Unit 2 Course Notes Merged

1: The Construction Industry: Practices,
Performance and Development
Learning outcomes from this unit

At the end of this unit you should be able to fully appreciate the problems and challenges
facing the construction industry.
You should understand that traditional procurement systems and construction

management practices are increasingly being criticised as the reasons for poor
performance in the construction industry. You will appreciate the type and level of
problems the industry faces and the associated reasons. You will develop a good
understanding as to why the construction industry is currently rethinking its practices and
systems with specific reference to The Egan Report.
At the end of this unit you will appreciate the extent and magnitude of the challenges
facing the industry and the implications of these challenges on project management as a
discipline and on the industry’s practitioners.
1.1 Introduction
The construction industry is often criticised for poor performance. In the UK, over recent
decades there have been numerous government led investigations into why the
construction industry is lagging behind other industries. Most recently, there have been
two investigations that were led by Latham and Egan and as a result there is now a real
momentum for change. It is becoming evident that the industry needs radical change
rather than a step change to overcome the problems and challenges it is facing. The
industry’s clients are not satisfied with the products and processes delivered. The
industry’s workers and practitioners are not satisfied with the environment they are
working in. In addition, the level of profitability and investment is relatively low when
compared with other major industries.
The traditional procurement system, the structure of the industry and the nature of the
construction product all influence current practices and thinking within the construction
industry. Given that these practices are not delivering strong performance, there is a need
to re-think the traditional procurement system and industry’s structure. Innovations in
how projects are procured would undoubtedly influence project management practices
and hence the techniques and skills needed by project managers. Indeed, the project
management profession is becoming increasingly necessary as the industry moves to
more integrated and concurrent procurement systems.
1.2 Background
Consider this scenario. You have recently bought a house in an area of your liking and at
a price you could afford. You moved into the house and after couple of years you realise
that you need more space. You must decide whether to move into a bigger house or build
an extra living room. You rightly seek advice from your mortgage lender who suggests
that you get a rough quotation for how much an extension would cost. He also advises
you that property prices have gone up so much during the past two years, making the
extension option much more feasible.
In considering who to contact for an estimate of the cost of the work you ask friends and
colleagues some of whom tell you to contact an ‘architect’, some a ‘surveyor’ and some a
‘builder’. You make your first move by contacting an architect and by doing so you have
become what is called an ‘occasional construction client’. The architect visits your home
and tells you that given that the project is relatively small you would not need to
approach a surveyor for an estimate. He tells you that the average cost per metre square
for such work is £1,100 but adds that this would very much be influenced by design and
the type of finishes. You briefly discuss what you are looking for with the architect (i.e.
the function of the building product you are seeking) and you are told that you probably
require 20 m2 of space. You subsequently learn that this would be your best option and
the lender agrees to fund the project.
You confirm your intentions to the architect who sends you his fees and other costs
involved such as planning permission, etc. You study these proposed costs and decide to
approach others for comparison. You find significant differences in the figures quoted,
hence you decide to go for the most reasonable one. Next, the employed architect visits
your home to take measurements and discuss your requirements in more details. You
struggle to answer many of the questions relating to the shape and aesthetics of the
building but you are more confident about its functions. The architect suggests that he
present you with several ideas/options in a week or so. He does so in the form of
drawings or rather sketches (visualisation) and you struggle to imagine what the
extension would really look like in each option. You discuss this at length and you finally
agree on one of the alternatives. The architect takes the process one step further and he
presents you with more comprehensive drawings and you agree for the design to go
forward.
The following step would involve the architect working on planning regulations, building
warrant, etc. Once granted, you invite five builders to tender for the project. The first
estimate you receive is significantly higher that the £1,100 per m2 suggested by the
architect. You start to panic that the whole project may be jeopardised or at least you
might need to alter the design and hence reapply for planning permission, etc. The
following tenders are slightly more reasonable but still above the originally estimated
cost. You approach your lender and to your relief he agrees to fund the higher cost.
Next, you draw up a contract with the winning bidder. To your surprise, this does not
state the duration of the project. The builder tells you that he will finish the work within 8
weeks but he will not be able to guarantee that because of uncontrollable factors such as
weather, etc.
Construction starts and immediately you realise that the disruption to your daily routine
and comfort is much worst than anticipated. You are also stricken by the lack of
consistency of the builder in terms of working hours and days. You explore with the
builder the reasons for non-attendance (in some cases for a whole week) and you learn
that this is due to shortage of materials and labour. Halfway into the project, you discuss
progress with the builder and he informs you that the project is likely to be delayed
because of many reasons that are not of his making. You are not at all happy and the
relationship and trust between the two of you starts to deteriorate. This gets worse as you
delay interim payments to put more pressure on the builder and progress suffers further.
Things start to get back to normal until the builder informs you that the cost of finishing
the project will be higher than anticipated and that you would need to cover some, if not
all, of the extra costs. There is a whole list of reasons for the extra costs and you find
yourself in a difficult position: if you do not pay the extra money the builder will stop the
work and you will have to meet the significant costs of getting a new builder. You
decided on the former.
As the project is nearing completion your visualisation of the end product starts to
improve significantly and your ideas for the use of the extension develop further.
Subsequently, you decided that there are certain design elements that need changing
(either due to lack of visualisation at design stage or because your requirement has
changed) and hence with the help of the architect you instruct the builder to
accommodate these variations. This causes the project cost and duration to rise even
further.
At project ‘completion’ you make the mistake of paying the final payment knowing there
are very minor tasks still to be completed. Several weeks later these tasks are not attended
to despite repeated phone calls. As time passes you discover a leak in the ceiling and you
are daunted by the task of making the builder attend to and fix this fault. Problems go on.
On reflection, you and your partner agree that if you knew what the experience would be
like, you would never have started the project in the first place. You are certainly what is
referred to as a dissatisfied customer. You subsequently find out that many of those who
have been unfortunate to become occasional construction clients have been dissatisfied
with the quality of the product and services they received.
The above scenario is not exaggerated or uncommon. Indeed many small construction
clients have faced worst problems such as the builder becoming bankrupt, damage to
their existing property and legal disputes with significant cost implications. Moreover,
the scenario above refers to a very small construction job with a limited number of
suppliers and stakeholders. The construction of a large office block for example, would
be significantly more complex and stakeholders would be numerous and difficult to
identify.
This unit highlights the lack of performance of the construction industry and explores the
reasons for this. The unit will recommend a way forward for the industry both in terms of
structure and practices. Finally the unit will refer to Egan’s Rethinking Construction
report, which was written as a result of a government commissioned study aimed at
identifying a way forward for the UK construction industry.
1.3 The Construction Industry: Performance

The construction industry is often criticised for poor performance. Similarly, other
countries are undergoing a similar phase of rethinking and reengineering how
construction projects should be delivered and maintained. It is becoming evident that the
industry needs radical change rather than a step change to overcome the problems and
challenges its facing. These problems may be summarised under five headings:
1.3.1 Industry’s clients are not satisfied (cost, time and quality)
Reasons for client dissatisfaction are:
a) High cost and duration of the project

b) Failure to meet cost and duration pre-set targets
c) Failure of design to meet clients’ needs
d) Quality of construction is poor (repairs and reworks)
e) Inefficiency of the construction team to respond to clients’ complaints and enquiries
f) Contractors not flexible enough to accommodate design changes
g) Lack of innovation on behalf of the contractor and designer
h) Disputes and claims
i) Cost of occupancy and maintenance of building is high
j) As built drawings and other information about the building and its requirements are
incomplete.
According to the National Audit Office’s report ‘Modernising Construction’ (2000),

more than 70% of all publicly procured projects were over time or over budget. The
British Property Federation’s 1997 survey of major UK clients reveals that:
• More than a third of major clients are dissatisfied with contractors’ performance
in keeping to the quoted price and to time, resolving defects, and delivering a final
product of the required quality
• More than a third of major clients are dissatisfied with consultants’ performance
in co-ordinating teams, in design and innovation, in providing a speedy and
reliable service and in providing value for money.
A recent survey by the Design Build Foundation in the UK shows that:

• Clients want greater value from their buildings by achieving a clearer focus on
meeting functional business needs
• Clients’ immediate priorities are to reduce capital costs and improve the quality of
new buildings
• Clients believe that a longer-term, more important issue is reducing running-costs
and improving the standard of existing buildings.
1.3.2 The supply team is not satisfied

Common causes for dissatisfaction are:
a) Bad working conditions (weather, facilities, etc)
b) Bad health and safety record (too many accidents, etc.)
c) Low wages and salaries
d) Job security
e) People are not valued
f) Frequently changing location of work
g) Bad training and carrier development.
According to Egan’s rethinking construction report, the health and safety record of
construction is the second worst of any industry. According to DETR statistics and other
sources, people working in the construction industry:
• Are getting older (10 years ago, 33% of the workforce was under 30 years old, this
proportion is now 25%)
• Tend to be white males (the current proportion of women in all positions in

construction is 8.6% compared with 8.4% ten years ago. The proportion of the
construction workforce from ethnic minorities is 2.3%, compared with 5.4% of all
economically active adults.)
• Are likely to work for a small firm (93% of people in construction work for firms
employing less than 8 people; 83% work for firms employing only 3 people or less.)
• Are quite likely to be self-employed (36% of all people in construction are self-
employed (second quarter 2000) compared with 45% five years ago)
• Are working longer hours than other industries (on average, including overtime, male
manual workers work 46.4 hours/week (of which 5.9 hours on average is overtime),
their non-manual counterparts work 41.4 hours per week. These figures are 2
hours/week higher that the average for all industries and services).
• Are more likely to be involved in an accident (the reported accident incident rate for
construction was 1,254 per 100,000 employees in 1998/9, 30% lower than in 1991/2.
This compared with 666 per 100,000 employees for all UK industries, 16% lower
than in 1991/2)
• Are paid around the average for all industries and services (male manual workers earn
£351 per week gross (compared with the average for all industries of £335), whilst
male non-manual workers earn £509 per week (£525)).
1.3.3 Industry’s bad reputation (not attractive to young generation)

Causes of bad reputation:
a) Lack of performance
b) Lack of innovation and development
c) ‘Cowboy’ builders
d) Industry dominated by the old craft culture and less technology
e) Fragmented and adversarial.
This perception of the industry is seriously damaging its image and reputation, and is
discouraging potential recruits of all abilities from joining or remaining within it. This
has led to a skills shortage. The Construction Industry Training Board (CITB) estimates
the industry will require about 73,000 new recruits each year for the next five years.
Applications to university courses have gone down dramatically over the last five years,
by 34% in the case of architecture, and by 50–52% for construction and civil engineering.
Recruitment into the industry is not just about convincing people to join the industry, but
it is also about maintaining and developing the best talent necessary for a top class
industry. The competition for the best talent is very high (for example the choice between
becoming a doctor, lawyer or civil engineer).
1.3.4 Low profitability (short cuts, bankruptcy, lack of investment in

research and development)
Causes of low profitability are:

a) High competition
b) Competitive tendering
c) Client focus on cost rather than value
d) Lack of investment in assets
e) Inefficiency of industry and too much waste.
According to the Egan’s rethinking construction report, the construction has a low and
unreliable rate of profitability. Margins are characteristically very low and share prices
often lag behind companies in other industries. The under-achievement of construction is
graphically demonstrated by the City’s view of the industry as a poor investment. The
City regards construction as a business that is unpredictable, competitive only on price
not quality, with too few barriers to entry for poor performers. With few exceptions,
investors cannot identify brands among companies to which they can attach future value.
As a result there are few loyal, strategic long-term shareholders in quoted construction
companies. This adversely affects the industry’s ability to generate funding for long term
investment and development. Low margins are often associated with bankruptcy, claims,
litigation and poor quality. The Rethinking Construction Client report states that
traditional capital and service contracts selected on lowest price are delivered late, over
budget and do not meet clients’ needs.
1.3.5 Lack of innovation and development

a) Lack of high technology in design and construction
b) Lack of branding
c) Building products are behind in terms of value and intelligence
d) High reliance on site based and unskilled labour
e) Pace of development is slow
f) Demand for buildings is largely client led (industry does little to create demand for
new products).
According to Egan’s rethinking construction report, the construction industry invests

little in research and development and in capital. By 1996, in-house R & D had fallen
by 80% since 1981 and capital investment was a third of what it was 20 years ago. This
lack of investment is damaging the industry’s ability to keep abreast of innovation in
processes and technology. Innovation has been defined as the actual use of non-trivial
change and improvement in a process, product or system that is novel to the institution
developing the change.
1.4 Current State: Industry and Practice

The traditional procurement system, the structure of the industry and the nature of the
construction product all influence current practices and thinking within the construction
industry. Whilst there have been recent changes in the way the industry operates, the
majority of construction projects are still delivered using traditional practices. The main
features of the current state of construction are listed below:
• Design and construction are two separate processes. This leads to:
a) Longer than necessary duration (design and construction can overlap: there is no
need to complete the whole design for construction to start)
b) Inefficient design (this could increase the cost of construction as some design
features could be hard and costly to construct)
c) Tension and adversarial culture (lack of trust and confidence between designers
and constructors).
• Architect is the project leader. This leads to:

a) Focus on design and aesthetics rather than cost, time and quality of service
b) Limited project management skills.
• Competitive tendering is the most common way in which contractors and

professionals obtain work. This causes:
a) Focus on cost rather than value
b) Innovation suffers
c) Discontinued project teams
d) High tendering costs, which would eventually be passed to clients
e) Planning and estimating suffer as practitioners cannot spend much time on the
tender unless confident of winning.
• Construction is dominated by the old craft culture (site based). This leads to:
a) Quality control suffers
b) Sensitivity to weather and site conditions
c) Less reliance on technology and modern production methods
d) Limited standardisation and hence high cost and duration
e) Increase in fragmentation and professions/trades.
• The industry is fragmented and construction is performed by specialist

subcontractors. This causes:
a) Long supply chains that are difficult to manage and control
b) Training and development suffers
c) Disputes and tension rise.
• Different projects are procured by different temporary teams. This leads to:
a) Discontinuity of teams means that on each new projects practitioners face an
initial period of team building which slow progress
b) Different organisations would have different processes and technology
c) Long term and co-ordinated planning and development are non-existent
d) No branding and strategic product development between design, manufacturing
and assembly.
• Project team responsibility ends at completion of construction. This means that:

a) Life cycle costing (cost of occupancy, maintenance and repairs) is not taken into
account
b) Information on the performance of the building in meeting consumers’
(occupiers) needs and expectations is not fed back to those responsible for
design and construction.
• Client is not the consumer (occupiers and users of the building are often temporary
tenants) and the industry is dominated by occasional clients. This causes:
a) Lack of real customer focus
b) Misalignment of interest within the supply chain and between stakeholders
c) Clients are inexperienced and have limited power to exert change in industry.
• Need to price before production. This causes:

a) High financial risk
b) Need to complete all design before the construction cost can be estimated and
agreed on
c) Project performance is judged by the extent to which cost can be kept to that
estimated (rather than the extent to which value is maximised).
It is clear from the above that the traditional procurement system is a cause of many of
the problems within the industry. This, and the fact that construction is very much
influenced by economic cycles and governmental interventions, leads to an industry that
lacks innovation, customer focus and long term planning. The gap between construction
and other industries in terms of performance and client satisfaction is becoming
significant. This has resulted in an overwhelming call for reengineering the way in which
construction projects are procured. As a result a number of initiatives and alternative
delivery systems (procurement systems) have been developed (e.g. design and build).
How would these initiatives affect project management and how should project managers
contribute to the whole reengineering process?
1.5 Current State: Project Management

Project management as taught by professional societies, academia and applied practice
must be reformed because it is inadequate today and its performance will continue to
decline as projects become more uncertain, complex and pressed for speed. There are
three main principles that shaped project management principles and techniques:
• The main focus was on setting cost, time and quality targets and then meeting these
targets.
• Construction was unique and hence management concepts and tools had to come
from within.
• PM in the main is to do with maximising efficiency and predictability given the

scenario. Boundaries and ‘rules of the game’ were assumed to be fixed (e.g. use of
standard forms of contracts).
In traditional project management, a project has a well-defined scope and can be

understood as a sequential dependent series of activities. The project is managed by a
central authority to ensure activities meet schedules and budget targets. The relationship
between activities is assumed to be simple and sequential. Control is the act of comparing
variances from the plan and taking action. Control actions attempt to return the project to
its plan or manage the change. There is constant pressure to reduce time and/or cost of
activities’ even if there are no negative variances’ because the project manager is always
trying to meet or exceed requirements. This effort almost always involves trading
between time and cost.
So how would project management look if, for example, design was not completed at the
start of construction (i.e. no cost target is fixed and indeed project definition remains
flexible)?
1.6 Questions to be asked

• How can the construction industry be improved?
• What are the developments needed?

