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Message About The Future Of COAA’s Owners Perspective from COAA Communications Committee

You may have noticed that you haven’t received a print copy of Owners Perspective recently. We want to fill you in on why that is and our immediate plans for Owners Perspective moving forward.

Don’t worry. Owners Perspective is not going away.

In fact, we’re proud of the standard we’ve set for the educational content we provide our membership. And we recognize and appreciate the positive feedback we’ve received about Owners Perspective over the years.

As you may know, over the last decade, the publishing landscape has changed. And the long-term agreement we had with our publishing partner was no longer working for either party. So, we decided to forge a new path forward for Owners Perspective.

The first thing you’ll notice is we’re consolidating our email newsletter (COAA Exchange) into the Owners Perspective brand. And you’ll see more original content within that email and on our dedicated website, OwnersPerspective.org.

Look for new Owners Perspective articles landing in your inbox in the coming months. And your feedback will be key to helping us determine the long-term format and path for Owners Perspective (Print? Web? VR experience? Delivered by drone?).

If you are interested in joining this effort as an article contributor or committee member, please don’t hesitate to reach out to Laticia King at lking@coaa.org.

And as always, we value your feedback. So, don’t hesitate to give us any of your thoughts about Owners Perspective.

COAA Communications Committee
Matt Handal, Trauner Consulting (chair)
Kyle Majchrowski, Banner Health (COAA board liaison)
Bill Bowen, Oregon Health & Science University
Michelle Orr, Gilbane Construction
Laticia A. King, COAA (staff liaison)

 

5 Important Considerations When Using Target Value Delivery by James Pease

A common concept in the construction industry is that there are three legs to a project: Schedule, Cost, and Quality. An owner is advised to pick any two, and thereby sacrifice the third (i.e., you can have cost and schedule, but not the quality you want. Or vice versa, you may get the quality and schedule that you want, but not within your budget.)

By employing Target Value Design or Target Value Delivery (TVD), owners might avoid having to sacrifice one of those legs and instead meet all three primary goals.

One of the most powerful and misunderstood components of Integrated Project Delivery is the systematic thinking of TVD.

Target Value Design:

The primary concept of TVD is to drive down the cost (or maintain cost and increase value) of a project through the design and delivery phases without reducing the quality provided or the schedule for completion. In essence, TVD is a process to make sure that the owner receives all three legs of schedule, cost and quality.

In TVD, the team will “Design to the Cost, not Cost the Design”.  The project budget is a transparent part of the design process and is known to all design partners.  Instead of drawing parts of the project and then passing them to an estimator to put a budget together, the team will look at the budget prior to starting drawing.  If it is not in the budget, than it should not be drawn at all.

As the design of a project develops, along the traditional path from Schematic Design through Design Development and into Construction Documents, there is near continuous estimating by all parties on the project.  There is a detailed tracking of each development, whether it be an increase or decrease to the original estimate.

It takes a mental shift and discipline for teams to not draw anything until they have confirmed that it is already in the budget.  In order to drive down cost while maintaining schedule and quality, teams set cost targets for design and construction that are usually below the current estimates. These targets are usually set up as stretch goals to push the teams to innovate new ways of delivering projects, not just to be more efficient in doing things by traditional means.

Typical component groupings might consist of all Mechanical, Electrical and Plumbing costs in one bucket with a target and core/shell costs in another bucket with a different target.  Each of these targets is added together to form an overall budget target for the project teams to strive to deliver.

Targets can have two effects: they can either motivate a team to get amazing results, or they can break down the culture of a team and push members into traditional behaviors.

FIVE THINGS TO CONSIDER WHEN SETTING TARGETS FOR A SUCCESSFUL TVD PROCESS:

1.Do not set targets arbitrarily. There should be some logic to support the targets.

Targets can be set in many different ways. They can be set as a percentage reduction to the current budget or the owner’s allowable cost, as a cost per square foot, a cost per unit (i.e., per exam room or per bed in healthcare), with a comparison to a similar project, or other methods. Pick types of target that make sense for the project and that are relevant to the team. Many teams will push back against a target with a large lump sum reduction without some justification to support the reasoning behind the target.

2.Involve the team in setting targets, don’t set them in a vacuum.

The more you can involve the individual team members and companies in the rationale behind the targets, the more buy-in the team will have to the targets. Even if the targets seem like a stretch, understanding how a target is set is the first step in engaging the team to go after the target. Without this belief and understanding in the targets, teams can become disconnected and go back to traditional project delivery behaviors.

3.Make them within reach, not something so aggressive it seems impossible.

Targets should be a stretch goal to motivate the team to innovate. If the target is too easy, the teams will achieve them by being slightly more efficient, but the culture will not change and true innovation will not occur. If the targets are too aggressive, the team will find them to be unobtainable and will instead focus on protecting their profit and limiting their risk.

