Home Sustainable Land Development Today April 2005

The Master Developer: Dawning of a New Age

Written by Rob Kundert

Thursday, 31 March 2005

Industry leaders need to make a quantum leap in project management. Not many people like change. This seems to be especially true in the land development industry where turning dreams and ideas into reality has been occurring for millennia. Unfortunately, the approach to the inherent risks and complexity of moving concepts to completion through operation in the industry has also evolved at glacial speed. Perhaps it is time for a quantum leap in thinking that can revolutionize the industry and benefit every sector of it. Long-term trends don’t lie—they support the argument for change. According to U.S. Labor Department statistics, between 1964 and 1998, non-farm labor productivity rose 1.7 percent. Productivity in the construction industry over that same period of time has decreased 0.5 percent. In an industry that focuses on creating projects that have a positive, long-term impact on society, at the lowest possible cost, studies show that there are monumental amounts of money, time, and material to be saved. Today’s major capital projects too often cost more than projected or fail to fully meet expectations. One theory is that because land development has been around since the dawn of humanity, unlike other segments of the economy such as aerospace and the automotive industries, it is painfully slow to evolve. In fact, a Georgia Tech civil engineering professor says that since the creation of the pyramids, the fundamental process of creating major capital projects has focused on the same issues: How much will the project cost? How long will it take to build? What quality will it have? And the answer to these questions is still a function of the labor, materials, and equipment used. Where We Are During his presentations that argue for a major shift in land development philosophy, Dr. Jorge Vanegas likes to pull someone from the audience to pose as a developer. He asks for a dollar bill. Vanegas then rips the bill in two, throws half away and asks the developer for another dollar bill. He says that is what is happening in the land development industry today because each segment in a project’s life cycle, from its conception through design, construction and completion, to its operation and maintenance, focuses primarily on its own inherent problems and associated costs. In the process, economies are lost due to lack of communication and integrated data sharing across the spectrum of the project’s life cycle. Further, valuable lessons that are learned in each project fail to materialize into best practices, because they are not shared. So where is the waste? Well, it typically occurs on delays in the delivery of materials or services, on rework, on change orders, on lawyer claims, on the perpetually-nagging punch lists, and the list can go on and on. After a project is turned over, how often are HVAC systems out of balance, do elevators refuse to function properly, electrical systems fail, or those just completed color combinations clash a little? Sometimes a finished project even creates some unforeseen spin-off effect that presents a negative impact on the environment, the community, or society. Regardless of the ultimate problem, in the end, the owner(s) and investor(s) often end up with sticker shock at the final bill, and everyone involved is left with something short of expectations. Where We Can Go The solution, according to Dr. Vanegas, who has studied the problem for over ten years, is his Integrated Project Definition Model. The IPDM calls upon every conceivable stakeholder in a project to be drawn together to take a team-oriented approach to land development by what he calls a Master Builder/Developer. It is accomplished through upstream team building and through the use of a series of definitions, which clearly delineates the roles of the major stakeholders and sharpens their focus on the goal of a successful, efficient, and satisfactory conclusion. The IPDM is a broad-based, all-encompassing approach that calls for a major attitudinal shift in the land development paradigm. It draws together every internal and external stakeholder in a project to take an active role in the entire process, from beginning to end. It also involves more than the traditional development team of owner, designer, engineer, constructor, vendors and suppliers, and later, operation and maintenance. His approach also brings in external parties, such as finance, insurance, regulators, and even the general public, all of whom have a stake in major capital projects, that, in the final analysis, influence the ebb and flow of society and the environment for decades. “The industry is a complex system of dynamic, systemic interdependencies, and behaviors,” explains Vanegas. “We need to make a quantum leap in integration and automation in the construct industry. We need a technology vision aimed at enhanced effectiveness, efficiency, productivity, value, quality and performance.” It Starts Upstream Vanegas is a proponent of what is called the “Enhanced Performance Paradigm,” which espouses a great deal of preplanning by the developer before any action is made on the project. It is segmented into four main areas of performance: product, conventional, delivery, and life cycle. These address the major aspects of the capital entity: from the impact of climate and the socioeconomic ramifications of the project, to products and materials to costs, delivery and commissioning, and finally, to the performance and sustainability of the project to the end of its service life. “What we have learned through research is that all these things need to come together,” Vanegas says. “If the owner, in this case the developer, does not pay attention in an integrated way to all of this upstream where it counts, the consequences will be felt downstream, of poor decision-making early on.” Tunnel Vision and Stove Pipes The basic problem is lack of clear communication, data sharing, and integration across the spectrum of those connected to any project, which result in a rather scattered approach to a project’s goal. Vanegas