• How can project management contribute to this development?
• Assuming that the road to change is a long one, where do we initially put our effort
to get maximum returns?
1.7 Initiatives to influence the construction industry

In the UK, there have recently been major initiatives aimed at reengineering how
construction projects are procured. Amongst these are:
• Major government led studies and investigations (Technology Foresights, Latham,

Egan)
• Related organisations and departments (DTI, CRISP, Rethinking Construction)
• Major initiatives (M4I, CBPP, IMI, KPI, RfP, Trust and Money, etc.)
1.8 Main findings and the change agenda

• The procurement system should be concurrent and integrated (concurrent
engineering)
• Tackle fragmentation and adversarial culture by partnering and teambuilding
• Improve productivity, quality and cost by adopting ‘new’ management concepts for
example, ‘lean production’, ‘benchmarking’, ‘value management’ (VM), ‘supply
chain management’ (SCM), ‘process mapping’ and ‘reengineering’)
• Industry must measure its performance and define scope for improvement (using
key performance indicators: KPI)
• Briefing the team (client empowerment, visualisation)
• Move away from competitive tendering and cost as the selection criteria
• Incorporate whole life-cycle costing (WLCC) and sustainability in design
• More use of standardisation and pre-assembly
• Respect the people working in the industry (training, better working conditions, etc)
• Take full advantage of IT and other new technology
• Develop people and culture necessary to facilitate all of the above.

1.9 Reading exercise: Rethinking Construction by Sir John
Egan
The report at Appendix A presents an investigation that was led by Sir John Egan in
1998. The aim of the investigation was to appraise the construction industry in the UK
and propose a way forward. The report underlines many of the points raised by this unit.
After reading the report, you will realise that the construction industry requires major
rethinking in the way it procures its products. You will also realise that construction
under-performs when compared with other industries and that lessons learned from other
industries need to be communicated and adapted into construction.
The report targets practitioners and all concerned with the future of the construction
industry, hence you will need to read it fully and understand the issues raised. When you
finish reading this report together with this unit you should be able to answer the
following questions:
• What are the main problems the construction industry in the UK (and elsewhere)
faces?
• Why would fragmentation in the construction industry be viewed as both a strength
and weakness?
• To what extent there is scope for improvement and what are the main drivers for
change?
• What are the most important recommendations and initiatives proposed by
‘rethinking construction’ in order to improve performance of the construction
industry?
Self Assessment Questions

1. What are the main advantages and disadvantages of having competitive tendering as a
source for awarding construction contracts?
2. What would be the consequences of having design and construction as two
consecutive processes?
3. Discuss why the current construction industry culture is seen as one of the main
problems facing the industry?
4. ‘Innovation in construction is seen as limited.’ Discuss this statement.
2: Project Management Evaluation

At the end of this unit you should be able to fully appreciate the
development of the project management discipline and understand better
why it has evolved the way that it has.
You should understand that project management is a mature discipline and

that it is one that has been applied successfully in many industries across a
wide range of project types, however, you should understand that in the case
of UK construction and construction generally, the discipline is failing to
deliver the outcomes that can be reasonably accepted of it by clients.
At the end of this unit you will not be able to answer categorically why PM
appears to fail in this context, however, you should be able to formulate
justifiable hypotheses for why PM may not be delivering in construction as
successfully as it ought and you should be aware of what may be missing
from the practice of PM in the field that may be contributing towards this
failure.
At the end of this unit you should be fully able to debate these issues.
Recommended reading for Unit 2

Morris, P W G. The Management of Projects, Thomas Telford Ltd. 1994,
ISBN: 0 7277 1693 X
Heriot-Watt University Unit 2 - 1

2.1. Summary
Project management as a discipline can now be considered mature. Its
origins lie with the Manhatten project in the 1940’s which had the aim of
delivering an atomic weapon. It was recognised that the conventional
management organisation structures could not be expected to deliver this
project and the defined ‘performance’ outcomes successfully within the
available time. From these beginnings the project management profession
and the tools and techniques embodied therein have taken hold in a wide
range of industries from biotechnology to aviation and an extensive body of
knowledge has developed to support the theoretical advancement of the
subject and its practical implementation.
The first use of project management practices in construction came by way

of Du Pont Engineering in the USA in the mid- 1950’s. While other US
organisations, most notably the US Navy were continuing the development
of early project management tools, Du Pont were looking to find a method
to predict the optimum time in which construction projects could be
delivered. This led to the development of an early form of the Critical Path
Method (CPM). At roughly the same time the Project Evaluation and
Review Technique (PERT) was developed by the US Navy within the
Polaris Missile programme.
Project management thus has two main intentions. First to address the need
for new management structures to organise individuals and contractors
towards the delivery of a specific project rather than towards the
conventional achievement of an organisations profit.. This is the origin of
the matrix organisational structure. Second, project management addresses
the need for operational tools to quantify, control and deliver various
specific project tasks. You have studied a number of these tools and
systems in some detail in the previous two project management modules.
These components, strategic organisational design and systems management
tools form the two key foundation stones of contemporary project
management. To be effective, project management must incorporate both
organisational design (strategic management) and systems management
(operational project management) techniques.
Despite project management’s emergence as a major discipline, both in

construction and as a whole, and despite all the tools and systems developed
within it to allow successful project delivery, the record of project
management performance is actually dismal.
Morris undertook a study in the early 1980’s in which he examined 1449

projects. Of these, only 12 were completed below or within budget. He
repeated this study some time later with 3000 projects and obtained similar
results (Morris 1994). More recently a study undertaken by the World Bank
demonstrated that 90% of all construction projects on a world-wide basis
encountered significant time or cost overruns (World Bank 1987).

This is not encouraging for a discipline that makes extensive use of systems
and tools that are designed to permit the successful delivery of project
outcomes with specific emphasis upon time and cost delivery.
2.2. Introduction
For the large, knowledgeable construction client, the ability of the
construction industry, and in particular, the ability of the consultant project
manager to deliver capital building projects in accordance with defined
objectives specified in relation to time, cost and quality, is viewed with
increasing uncertainty.
Mounting evidence tends to suggest that the client frequently acquires an

asset that is compromised in terms of its ability to contribute to their core
business function either because its capital cost is greater than planned or it
is delivered behind schedule or because it fails to fully meet the
performance criteria which were specified at project initiation.
Clearly, the procurement phase of a new capital building asset represents

only a relatively small proportion of the total life cycle of that asset,
however, the ability of that asset to fully and successfully realise a clients
core business activities over its complete life cycle can be significantly
influenced by the success or failure of that relatively short procurement
process. Since project management, whether internal or external, attaches
additional costs to projects there is a need, given the perception that project
delivery remains highly problematic, to understand what value is added to
the building procurement process by the application of the project
management techniques that have been presented in the previous modules.
This is a complex area of study because a plethora of variables are known to

significantly influence the propensity for successful construction project
outcomes, not least the clients own subjectivity. Project management
techniques have the capability of influencing a large number of these
variables if the techniques are properly implemented, however, many
variables have little or nothing to do with the project management
techniques regardless of whether these are implemented extremely well or
extremely badly. Therefore, to achieve our aim to understand whether or
not project management techniques as presently implemented in
construction are effective, we must cover much ground.
We begin by investigating the origins of the project management profession

and the various performance attributes that can be appraised in deciding
whether or not a project has been delivered successfully. This is necessary
to gain an understanding the reasonable expectations that we (and clients)
can make of project management. Frequently clients may deem something
to have no added value despite the fact that the item in question could not be
reasonably be expected to deliver what was asked. Therefore, the material

presented in this unit will be a useful starting point to establish evaluation
parameters and it is prerequisite to our study of project management
effectiveness.
2.3. What is PM?

The contemporary building project presents a complex set of highly
differentiated skills, tasks and technologies which are both specialised and
interdependent. These skills, tasks and technologies must be co-ordinated,
controlled and integrated in such a way as to realise what is typically an
uncertain product successfully in an environment which rarely remains
stable throughout the duration of the project. Realising a building project
successfully, from a management perspective, is generally accepted to relate
to ensuring that the project is delivered in accordance with its agreed
objectives, typically those which concern time, cost and quality [Morris, P
W; 1994]. There are other important criteria against which project success
can be measured [Thomas, R H; 1988].
For immediate discussion we will assume that time, cost and quality are the
most important project attributes that project management must deliver (we
will consider the validity of this assumption shortly). If this is the case then
the primary responsibility of management in the modern building project
must be to ensure that the mobilisation, integration and utilisation of the
resources required to execute the project are organised in the most
appropriate manner such that the project fully satisfies the specified and
agreed objectives with respect to time, cost and quality. In the simplest
analysis this is all project management is concerned with.
Therefore, modern building project management has two main functions.

First, it is concerned with the establishment of an appropriate organisational
structure which allows a project to be managed by its objectives with
respect to its technology, its contributors and the environment in which it
takes place [Walker, A; 1988][Bennett, J; 1991][Morris, P W; 1994]. This
organisational structure must allow for the integration of a large number of
highly differentiated contributors. Moreover, it must allow contributors the
ability to meet their own individual needs but must also emphasise that the
delivery of the project’s objectives is their common purpose. Once the
project organisation is established project management can address its
second main function. This is concerned with the identification of the most
appropriate project objectives having taken due cognisance of the project’s
intended purpose, its client and its environment [Bennett, J; 1991]. Within
this second function lies the need for planning tools and systems to control
and monitor these objectives in order that they are successfully delivered.
These functions lie at the heart of the project management profession. They
are its raison d’etre. All of the material that has previously been presented
to you in past project management modules relates directly to these
functions at some level.

2.4. Organisational design
Much has been published within general management literature which
addresses issues surrounding the development of appropriate organisational
structures with respect to products, their technology and their environments.
Considered significant in the management of building projects [Bennett, J;

1992][Morris, P W; 1994] are the contingency theories developed by
Woodward [Woodward, J; 1965] and Lawrence and Lorsch [Lawrence and
Lorsch; 1967]. Woodward deals with organisational structure in relation to
technical complexity whereas Lawrence and Lorsch investigate
organisational structure in relation to differing degrees of differentiation and
integration. Also relevant is the work of Burns and Stalker [Burns and
Stalker; 1961] who examine mechanistic and organic organisational
structures with respect to the nature of the product and its environment.
Pugh, Hickson et al [Pugh, Hickson et al (‘Aston Group’); 1968] consider
technical complexity and company size in relation to the adopted
organisational approach. Additionally, Drucker’s work on ‘Management by
Objectives’ (MbO) [Drucker, P; 1950] is of relevance to building project
management.
Whilst of substantial importance to the management of building projects and

mentioned in much project management literature, the principal emphasis of
the work cited above relates to achieving the most appropriate
organisational structure within the firm, business or private company, with
the intention of realising the commercial objectives of that business. The
usefulness of these theories is clear when a project is itself is viewed as a
business, however, there are added complexities in building project
management.
2.5. Project organisation and project management

The specialised and differentiated nature of the modern building project is
such that there are few individual businesses which possess all of the skills
necessary to complete it. As the degree of specialisation and differentiation
increases within the building project, so the number of separate independent
businesses contributing in order to complete it increases, ceteris paribus.
Each of these contributing businesses has its own organisational structure.
Each individual contributor’s organisational structure is designed to achieve
their own business’ commercial objectives as opposed to the overall
objectives of the project to which it is contributing.
Clearly as all of the contributors will be organised towards profit

maximisation, the commercial objectives of the contributing businesses will
conflict with the objectives of the project.

Since this is the case, there is a need for the organisational structure that is
applied to a building project to secure the priority of the project’s objectives
over and above those of the individual, independent businesses which are
contributing to it. This is traditionally achieved by way of various
contractual mechanisms, many of which you will be familiar with through
the study of other modules in the course. However, by themselves,
contractual mechanisms will not organise project contributors towards
optimum project outcomes. Indeed, a controversial argument suggests that if
project managers get the project organisation right, contracts do not require
to be used at any point by any party. They can be forgotten and become
largely redundant, only needed when something goes wrong as a result of a
failure in the project organisation at some level.
Beyond the contractual devices, there is the need to integrate, control and
co-ordinate the activities of the separate independent businesses with the
intention of motivating them to work together in order that the project’s
objectives will be realised whilst simultaneously allowing each individual
contributing business to organise itself towards realising its own commercial
objectives through participating in the project. This can only be
accomplished by successful project organisational design.
The organisational and integration aspect that has been described is a very
strong antecedent to the modern building project management discipline,
although this was first formally recognised in project based industries other
than construction.
The Manhattan project to develop the first atomic bomb (1942- 1945) is
now generally accepted as the first project to successfully implement the
organisational and integration techniques which are presently typified in
modern project management thinking. The approach taken to the
management of this project was necessitated by the level of integration
required as a result of the inherent technical complexity and the uncertainty
surrounding ‘product’ development. Also important was the urgency of
achieving completion and the perceived importance of success. A traditional
approach to the provision of management to this project was considered
inappropriate [Meredith & Mantel; 1988]. The secrecy surrounding this
project meant that the methods used to manage it were not widely publicised
at that time [Morris, P W; 1994].
Morris argues that later uses of project management practices by the US Air
Force Joint Project Offices and the US Navy Special Projects Office (1953-
1954) had as their precursor a paper by Gulick on matrix organisation
[Gulick, L; 1937]. Therefore, it is clear that project management’s initial
intention was to address the integration and organisational aspects of
complex projects which involved a large number of contributors such that
the project attained the maximum chance of realising successful outcomes in
relation to its objectives.

