Risk management and TQM on the design-build projects

Hiromitsu Sakamoto, PMP, Office of Construction Management, Takenaka Corporation, Tokyo, Japan
Eiji Tsuji, Office of Construction Management, Takenaka Corporation, Tokyo, Japan
Seishi Unuma, Office of Construction Management, Takenaka Corporation, Tokyo, Japan
Masakazu Kashiki, Office of Construction Management, Takenaka Corporation, Tokyo, Japan

Design-build use is gaining popularity in both the private sector and public sector in the United States (U.S.) as well as around the world. The design-build project delivery system provides single-point responsibility to the clients for both design and construction. The design-builder is both the architect/engineer and contractor of the project, and guarantees performance on quality, cost and delivery schedule. Use of the design-build delivery system continues to surge, and it is expected to gain even more popularity in the 21st century. Design-build is both an old and a new delivery system for construction projects. The practice of design-build is rooted in ancient times, when the master builder designed and also directed construction for the projects that he undertook. The pyramids of Egypt and the Great Wall of China, and thousands of historical structures and buildings were the projects of master builders.

Japan has the second largest construction market in the world followed the U.S., and the design-build delivery system has been one of the most popular project delivery systems. Not only for private sector projects, but also for public sector projects, application of the design-build delivery system has been studied and implemented for a number of large-size projects. Many Japanese general contractors acquired technical strength by integrating design and construction for design-build-type projects during the rapid economic growth period, and expanded business overseas by taking advantages of integrated design-build know-hows.

To maximize the advantage of the design-build project delivery system, it is essential to understand the characteristics of the design-build contract, integration process of design and construction, legal risks and restrictions, worldwide trend of design-build use and project management process. Proper risk management is the key to successfully deliver the project under the single point responsibility of the design-builder, and increasing complexity of the today's project environment makes it very difficult for the project managers to handle the design-build process. Financial commitment at the very early stage of the projects with the proper risk management especially on the cost, schedule, and quality are very essential for the projects. Furthermore, developments of the new technologies are often required to realize the technically challenging projects, and design-builder has to undertake such risk as well.

Emergence of Design-Build

Traditionally in many countries, the process of design and construction consisted of three phases: design by an architect/engineer, selection process of the contractors by the bids, and the construction by the contractors selected. Recently in many countries including the U.S., the use of the design-build has increased and gaining popularity around the world.

Following are the major advantage of the design-build approach:

•   Single point responsibility

There is a single point of responsibility by the design-builder for Q (quality), C (cost), D (delivery time), and S (safety).

•   Improvement of QCDS by early constructibility input

Design and construction team from very early phase of the project can improve the Q (quality), C (cost), D (delivery time), and S (safety) through the early constructibility input, value engineering, overall design-construction schedule optimization, and safety conscious project approach.

•   Early knowledge of the firm construction cost

Lump sum or guaranteed construction costs are obtained very much earlier then other project delivery system.

•   Reduced administrative burden by the owner

Owner is not required to invest time and money coordinating between separate design and construction companies. From the planning stage to maintenance stage, design-builders take full responsibility to successfully execute all the phases of a project. Thus, the owner's administrative burden minimized.

•   Improved risk management

Performance aspects of quality, cost and delivery time are clearly defined and responsibilities/risks are appropriately balanced.

•   Partnering process

Every day activities of the design-build process constitute a partnering process. Everyone involved in the project will share the same goals, and that is only possible through close communication and coordination carried out with numerous activities.

Exhibit 1. Design-Bid-Build vs.Design-Build

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Current Status of Design-Build in the U.S., Europe, and Asia

U.S.

Design-Build market has been rapidly growing in the U.S. and it is 172% growth since 1986. It is now estimated as US$50 billion market and projected to be 45% of construction market by 2005, and 55% by 2015. Design-Build is now used by both public and private sector owners and 30 states allow design-Build procurement (Data: DBIA Conference).

U.K.

In the U.K., Design-Build market in 1995 was about 23% according to the hearing carried by JIA (Japan Institute of Architecture). The market segment with highest Design-Build share was public sector housing segment with 65% followed by 43% of private sector industrial segment and 27% of private sector commercial segment.

France

In France, Design-Build market share for the public projects is 20% according the hearing carried by JIA (Japan Institute of Architecture). Also, design-build share for the general building segment is 35–40%.

Singapore

In Singapore, Design-Build is positioned as “An integrated Approach to Construction,” and government of Singapore started to implement the Design-Build since 1994. In 1998, Design-Build market share for the public projects is 16.6%, and 9% for the private sector projects. Overall average for the market was 13.7%. Following advantages were pointed out in Singapore:

•   Single point responsibility in quality of the buildings

•   Better cost balance form early constructibility input (University of Singapore: Construction conference).

Design-Build in Japan

Overview of the Construction Industry in Japan

Reconstruction of the nation began after WWII and it was accelerated by high economic growth in 1950s and 1960s, and a high level of construction activity amounted to 20% of GDP in 1970. In the mid 1980s, construction investment was down to around 15% of GDP due to a slow Japanese economy. Construction investment in Japan again drastically increased during the late 1980s because of a large construction boom mainly from the private sector. Since the burst of the so called “bubble economy,” public investment has been increasing to cover the private sector's investment decline. The government of Japan planned to revitalize the domestic economy by spending another 630 trillion Yen on infrastructure-related investment between 1995 and 2004. In 1997, the ratio of construction investment to GDP in Japan accounted 14.8%, which was still considerably higher than the U.S. and European countries. In Japan, the total number of licensed contractors is about 530,000 (about 580,000 in the U.S.), and the majority of these contractors are small and medium-size companies or individuals. Total numbers of workers in the construction industry in Japan was estimated to be about 6.8 million people, which was about 10% of the total workforce of the country in 1997.

