At the 2012 Construction Owners Association of American (COAA) Texas LEAN Workshop for Owners, several Owners participated in the “Parade of Trades” and “Light Fixture” simulations experiencing first-hand the limitations of “push” scheduling and the importance of “flow.” These simulation exercises vividly demonstrated that traditional contract terms on scheduling and practices, unlike scheduling under the Last Planner System™ and related Lean practices, can hinder progress. Lean practices clearly provide a better way.
Owners know that schedules are frequently delayed and projects are completed late. They are correctly concerned about delays and want their project back on schedule asap. If the project does not get back on schedule, they will often expect the contractor to “pay” for the delay.
Owners try to close the gap between what they “know” and what they “want” by incorporating difficult contract clauses. Nearly all traditional contracts contain the following terms: (a) time is of the essence; (b) Contractor is required to work overtime and/or supplement labor as necessary to get back on schedule; (c) Contractor is made to “pay” for the delay by (i) requiring Contractor to assume all costs of overtime and supplementation; (ii) requiring Contractor to reimburse Owner for actual or liquidated delay damages incurred by Owner; and (iii) including “no damages for delay.”
Despite the onerous language, Owners frequently do not get the on time performance that they want for many reasons. First, these terms place the Owner in the role of a father-figure telling squabbling kids in the back seat, “don’t make me stop the car and come back there.” While this method may momentarily work for the father of unruly children, threatening punitive action in a commercial setting is an ineffective means of bringing order to a chaotic construction project.
Second, Owners who have experienced a “Parade of Trades” simulation realize what every Contractor and Subcontractor know - that the contract obligation to work more hours with more people often adds to the chaos. “Pushing” more work does not cure the schedule and productivity problems. Schedules are met when the work flow is predictable.
Third, an Owner’s first impulse is typically to exercise their contract right to withhold retainage or assess liquidated damages. Implementing the “punishment” is no more effective than threatening it. The Contractor’s and Subcontractors’ fee is in that retainage. When the Contractors and Subcontractors cannot absorb the costs, claims are made and lawsuits erupt. Contractors and Subcontractors engage lawyers to defeat the no damage for delay clauses, and Owners engage lawyers to enforce the clauses. Instead of the Owner getting what it wants, a project that is on schedule, traditional contract terms merely ensure the opportunity to litigate.
Instead of insisting on terms that give the opportunity to litigate, Owners and Contractors can agree to contract terms that enable Last Planner and benefit all parties when the schedule is kept.