This was attempted by the appointment of a single person or a team of
people who carried full responsibility for the overall organisation and
integration of the contributors to the project and who were furnished with
the appropriate authority to disregard the conventional vertical management
structures of that time in favour of a matrix style of organisation.
Why are we labouring this point? It is because organisational design is

absolute within the project management concept. Without this, project
management becomes simply nothing more than a planning and monitoring
activity. If project management is to be a worthwhile activity, organisational
design is perhaps more important than any of the systems or planning tools
that are readily recognised to be key components of the discipline.
We will return to the organisational design theme later in the module when
we examine the implementation of project management in practice.
2.6. Systems, planning, and control tools

The initial concentration of project management practice upon organisation
and integration was followed by an interest in systems management
practices which addressed the second principal intention of the modern
project management discipline, namely, the need to identify the most
appropriate project objectives and subsequently to monitor and control the
delivery of those objectives.
Morris defines the early attitude towards systems management thinking in

the management of projects as follows:
“specify performance requirements; carefully preplan to prevent

future changes; appoint a prime contractor to be responsible for
development and delivery”
Morris, P W; 1994 pg. 213
Consequently, the late 1950’s saw those involved in the early project
management discipline focus upon the development of specialist tools and
techniques designed to control specific project processes. The particular
processes examined were those inextricably linked to the identification of
appropriate project objectives and those linked to ensuring that those
objectives were realised. Initially processes which were related to the
objectives of time and cost assumed principal importance. Quality
objectives were tackled later.
Over the period 1957- 1958 specialised risk analysis and scheduling tools
were developed. The Project Evaluation and Review Technique (PERT)
[Raborn; 1959] and Critical Path Management (CPM) [Kelley, J C and
Walker, M R; 1959] methods were developed before 1960. Systems
management approaches within project management were formally

endorsed by the Anderson Committee in 1959; additionally the first
academic paper specifically on the subject of project management was
published [Gaddis, P. O;1959]. The 1960’s produced a continued emphasis
upon the development of tools and procedures which were intended to
ensure that projects could be delivered in accordance with their stated
objectives. These tools and procedures included the introduction of Work
Breakdown Structures (WBS) [1962]; the Planning, Programming,
Budgeting System (PPBS) [1963]; Earned Value Analysis (EVA) [1964];
Quality Assurance (QA); Value Engineering (VE); Technical Data
Management (TDM); systems analysis; resource allocation; Integrated
Logistic Support (ILS); Graphical Evaluation and Review Technique
(GERT). You will be familiar with many (though not all) of these systems
and the mechanics of their operation from PM1 and PM2.
The organisation and integration aspect of project management was not

completely neglected during this period and this was strengthened by the
work of Lawrence and Lorsch (cited earlier) and Galbraith [Galbraith, J, R;
1968]. The late 1960’s and the early 1970’s witnessed practices of project
management and academic investigation of the subject increase
dramatically, in part driven by the Organisation of Petroleum Exporting
Countries (OPEC) crisis of 1973. It is clear that during this time the
emphasis of project management was placed upon the utilisation of the tools
and techniques of the 1960’s. The importance of the integration and
organisational aspects of project management’s implementation was under-
estimated during this period [Morris, P W; 1994]. The 1980’s produced a
resurgence of interest in the integration and organisational issues whilst the
use of practices such as simultaneous engineering, fast build, lean
production and Just- in- Time (JIT) became accepted components of project
management practice. This theme continued in the 1990’s with attention
being focussed on Total Quality Management (TQM), configuration
management, concurrent Engineering, scope creep control while risk
management and analysis techniques became core project management
responsibilities. Figure 1.1 illustrates the development of the project
management discipline.
The evolution of the project management discipline, as very briefly related

above, reveals that it is a discipline which requires to be implemented at
both the strategic level and the operational level.
At the strategic level project management is concerned with the provision of

the organisational and integration structures which are appropriate to
projects and with the provision of appropriate mechanisms for the overall
control of project contributors such that project objectives can be attained.
At the operational level, project management is concerned with the

application of a clearly defined body of knowledge which relates
specifically to how particular processes common to all projects should be
executed and controlled in order to appropriately define the project
objectives and subsequently deliver those objectives successfully.

1930’s Integration & Systems and Tools Use in Construction
Organisational aspects
US Air Corps & Exxon’s Project

Engineering and
F uonocrd
C tiionnating
Gulick paper on Matrix

Organisation
1940’s Manhatten P roject (1942-
45)
US Air Force Joint Project
1950’s Office Critical Path
Weapons systems project Management
offices Programme Evaluation Review
Technique
Navy Special Projects
Office
1960’s Lawrence and
Lorsch Work Breakdown Structure
Galbraith
Planning Programming Tishman Company project
Woodward Budgetin g System manage World Trade Centre
in New York
Burns & Stalker Earned Value
Analysis
Quality Assurance
Value
Engineering
Technical Data
Management
Configuration
Management
Systems Analysis
Resource Allocation
Integ rated Logistic

Support
Graphical Evaluatio n Review
Technique
1970’s
Wood Report formally
endorses the use of
m
p raonjeacgtement in
construction
New procurement path s such
as manage ment contracting
are devised but d o
im
notprove pe rformance
Widespread eme rgence of

1980’s cthoenstruction consultant
praonjeacgter
m
Simultaneou s
Engineering CIOB Endorsement
Fast Build
Techniques RICS Endorsement
Lean
Production Ibbs Report
Just in Time
Use of co nsultant p roject
Total Quality Mana gement managers mandatory on all
public sector capital building
1990’s projects valued in excess of
Configuration £1 million
Management
Risk Managem ent
Concurrent
Figure 6.1: The evolution of the modern project management

discipline

2.7. The application of project management in the UK
construction industry
In the UK construction industry, project management practices were
implemented unsuccessfully during the 1970’s [Hughes, W P:1990][Morris,
P W: 1994]. It now seems clear that the tools and systems developed to
implement project management at the operational level were applied
without a corresponding implementation of practices at the strategic level
concerning the integration and organisational aspects of projects. This
situation produced a confusion surrounding the use of the term ‘project
management’ in UK construction which remains [Rougvie, A; 1988]. It is
possible to implement project management practices at the operational level
without necessarily implementing them at the strategic level. The confusion
is centred upon whether or not a project can be ‘project managed’ purely by
the application of the tools and procedures developed at the operational
level. In consequence, the early to mid 1980’s saw contractors and various
professional practitioners market ‘project management’ as an approach to
win contracts, however, it is now reasonably clear that whilst certain of the
operational project management tools and processes were implemented,
project management at the strategic level could not be properly implemented
due to the restrictive nature of the established professional roles already
present within the UK construction industry, reflected by the traditional
procurement methods adopted [Hughes, W P: 1990].
2.8. The private sector

The UK property boom in the late 1980’s coupled with the increasing
recognition of poor performance and inefficiency within the UK
construction industry caused major UK client institutions to attempt to
implement building project management at the strategic level thereby
adding the organisational dimension to the tools and systems at the
operational level which were already applied. This was done primarily in an
attempt to reduce the time and cost overruns which had become
stereotypical of the projects at that time [HMSO: 1993].
As a result the professional project manager emerged as a recognised UK

building discipline and was added to an already large team of consultants
employed to deliver building projects. In 1988 the Chartered Institute of
Building (CIOB) published its interpretation of the building project
management function which was described as:-
“The overall planning and coordination of a project from inception

to completion aimed at meeting a clients requirements and ensuring
completion on time, within cost and to required quality standards.”
[CIOB: 1988: Page 3]

The Royal Institute of Chartered Surveyors (RICS) published their standard
conditions for the engagement of project managers some time later in 1992
[RICS, 1992] These also emphasise the duties and responsibilities of the
consultant project manager in relation to the coordination of contributors
and the delivery of a project’s objectives with respect to time, cost and
quality.
2.9. The public sector

In 1985 an investigation was carried out into the efficiency of the UK
Government’s capital building project expenditure programme by a central
government efficiency unit. This investigation, which was led by Sir Robin
Ibbs, concluded that the management of public sector capital building
projects should be decentralised and placed within the direct control of
individual public sector client organisations and departments [Ibbs, R,
19852]. In practice many of the public sector client organisations in
question possessed little or no building project procurement expertise. As a
result it was recommended that consultant project managers should be
appointed to control all public sector capital building projects which were
valued in excess of £1 million. This recommendation was implemented,
having the effect that the use of professional project management on all
public sector capital building projects valued in excess of £1 million became
mandatory as part of HM Treasury policy. This policy had as its primary
objective the minimisation of the time and cost overruns frequently
encountered on public sector capital building projects, however,
expectations were also held with regard to the delivery of quality [SOBD;
1993]. Antecedent to this policy were projects such as the Thames Barrier
which was started in 1971 and eventually delivered in 1982 some 3.5 to 4
years late and an estimated £329.3 million over budget [Morris, P W: 1994].
2.10. The present situation

Construction project management can now be considered a mature
discipline. The project management discipline in a wider context is
internationally recognised across numerous project based industries and it
used successfully to manage project delivery in the sectors of its original
development such as the military, space exploration, aviation, oil, and the
built environment and it is now used by sectors conceived since its original
development, most notably in information technology fields.
The complete body of knowledge which relates to project management,

which has in part been referred to in the preceding discussion; ie. the
planning, scheduling and control tools, the systems theories and the
organisational theories (many of which you have studied in detail in the first
two project management modules), when applied by professional project
managers to the modern complex and differentiated construction project,

should, on an a priori basis, result in the delivery of a completed building
which fully meets its defined schedule, budgetary and technical objectives.
However, in practice, the true situation is somewhat uncertain. The value

added by project management in the specific context of the UK construction
sector is considered dubious and is often viewed with suspicion by the
private clients that pay for the services offered (whether the costs are
incurred internally for in- house project managers or externally for external
consultant project managers).
Moreover, continuous failures in public sector projects have produced

almost continuous change. In September 1994 John Major ordered a full
enquiry into the management of public sector capital building projects
which were then either “seriously late” or “seriously over budget”. Notable
examples included the Faslane Trident complex which was reported as
being £800 million (72%) over budget and the British Library project in St.
Pancras which, 12 years after its initiation, remained without an estimate of
its likely final cost [Scotsman; Sept. 1994]. Since that time, Latham and
Egan have reported their conclusions on the state of the construction
industry in the UK and building procurement and the public sector have
once again altered their approach to the provision of the management of
project delivery with emphasis upon prime contractors and facilities or
investment managers. This is coupled with a sustained move towards
shifting the procurement of public facilities to the private sector via Public
Private Partnerships (PPP) in an attempt to shift project risks away from
public sector organisations where public accountability must remain
foremost. This trend, in part, can be attributed to the past performance of
project management in this sector. The scenery changes but the key
‘players’ remain unchanged.
The titles and the mechanisms which allow for the implementation of
project management change, however, the project management concepts
themselves (ie. organisational design and systems control) remain in tact,
but questionable in terms of efficacy. We can look to other industries, such
as aerospace, and see that project management seems to enjoy success, yet
there is a general perception that project management in construction stands
out as much for its singular failure to consistently deliver as it does for any
benefit.
The construction industry in the UK is presently in the midst of fundamental

change in relation to its management processes as a result of 50 years of
under-performance. Although it is generally considered that Latham and
Egan sparked the current change (Latham, 1994, Egan, 1998), these authors,
in many respects, simply reiterated what had previously been said by
Emmerson and Banwell (Emmerson, 1962, Banwell, 1963). Latham and
Egan’s recommendations have taken hold not because what they said was
new or or radical or fundamental, but rather because they represent the
Industries leading clientele, because globalisation means that the UK’s
relative under- performance can no longer be tolerated and because there

has finally been recognition that construction projects consists of a series of
common, repeatable processes; the old argument that construction projects
were each individual and unique, from a management perspective, is (at
last) quiet. The present situation in UK construction is vastly altered from
that when project management processes were first introduced.
Management thinking, practices and processes are evolving rapidly. The
position of the ‘traditional’ project manager is constantly challenged, project
management practices are fast changing and other professional consultants
compete to provide project management services. Terminology such as
critical path management, contract management, concurrent engineering,
value engineering and their counterparts have been replaced by business
process mapping, partnering the supply chain, logistics control, prime
contracting, public private partnerships amongst others. We will address
these new ideas and practices in Unit 5, however, in the meantime we will
focus on understanding the effectiveness of project management as applied
in the conventional models.
Given the above scenario, we must ask; how effective is project

management in construction?, Does it offer any of the benefits we may
expect and which are suggested in PM 1 and 2?, What, in fact, should we
expect? Can project management deliver in the future or do we need to look
to a new method for the management of projects?
The general record of projects in meeting their defined schedule, budgetary

and technical objectives suggests generally poor performance over a wide
range of building types which have utilised a variety of procurement
systems and management strategies [Morris, P W: 1994].
This is the case despite the extensive body of knowledge which exists on the
subject of project management referred to in earlier in this unit and in PM1
and PM2.
Clearly, with respect to performance difficulties such as these and the poor
record of projects generally in relation to realising, an objective and
quantitative evaluation project management’s effectiveness will be of much
value. The results of such an evaluation would give us a clear indication of
how successful project management is together with a clear indication of the
actions that should be followed to allow continuous performance
enhancement for those engaged in the techniques of construction and project
management. Undertaking such an evaluation and interpreting the results
towards improving the future implementation of project management in
construction are our aims in this module.

2.11. Does PM work? How do we assess PM
performance?
Before reading further, how do think the effectiveness of project

management should be measured?
As mentioned at the start of the unit, up until now we have assumed that
time, cost and quality are the key performance attributes that we should use
to measure project management’s success or failure. However, there are a
number of recognised alternative criteria in appraising building project
performance, and there is much debate as to which of these are most
appropriate in the evaluation of contemporary building projects [Morris, P
W: 1994][Walker, A: 1989]. Therefore, we will now spend time examining
the available criteria and establish whether or not time, cost and quality data
are the sole attributes that we can use to reasonably judge project
management effectiveness.
It is worthwhile noting that the building project performance analysis

method adopted significantly effects the scope, limitation, and usefulness of
an evaluation that intends to test the relationship between variables such as
project management, and building project performance.
The principal difficulty in evaluating the effectiveness of professional

project management is that the success or the failure of the approach can
only be measured in relation to the success or failure of the delivered project
[Walker, A: 1989]. In order to be reliable, objective or quantitative
measurements of the success or failure of a building project ie. its
performance, must be obtained.
However, the intrinsic nature of building activity, together with the range of
characteristics which can be presented by, or expected from a building
project, make the quantification of building project performance an
intractable task.
Bennett argues that the input: output ratio represents the only practical
comprehensive measure of the success or failure of a building project. He
suggests that the only practical common measure for all of the outputs and
inputs in building projects is money. Therefore, the success or failure of
projects is most comprehensively measured in terms of the Value: Cost ratio
[Bennett, J: 1992: pg 48]. However, it is also argued that a comprehensive
evaluation of building project performance must examine both quantitative
and qualitative data which are obtained by analyses of both the building
process and the building product; an argument supported by the work of
Meredith and Mantel [Meredith and Mantel; 1988].

