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Thought Thursdays

 Big money in better productivity

2013-02-12 00:00
Willem Louw, Director: Centre for Business Management of Projects at USB-ED

Introduction
In a world where the shortage of skills and expertise in both construction craft employed on capital projects and in construction site supervision has become a recognised predicament – since the turn of the century – it does not help only to talk about it. Something has to be done about it, urgently. It is also not only the responsibility of the construction contractors to turn this scarcity into action – it is as much the responsibility of the major owners/clients providing the capital funding for projects, be they small, medium or large or be they private enterprise-, parastatal- or public enterprise-funded.

Facts
If we for the moment and for the purpose of this article confine ourselves to the South African environment (and it will not be much different for the southern African region), then the following set of statistics is relevant. About 20 years ago (in the early to mid-nineties) in the petro-chemical/oil and gas industry, a pipe welder on average (compared to the standard for the pipe welding of normal carbon steel material) performed 1,20 to 1,50 times worse than the US Gulf Coast norm, which is still today considered the benchmark and assumed to be at factor 1,0. Today, in the same industry for the same activity, the performance in South Africa is on average between 3,5 and 4,5 times worse when compared to the US Gulf Coast norm. A significant decrease in productivity over this time is a logical deduction. This is similar for the rework required measured as a percentage of the total diameter inches (common reference in the welding trade) welded by a welder for a given time period.

At the beginning of the nineties the percentage rework acceptable on site was in the range of 0.5 to 1,0%. Today, you are lucky if the rework performance on your project is in the range of 10 to 15%. Arrive at your own conclusions about productivity performance if you take the compound effect of comparison to US Gulf Coast norms and rework into consideration. Large savings are blatantly available for owners/clients, if the necessary steps are taken to improve craft labour productivity on site or in the field. Dealing with the contribution that construction management can make to the improvement of site productivity on a project is the focus of the following discussion.

Discussion
Much rationalisation can now take place on various fronts as far as training (or the lack thereof) in a number of different trades is concerned, the availability/continuity of workload to support the training effort that may (or may not) have been directed at these trades or the inability/availability of site supervision to assist in correcting the current situation. Training of craft labour and again achieving the performance of the early nineties (and before) is and will be a time-consuming exercise accompanied by many gyrations when the discussion take place as to who should ultimately be responsible for doing it. There is a much speedier alternative to this available, and it is fundamentally in the hands of the owner or client management.
The argument is offered here that the facets mentioned (training of craft labour and making supervision available) also have to be carried out, but are not the only parameters to be considered, particularly as the individual owners/clients can much sooner rectify the situation of the availability of in-house construction management expertise.

It is the primary responsibility of the owners/clients making the funds available for capital projects also to ensure that they are fully informed as to what is happening in the domain of construction management required for these projects and to the deal with the current challenges that are being experienced by those that are responsible for construction management on capital projects.

During the same time period (the previous twenty years), owners/clients have to a great degree outsourced their own in-house construction management capabilities to the engineering industry. This has enabled the engineering industry to offer engineering, procurement and construction/construction management (EPC/EPCm) services in addition to their usual offer of engineering and procurement services for capital projects. Owners/clients have done this largely because of the ‘fashionable’, consultancy-driven thinking at the time that all non-core services and capabilities had to be outsourced and that it would be better positioned outside the organisation to be incurred as a variable cost. Consequently owners/clients have mostly lost their construction management capability, except and generally on small site-based projects. They have also lost most of their hands-on understanding of construction management. Unfortunately this has resulted in the engineering industry taking advantage of the situation following practices where the owner/client is not necessarily guaranteed that his/her interest is protected at all times and, more often than not, higher profits are extracted from projects in ways that the owner/client often does not see.

The statements of Edward W Merrow, founder and chief executive of Independent Project Analysis, Inc., a leading consulting firm in the world of capital project benchmarking, in his latest book Industrial Megaprojects: Concepts, Strategies, and Practices for Success are particularly relevant to this part of the conversation: ‘Many of the world EPC firms are much better at engineering and procurement than they are at construction or construction management. Most of the EPC contractors are engineering-centric organisations that have relegated construction to second-class status.’

Although best practices in construction management cannot ensure excellent craft labour productivity, it has been proved that poor construction management practices will lead to poor productivity.

This implies that the owner/client, with the assistance of the in-house construction management expertise in the in-house project management team, needs to focus on the timely and accurate delivery of engineering deliverables. This availability of in-house construction management expertise will assist greatly in ensuring that the engineering contractor properly procures, sequences and expedites equipment and bulk material required for the project, resulting in much improved craft labour productivity on site.

Conclusion
The clear message is that there is big money in better productivity. Enough work has been done to confirm that having access to in-house construction management skills and expertise will put owners/clients in a much better position to measure and monitor craft labour productivity, diagnose field problems, respond when productivity is lagging, and drive the availability of equipment and materials.

Regaining this lost competence of in-house construction management expertise in a hurry is vital if owners/clients want significantly to mitigate the impact of poor craft labour productivity on profits. It can and should be driven from the top, should be initiated immediately and can be done in parallel with tackling the issues of craft training and improved supervision. Driving it is solely in the hands of owner/client management. Nothing prevents the owner/client from starting with the drive tomorrow.

 

For more information on the Centre for Business Management of Projects, click here

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Project Management