the factors affecting productivity and performance in greater detail. Approximating the probability that events will occur aids project managers in risk preparedness and preventative actions. Ranking the factors allows for proper distribution of resources, ensuring better workflow along with adherence to budgets and schedules. Furthermore, the framework is not dependent upon historic data and evaluates factors in linguistic terms, leading to appropriate decision making and reliable results [Shoar 2018].
Studies of construction productivity usually focus on specific attributes: technology, capital investment, market risks, duration per floor and by gross area, scope and complexity, or project environment and management [Lee 2021]. Comparison of regions with highest investment and lowest risk provides accurate and stable data (see Table 2).
Table 2. Construction investment and risk scores [Lee 2021]
Calculation of duration per floor and by gross area of regular and non-modular buildings is completed with the following equations.
where CDFi,j is the average construction duration per floor (see Table 3) and CDFAi,j the average duration by gross area (see Table 4) in country i for period j, with CDi,j,k the duration for building k, NBi,j the number of buildings, NFi,j,k the number of floors per building, and TFAi,j,k the gross area of building k.
Table 3. Construction duration per floor [Lee 2021]
Table 4. Construction duration of 1,000 m2 gross area [Lee 2021]
Construction durations have been increasing even with advancements in technology and skilled manpower, particularly in congested urban settings. Subterranean floors generally take longer than the superstructure due to more mechanical, plumbing and electrical work [Lee 2012]. Learning effects do improve productivity through repetition of mid and upper levels. Stricter code requirements and increases in building complexity appear to be the limiting factors in overall productivity.
5. Labor Performance
Various formulas have been developed to measure and evaluate the construction productivity of skilled laborers and equipment. Project managers must understand many factors to properly and efficiently utilize available resources. Standard methods are based on units of work completed per man-hour of labor or man-hours per unit. Productivity is defined by the ratio of earned hours to actual hours [Shehata 2012].
The following formulas are some of the standard measures of productivity used throughout the industry.
TFP becomes an economic model for measuring the dollars of output based on dollars of input.
With most tasks and activities defined by unit rates, many contractors define productivity in terms of work performance.
Comparing actual performance to historical data provides numerical values for worker and company competitiveness based on total productivity.
Variations in performance are quantified by deviation from the assumed rate of productivity. Reducing delays caused by waste requires adequate planning throughout the entire project lifecycle. Improving productivity becomes a matter of focusing on maintaining a predictable work flow rather than trying to maximize output or increasing the number of tasks completed [Shehata 2012].
6. Contractor Perspective
Many factors affect contractor competitiveness throughout international markets including project management expertise, specialty trade workers, vast supply networks, and technological advantages. While US companies once provided a significant portion of construction worldwide, that share has been reduced due to domestic growth over the past few decades leading to the rise of Asian firms [Gunhan 2020]. Financing of projects is often expected from construction companies providing European contractors advantages through public-private partnerships (PPP) and build-operate-transfer (BOT) along with mergers and acquisitions (M&As). Facilities management has also become a trend for large firms, while risk transfer has emerged in delivery methods through design-build (DB), design-build-finance (DBF) and design-build-finance-maintain-operate (DBFMO).
Labor accounts for 30–50% of total project costs making workforce productivity an essential component of success for a construction company. CLP has gained attention through increasing competition and greater project demands, with worker knowledge, skill and competency necessities for achieving optimal results [Johari 2020]. Higher aptitude, confidence, motivation, and attitude are critical for efficient performance and completion of tasks. More training and education for engineers and managers will promote further gains throughout the workforce and create better performance across job sites. Performance ratio (PR) is defined as:
where earned productivity is the actual work completed on-site and expected productivity the planned production time without disruption, delay or rework, when i is the worker being considered and m the task or activity.
Worker fitness, fatigue, stress, fear, and insecurity can result in measurement errors, best addressed through random sampling and study of standard procedures or protocols. The general aptitude test battery (GATB) developed through the Department of Labor is a work-related screening and assessment of intelligence (G), verbal (V), numerical (N) and spatial (S) aptitudes, form (P) and clerical (Q) perception, motor (K) coordination, and finger (F) and manual (M) dexterity [Johari 2020]. These nine subsets and 12 subscales by the US Employment Service (USES) act as guidelines for measurement of trade worker skill level and competency. Although work performance decreases over longer durations on-site, productivity remains directly proportional to aptitude with higher levels producing greater and more efficient output.