The exclusive analysis of either wholly quantitative or wholly qualitative
data obtained from only the building process, or from only the building
product, is unlikely to yield a ubiquitous or true assessment of the overall
performance of a building project. This is a view supported by the Building
Investigation Centre (BIC) [BIC: 1992], Nahapiet [Nahapiet, 1988], and
Walker [Walker, A; 1989].
The BIC argue that a project having realised all of its predicted time and
cost estimates (ie. having satisfied the principal expectations which relate to
the building process) cannot be viewed to have performed satisfactorily if a
high number of user complaints were evident upon occupation of the
completed building by its Client organisation. In other words it is argued
that it is possible to perform successfully in terms of the building process
whilst simultaneously failing in terms of the product.
Therefore if a true evaluation of performance is to be obtained it is

necessary, in theory, to combine the quantitative measures of the building
process with those of the product, and furthermore to combine these with
the qualitative measures of both the process and the product (examples of
qualitative performance measures which relate to the process and the
product are ‘Quality of work life’ and ‘Aesthetic Quality’ respectively.
There is a strong theoretical argument, therefore, which suggests that, in

order to be meaningful, any evaluation of building project performance,
having as its purpose the comparison of differing organisational or
managerial strategies, must attempt to arrive at a single measure of the
project performance outcomes. This measure should incorporate an
appraisal of all of the qualitative and quantitative performance criteria which
are readily appreciable within the concept of building project performance.
However, despite having acknowledged this theoretical prerequisite, the

BIC fail to propose a framework or method which provides for the true
measurement of building project performance which they argue is required.
Similarly Nahapiet acknowledges that the evaluation of building project

performance must include an examination of qualitative data in addition to
the analysis of quantitative data in order to gain a true picture of building
project performance. However, again, no attempt is made to arrive at a
single measure of performance which embraces both qualitative and
quantitative data which relate to both the building process and the building
product [Nahapiet, 1988]. Brensen [Brensen, M J. et al, 1987] considers
that the evaluation of building project performance requires the input of
what he terms soft data (ie. qualitative data) to supplement the traditionally
accepted hard building performance data (Brensen applies the term hard
data to the quantitative criteria relating to time and cost).
Again, he does not propose a method such that a single measurement of

building project performance, which embraces all of the qualitative and
quantitative criteria within the performance concept is obtained. Instead, the
framework he proposes comprises two separate and wholly independent

evaluations, one based upon quantitative data and the other based upon
qualitative data. In Brensen’s rationale, overall or true performance must
therefore be assessed via the evaluator’s judgement upon how the two
separate evaluation results should be combined.
The difficulty surrounding the combination of qualitative and quantitative

data from both process and product in building project performance
evaluation and the range of performance criteria which may be included
within such an evaluation is extended in studies by Sink [Sink, 1983],
[Thomas, R H. et al, 1988] and Maloney [Maloney. et al., 1990].
Sink argues that there are seven building performance criteria, each of
which is crucial if an assessment of the overall performance of a building
project is to be obtained. Sink’s seven criteria are as follows:-
Criteria Type
Product/Process
ο Effectiveness Quantitative Process

ο Efficiency Quantitative Process
ο Productivity Quantitative Process
ο Profitability Quantitative Process
ο Innovation Qualitative
Process/Product
ο Quality of Work Life Qualitative Process
ο Quality of Product Qualitative/ Quantitative Product
Thomas and Maloney agree with Sink’s analysis. In the discussion

forwarded by Sink, Effectiveness is considered to be the degree to which a
project succeeds in realising its initial agreed objectives. In this performance
dimension quantitative performance data, such as time and cost information,
are analysed; the effectiveness being quantified through the expression of
the expected result and the actual result as a ratio. Efficiency concerns the
measurement of the productive utilisation of machines, equipment and
materials. This is expressed as a percentage of total available time and is
therefore, again, interested in only the building process. Labour utilisation is
excluded from the efficiency criteria as Sink considers that the labour
intensive nature of building activity requires that the productive efficiency
of labour be examined within the productivity criteria, which is likewise a
quantitative, process orientated building performance measure. Profitability
represents the expected return or value and the achieved return on the
project as a ratio, thus adding a further quantitative, process based measure
to the performance evaluation method. However, Sink also recognises the
need for qualitative measures related to the building product as well as to
the process.
These are reflected in the criteria: Innovation, Quality of Work Life and
Quality of Product. Innovation is a qualitative measure which can be used to
examine data from both the building process and the building product;

Quality of Work Life addresses the perceptions of those involved in the
delivery of the project and is therefore entirely qualitative and process
orientated.
Finally, Sink considers the Quality of the Product. Here he analyses the
qualitative aspects of product quality, however, it should be noted that
certain aspects of the product quality may be evaluated quantitatively (as in
the case of the number of user complaints proposed as a measure of product
quality by the BIC); this feature of product quality will be discussed and
developed further in Unit 2.
Significantly, despite having extensively discussed the individual variables

which contribute towards building project performance, neither Sink,
Maloney or Thomas propose a method which facilitates the synthesis of the
seven partial performance criteria such that a single measure of true project
performance is obtained. In Sink’s method a project is appraised discretely
in terms of each of the seven partial criteria. Therefore, seven separate
performance measurements are made for each project. The
interdependencies between these partial measures are not appraised and the
overall evaluation of performance remains a value judgement based upon
the separate information provided by each of the seven measures.
Oglesby considers that there are four principal performance criteria which
require to be measured in order to evaluate ‘on- site’ building project
performance [Oglesby, 1989]. These are:-
Criteria Type
Process/Product
ο Productivity Quantitative Process

ο Safety Qualitative/ Quantitative Process
ο Timeliness Quantitative Process
ο Quality Qualitative/ Quantitative Product
Again, this proposition recognises that the analyses of both quantitative and
qualitative data which are acquired from both the building process and the
product are necessary to appraise building project performance at the site
level. However, Oglesby (like BIC, Nahapiet, Brensen, Sink, Thomas and
Maloney) does not forward a framework to combine his partial performance
criteria such that a single overall assessment of building project performance
is obtained.
Examining building project performance from the Clients perspective

Penderson [Penderson,1975] and Walker [Walker, A., 1988] consider that
evaluations may be appraised upon investigation of the following partial
measures:-
Criteria Type
Process/
Product
ο Quality:-
2.11.1. Technical Standards Quantitative Product

2.11.2. Aesthetic Standards Qualitative Product
2.11.3. Functional Standards Quantitative/ Qualitative
Product
ο Price:-
(a) Capital Cost Quantitative Product/

Process
(b) Running Costs Quantitative Product
ο Time Quantitative Process
Walker suggests that measurements of these may be obtained and

subsequently weighted in accordance with the relative importance attached
to each by the Client organisation. In this way it is possible to arrive at a
single measure of building performance. However, this attaches a subjective
dimension to the evaluation which presents validity problems should such
an approach be used as a basis to compare alternative building policies or
systems as we are trying to do in measuring project management
effectiveness.
Alercon Gardenes proposed a predictive building project performance

measurement methodology [Alercon Gardenes, F., 1992]. His methodology
had as its aim the comparison of differing managerial strategies in terms of
the predicted effect that each have upon a combined performance measure.
In Gardenes’ approach the combined performance measure is based upon
the partial performance measures of schedule, budget, value and
productivity. The combined performance measurement is produced by a
statistical analysis which requires the client to weight the importance of
each partial performance measure and which requires that a set of baseline
values for each partial measure be arbitrarily specified. The combined
performance measurement is then made by analysis of the sum of the
deviations between the models predicted value for each partial measure and
the corresponding pre-specified baseline value for the partial measure. Each
of the partial measures produces a weighted deviation from a baseline
predetermined value for combined performance.
Thus, it is argued, the influence of alternative managerial strategies may be

assessed on the basis of the observed variance in the combined performance
measure for each strategy (Gardenes assessment of the influence of each
strategy is based upon probabilistic inference). It should be noted that the
combined performance measure used in this approach is a mathematical
prediction which is dependent upon the arbitrary selection of weights and
baseline values for each of the partial measures and is therefore open to the
same criticisms made of Penderson and Walkers approaches described
earlier. Gardenes stresses that the combined performance measure
developed in his approach can only act as an aid and does not, by itself,
represent an adequate basis for decision making or evaluation.
There is an apparent general recognition, in theory at least, of the need for a
comprehensive building project performance evaluation method which
appraises both quantitative and qualitative data relevant to the many aspects
of building project performance. However, it is evident that (with the
exception of Alercon- Gardenes) contemporary building project
performance evaluation literature focuses upon the almost exclusive
examination of partial, single attribute performance criteria in order to
evaluate discrete aspects of building project performance as opposed to
evaluating true or complete building project performance.
It is apparent, within project performance evaluation literature, that a

pragmatic approach to the evaluation of building project performance is
generally acceptable. The theoretical argument concerning the need to
conduct a multi- attribute evaluation of building project performance is
generally undisputed. Moreover, it is acknowledged that the isolated
analysis of partial performance criteria will not produce a true picture of
building project performance.
However, the logistical and practical difficulties we encounter in attempting

to produce a single measure for building project performance, that embraces
all of the quantitative and qualitative aspects within building projects,
clearly dictate that a realistic, perhaps severely limited approach to building
project performance evaluation should be taken in most cases. Bennett
expresses the view that:-
“...there are often good reasons for adopting a less than

comprehensive measure [of performance]”
[Bennett, J; 1992; pg 48]
Similarly, Walker clearly indicates his belief that the attempt to arrive at a
single multi- attribute measure of building project performance
incorporating all of the attributes inherent within building may be
inappropriate [Walker, A; 1989; pg 231].
This acknowledgement, whilst greatly simplifying the performance

measurement problems expounded above, means that performance
evaluations which have as their purpose the objective comparison of
differing project execution strategies must be approached diligently. The
literature indicates that building project performance evaluations making use
of single- attribute performance criteria must be carefully planned and
designed in order to ensure that the single attribute criteria which are
examined relate specifically to the purpose of the evaluation (Walker, A;
1989, pg 231; Price Waterhouse, 1992).
A thorough examination of the available literature on performance

evaluation reveals that by far the most common performance criteria used in
the evaluation of building project performance are those which may be
classified within Sink’s definitions of the criteria relating to Productivity

and Efficiency (although the clear distinction that Sink identified between
them is not always observed). A large number of studies have been
published that focus upon these performance criteria in order to conduct
evaluations of the influence of particular variables, approaches or strategies
upon building project performance per se.
Therefore, it is clear that the practical measurement of building project

performance requires a pragmatic and constrained approach. This is the case
despite a clear recognition that, in theory, evaluations of building project
performance should examine all of the quantitative and qualitative data
which is presented by all of the various aspects of building projects if a true
picture of performance is to be obtained. It is apparent that a general method
to achieve such a ‘true’ evaluation has not yet been established.
The literature suggests that provided the performance criteria selected are
pertinent to the objective of the evaluation, and that the limitations of the
use of partial performance measures are clearly stated, then an appraisal of
the influence of a particular technique or approach (for example project
management) upon building project performance through the examination of
partial, single- attribute performance measures, is valid. Therefore, the tasks
to be addressed in deciding how to evaluate the influence of a particular
technique upon building project performance are; First to determine the
perspective of the evaluation together with the intended purpose of the
evaluations output, and; second, to identify the particular performance
criteria that the particular policy or system has the capacity to influence
[Walker, 1989][Price Waterhouse 1992].
Question
Based on what you have read, have you changed your

opinion on what should be measured in order to quantify
project management effectiveness. If so, what do feel
should now be included in an evaluation and do you
believe you could determine practical ways of measuring
them?
2.12. What are we going to determine PM success

against?
Given the range of criteria available as discussed above, how do we decide
which performance criteria we should use to measure success. We must
consider this problem from three perspectives as follows:
(a) What does the construction client expect by appointing a project

manager.

Project Management can be considered in terms of the utility which it offers
the client organisation. Therefore the performance criteria included within
the a performance evaluation method must be those which are meaningful to
public sector clients. This immediately limits the performance criteria which
require to be investigated. Criteria such as safety [Oglesby; 1988] and
quality of work life [Sink; 1983][Maloney; 1988][Thomas, R H; 1988] may
be disregarded. In contrast, criteria such as time, cost and quality [Walker,
A; 1988][Penderson; 1975] (also advocated by BIC, Brensen, Nahapiet,
Sink, Maloney, Thomas, Bennett, Morris; refer to earlier citations) assume
principal importance. These performance criteria are collectively referred to
by the colloquialism ‘the deliverables’ and are cited by Meredith and
Mantel to be the prime objectives of project management. The use of time,
cost and quality as principal building project performance criteria or
indicators, and the importance of their delivery in the modern project
management discipline is confirmed by much contemporary literature.
In addition to the deliverables (and directly dependent upon them), since

project management services whether internal or external are always
transaction costs we must be concerned with the concept of value (the
principal performance criteria cited by Bennett; refer back to 1.11) and
perhaps more importantly value for money (VFM).
The criteria time, cost and value, broadly speaking, all fall into Sink’s
definition of the criteria labelled effectiveness, whilst quality fits into his
definition of the Quality of the Product.
More difficulty is encountered in determining whether or not the analysis of

Sink’s criteria Efficiency and Productivity is meaningful whilst conducting a
building project performance analysis from the clients perspective. These
criteria do not in themselves represent project deliverables, in other words
they are aspects of building projects which are not usually specified by
clients.
Provided that a project is delivered in accordance with its specified time,

cost and quality objectives a client will not normally require information
pertaining to the efficiency and productivity of the project. However, the
project deliverables; time, cost, quality, value and value for money are of
course reciprocally interdependent upon efficiency and productivity.
Inefficient and unproductive projects do not represent value for money.

Therefore, efficiency and productivity despite not being classed as
deliverables, are of importance and meaning to client organisations in the
evaluation of building project performance. This is verified by the work of
private sector clients such as the British Airports Authority (BAA) Plc
[BAA Plc; 1993] and Lynton Plc [Lynton Plc; 1993]. Therefore, to use
Sink’s terminology, the literature reviewed reveals that the performance
criteria effectiveness, quality of product, efficiency and productivity are
those which are of principal importance to client organisations when
conducting evaluations of building project performance.

There is increasing demand from building clients for improved project
performance specifically in relation to the delivery of time, cost and quality
objectives. Forums such as the Construction Productivity Network, set up in
1996 by the Building Research Establishment (BRE), The Business
Roundtable and the Construction Industry Research and Information
Association (CIRIA), have allowed large clients to express demands
concerning what they require from the construction industry. In the case of
leading clients, the demand is for building project delivery to be 100%
predictable (Matthews, 1997). Their aim is to procure a high quality product
at a low cost which will be reliable and which will be delivered on the date
that it is required. Clearly, time, cost and quality assume principal
importance.
(b) What is the project management discipline equipped to deliver.
Having established the principal performance criteria from the Clients

perspective, it is necessary, following the recommendations of Walker
[Walker, A; 1989] and Price Waterhouse [1992], to identify which criteria
project management has the scope to influence. Thus it is necessary to
conduct a review of project management literature in order to determine the
duties and responsibilities which the consultant project manager may be
expected to discharge.
To a large extent it is clear that the tools, systems and organisational

theories which have been developed specifically for the execution of the
project management function accurately reflect the duties, responsibilities
and expectations which are made of the contemporary building project
manager.
Having conducted a thorough review of the available literature, it is clear

that, as Meredith and Mantel put it, the prime objectives of project
management are to deliver a project on time, within budget and in
accordance with its required technical specifications (quality). The
requirement to achieve these three goals represents a principal feature of
most of the principal publications in the discipline (refer to Walker [Walker;
1989], Morris [Morris, P W; 1994], Lock [Lock, D; 1988], Bennett
[Bennett, J; 1988 & 1992] Meredith & Mantel [Meredith and Mantel; 1988],
Kerzner [Kerzner, P; 1957], Chartered Institute of Building [CIOB, 1988]
and the Royal Institute of Chartered Surveyors [RICS, 1992] amongst
others).
The literature repeatedly states that the project managers prime

responsibilities, beginning at project inception and continuing until project
handover, are to ensure that the project is delivered on time, on cost and in
accordance with the specification (for example, refer to the Chartered
Institute of Building [CIOB; 1988] and the Royal Institute of Chartered
Surveyors’ Standard conditions for the appointment of project managers
[RICS; 1992]. It is also clear that these duties and responsibilities have

remained constant and essentially unaltered from the early uses of the
project management discipline to the present day.
The processes, tools, systems and organisational designs which are specific
to the contemporary project management discipline amply demonstrate the
concentration of project management effort upon the realisation of these
three criteria. An investigation of these processes, tools, systems and
organisational designs clarifies the expectations which may be reasonably
held in relation to the influence that project management has when applied
within the context of building projects.
Tools used for options appraisal, such as the comparative benefit model,
payback analysis, average rate of return, discounted cash flow, internal rate
of return, profitability indices, scoring models (including the unweighted 0-
1 factor model, the unweighted factor scoring model, the constrained factor
model, Dean and Nishry’s model and goal programming with multiple
objectives), risk analyses and general simulation analysis techniques are
designed to ensure that a pursued project represents the best available value
and value for money to the client organisation and to ensure that it will be a
profitable investment.
Budgeting tools and systems such as the work breakdown structure (WBS),
the planning and programming budgeting system (PPBS), Resource based
cost estimating tools, activity/ task based estimating tools, Gozinto charts,
learning curve analyses and risk analysis all have their application in
ensuring that costs are properly estimated, planned and subsequently
controlled.
Tools and systems designed to schedule tasks and thus to plan and control
time include work study analysis, Gozinto charts, Gnatt Charts, the
programme evaluation and review technique (PERT), the critical path
method (CPM), the graphical evaluation and review technique (GERT) and
computer analysis packages such as ‘Microsoft Project’, ‘Microplanner
Expert’, ‘Pertmaster’, ‘Primavera’ and ‘SuperProject’ amongst others.
Processes such as interface management (eg. TREND analysis and Linear