4.Focus on optimizing the whole, not any one piece.

If targets are set by company or by individual system, team members will be driven to optimize their given piece without considering the project as a whole. Setting target by system (i.e., MEP, Core/Shell, etc) can allow for give and take between team members to drive down the overall cost or increase the value delivered on the project. This transfer of scope and reimaging of delivery methods is often what allows a team to reach an aggressive target.

5.Focus on the process, not just the numbers.

The process of setting targets drives a deeper understanding of the project for all participants. By setting construction targets which stretch the team, it will free up the team to think about how projects are delivered and allow them to come up with new solutions. The process of understanding cost drivers is one of the early steps in actually hitting the targets. Once a team deeply understands what drives cost, they can focus on finding levers to lower the risk and drive down the cost to deliver the project.

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CONCLUSION

Without intentional management, projects tend to increase in cost through the scoping, design, and construction phases. Target Value Design / Target Value Delivery offers strategies to manage a project’s costs through its development and construction. Setting cost targets for a team can align thinking and motivate members to innovate. How those targets are set and who is involved in setting them is just as important as what targets are actually set on the project. Through a focused strategy, projects can achieve the desired scope, schedule, and cost.

James Pease is a regional manager for Project Delivery at Sutter Health with experience delivering over $650M in health care projects using Lean Integrated Project Delivery (Lean IPD).  He has a BS in Management Science from the University of California San Diego, is Editor of leanipd.com, and co-founder of the COAA CA chapter.

Watch Out For This New Liquidated Damages Loophole By Mark Nagata

There’s a new argument contractors can make to sidestep paying liquidated damages. Unfortunately, a new standard published by the American Society of Civil Engineers might give contractors new footing to make this argument. This could result in more unnecessary claims and increased costs to defend them. Therefore, it’s important for owners to understand what the offsetting delay argument is and how to protect themselves.

How The Offsetting Delay Argument Works

The offsetting delay argument is quite nuanced. And to some respect, that’s part of what makes it so insidious.

Here’s an example I’ve used to help explain the argument. Let’s say you are building a school with a September 1st contract completion date. And let’s assume that contract has a liquidated damages provision.

The contractor delays the critical path by 60 days. When the project completes 60 days late, the owner would be entitled to assess 60 days of liquidated damages.

That’s pretty standard stuff. But here’s where the new argument comes in.

The contractor says, “Wait, your late selection of the cafeteria wall color in August delayed the cafeteria completion 10 days later than the September 1st contract completion date.  Even though the cafeteria work was not on the project’s critical path, your delay offsets a portion of my delay. Therefore, I won’t pay liquidated damages for 10 of the 60 days.”

What’s Going On Here

Over many years of CPM scheduling, certain truths became standard practice within the construction industry. One of them is that only delays to the critical path can delay the project. And the activities on that critical path are known as “critical activities.”

But if you change one of those definitions, you can change the outcome of any schedule analysis. For example, if you change the definition of “critical activities” to say they don’t have to be on the critical path, you could argue that activities not on the critical path delayed a project.

That’s exactly what’s happening here.  ASCE’s new standard changes a few industry recognized CPM scheduling definitions. And this results in the liquidated damages loophole known as the offsetting delay argument.

Why This Argument Is Unfair To Owners

On its face, the argument almost seems logical. If the owner’s actions (or lack of action) after the contract completion date delayed any of the work, why should the contractor be assessed liquidated damages when those delays occurred?

But unfortunately, the offsetting delay argument is unfair to owners because it doesn’t work both ways.

Let’s go back to the school cafeteria example. Let’s say the contractor is working with another owner. And let’s say that owner caused a 60-day delay to the project’s critical path. This time, the contractor’s painting work (which wasn’t on the critical path) took longer than planned and finished 10 days after the contract completion date.

You might think the owner could just say, “Your painting activity was completed 10 days later than the contract completion date, so we’re only granting you a 50-day time extension.” But under ASCE’s new standard, the owner is not entitled to the same consideration.

Suggestions for Owners to Protect Themselves from Offsetting Delays

The best protection against an offsetting delay argument is to make sure your contract properly defines specific CPM scheduling terms and includes a detailed time extension provision.

I recommended that your contracts include the following components:

  1. A “critical activities” definition that states a “critical activity” is an activity on the project’s critical path; the definition of this term should not rely on an activity’s total float value.
  2. A “critical delay” definition that states a “critical delay” as a delay that delays the project’s critical path and, thus, the project’s forecast completion date.
  3. The time extension provision should require the contractor to demonstrate its entitlement to a time extension by showing that the project’s critical path and, thus, the project’s “predicted” or “forecasted” completion date was delayed by an excusable delay as defined by the contract.
  4. A time extension provision that expressly prohibits the extension of time or relief of time-related damages (LDs) for delays that occur on a non-critical path.