calls it, “horizontal tunnel vision and vertical stove pipes.” Public policy makers are looking straight ahead to their goals for their communities. Corporate policy makers are looking straight ahead to their corporate goals. Tactical planning, operational procedures and practices target their immediate goals and the user/operators are left with the end product. A virtual wall separates each group because the tendency, depending on the culture of each, is to have “tunnel vision,” looking straight ahead to their immediate tasks, goals, and responsibilities. They are disconnected for the most part from any interaction with anyone outside of their direct activity. Then there is the problem of the isolated “vertical stove pipe” effect in the industry sector, among stakeholders and among various disciplines associated with capital projects. Within the industry sector, industrial, heavy civil, building and residential construction are isolated, each in a sort of vertical tube or “stove pipe,” again, with a tight, sector-specific focus on their respective goals and challenges. The same can be said of the stakeholders in a project: the owners, designers, constructors, suppliers and users. Then there are the disciplines involved: real estate, city planning, engineering, architecture, finance, the environment and management. Each has the tendency to look up and down within, but rarely over and across, to the other sectors. Cutting Across the Boundaries There needs to be horizontal and vertical integration to create a forum for these various sectors to talk, and perhaps more importantly, to listen, according to Vanegas. “By creating horizontal and vertical integration, you raise awareness and provide people with background on other people,” Vanegas says. “No architect, engineer or constructor is out to make anybody unhappy, but it happens every day.” Today’s architectural, engineering, and construction (AEC) projects are quite fragmented. The ownership team has its planning phase, the design team has its design and engineering phase, construction has its building phase and the end-user has its operation and maintenance phase. Each has its immediate goals and responsibilities, with the various vendors and suppliers interspersed to provide their goods and services along the way. What would happen if, at the very beginning, the developer brought all the parties together along with all the external stakeholders—finance, insurance, regulatory, the general public, etc.—and got everybody to take a more active role in the entire project? What would happen if, from the beginning, the designers were working with the constructors and operations and maintenance on what processes, materials, and systems would work best for the project? What if the builders were able to tell the designers of an innovation they used in the past that would enhance the systems within the project? What if the operations personnel could provide input on what has worked for them and how to make improvements? What would happen if vendors and suppliers were brought in at the beginning to look at project phases and schedules to make sure their products and services arrive on time? Turf Battles Dealing with the turf mentality in a highly competitive area such as the land development industry will be a challenge. For instance, there are certain groups doing Facilities (F), certain groups doing Civil Infrastructure Systems (CIS) and certain groups doing technologies, services, products, materials and equipment used by both (FCIS). Vanegas maintains that there are currently traditional barriers between the three sectors that inhibit any kind of productive cooperation, collaboration, or data sharing, which results in a lost opportunity for all those involved. Both the F and the CIS go through a similar life cycle of planning, design, procurement and construction, commissioning and start up, operation and maintenance to the end of their service life. Meanwhile the materials, technologies and equipment systems used in both (FCIS) go through a different cycle of feasibility, research and development, testing, approval, manufacturing, delivery, use and end-of-service life. In the process, FCIS is pushing both the F and CIS to use its respective materials, equipment, and services. What would happen if there were greater collaboration among all three? Data on the concepts and needs of the respective sectors would be shared, product demand could be identified and developed, and a push-pull environment would be created to benefit all sectors. New products could be developed that better address specific needs, and redundancies in the life cycles of the three could be weeded out and processes made more productive. Within such a collaborative environment, the resulting push-pull effect would foster streamlined enterprises that are learning organizations. “Developing external, strategic alliances and partnerships with a focus on the essentials, the industry becomes more effective, stable, flexible, scaleable and adaptable,” according to Vanegas. The Data Sink There is a tremendous amount of data generated and accumulated over the life cycle of a capital project. Vanegas maintains that that data should be put to long-term benefit for the entire industry. A capital project begins with a planning process, which produces numerous preliminary studies and evaluations. A design process follows, which after going through several design phases, ends with the plans and specifications for the project. Construction follows design, and delivers the constructed facility, which is then handed over to operations and maintenance. The performance of the process and outcomes of each of these phases is then neatly analyzed and filed away. All that data and information generated, Vanegas says, tends to end up in what he terms, collectively, the “Data Sink.” But it doesn’t, and shouldn’t, have to go down the drain. He suggests the creation of an “Industrial Repository of Lessons Learned,” where the performance analysis associated with a project’s planning, design and engineering, construction and operations and maintenance phases can be collected and reviewed. Further, Vanegas proposes the