Responsibility Analysis (LRA)) and knowledge management techniques are
designed to ensure that processes, tasks, information and personnel are
coordinated and controlled such that the schedule and budget plans are
realised. Advanced PERT and CPM procedures facilitate resource levelling
and resource optimisation which enable time and cost tradeoffs such that a
clients objectives may be realised efficiently and productively.
Finally, processes and concepts such as total quality management (TQM),

quality assurance (QA), value engineering (VE), zero defects and
configuration management have as their intention the guarantee that product
quality will be adequately delivered to the client organisation.
Thus, upon examining the principal contemporary project management

tools, systems and processes it is clear that the discipline’s is equipped to

realise value for money projects which are delivered on time, within budget
and in accordance with the required product quality.
The resource allocation and analyses features provided by PERT, CPM and
the contemporary project management software packages demonstrate
project management’s concern in ensuring that resources (including time
and money) are utilised in the most efficient and productive manner,
however, it is apparent that project management’s concern for these issues is
developed from the prime objective that a clients objectives in terms of
time, cost and quality should be delivered.
You should note that there is almost perfect correlation between the
performance criteria which are important to client and the performance
criteria which the project management discipline has the tools, knowledge
and thus the scope to influence and control. This correlation is, of course,
expected since the contemporary project management discipline was
originally developed and utilised by leading client organisations.
Therefore, combining the performance criteria relevant to clients in building

project performance evaluation and the performance criteria which project
management may be expected to, and has the scope to influence, the
evaluation of the influence of project management upon building project
performance must focus upon the criteria: time delivery, cost delivery,
quality delivery, value for money, efficiency and productivity.
(c) Specific contractual requirements and obligations demanded of

professional project managers.
Having determined the relevant performance criteria from both the clients
perspective and from the point of view of the performance criteria project
management may be expected to influence, it is necessary to consider the
contractual conditions that we would normally expect to find between
clients and project managers, although we must acknowledge that this only
properly applies in the case of external project management arrangements.
The situation in the case of internal project managers in terms of what the
client (ie. their employer) may expect could be somewhat altered. Normally,
the contractual requirements are based upon the standard conditions of
engagement issued by the RICS and the Project Manager Diploma
Association of the RICS (RICS, 1992).
In short, these conditions broadly stipulate that project managers are

responsible for the administration, management and coordination of a
project. The project manager should not issue any instruction which would
act to materially alter the projects agreed objectives in relation to either time
or cost. In addition the project manager has a duty to notify the client of any
reason why the agreed objectives in terms of time, cost and quality may not
be achieved.

A full disclosure of the contract of engagement for consultant project
managers can be obtained from the Royal Institution of Chartered Surveyors
(RICS) and further recommendations are evident from BS6079.
Clearly, once again, these requirements emphasise the project managers

duties with respect to the delivery of time, cost and quality. Therefore, an
evaluation of the project management effectiveness must be focussed upon
building project performance in terms of the delivery of time, cost and
quality.
Question
By focussing on time, cost and quality we neglect many

other performance attributes that we have discussed,
many of which may be considerably influenced by project
management. Do you think we are correct to disregard
the others in favour of time, cost and quality?
In summary, project management represents a transaction cost for

construction clients. If you pay someone you expect something in return
and in the case of project management, what is expected in return at the
bottom line is 100% predictability in securing the project deliverables and
for most clients and most projects the deliverables are almost always
defined in terms of time, cost and quality.
So, we have covered much ground in determining what project management

is, how performance and project management success could be measured
and we have considered what the typical project manager can be expected to
accomplish. But we still don’t have an answer to whether or not it actually
makes a difference.
2.13. Does project management deliver or not?

Sadly, when we consider the criteria, time, cost and quality, and ask this
question, the answer is an emphatic NO!
The evidence against the value of project management in construction

projects is almost overwhelming!
In 1987 a study carried out by the World Bank determined that 90% of
construction projects were delivered late; In 2000 a survey by the National
Audit Office reported that 70% of public construction projects in the UK
were running seriously late or seriously over budget; In the early 1980’s
Morris undertook a study of 1449 separate construction projects and found
that only 12 were delivered within budget. These studies are not

encouraging for a discipline that we have determined can be measured
against its ability to deliver these criteria with 100% predictability. All of
the PM tools and processes have the delivery of these goals as their primary
aim. The evidence does not stop there! Further studies by Kalantjakos
(2001), Schlinchter (2001), Crawford and Pennypacker (2001), Clarke
(1999) and Pinto & Mantel (1990) amongst many others, seriously question
the ability of PM to successfully deliver project targets in the case of
construction projects.
2.14. What if?

What if all of these studies have just looked at the performance of the
projects from afar instead of looking at the performance of PM in detail-
perhaps the projects had unique circumstances and would have been very
much more late or over budget if it had not been for the involvement of the
PM. If this were the case then the picture would be positive since the PM
process could be seen to be working from the perspective of mitigation.
This is a valid question. In order to get a better handle on the detail, we

need to find out how a PM managed project compares with a non-PM
managed (traditional) project. Such a study has been undertaken by the
author using a causal path model.
The causal path model, shown below, compared PM projects with non PM
projects. The numbers on the arrows represent the influences between the
variables.

E1
RK 0.859 E2 0.830 E3 0.743 E6
0.899
TC VA QE
+0.899 -0.372
-0.500
0.816 E4
+0.478
PM PR TE
+0.648 +0.691
RK Risk PR Procurement
TC Technical Complexity TE Time Effectiveness 0.865 E7
PM Project Management QE Quality Effectiveness
VA Variations to Contract
Note that there is no cost variable shown on the model. This is because no
statistically significant influence could be found between PM and delivered
cost. This in itself is a somewhat damning finding as it seems to suggest
that the final delivered cost of a construction project is entirely uninfluenced
by the management techniques implemented and instead depends on factors
entirely outwith the control of management.
In terms of the rest of the results shown in this model, it is apparent that
project managers have no direct influence upon any of the performance
variables.
However, project management does seem to reduce the level of risk

encountered within building projects. It also appears to be influencing the
level of technical complexity within projects (this was measured in relation
to programmed activity, specification and repetition). Project management
appears to produce a tendency to adopt less traditional contractual forms.
Thus, through the variables, TC and PR, project management appears to
influence building project performance in an indirect manner despite the
lack of evidence for any direct influence.
The increased technical complexity which is associated with project

managed projects results in a greater number of variations made to contracts
which in turn seems to reduce the effectiveness of quality delivery.

On the other hand, the more advanced contract forms associated with project
managed projects act to improve the time performance of projects.
Project management can, therefore, be seen to have indirect influences

upon building project performance which are beneficial to the time delivery
of projects but which are detrimental to the effective delivery of quality.
No influence, either direct or indirect, is evident between project
management and cost.
This is particularly important. It is essential that the use of project

management can be shown to demonstrate net additionality (or added value)
in either or all of the time, cost, quality criteria. Remember project
management represents a pure transaction cost. If net additionality cannot be
demonstrated then the case for clients using project management services
for the management of future projects is severely weakened. This is
because value for money cannot be demonstrated.
ο Interpretation of the indirect effect
We see that project management is not observed to have any direct effect
upon building project performance and has only an indirect effect upon the
performance variables of time and quality, time benefiting at the expense of
quality. An assessment of the overall effect of project management upon
these variables may be computed as follows:-
ο Effect of PM on TE @ 95% = (PPR,PM x PTE,PR)

= +0.648 x +0.691
= +0.448
This means that the use of project management improves time performance
by +0.448 standard units (remember the data had to be standardised to allow
the model to work.
ο Effect of PM on QE @ 95% = (PTC,PM x PVA,TC x PQE,VA)

= +0.478 x +0.899 x (-0.372)
= -0.1599
This means that the use of project management reduces quality performance
by 0.159 standard units.
When the results are converted back from the standardised values to the
original scales of measurement, the results indicate that the use of project
management improves time delivery by 0.171 or 17.1%.
On the other hand, this improvement in time is balanced by a reduction in

quality delivery of 0.122 or 12.2%.

2.15. Where does this leave us?
The analysis undertaken above indicates that project management does not
act upon the delivered time, cost and quality outputs in the manner we can
reasonably expect nor in the manner that construction clients expect.
The results of the path analysis suggest that project management, in fact, has
no direct influence project performance! Instead, the results obtained
provide evidence for an indirect relationship between project management
and construction project performance. This finding, in itself, is considered
significant, however, it is important to note that the indirect relationships
identified exist only between project management and the performance
criteria of time and quality. No evidence substantiates even an indirect link
between project management and performance in terms of cost delivery.
Moreover, returning to the indirect relationships, the results obtained from
the path analysis suggest that projects managed by project managers realise
their time objectives at the expense of quality implying that project
managers place greater emphasis upon the successful delivery of time than
is the case for the delivery of quality (This perhaps indicates the success of
the project management planning and scheduling tools you have studied in
PM1 and PM2, but indicates that less value is attached in practice to the
strategic tools available to project managers).
The same project has neither a better or worse chance of being delivered in
accordance with its agreed budget regardless of the use of PM! Therefore it
is clear that project management in practice does not provide or guarantee
the benefits which may be expected as a result of its application to
It follows that a similar improvement in the time performanceprojects may

be realised at a lesser cost to the client by removing fees paid to project
managers.
The assessment of whether or not project management adds value must

depend to a large extent upon where the priorities in relation to performance
are placed by the particular client organisation in question.
In the case of a project which has timeous delivery critical to its success, the
expenditure of money on project management does, in fact, add value.
Therefore we can see that ‘net additionality’ with respect to the time
component does appear to be present, albeit indirectly. However, we cannot
identify any net additionality, direct or indirect, in relation to the cost and
quality components.
This must of concern to us as project managers. The cost component is

perhaps of most critical importance to the majority of construction
clients. The same problem is inevitably demonstrable when considering

a project which has the successful delivery of quality principal amongst
its performance objectives.
The path model tells us that there is a problem with project management
application in construction projects not simply that there are huge problems
with construction which PM is helping to mitigate as we had earlier
supposed!!
What is going wrong? From your studies in PM1 and PM2 we know how
project management should perform and what it should influence. Yet all of
the evidence indicates that project management in practice does not deliver.
Before you question the value of project management at a more fundamental
level, let us address a crucial point.
None of these studies have identified any evidence that suggests project
management theory, in terms of the tools developed or in terms of the
recommended working practices you have studied in PM1 and PM2, cannot
deliver in practice that which is expected of it. In the absence of evidence
that there is a fundamental problem with project management knowledge we
must conclude that the problem lies not with project management per se. but
with project management implementation in construction. Alternatively, it is
possible that the systems and processes which are currently employed by
clients in order to integrate project managers within the organisational
structures of their projects in some way restricts the ability of the project
manager to perform in a manner which approaches ‘Best Practice’.
2.16. Explanation
There are only a limited number of possible explanations for the results
obtained:-
(i) The contemporary project management discipline does not possess

the knowledge or the capability to successfully deliver modern
complex construction projects, or;
(ii) The tools and systems designed to underpin project management,

many of which you have studied in PM1 and PM2, are not equal to
the task of managing projects, or;
(iii) There is a general failing to implement project management properly

in relation to the recognised requirements that are fundamental
within the discipline.
We must consider which of these is most likely to be valid.

2.17. The probable cause of failure
Clearly, the project management profession in the UK construction industry
does not consistently deliver the results demanded by contemporary clients.
We need to carefully consider what this means for both the practice of
project management and for the management of projects generally. Do the
results mean that project management is a flawed concept, do they mean
that project management techniques are not sufficient to cope with the
demands of managing modern construction projects or, finally, do they
mean that there is something seriously wrong in the manner with which they
are presently applied in the UK construction industry.
The first question we must address is whether or not project management

has some fundamental problem that prevents it from being successful. If
this is true we can expect project management to consistently fail when
applied to a wide range of projects in a wide range of industries.
We can be reasonably confident that this is not the case. When the track
record of project management is examined across a wide range of project
based industries, ranging from Aerospace, Computing and Manufacturing
we see that the general record of project management has been reasonably
good. This was not the case in the late 1960’s to the early 1980’s where
project management in general seemed to perform very poorly in relation to
its ability to deliver complex projects, however, lessons concerning project
management implementation were learned and the present situation is
generally good. Sadly, the construction industry has a tendency to lag
behind other industries in terms of performance improvements and the
lessons learned in other industries are only coming to fruition in
construction now. The Latham and Egan reports testify to this.
With these facts in mind we can be reasonably confident in asserting that

project management per se is not fundamentally flawed.
The second question we must consider is whether the tools and systems
used to underpin project management are not equal to the task.
A couple of points arise here. First, the nature of technological advance

means that the tools and systems we have available to us today will not be
perfect and that we can expect to see improvements in future, particularly in
the way of project management information technology systems which are
developing at a considerable rate.
Therefore, we can expect that in future, the tools and systems available to us
as project managers will be better and will therefore better enable project
managers to manage projects towards successful outcomes. However, the
fact that we know tools and systems will improve does not mean that the
tools and systems available at present are not equal to the task if properly
used.

Once again we can answer this question by considering other project based
industries that use the same tools and systems. Because the recent track
record of project management in aerospace, computing and manufacturing is
relatively good and because these industries use tools and systems that are
equally applicable in construction, we can confidently say that the problem
does not lie with the tools and systems themselves.
Therefore, we are left with implementation.
If the tools and systems developed to implement project management at the

operational level are applied without a corresponding implementation of
practices at the strategic level concerning the integration and organisational
aspects of projects then, purely from a theoretical perspective, problems are
inevitable.
We can argue that this is the basic problem with project management in the
UK construction industry at the present time insofar as the project
management function can be and sometimes is viewed as a non- strategic
activity whose purpose is to control the delivery of projects. Viewing
project management in a non- organisational way means that the project
management function is subsumed within the procurement or pre- delivery
phase of the total project lifecycle. This is, of course, far removed from the
intended nature of the project management discipline with regard to the
overall management of projects.
The application of project management at only the operational level would

indicate a misunderstanding and consequently a misapplication of project
management practice in the context of UK construction.
In other words, the failure described does not condemn the project
management discipline in terms of the body of knowledge and tools that
have developed therein over a period of some 60 years. Rather, the results
question the ability of the UK construction industry to appropriately
comprehend and apply the pure project management function in relation to
sufficiently empowering one individual or group with an appropriate level
of authority to implement that function efficiently. This is of much
importance to us if we are to be successful in project delivery in the future.
The ability of project managers to successfully deliver time, cost and

technical performance objectives in industries where the product can be
argued to be very much more complex than a typical contemporary building
give credence to such an assertion (an example would be the aircraft
industry). It is apparent that the project manager, in the context of the UK
construction industry, is rarely permitted (as a result of institutionalised
professional prejudices) to effectively discharge the project management
function as this was conceived.
The project management function has become confused in the case of UK

construction and the term ‘project manager’ is too frequently associated

with a consultant who is used to monitor the progress of projects using
sophisticated packages and tools. We must recognise that no matter how
good or sophisticated they may be, project management tools cannot
manage projects by themselves. The project managers leadership role is of
absolute importance if project management is to be successfully
implemented.
Recent thinking suggests that the characteristics of the individual or the

team that act as the project manager, particularly, in respect of leadership
and political skills is of much greater importance in successful project
management than any other single factor. We will investigate this later in
this module.
Clearly, if project management is only implemented at an operational level,

or if restrictive established professional roles, such as those of the Architect,
Quantity Surveyor, or Contractor, interfere with the ability of project
managers to take strategic decisions, this single factor may not have the
chance to have any bearing on project success.
The integration and organisational responsibilities of the project

management function have been neglected in the context of the UK
construction industry and too much emphasis has been placed upon the
achievement of time and cost targets which are frequently poorly defined
and which in some instances the project manager has not been involved in
specifying. This has been at the expense of ensuring that the product
performs in- use once delivered. Hopefully, the inadequacies of such
situations are obvious and it should be equally obvious that project success
is unlikely in such scenario’s.
It is suggested, therefore, that the results presented earlier are indicative of a

general failure of the UK construction industry rather than a failure of the
project management discipline per se.
2.18. Self Assessment Questions

(i) The purpose of contemporary project management (PM) is to deliver
projects on time, within budget and to the required quality standards.
Discuss this statement making particular reference to the record of

PM in delivering successful projects and giving consideration to the
present need for strategic project management practices.
(ii) Evaluate the role that systems management and project

implementation tools have played in the development of the UK
construction project management discipline and appraise the
usefulness of the same in delivering successful project outputs.