Design-Build Environment in Japan

Design-build approach is one of the major project approach method for private sector building projects in Japan, and about 50% of projects for the big five general contractors are under this category. The following is some of the background of why design-build became a major approach in Japan:

Exhibit 2. Design-Build Process

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•   Many general contractors are financially stable and technically lead the construction industry in Japan

•   Long-term relationships between clients and general contractors

•   Rapid economic growth continued for decades in Japan and completion of projects on a planned schedule and budget was one of the most important criteria.

•   Single-point responsibility under design-build is very clear and clients can avoid financial and operational risks.

TQM Process in Design-Build in Japan

TQM in Design-Build

Design-Build approach is a system that produces high quality products by integrating R&D, design and construction activities throughout the whole construction process. It is similar process done by a single organization in the production industry. Comparison of conventional system and Design-Build approach as unified formation is shown in Exhibit 1.

In Design-Build approach, feedback from construction experience can be obtained easily into planning and designing. On the contrary, once accident occurs in the conventional split formation, it is very difficult to determine whether it was the result of the design or construction error because of divided responsibility by contracts. General contractors in Japan with abundant experience in Design-Build experience have been improving their TQM through smooth information exchange between the design and construction department.

TQM With Subcontractors

A project is completed with the assistance of numerous sub-contractors. It was recommended that subcontractors providing general contractors with their service introduce their own TQM program as an aid toward general improvement of procedures and capability for quality assurance. On construction sites, general contractors encouraged and supported QC circle activities by subcontractors. It creates the environment in which all workers from general contractor's staffs through craftsmen of subcontractors have common goal for Quality to meet clients need, and results in high quality production and safety work condition.

Design-Build as a Partnering Approach

On design-build projects, the above advantages are maximized, and a lot of concurrent activities and interactive information exchange are made by in-house architects and construction engineers. Since design-build includes constructibility input through the design phase and fast-track construction phase, it is considered that the system is compatible with the CM approach in the U.S. For several decades the Japanese construction industry has been improving the unique way of construction approach driven by large-scale general contractors in the different business customs and cultures from western countries. Long-term relationships, which are partnering relationships with private sector companies, allow general contractors to put large amounts of investment into R&D. This also creates an environment in which owners and contractors have high motivation toward R&D for mutual interest. Therefore, large-scale contractors compete to provide various types of services from the early stages of a project, sometimes even before a project exists.

In Japan, even for a $100 million project, the project will be started under a very loose agreement based on a long-term relationship between the private owner and general contractor. Lump-sum price agreed at the beginning of the project without any detailed contract documents works as a GMP, and ongoing changes by the owner are balanced through VE carried out by the general contractor. Heavy risks are taken by general contractors, but that is also the incentive for general contractors to win the trust of the owner and keep a long-term relationship with them. This is really the partnering approach to share the risk and benefit by both the owners and the general contractors.

Case Study of Risk Management Process in Design-Build Project Delivery System

Following is the risk management process in Design-Build project in the case of long span sports facility project in Japan:

(1) Challenges and risks

•   Gigantic movable roof structure had to be developed

•   Short construction period was required to meet the schedule of pennant race

•   Technically complicated fabrication of roof structure

•   Precise quality control of guile rail which is essential to the mechanism of movable roof

•   Special design for air-conditioning and ventilation, fire fighting system.

(2) Risk management activities for the design-build process for the project

•   Companywide deployment of standardized technology

A lot of data was provided from various TQM activities of past projects and similar projects. All other problem solving procedures were performed using TQM logic (QC story) and with TQM tools (seven tools, etc.)

•   Super Fast track approach

During the building permit application period, all possible preparation other than actual construction works on site were commenced. Once the building permit was obtained, piling, footing, underground works were started based upon a set of drawings prepared for the building permit, which meant the minimum drawings. Detailed design drawings were developed in parallel with construction activity.

•   R&D

From the preliminary design phase, architects/engineers from design department, construction engineer from technical department and research engineers from R&D center worked closely to develop the new technologies required to complete the project. All presumable problems that may arise during construction period were discussed, and staffing, budget and schedule were authorized by the top management to overcome the various challenges that project faced.

•   Abstractions of actions by PDPC analysis

PDPC (Process decision program chart) was performed using a well-thought-out complex decision flow process to determine the critical actions for the projects.

Future of the Design-Build

It is essential for the owners to choose the right project delivery system when planing a construction project, and following are the major criteria to choose the delivery system:

•   Complexity of the project

•   Financial restriction

•   Schedule constraint

•   Technical challenge required for the project

•   Owner's decision-making process

•   Owner's project management team's project management capability

•   Site specific, local condition.

Design-Build is not always almighty project delivery system, but the essence of the Design-Build approach has a significant potential to meet the today's complex requirement of the globalizing business environment. Latest computer technologies and information technologies brought us the unlimited chance of the integration of design and construction process. 21st century is the new era that design-build process is not just an integration of design and construction process, but rather they will be one single process of activities.

References

Japan Federation of Construction Contractors. (1997). Contractors in Japan.

Sidney M. Levy, Japanese Construction.

William F. Maloney, Increased use of design-build as a project delivery system.

DBIA Conference 1999.

JIA (Japan Institute of Architecture). (1997). Report on procurement/contract method.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA

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