creation of an “External Benchmark Repository,” where all the information can be redistributed to the planning, design, construction and operations phases for future projects, to promote the development of best practices. Mistakes in the past could be avoided in the future and successes and new discoveries could foster ongoing development in thought and practice that could perpetuate a constant evolution in all aspects of the industry. By the way, this is not an altogether new idea. “The Construction Industry Institute has done some work in this area, to show lessons learned as a way to leap ahead,” Vanegas says. The Team Approach It should be apparent that getting all parties involved and pulling in the same direction is critical to the success of this process. Vanegas’ idea of a “Master Builder” draws together all the major internal stakeholders: ownership, design/engineering, constructors, suppliers and vendors and finally operations and maintenance, with the external stakeholders: finance, insurance, regulatory, government, the general public, etc. Over time, a series of efforts would seek to bring all stakeholders in alignment and focused on a set of common goals. Vanegas suggests this team-building design:     • Task 1: Identify all internal and external key project stakeholders that are directly and indirectly involved in the project, including organizations, organizational units, functional units, and individuals.     • Task 2: Establish a common and well-defined set of goals and objectives for the project.     • Task 3: Implement partnering development and team building processes within the project team.     • Task 4: Implement project alignment and misalignment elimination processes within the project team.     • Task 5: Establish a set of acceptable tolerances and team norms.     • Task 6: Implement ongoing partnering and team maintenance processes within the project team.     • Task 7: Provide ongoing strong leadership. Risks Today, contractors are the ones blamed if a project doesn’t perform to expectations. “Problems arise because corners are cut,” Vanegas says. “But, how was the project set up?” Perhaps, if it is directed in the right fashion, risk can become an integral part of the entire team building effort. But it must be spread evenly among the participating stakeholders. Risk can become an incentive, a driving force, that can be a unifying and constructive element to team building, that can draw a diverse group to focus on a common goal or set of goals. “The whole issue of risk is interesting,” Vanegas says. “When you assume the role of Master Builder, the risk needs to be shared by the whole team equally. You need to manage risk, rather than have risk manage you.” Sustainability To round out the entire theory of the Master Builder, Vanegas espouses the concept of early planning for environmental sustainability. Too often, developers are viewed as the “bad guys” because they alter the existing environment, deplete resources, and affect the surrounding community, and possibly society as a whole. They tear down forests, they create urban sprawl, and in some ways, they are part of the problem. However, if the planning upstream includes green approaches to the use of resources and the effects on society, these problems can be avoided. “If you, as the developer, think long term,” Vanegas says, “in terms of the products that you use, in terms of manufacturing, in terms of renewable energy sources, what used to be problems can stop being problems, through sustainable resource management.” Cost Shifting Short-term thinking will be one of the most critical challenges to any Master Builder who wishes to champion this long-term all-encompassing approach to land development. While over the long term, there will be cost savings and waste reduction through this process, all the preplanning to create projects that are economically produced, sustainable and environmentally compatible, will come at a price. The team-building process alone will be time consuming as key stakeholders are identified and brought together to be forged into a unified development force. Additional costs to research, develop, and identify the most compatible products, services and systems for each project will add to the bill. Overall, making sure that quality is more important than initial savings will be a critical shift in thinking. But to put it into perspective, one fascinating formula drives home the importance of wise investment and extensive, upstream planning. “For every dollar you spend to build a facility, it will take $10 to operate and maintain it (utilities, repairs, etc.), and it will take $100 dollars to staff it over its service life,” Vanegas says. “Why would you want to skimp on the dollar during development?” Who Will Be a Pioneer? The theory is there. The research is there. Now, who will put it all into practice? It could be an owner. It could be a developer. It could be a company executive or a new hire. But it will have to be someone with vision and courage. “As one developer, who I admire, once told me,” reveals Vanegas. “‘I don’t want to be a pioneer. They’re the ones with the arrows in the back.’”. But, as the word goes out through researchers like Vanegas and through further study at the Construction Industry Institute, the seeds of thought may take root. Vanegas also says there is good work being done by FIATECH, a non-profit consortium that is doing a great deal of work in this area. For more information on its work, you can go online to: FIATECH.org. Summary There is little doubt that many builders and developers will continue to operate and manage projects as they always have. Many will even continue to show profits. However, in today’s increasingly complex and changing development environment, those who can adapt and begin to implement changes in the way they operate will reap significant benefits. Through increased communication and the inclusion of others earlier in the development process, builders and developers will see a more effective and efficient development process that will save valuable time and money. They will truly become a Master Developer in the eyes of their colleagues and clients. SLDT