We’ve Only Scratched The Surface

The offsetting delay argument is a complex and nuanced attempt to sidestep the contractor’s responsibility for liquidated damages. And it’s something you’re likely to see more of in the coming months and years.

I’ve evaluated delays on many projects. And I can see just how temping it will be for contractors, who are already behind on a project, to look to this argument as a way to reduce their exposure to liquidated damages.

This article just scratches the surface on a complex topic. If you want to learn more, ASCE’s full schedule Delay Analysis Standard can be purchased at this link. You can also read a published whitepaper about the problems with the offsetting delay argument here.

Mark Nagata is a Director/Shareholder of Trauner Consulting Services and is an expert in the areas of critical path method scheduling, delay and inefficiency analysis, and construction claim preparation and evaluation. He loves to get questions at mark.nagata@traunerconsulting.com.

New COAA Executive Director On His New Role And Two Important Initiatives

In August, long-time member Howie Ferguson signed on as the Construction Owners Association of America’s new Executive Director.

We talked to Howie to learn more about his new role within the association and two very important initiatives going on right now.

What can you tell us about your journey from someone just hearing about COAA to becoming a board member? How did you “get your feet wet” as a volunteer in the association? And looking back, would you have done anything differently?

I first attended a COAA conference many years ago in New Orleans as a presenter.  I was blown away by the vibe and seriousness with which everyone seemed to take the educational and networking opportunities.  Within a couple of years, I got involved as the programs chair for the Florida chapter and, eventually, a member of the national program/conference committee.

I took over as chair of the conference committee, and ended up serving in that role for About 12 years.  About halfway through that tenure, I was elected to the Board, which I likened to moving up from the kids’ table at Thanksgiving to the big people’s table.  I also became very involved with the Owner Training Institute (OTI) as an instructor and reviewer/developer of content.

I can’t imagine doing anything differently, and it’s the sort of path I’d encourage our volunteers to consider (feet wet, then ever-increasing involvement as time allows).

Howie, in the last month or two, you’ve gone from a long-time COAA volunteer and board member to the organization’s full-time executive director. What was your biggest takeaway going from volunteer to staff member?

That there’s a LOT more to running an organization than appears on the “outside.”  I sort of suspected that, but couldn’t fully grasp it until being behind the curtain.

I’m also pretty stunned (in a good way) at the depth and breadth of folks who devote their professional lives to managing associations like COAA.  I was fortunate to get to attend the annual meeting of the American Society of Association Executives last month, and found an enormous and welcoming collection of folks who’ve invented just about all the wheels … meaning, colleagues with established best practices and lessons learned when it comes to association management (very much like COAA).

How is managing the operations of a volunteer-led association like COAA different than what someone might experience in a management role within an owner organization?

Well, the answer now is probably different than what the answer might be in a year or so. But for now, I’d say it’s the relative newness of our in-house management model (COAA was run until 2016 by an outsourced management company) … which means we’re still in the process of confirming that we have the right staffing structure; evaluating the need for better and more integrated IT platforms and systems; etc.

In other words, those sorts of things – even if imperfect – are mostly settled in most owner organizations, while still a work in progress for COAA.

For a while now, COAA has had both a mission and vision statement. Recently, the organization developed a “value proposition.” What is a value proposition? Why did COAA feel they needed one? And what is COAA’s value proposition?  

It’s a means of quickly differentiating something (COAA in this case) and explaining how it’s better and more valuable than similar or competing options.

Its development is rooted in a down year in terms of national conference attendance in 2017, which caused us to ask why?  The reasons for the dip in attendance were varied. But the good that came from the analysis is our new value proposition … an explanation to current and future members of what makes COAA special and different than other organizations offering educational & networking opportunities.

The COAA Value Proposition boils down to:

  • The fact that we purposely offer something for everyone since most owner reps/PMs are responsible for every aspect of a project’s execution
  • That we offer “safe haven” events, where failures and lessons learned are as important or more important than successes
  • The idea of being humble enough to know what you don’t know, along with a sense that being a “good owner” (the kind folks want to work with), matters and ultimately leads to better and more rewarding projects

You Can Download More Information About COAA’s Value Proposition At This Link.

What are the goals of the organization regarding the growth of its owner membership base?

We haven’t established specific numeric goals at this point. But a strategic goal established in 2017 was to grow membership both vertically and horizontally. And we’re actively pursuing both of those goals.

In other words, increased depth and involvement for current owner member organizations and new-to-COAA owners from sectors we haven’t historically reached.  One specific example of the latter is major airports, which – like higher ed, K-12, healthcare, and other institutional owners – never stop expanding and improving their built environment.  Regardless of the particulars of airport planning, design, and construction, their facilities staffs undoubtedly face the same challenges and could both give and receive when it comes to lessons learned, best practices, etc.