Heriot-Watt University Unit 2- 34
3: Learning from Other Industries:
The Manufacturing Industry

At the end of this unit you should be able to understand how manufacturing industry
developed over past decades, with a specific focus on the automotive industry.
You should understand the main reasons why mass production came into existence and
how production became significantly more efficient than craft production. You will have
outline knowledge of the type of transformation systems available and realise the
advantages and disadvantages of each. You will also appreciate the problems associated
with mass production and the main solutions provided by new production systems such
as ‘lean production’.
At the end of this unit you be able to compare the types of production system applied in
construction with those in manufacturing. This should help you think of construction in
terms of a series of repeated production processes instead of individual unique projects.
3.1. Introduction
This unit gives the student an understanding of how manufacturing industry produces its
goods. It will also review how manufacturing principles and practices were developed
over the decades. The main objective is to discuss how the construction industry can
learn from manufacturing industry.
3.2. Developments in manufacturing industry

The automotive industry casts a long shadow over the way we think about production. It
has gone through two major transitions in this century. The first by Henry Ford who
mastered mass production applications in the automotive industry. The second transition,
called ‘lean production’, was a contribution by Eiji Toyoda. Other manufacturing
industries have and are still adopting the principles developed by the automotive industry.
The following sections look at how manufacturing developed over the decade, with
emphasis on the car industry.
3.3. Craft production
This is how manufacturing looked in its initial stages. Skilled labour (craftsmen),
individually or in groups, carried out the entire design and production process. (A typical
example is a carpenter making a chair.)
3.4. Mass production

Supply of products using craft production principles could not cope with demand. As a
result, prices were too high and only very few could afford products such as a car. Since
demand for goods was plentiful as long as the price was low, companies desired to
minimise the unit cost of items. One method for reducing unit cost was increasing
capacity through mass production.
In-text question
Is this the case for all types of products and services? Would reduction in cost
and price always result in increase in demand? Will demand for construction
products (buildings, for example) be increased significantly if production process
became more efficient?
Henry Ford’s philosophies have had a profound impact on the manner in which other
goods are produced. Ford’s contribution came from his approach of breaking larger jobs
into smaller, highly repeatable tasks. By emphasising standardisation and assembly line
production, his success in car manufacturing demonstrated the advantage of moving away
from craft production. It was no longer necessary to assemble products from beginning to
end as a complete unit. Tasks could now be broken down to such a level that workers
could repeat very narrow operations using specifically prescribed procedures. It was
found that a worker assigned to relatively simple, repetitive jobs could become very
efficient over time, yet still maintain or even improve the quality of the products. No
longer constrained by the need to custom fit parts on assembly, the overall speed and
capacity of the production line were dramatically increased.
Analysis of literature (Koskela, 2000) shows that scientists proposed this theory of
production (transformation) at the end of the 19th century. In this theory, production is
conceptualised as a transformation of inputs to outputs. There are two first principles in
the transformation model. Firstly, the total transformation can be achieved by
decomposing the total transformation into parts, finally into tasks, ensuring that all inputs
are available, and assign these tasks to operatives or workstations. Secondly, minimising
the cost of each task using standardisation.
Thus, companies moved towards standardisation and thereby interchangeability of parts

to minimise both the cost and difficulty of assembly. An individual company can
standardise the parts it uses in their production. However, industry level standardisation
can bring major savings and benefits to consumers. Standardisation is obviously an
effective way to hold cost down. Beyond this it provides many advantages for consumers
too. For example, it enable us to buy common items at the store such as light bulbs, film,
automobile tyres without worrying about fit or proper function.
3.5. Modularity
Once the market for the various manufactured goods matured, competition started to
grow and consumers demanded variety and customisation. One method to obtain variety
and still hold down cost is modularity. This means producing the output in modules or
subassemblies that are interchangeable, thus giving the consumer some choice. For
example, the purchaser of a new car can specify engine size, type of transmission, colour
etc. This is achieved not by producing a number of every possible model but rather by
producing modules (engines, etc.) and then joining the appropriate modules together in a
final assembly according to customer’s order. One example of modularisation is a car that
has 3 possible engines, 2 possible transmissions, 5 different exterior colours and 3
different interiors available to customers, but requires only 13 modules to be
manufactured. However, these 13 modules can be combined to form 90 different versions
of the same model.
3.6. Product and Transformation System Design in Mass

Production
The process of converting an idea or concept into a product to be sold to consumers
includes:
Product/service selection and design

Transformation system selection and design (how the product will be produced).
3.6.1. Product/service selection and design

There are two main stages in the output selection and design:
Stage 1: Selection
• Generation of ideas: Ideas for potential products or services can come from a large
number of sources: customers, market research, salespersons, internal research and
development laboratories, suppliers and even competitors. Those that come from an
identified need, such as need for high-speed connectors to the Internet is known as
market pull. Those that come from R&D, such as lasers, plastics and microwaves, are
known as technology push.
• Screening and selection: Ideas pass a large variety of tests and analyses before
receiving the final go ahead and typically 1 in 50 or so will pass. Screening includes
market analyses and forecasts of customers needs, assessment of the reaction of
competitors, analyses of economic viability, studies of technical feasibility, and
checklists for organisational fit. On the basis of these analyses, one or a very few are
selected for further study.
Stage 2: Product and Service Design

• Preliminary design: The preliminary design focuses on decisions concerning major
aspects of the product or service: Will the product be made out of metal or plastic?
Specific attributes of the product, such as cost, are first set as goals; various designs
are then considered that may have the potential to achieve them. Critical trade-offs
(e.g. reliability vs. price) are considered and made at this stage. These provide the
information necessary for the construction of prototypes and lay the foundation for
the final design that comes later.
• Prototype testing: For a product, a model or a simplified representation of the final

design is often built and tested. A clay or wooden model may be enough to test
appearance, or a limited version of operation maybe sufficient to test technical
performance and customers’ reaction and tastes. Computers and virtual reality
systems are often used to simulate these models. In some cases a complete prototype
may have to be produced and used.
• Final design: On the basis of reactions to the prototype and any desirable changes or
alterations in the preliminary design, a final design is developed, with full drawings,
specifications, procedures, policies and other information needed for the production
system. If the changes to preliminary design are extensive, a new prototype may be
constructed and tested again.
3.6.2. Transformation system selection and design

Once the final design has been frozen, the production (transformation) process for
making it will be selected/designed. The general procedure in designing a transformation
system is to consider all alternative forms and combinations to devise the best strategy for
obtaining the desired outputs. The major consideration in designing the transformation
system is efficiency, capacity, lead time, flexibility and so on. These are so
interdependent (trade-offs have to be made). What are the trade-offs between producing a
wooden board and a plastic board?
There are five basic forms of transformation systems:
1. Continuous process
2. Flow shops
3. Job shops
4. Project operations
5. Cellular shops.
Each of these is considered in more detail in the sections that follow.

3.6.2.1. Continuous process
This is typically used by industries where the manufacturing process involves moving
fluid material continuously through vats and pipes until a final product is obtained.
Products typically are highly standardised (no difference even between competitors in
some cases) and in extremely large volumes. Examples of such products include gases,
chemicals, flour, cement, etc.
3.6.2.2. Flow shops
Produce discrete, usually standardised, outputs on a continuous basis by means of
assembly lines or mass production, often using automated equipment. Examples of flow
shops are steel making, automobile assembly, car wash, etc. Advantages of flow shops
are:
3.6.2.2.1. Low per unit cost
3.6.2.2.2. Bulk purchasing
3.6.2.2.3. Lower labour rates (need for skilled labour lower)
3.6.2.2.4. Efficient utilisation of facility (factory space)
3.6.2.2.5. Low in-process inventories
3.6.2.2.6. Simplified managerial control.
Disadvantages are:
a) Variety of output is difficult to obtain
b) Changes in the rate of output are hard to make (overtime, laying off workers,
or closing plant temporarily)
c) Even minor changes in design of the product may require substantial changes
in equipment (weakens marketing position).
d) Dehumanisation of workers (constant, unending, repetitive nature)
e) If line of production is stopped for any reason (breakdown of machine or
conveyor, a shortage of supplies, etc.) The entire production may come to a
halt unless work-in-process (WIP) is stored at key points in the line
(expensive option)
f) Simplicity in ongoing operation is achieved at the cost of complexity in initial
setup (high capital and maintenance cost and risk of obsolescence).
3.6.2.3. Job shops

Offer a wide range of possible outputs, usually in batches, by individualised processing
into and out of a number of functionally specialised departments. These departments
typically consist of a set of largely identical equipment, as well as highly skilled workers.
Job shops could also produce unique (one of a kind) customised outputs (often called
model shops or jobbers). The general characteristics of a job shop are grouping of staff
and equipment according to function; a large variety of inputs; a considerable amount of
transport of staff, materials, or recipients; and large variations in system flow times (time
it takes to complete a ‘job’). In general, each output takes a different route through the
organisation, requires different operations, use different inputs, and takes a different
amount of time. Examples of organisations using this transformation system are tailor
shops, machine shops, hospitals, car repair shops, etc.
In text question
Can any stage/component of the design and construction processes be attributed

to ‘job shop’ production techniques?
Advantages of job shops are:

• Provide flexibility to respond to individual, small volume demands (or even custom
demands)
• General purpose equipment is used to provide variety at reasonable cost
• Larger base of experience with general purpose equipment and risk of obsolescence
is low
• Because of the functional arrangement of equipment, resources maybe centralised at
the location of the relevant function (high utilisation rate; distracting or dangerous
equipment can be segregated)
• Staff highly skilled (work is challenging and interesting) and similar people grouped
together (incentive and teamworking)
• Pace of work is not dictated by a moving line (productivity is not hindered by other
groups of staff or a machine breaking in another function).
Disadvantages are:
• General purpose equipment is usually slower than specialist equipment (higher per unit
cost)
• Cost of skilled labour is high
• Initial cost of general purpose equipment is significantly less but variable cost is
significantly higher (hence for large volume of production cost per unit is high)
• Need for high stocks of raw materials, parts and supplies and in-process inventories
becomes very large (need for space and working capital rise)
• Cost of handling material is high (transport and waste)
• Management and control is difficult and expensive as production varies.
3.6.2.4. Project operations

These are one of a kind endeavours on a massive scale when the labour and equipment
are brought to a site rather than a fixed production facility. Frequently the output is
unique (a dam, building, fire fighting) but it need not be (ship, house).
3.6.2.5. Cellular shops

Produce families of outputs within a variety of flow cells, but numerous cells within the
plant can offer a range of families of outputs. This is a relatively new type of
transformation system that many firms have recently been adopting. It combines the
advantage of the job shop and flow shop to obtain the high variety possible with job form
and reduced costs and short response time available with the flow form. The cellular form
is based on group technology, which seeks to achieve efficiency by exploiting similarities
inherent in parts. This is accomplished by identifying groups of parts that have similar
processing requirements. After the parts are divided into families, a cell is created that
includes the human skills and all the equipment required to produce a family.
The advantages are:
• Similar to the advantages in the flow shop and job shop models, but not as big
• Decreased machine set-up time (increase capacity/productivity, less need for
equipment, less factory space)
• More variety at competitive cost
• Set up time is low, hence the ability to produce small batches (enhanced flexibility
to respond to changes in market demands, reduction in work-in-process inventory).
Disadvantages are:
• Similar to the disadvantages in the flow shop and job shop models, but not as serious.
3.7. Commercialisation
Commercialisation refers to the process of moving an idea for a new product from
concept to market. Consider the typewriter. The earliest typewriter was the mechanical
one, which dominated the market for 25 years. After that came the electromechanical
typewriter, which dominated the market for 15 years. Then came the entirely electric
typewriter which dominated the market for the next 7 years. After that came the first
generation of microprocessor-based machines, which dominated the market for 5 years
until the next generation microprocessor-based machines became the market leader.
Notice that the amount of time that each succeeding generation dominated the market
decreased. Couple significantly shorter product life cycles with a market place that is
becoming increasingly competitive as a result of globalisation, and you begin to get an
idea of how important it is for organisations to be able to rapidly move ideas for new
products from concept to market.
Given the construction of factory space is part of this commercialisation process, one
could see how pressure is building up on construction industry for fast procurement.
In text question
How can the construction industry assist other industries in speeding up their
commercialisation processes? What would be the consequences on cost of
construction and efficiency of production and why?
3.8. Modern Production (Lean Production)

Mass production was extremely successful for a long time. The main reasons for its
magnificent success is typically explained by the following points relating to the car
industry. Ford and GM were the two largest car manufacturers in the world.
• The Ford and GM product development processes fit what consumers wanted in the
1920s through the mid-1950s.
• Labour was cheap and people were hired and fired as the product demands rose and
fell.
• Customers wanted variety only if it was inexpensive and did not disturb the
philosophy that ‘cars were produced only to satisfy the society’s need for
transportation’.
• Initially, styling was important only in what the occupants of the autos wore.
• Automakers felt no particular pressure to redesign basic automobile styles.
• Suppliers, like the workers themselves, were secondary and could be abandoned if
necessary.
• Huge inventories could be kept in hand because business was booming.
• A minimum amount of product inspection was performed, and only the more obvious
defects were reworked to satisfy the customer’s demand for quality.
Shortcomings and drawbacks in mass production systems were concealed by the above
factors. The simplification of workers’ span of responsibility did not come without a
price. By dramatically increasing the number of tasks that must be managed in an
environment already stressed by increased production rates and product mixes, the job of
managing the facility was greatly complicated. Rigid production control methods now
had to be put in place to organise and co-ordinate long, variable sequence of operations.
The result was two layers of skills: a group of highly trained individuals to manage the
overall production process, and a much larger group of more specialised workers to
perform the manufacturing process. The size of production became bigger and no longer
could an engineer walk out to the production shopfloor to discuss changes in design.
Instead a separate team of liaison engineers served this interface. Other departments were
created to buffer workers from suppliers and consumers and as a result rigorous
communication channels became necessary to enable the free flow of information.
This organisational complexity led to underestimating or over-planning of capacity,

supplies and raw materials. This necessitated the use of high inventories (of finished
goods and WIP), large stocks of raw materials and buffers to schedules. Also the
segregation of production into many small tasks resulted in an increased requirement for
factory space and problems in material handling (cost of transportation and wasted time).
After World War II, Toyota began to experiment with its own concept of manufacturing,
one that started with an understanding of the tenets of mass production, but adapted to
work within the scope of its own environment. Toyota could not adopt the approaches
used by US giants because:
a) There was a much lower demand for its product (produced far fewer cars in a decade
than were shipped from Ford in a single day!)
b) The company had little access to investment capital
c) The company had agreement with its trade unions that virtually guaranteed lifelong
employment to the workforce.
Through trial and error, Eiji Toyoda and his production designers worked out a number
of innovative solutions to their problem:
1. An emphasis on creating an environment of workforce flexibility and empowerment

was central to the strategy. Only with this could the company get the most from
workers who would be tied to the company for many decades. With a workforce
trained for multiple disciplines, it would no longer be necessary for them to remain
idle between tasks (i.e. while waiting for a piece of production machinery, they could
move to another station).
2. Equipment was moved closer and procedures were developed to permit the
fabrication of parts in very small batch sizes. This was done by adopting ‘cellular’
production (see below), which enabled equipment to be set up rapidly. This allowed
Toyota to dramatically reduce production cycle times and inventory levels needed
(finished goods and WIP).
3. Variations in production levels within each task were eliminated. This resulted in
reduced need for buffers between tasks.
4. Elimination of activities that added no real value to the final product.
5. Strong emphasis was placed on minimising production rework. By driving down

batch sizes and rework, buffers to schedules were dramatically reduced.
6. Continuous improvement (or ‘kaizen’) was adopted where workers were asked to
identify the root cause of problems and means to improvement. Cars were designed
by taking full advantage of lessons learned in the factory.
7. The company took additional measures to ensure quality and timely delivery from its
suppliers. This was done by emphasising the development of a small, close-knit
supplier base.
8. Substantial effort was made in designing products for this type of manufacturing
approach (processing capability drove the complexity of the product, minimum
complexity of set up between different items).
This enabled Toyota to compete on a price while delivering cars with unprecedented
levels of quality. This allowed it to attract a sizeable portion of the world market. This
ultimately created a crises in Detroit; subsequently US car manufacturers were driven to
adopt the same practices that had made their new competitor so successful (namely, ‘lean
production’).
Lean production is mainly to do with cutting waste. Waste is anything that does not add
value to the final product (rework, non value-adding activities like inspection, stocks and
inventories, labour sitting doing nothing, etc.). The main steps advocated by lean
production to cut down waste can be categorised as:
1. Eliminate variations in the production process