Accelerating construction schedules while minimizing cost impact requires contractors to increase on-site labor by adding work hours or implementing multiple shifts. Addition shifts are the preferred method to avoid inefficiencies of physical fatigue and greater costs from overtime pay rates [Hanna 2008]. Profit margins on labor-intensive work are typically 2–3% of total project budget, making the labor variable riskier than other cost components since owners are usually willing to pay for direct costs but not for the associated loss in productivity.
Compression and acceleration of a project schedule will lead to a reduction in quality, scope and performance without an increase in total man-hours beyond initial budget and original contract amount [Hanna 2008]. Efficiency loss is the difference between actual hours and earned hours due to poor performance from overtime, overmanning, interruptions, and shift work. The effect of shift work on productivity is calculated as the ratio of total shift work hours to budgeted man hours. These losses can result in project failure or termination without greater efficiencies, better productivity and more financing. Labor hours—not labor cost—is therefore the appropriate measurement for estimation of work regardless of productivity loss and project size (see Fig 4). Shiftwork remains the most effective method to compress schedules in labor intensive construction over a short duration.
Figure 4. Labor hours for project completion [Hanna 2008]
Hazardous working conditions from noise, dust, limited access, low lighting, and poor ventilation adversely affect construction productivity. Lack of cleanliness on-site and various health conditions, along with alcohol and substance abuse, further erode worker performance [Gurmu 2019]. Poor safety practices and violations of procedures in dangerous environments result in accidents, injuries and fatalities. Preparing and implementing a workplace health and safety (WHS) policies and plans will improve productivity of workers and decrease risks for managers.
7. Client Relations
Early contractor involvement (ECI) integrates design and construction to evaluate buildability and constructability, allowing for more efficient methods of construction and better utilization of technology to improve labor productivity and shorten project duration [Pheng 2015]. LC principles recognize and promote many of the benefits from a design/build approach. Designers are able to develop stronger relationships with owners and contractors, establish a good reputation and avoid lawsuits. Contractors can supply information on resource availability and limitations along with cost and performance data while considering access and site conditions. Owners benefit from reduced costs, improved schedules and quality performance.
Relational contracts define the working arrangement between parties and provide a legal mechanism that governs transactions based on mutually accepted guidelines [Jagtap 2019]. Fast-track projects integrate design and construction phases in a concurrent engineering method to improve performance, avoid rework, reduce cycle-time, and diminish the risk of schedule overrun. Joint ventures and public-private partnerships establish trust, commitment, collaboration, and cooperation under a mutual beneficial philosophy to build team competence towards shared goals and targets. Contractual agreements and critical decisions regarding roles and duties made during project inception overcome adversarial relations that commonly develop at later stages.
8. Conclusion
Productivity is defined as maximizing output through optimization of input and remains one of the most significant measures of performance for any organization. Performance management systems (PMS) are recognized by contractors, companies and corporations as ways of reducing costs while improving productivity without compromising human safety [Sejati 2024]. Quality management practices (QMP) aim to improve competitiveness through involvement of every individual within the organization and extend that philosophy through contractor personnel to aid in problem-solving and decision-making. Lean six sigma (L6s) merges lean principles with six sigma concepts into a proven strategy for achieving business improvement through processes.
Labor productivity remains a primary aspect of project success, significant factor for the strength of a construction company, and major contributor to economic growth. Difficulty in recruiting supervisors and skilled workers, high rates of labor turnover, worksite absenteeism, and communication problems threaten the construction industry. The costs of rework, lack of materials, and a shortage of experienced labor impacts financing by owners and developers. Slow decision-making, delays in the transfer of information, and unethical business practices affect work at the managerial level, while fair and timely payment and lack of incentive or opportunity are the greatest concerns for members of the workforce [Van Tam 2020]. Developing labor skills and experience, enhancing construction worker motivation, and greater managerial competence are critical in improving performance.
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