What can you tell us about the recently unveiled COAA Way initiative? How has it evolved over the last six months? What’s the plan for the COAA Way over the next year or two?

This is a really cool and important initiative … something else born from the 2017 strategic planning effort and connected – at least indirectly – to the Value Proposition.  It speaks to the mindset, culture, and approach of a “typical” COAA owner (and associate), and is both tangible and intangible.

It was first introduced publicly at the May conference in Pittsburgh, but really just as a concept or thought.  Since then, a small work group led by John Zahor of University Of Maryland Baltimore County worked to formally & fully define it with words.

The next step is to accompany that definition with a graphic – specifically, a logo that we hope will one day be easily & instantly recognized as being a graphical indication of The COAA Way.  For example, you might see this logo sprinkled around a conference or chapter meeting agenda to indicate particular sessions that exude The COAA Way principles.

We’re very excited about the plan for developing that logo in a way that engages the membership on two fronts – both creation and selection.  Hint: If people would like to have a voice when it comes to picking this logo, make plans to attend the fall conference in La Jolla!

You Can Download More Information About The COAA Way At This Link.

5 Reasons Why I Registered For COAA’s Fall Conference by Kyle Majchrowski

When the 2018 Leadership Conference in La Jolla was announced, I thought about the COAA events I’ve attended for the past 7 years. Very quickly I decided to find a way to attend the conference in La Jolla. With so many options out there on conferences, as an Owner, I have found COAA’s conferences to be the best value for 5 reasons.  

Reason #1: Content 

COAA conferences do a great job delivering content designed specifically for the owner project management group. The early conferences I attended emphasized topics like BIM and project management systems, then a few years later included IPD case studies and facilities management systems.  

Sessions range from entry level courses like Pay Application review, to large project case studies, to hands-on workshops where attendees participate in the discussion. The past few events have included focuses on Leadership Development and overall industry improvement. One unique aspect of the conference is the content looks at every aspect of the capital project delivery process. The content at COAA events is tremendous from an Owner’s point of view. 

Reason #2: Fellow Attendees  

I’m an introvert and going to conferences taxes me. It takes effort to talk to strangers, even if it is just small talk. Early on, I found that many COAA attendees are similar – which ironically makes them easy to talk to.  

I also found that people who attend do the job my group does, which makes striking up conversations very easy. The format of the conference, with the meals, breaks, and Q&A time for each session does a good job helping this introvert connect with others.  

Since many of the attendees do similar jobs, they are open to talk about what works and what doesn’t. People don’t seem to mind talking about failures and what they learned from them. Most importantly – the people who attend COAA conferences more than once are those good people trying sincerely to change our industry for the better. I like to spend time with those people.  

Reason #3: The COAA Way   

The COAA Way was introduced in Pittsburgh in the Spring of 2018. The COAA Way is beginning to articulate what it means to be a good owner. Shared success, mutual respect, sharing of practices (good and bad!), and industry improvement are the major elements that I heard.  

These themes have always been present at COAA events, and it was great to hear folks from COAA start to formally define what to some is just a way of doing business. It’s clear that those leading COAA believe that being a good owner really matters. The COAA Way effort is working with the members and conference attendees to define what a good owner is, then help us all truly embrace being a good owner. 

Reason #4: To Explore Solutions To The Industry’s Macro Problems 

COAA content includes sessions and discussions regarding the industry’s macro problems. Transitioning projects upon completion to facilities has been a standing session for many years. For the past few years there has been a session on workforce shortage. Then in Pittsburgh this Spring, a series of case studies was presented on how people are working to overcome the workforce issue around Pittsburgh.  

Every so often there are sessions on the macroeconomic view of the design and construction industry. To be able to talk with other owners about industry wide challenges that have no geographical boundaries and what others are trying to do to solve them is a unique opportunity. 

Reason #5 Location: 

COAA conferences are held in locations that are thoughtful, affordable, and add to the experience of the conference. COAA usually tries to host or point attendees to a local, post conference, event (a boat excursion, baseball game, tour of the Hoover Dam) to get to see the sights and continue building the relationships created during the conference.  

These events are low key and a great way to wind down after the conference. When you couple a location that has some cool stuff around with the extra local event post conference, that helps drive my decision to attend. 

There are indeed a lot of conferences available to us as Owners, though very few offer the combination of all five points above. With high demands on our time, I truly want to go where I will get the most value. I have felt and continue to see the value in the people, content, and overall experience at COAA. Hope you’ll join us in La Jolla.  

As Senior Project Executive within Banner Health, Kyle supports the team that manages renovations and new construction throughout the Western Division.