2. Set up the infrastructure to accommodate variations should they occur (people and
equipment) (cellular production)
3. Production system should drive design where possible (concurrent engineering)
4. Supply chain management and long term partnering
5. Getting it right first time (eliminate rework)
6. Continuous improvement or kaizen (emphasise on measurement).
References
Koskela, L. (2000) An Exploration Towards a Production Theory and its Application to
Construction, PhD Dissertation, VTT Building Technology, Espoo, Finland. 296 p., VTT
Publications: 408, ISBN 951-38-5565-1; 951-38-5566-X (is available on
http://www.leanconstruction.org/pdf/P408.pdf on 19th August 2003)
1. What are the main drivers that lead to the introduction of mass production?
2. What are the main drivers that lead to the introduction of lean production?
3. What would standardisation bring to the construction industry?
4: Lean Construction and Process
Mapping

At the end of this unit you should be able to appreciate the potential to apply lean
thinking to construction. You will develop understanding as to what makes the
construction industry different to other industries. Whilst appreciating these differences,
you will be able to identify the areas where lean production theories can make a
significant impact in construction.
You should understand that any business process has the potential for improvement in
efficiency and time. Waste exists whether in business or production processes. You will
learn that process mapping is a key step towards lean processes. By the use of an
example, you will develop skills that will help you map processes and provide you with
the background necessary to develop further skills in this area. You will realise that
inefficient processes are the result of non value-adding activities or value-adding
activities that have the potential for efficiency improvements.
At the end of this unit you will appreciate the extent of the benefits process reengineering
can bring to businesses.
4.1. Introduction
This unit gives the student an understanding of the fundamental issues surrounding lean
construction and the role process mapping and design play in achieving these. Several
research papers are provided to support the unit. The main objective is to discuss how the
construction industry can move towards lean processes.
4.2. Applicability of Lean to Construction

Read the paper, ‘What Kind of Production is Construction’ by Glenn Ballard and Greg
Howell 1998. (Appendix B and copy can also be obtained from
http://www.leanconstruction.org/)
What distinguishes construction from other industries?
• Is it ‘one-of-a-kind’ production?
- Is housing one of a kind? Manufacturing is striving to realise the vision of
producing custom products.
• Standardising components, modularisation, and prefabrication.
• Site production (not fixed position manufacturing)?

- So are agriculture and extractive industries such as timber, mining and fishing,
which are beginnings of manufacturing’s value stream.
• Temporary multi-organisations?
- Many other industries are project based.
• Enduring teams and partnering
Ballard and Howell suggested that construction has two characteristics which together
uniquely define it:
• It belongs in the category of ‘fixed position manufacturing’ (assembly has to be done

on site)
• The product is rooted in place (standardisation is limited, customer is linked to the
site, temporary teams).
This means that construction possesses the characteristics of site-based production, a

unique product and temporary teams.
There are two elements to making construction ‘lean’:
1. Separate the product manufacturing element from the site-based construction process
and thus minimise construction uniqueness in order to take advantage of lean
techniques developed in manufacturing. In other word make the production of
construction components lean and minimise site-based assembly.
2. Develop lean techniques for dynamic construction.
4.3. Lean Thinking

The main driver for lean thinking is for the management of an organisation or project to
recognise that only a small fraction of the total time and effort in any organisation or
project actually adds value for the end customer. By clearly defining value for a specific
product or service from the end customer’s perspective, all the non value-adding
activities (waste) can be targeted for removal step by step. As stated by Koskela (see
paper provided in Appendix C), there are two aspects in all production systems:
conversions and flows. While all activities expend cost and consume time, only
conversion activities add value to the end product. Thus, the improvement of non value
adding flow activities (inspection, waiting, moving), through which the conversion
activities are bound together, should be focused on reducing or eliminating them, whereas
conversion activities should be made more efficient. This concept is different to
conventional production theories where production is improved by implementing new
technologies primarily in value-adding activities (non value-adding activities are not
explicitly considered).
In order to achieve the above, production and management processes must be mapped
and analysed. The mapping exercise would entail identifying all of the activities
associated with the process, their interrelationships and whether they add value to the end
product or not. Once a process is mapped, non value-adding activities (flow activities)
would then be subject to reduction or elimination.
Once flow activities have been dealt with (indeed this is a continuous process and based
on kaizen), value-adding activities (conversion activities) must be made more efficient.
One of the main factors affecting the efficiency of activities is standardisation. Variation
is often the source of inefficiency and waste. The term ‘standardisation’ is often related to
the products or services provided by an organisation. In lean thinking however,
standardisation of the process (production or construction, business and management
processes) is equally if not more important.
A process can simply be stated as having inputs and outputs, with the process receiving
and subsequently transforming the inputs into the desired outputs. It provides the thinking
and action framework for transforming an idea into a product, and it can either be
tangible or intangible, functionally based or organisationally based. For example, a
tendering process is how a construction company deals with tendering right from
receiving an invitation for tender up to submitting (and perhaps negotiating) the bid. A
construction process is the process by which a client idea is transformed into a building.
A project management process is the tasks performed by the project manager in
managing the project.
Standardisation of the process implies that a particular process is designed (or mapped),
documented and given out to the various participants to implement consistently and
continuously. When a business is set up, its production and management processes are
designed. These processes evolve as time passes and the evolution is usually derived by
the concept of continuous improvement or indeed gradual change in the environment and
market place. After some time, the evolution and ad hoc amendments to the process
create waste and the whole process becomes inefficient and inappropriate for the current
environment. This is when process reengineering take place which basically involves the
organisation redesigning the process from scratch. For example, information technology
(IT) is often seen as a major driver for reengineering.
However, process reengineering does not occur frequently enough and hence
standardisation is likely to involve examining current, evolved processes and using the
most appropriate one as a standard process (benchmarking). Just as in product
standardisation, standardisation could happen in processes across an industry and not just
in individual organisations. Again analyses and documentation of processes implies the
need to produce a process map.
Process mapping is therefore important for two reasons:

1. Identification of non value adding activities
2. Standardisation.
4.4. Process Mapping

The main objective of process mapping is to enable analyses, improvements (lean) and
documentation (guide for implementation). There are many standard ways by which a
process map can be presented. These serve as languages for communities to relate to but
also as a mechanism for process engineers to adopt. Students that are interested to know
more about this may refer to computer science or business process engineering literature.
Modelling techniques such as Integrated Computer Aided Manufacturing Definition
(IDEF) and analytical reductionism/process decomposition are commonly used.
4.4.1. An example of process mapping, analyses and redesign

In order to demonstrate the value of process mapping, let us look at a particular business
process, namely the admissions process in universities. This is a process by which
universities admit students onto its programmes. You can relate the principles
demonstrated in this example to any other process (business or production).
Suppose that you have recently obtained a job as a senior administrator in one of the
university’s departments. Your first task is to examine the various administrative
processes adopted in that department. The aim of the exercise is to ensure that
administrative processes are efficient and meet the requirement of the department and its
clients (students). Having discussed briefly the perceived performance of the various
processes, you identify the key processes that you would wish to address. One of these
processes is student admission for PhD study.
Your first task is to map this process and produce a chart that will enable you to analyse
and improve its performance. This is achieved by a series of document chasing and
interviews with the key ‘actors’ participating in the process. As a result, you produce the
map presented in Figure 3.1.
The boxes present the activities that make up this administrative process (text inside
describes the activity) and the arrows joining the activities present the sequence and
relationship between them. Those that are involved in carrying out these activities are
listed above the boxes while the text below the boxes represents additional resources
required (in addition to the actors). Finally, the numbers listed above the activities
represent the duration of the activity (in days).
Secretary Stop Secretary
2 30 2
Figure 3.1
Receive Send Original
request for prospectus Wait for Send
information and student to application to process
and application respond PG director for
application
research
  students
Copy prospectus admission
and stamp
(120 days)
Team Member Group leader PG Director PG Director
20 5 1 5
Pass to Send to team Send to Consider

colleague member group leader academic
qualifications
Team Member Group leader Group leader PG Director

5 0 5
Mark Yes or
No and send Decide who Send to PG Contact
to group to supervise director referees
leader
  
Record on Stamp
workload
PG Director PG Director
10 5 30
Make final
Send offer decision Wait
 
Stamp
Once a process map is produced, the following stage would be to analyse the process and
identify non value-adding activities. Some of those can be eliminated while others may
need further consideration. Value adding activities would also need to be considered, but
the aim here is to examine whether these activities may be performed more efficiently
using different techniques or by introducing IT for example.
Figure 3.1 shows the first stage of this analyses whereby the non value-adding activities
are identified (a tick represent a value-adding activity, a cross denotes a non value-adding
activity and a question mark represents an activity that may or may not be value-adding).
According to Figure 3.1, there are 7 non value adding activities in the process (out of a
total of 15) and there is one that in some circumstances can be considered as value-
adding and in others non value-adding. This is because all but one team member would
end up supervising the student (perhaps there is the necessary waste of all other team
members considering the application). Overall the process looks inefficient (i.e. it has too
many non value-adding activities) and as a result too slow to meet students’ and the
department’s requirements. A processing time of 120 days (4 months) is too long and
action is needed.
Secretary PG Director
2 40 5
Figure
Send Consider
Receive prospectus, Wait academic 3.2
request for application & 40 days qualifications Improv
information request for
references and referees’ ed
comments proces
s for
• Prospectus
• Application resear
• Stamped envelope marked ch
to PG director
• To be sealed envelopes
studen
from referees Group leader ts’
and team admis
Group Leader members sion
10 6
1 (64
Decide who days)
Send offer to to supervise Send to
research
student group leader
The next step of the analysis is to reengineer this process and as far as possible eliminate
the non value-adding activities. Figure 3.3 present one reengineered process that is much
more efficient than the original. According to the new activities’ durations, the overall
process will now take 64 days instead of the 120 days. This is a significant time saving
and the process is now said to be lean. The total value of the process (or the output of the
process) however remains the same.
In text question
Can you produce a more efficient process? How can you make value-adding
activities more efficient and shorter?
4.5. Process standardisation: Construction Project Process

Latham argues that reducing variation in the project process will improve performance
and make significant cost savings. Processes should optimise predictability, facilitate
teamworking and effective communication between participants. He stresses that IT can
assist in the attainment of a new project process if its operation and the relationship
between the parties is sufficiently prescribed and detailed.
Unfortunately, the current perception is that flexibility is difficult within a standard

process because supply chains change for every project and relationships are dynamic.
Despite the lack of a standard project process, there are several well-recognised models
of the construction process (RIBA’s Plan of Work, British Property Federation manual,
etc.).
4.5.1. RIBA Plan of Work

The Royal Institute of British Architects’ (RIBA) Plan of Work (RIBA, 1997) was
published in 1963 as a standard method of operation for the procurement of buildings,
and it has become widely accepted as operational throughout the building industry.
However, it was developed from an architectural perspective, which has in some ways
restricted its application to Joint Contracts Tribunal components, and it is not generic
enough for a wide variety of construction works.
The plan represents a logical sequence of events that should ensure that sound and timely
decisions are made during the course of the project. It suggests that all the decisions, set
out or implied, have to be taken or reviewed and it is anticipated that the model will only
need slight adjustment depending upon the size and complexity of the project. The
project programme from inception to feedback in a linear fashion, requiring the
completion of one stage before proceeding to the next. However, the design and
construction process is essentially not linear and cannot be viewed in such a functional
fashion. Moreover, this sequential flow only aids the hard breaks between the
organisational structure of the industry and contributes to the problem of fragmentation,
co-ordination and communication between project team members, as highlighted earlier
by many governmental and institutional reports.
4.5.2. British Property Federation Model (BPF)

The formation of the British Property Federation model was a direct result of the growing
concern of the increasing problems within the construction industry, notably poor design,
inadequate choice of materials and poor supervision of the works, combined with a lack
of representation of the private sector client. The model was intended for use by all those
involved in a construction project i.e. client, design consultants, contractors, sub-
contractors and suppliers, which was where the RIBA Plan of Work was lacking. It
highlights the formal and informal relationships between these parties, and aims to
provide the client with value for money from the construction process by dividing the
design and construction process into five stages:
• Concept
• Preparation of the brief
• Design development
• Tender documentation and tendering
• Construction.
The model sets out to be flexible and allows the client to make a decision as to how to
continue with the project at the end of each stage. Furthermore, the model can determine
the actual position of the dividing line between stages, outlining when to make that
decision. Although the model has not been widely implemented – which may be due to
its close link with repetitive house building projects – it has many advantages over the
‘normal’ methods of design and construction, such as:
• It produces better buildings quicker and at lower cost

• It removes the overlap of effort between design team members
• Through more thought at the initial stages of the project, fewer variations are needed
when on site resulting in less delay, a lower cost and improved performance by the
design team.
4.6. Business Process Re-engineering (BPR)
Intense competition and other pressures on large organisations often oversaw the quality
initiatives that were introduced as part of continuous improvement programmes.
Therefore, to achieve substantial business improvement a powerful new tool emerged to
facilitate the fundamental redesign of work so that significant improvement could be
achieved, namely business process re-engineering (BPR; sometimes called process
innovation or process engineering). It is essentially a strategic business management
theory and is now actively one of the new buzzwords in construction industry. BPR
differs fundamentally from Continuous Improvement (CI) in that it deals with
breakthrough improvements as opposed to gradual changes. Improvements of 10–15%
can be achieved in most companies by using CI. However, where quantum leaps in
performance are required, where the old should be completely replaced with new, then re-
engineering is the way forward. Further, BPR processes appear to have a definitive start
and finish whereas CI is a never-ending process.
No two people have been more responsible for the re-engineering solution than Michael
Hammer and James Champy. The theory was acclaimed after their book, Reengineering
the Corporation: A Manifesto for Business Revolution, was published in 1993. They
define re-engineering as, ‘The fundamental rethinking and radical redesign of business
processes... to achieve dramatic improvements in critical contemporary measures of
performance, such as cost, quality, service and speed.’ That is, not small incremental
changes to the process and leaving the basic structures intact, but rather, abandoning
long-established procedures, conventional wisdom and assumptions from the past, to look
afresh at the work required in creating a company’s product or service to deliver direct
value to the customer.
4.7. Manufacturing project process

In order to improve construction performance, learning from other industries such as
manufacturing, was suggested as a solution (Latham, 1994). Although manufacturing has
been a constant reference point and source of innovation in construction for many
decades the industry has somewhat failed to seek out ways to reform existing processes to
improve productivity, in complete contrast to manufacturing. Manufacturing firms seek
not fractional but multiplicative levels of improvement i.e., ten times the improvement
rather than the 10% improvement of construction. Manufacturing success depends largely
upon an organisation’s ability to identify the needs of its customers, to quickly create the
desired products and to produce them at a low cost. Furthermore, achieving these goals is
not solely a marketing, a design or a manufacturing problem, but rather a management
problem involving all of these functions. This factor may indeed help to improve the
fragmented nature of the construction industry.
The following section aims to describe a ‘new product development’ (NPD) process
(manufacturing project), which has been designed to produce a one-of-a-kind product
(hence the suitability for construction process practice). The high level process of NPD is
standard/generic, and in a similar fashion it is anticipated that construction can be
modelled likewise. This thus addresses Latham’s (1994) concern that there is no means
by which to reduce variation as to improve performance.
4.8. New Product Development (NPD) process

The development of new products and services that can successfully compete in local,
national and global markets has become a key concern for a large majority of
manufacturing organisations. The NPD process is fundamental for organisations to
support this growth. The process has received, and continues to receive, much attention
by academia and practitioners to improve its effectiveness and efficiency.
A new product is one that has not been previously manufactured by a company; likewise,
it is commonly cited that construction eventuates one-of-a-kind products. The
fundamental aim of the NPD programme is to get the right product to the market or
customer as quickly as possible. This limits the chance of a competitor gaining an
advantage by first entry, and therefore enjoying an early market position. It is possible to
trace similar stages of NPD in the construction industry. The NPD process is composed
of a number of activities. Generically, these activities can be separated into three main
broad categories, namely:
1. Predevelopment activities: idea generating/establishing the need, followed by a
number of preliminary market, technical, financial and production assessments
2. Development activities: the physical development of the product
3. Post-development activities, the final launch of the product into the market place.
Depending upon the type of contract or procurement strategy in construction, NPD can
refer to: design and build, build to own, develop and construct, design-build-finance-
operate, build-own-operate or design and construction. The NPD activities adopted by a
company can be arranged in various ways to represent the sequence of implementation
and the interactions between them, forming the NPD model. From a historical point of
view, NPD models can be classified into three main streams: sequential, overlapping and
stage gate.
4.8.1. NPD models

In the 1960s, the NPD process was still in its first generation, following a simple linear
sequential structural model whereby the development moved through different, almost
mutually exclusive, phases in a logical step-by-step fashion. The development proceeded
to the next phase only after all the requirements of the preceding phase were satisfied,
and in each succeeding phase, different intermediate results were created, with the
outputs of one phase forming the major inputs to the next. In this sense, the major
activities of the process were isolated from each other, creating an over-the-brick-wall
effect, whereby each discrete activity played little or no regard to the next activity.
Since the first generation, the NPD process steadily evolved into a more increasingly
complicated second generation ‘coupling’ model. This phase bought about the
introduction of the stage gate process, which broke NPD into discrete stages, with review
points (gates) at the end of each stage. Each stage represented a number of activities that
needed to be performed before progressing to a ‘decision’ gate. These gates were clearly
defined as ‘yes’ or ‘no’ decision points that provided organisations with the capability to
measure and control the process and match subsequent funding to meeting the
requirements at each gate. Further, the stages, unlike that of the first generation, were
multi-functional activities involving numerous people from different departments.
Whilst enabling a higher degree of control and understanding of the progression of a

project process, such gates required variable tasks to be checked off against
predetermined lists. This often made the process both cumbersome and slow. Projects
were forced to wait at each gate until all tasks were completed and – so not to stray from
a process through which all projects had to progress – any overlapping of activities was
impossible. Therefore, in order to overcome unnecessary delay and to enable smoother
progression, the more recently developed third generation ‘parallel’ processes have
sought to accommodate the need for certain tasks to overlap during a NPD programme.
Through modifying the individual gates to become fuzzy to allow conditional go-
decisions, a degree of fluidity was introduced into the process that allows the stages to
overlap. In addition, by being more outcome-focused, these processes have permitted
organisations to build prioritisation models enabling projects to move through the process
with more flexibility.
4.9. Manufacturing ideals into construction

Manufacturing has developed and is developing solutions to improve its competitiveness.
So while many construction researchers are at odds with the precepts of manufacturing, it
is nonetheless felt that the business has much to learn from the manufacturing industry.
There appears to be elements of the NPD process that can potentially be applied to
construction. For example, generic manufacturing activities – namely predevelopment,
development and post-development – can equally be used to describe construction.
Further, the sequential ‘over-the-brick-wall’ approach mimics that of the sequential
construction project process, such as the RIBA’s plan of works, and the use of the second
generation stage gate may help to improve the fragmented nature of construction.
However, the chief executive of the Construction Industry Board (CIB) in the UK
recently reported that, ‘Efforts to improve the industry have been met with mixed
reactions... some construction organisations have risen to the challenge, reaping the
business advantage... others resolutely maintain that any change in industry practices is
impossible because of the apparently “unique” nature of each construction project.’ The
products of construction tend not to lend themselves easily to the solutions devised by
manufacturing. Fortunately, these problems are not insuperable. For some particular
types of construction, this direct transfer of knowledge from manufacturing to
construction has been proved possible. Many buildings, such as houses, are essentially
repeated products that can be continually improved; the process of construction itself can
be repeated from project to project. There are several notable examples of successful
implementation. A Japanese factory producing prefabricated houses with a customer
lead-time of 40 days (from order to completion on-site), and production time (first to last
operation) of one day. A Finnish window manufacturer provides delivery and installation
of windows on site with a 15-minute accuracy. An American industrial door
manufacturer has gained a considerable competitive benefit from short cycle-times with
Just-In-Time (JIT) production techniques. Indeed, it is true that manufacturing methods
can be used to re-engineer construction’s operational processes; pre-assembly is a very
important issue in construction at the moment because the qualities of assembly in a
factory are inherently better than can be achieved on-site.
British Airports Authority (BAA) led the way forward in the UK for design and
construction project process reform. (Another leading UK client, London Underground,
quickly followed their attempt.) A more generic project process – the Process Protocol
(based on the NPD process) – was developed by academia.
4.9.1. The BAA project process

The theory behind the introduction of the BAA project process was to have all of their
construction projects following the same processes, so that best practice could be
maintained. The process has seven major stages and eight major processes that combine
to cover all areas of a construction project.
The seven major stages of the model are:
1. Inception: brings together customer needs with the business strategy to address the
question, ‘Do we need a project?’
2. Feasibility: explores the full range of options that could meet the needs and objectives
identified, and determines the preferred solution
3. Concept design: develops the solution in terms of architecture and interior design,
also studies and selects major physical and engineering systems
4. Co-ordinated design: using specialist input, this stage predicts how the various
elements of the design will fit together to ensure cost, safety and operational
performance
5. Production information: all the aspects of construction works are fully detailed and
planned by suppliers and contractors
6. Construction: the project is constructed to the specification that was agreed in the
design, planning and consultation work
7. Operation and maintenance: the facility is handed over and the information required
for feedback is obtained.
The eight major processes of the model are
1. Development management: to ensure that the right solution is used for the right
problem and a business focus is maintained throughout the project
2. Evaluation and approval: to ensure who needs to the consulted on various matters is
informed
3. Design management: structuring the process of design to ensure the client knows
what exactly they are getting, how it will work and how it will be constructed
4. Cost management: ensuring predictability of cost and controlling things so there are
no surprises throughout the lifetime of the project
5. Procurement management: to obtain the optimum solution by getting all the right
people to do the right job
6. Health and safety: to plan, co-ordinate and manage health and safety throughout all
stages of the project
7. Implementation and control: controlling the delivery of the project by following the
process map and other associated documentation
8. Commission and hand over: to achieve a smooth transition from construction to
operation by ensuring the client knows how to use and maintain the finished facility.
4.9.2. Generic Design and Construction Process Protocol

This is based on the NPD model. The protocol is a common set of definitions,
documentation and procedures that provides the basis to allow a wide range of
organisations involved in a construction project to work together seamlessly. It maps the
entire project process from the client’s recognition of a new or emerging need, through to
operations and maintenance by breaking down the design and construction processes into
eight sub-processes:
1. Development
2. Project
3. Resource
4. Design
5. Production
6. Facilities
7. Health & Safety and Legal
8. Process Management
And into four broad stages:

1. Pre-project
2. Pre-construction
3. Construction
4. Post-construction.
Furthermore, continuous learning from both the process model and the project is
facilitated by knowledge database development, i.e. the legacy archive. In doing so, the
protocol aims to improve the design and construction process by providing the following,
more commonly referred to as its six key principles:
1. Whole project view
2. Progressive design fixity
3. A consistent process
4. Stakeholder involvement/ teamwork
5. Co-ordination
6. Feedback.
For further information on the process protocol visit www.processprotocol.com.

1. What are the main benefits of process mapping and why this is seen as an effective
way towards achieving lean processes?
2. Construction is often referred to as unique. Discuss this statement and suggest how
lessons learned from other industries can be adapted in construction.
3. What are the advantages of standard process protocols and discuss whether these are
realistic in design and construction processes.
5: Lean Construction and Planning

At the end of this unit you should be able to fully appreciate the problems associated with
traditional planning and scheduling techniques.
You should understand that traditional planning systems (and project management) are
increasingly being criticised as a source of waste and tension. You will appreciate that the
extent of this problem is exasperated by the increased complexity of construction projects
and the continuing pressure to finish projects more quickly. You will develop a good
understanding as to why ‘as-planned’ and ‘as-built’ schedules are often different. You
will start thinking of construction processes as a series of overlapping production
activities and how buffers could play a role in shielding activities.
At the end of this unit you will appreciate the need to rethink planning techniques. One
such technique you will develop familiarity with is the ‘Last Planner’.
5.1. Introduction
Project management is often summarised as the process of ensuring that projects are
completed within a predetermined budged and duration and at the specified quality.
Project managers control duration taking necessary action when progress deviates from
the overall project plan (schedule). Whilst this approach seems logical, it is often the
cause of waste and inefficient performance. Projects are becoming more complex and the
need to finish projects more quickly makes the task of controlling progress very hard.
Fire fighting often results in higher cost or short cuts.
As buildings become more complex (level of services, IT, building technology), the
construction process becomes more demanding and the number of suppliers more
extensive. The need for fast track projects means that more building components are
produced off-site, followed by construction activities (site based assembling activities).
As the number of overlapping activities becomes significant, the effect of delay (or
slower than anticipated production rate) in one activity is likely to result in others slowing
down or suspending (waste). This is a problem that is well understood and addressed in
the manufacturing industry where physical or time buffers are placed between activities
with variable production rates. Alternatively, “planning buffers” could be introduced
where short-term plans allocate work only to activities the necessary resources for which
(including work in process) are already available (Last Planner).
This unit will require you to read the following papers:

Implementing Lean Construction: Reducing Inflow Variation by Greg Howell and Glenn
Ballard 1994 (Appendix C and copy can also be obtained from
http://www.leanconstruction.org/ )
Implementing Lean Construction: Stabilizing Work Flow by Glenn Ballard and Greg
Howell 1997 (Appendix D and copy can also be obtained from
http://www.leanconstruction.org/)
5.2. Traditional Planning (CPM)

In an earlier module (Project Management Theory and Practice) you learned one of the
main principles and requirement of project management. This is to ensure that projects
are performed according to the specified quality and within a set cost and duration.
Project managers control duration by breaking the overall construction process into work
packages and activities and assigning these activities’ durations and logical sequence.
This technique is referred to as the Critical Path Method (CPM). A critical path (or paths)
is identified and activities within this path become the focus of control. Delays in these
activities would mean delays in the overall project duration.
Once a project schedule is produced, it is the project manager’s task to monitor and
control performance by regularly comparing as-built schedules with the as-planned.
Whenever progress in the critical path falls behind targets, the project managers along
with others would turn their attention to bringing progress back in line with the pre-set
schedule. This is often done by adding more resources (increased number of
workers/plant or hours of work) to the project at the expense of meeting cost targets (see
trade-off analysis). Non critical paths have slack and hence relatively small delays would
not influence the project overall duration.
In Unit 1, we discussed how clients are dissatisfied with the performance of the
construction industry and this was in the main because projects often exceed budget and
target duration. So what are the possible reasons for a particular activity not being able to
meet its time targets?
1. Changes in design and specification?

2. Material and other supplies shortages?
3. Accidents and absence?
4. Unforeseen circumstances (e.g. unexpected soil conditions)?
5. Delays in getting information/specifications?
6. Delays in preceding activities?
7. Lack of motivation and site based supervision?
8. Repairs and repeat work?
In text question:
Can you think of other possible reasons?
Indeed any of the above reasons are possible in a complicated process such as
construction. An average size construction programme would consist of more than 100
activities. In the majority of the cases the project plan is only produced once the contract
is selected and a project duration is agreed. A project plan that will have to meet this
agreed project duration is developed. The next step would be for the planner to decide the
extent of resources to be allocated to individual activities and the corresponding
durations. This is a complicated exercise that would undoubtedly involve personal
judgement and educated guesses. This is why planning is not conceived as a system but
as an art/skill.
Therefore, in addition to all of the above possible reasons for not meeting time targets,
there is a reasonable likelihood of unrealistic estimates of required duration or resources
at the planning stage. Underestimation of the effort required results in fire fighting. This
can be demoralising to workers who have performed to their best ability and capacity.
Corrective measures would almost always result in trading off other factors such as cost
and quality. Short cuts compromise quality and often result in repairs and repeated work,
hence leading to the very same problem management is attempting to address.
Overestimation of effort needed results in complacency, waste and low productivity.
In a study conducted by Ballard (1994), it was found that shortage of materials was the
most frequently quoted reason for why a particular weekly task was not completed on
time. Figure 4.1 list these factors.
Figure 4.1: Reasons why planned work is not done (Source: Ballard 1994)
There are several fundamental problems in traditional planning thinking and approaches.
Planning techniques are about control (preventing bad change) and neglect breakthroughs
(causing good change). As long as the project is kept within the cost and time targets,
there is no attempt to explore opportunities for further savings and improvements. Where
a project is behind schedule, the emphasis is not on why but what can be done to correct
the situation.
Finally, any system or process should incorporate in it a mechanism of assessing the

performance of this system (see Unit 6). Planning system performance is not measured
and failure is not analysed to identify causes.
5.3. Need for shorter duration (drivers)

The construction industry is increasingly being challenged with the need for faster
construction. The main drivers for this need are clients and the opportunity cost of
waiting for construction projects to be completed. However, and in addition to this, there
are several reasons why constructors would want to increase the speed by which they
execute projects, such as:
• Added competitivity for the constructor

• Enhanced cost
• Added scheduling flexibility (choosing starting dates more freely, added time for
design and planning)
• Added capacity (shorter time means more projects).
So how can project duration be shortened? Looking at a project plan, there are three ways
in which this can be done:
1. Increase speed of tasks (increase resources, use of specialist subcontractors, better
technology, cut out non value-adding activities)
2. Overlap activities (fast track) (e.g design and construction)
3. Reduce the number of tasks (prefabrication and pre-assembly, combine activities).
In text question:
How would prefabrication and pre-assembly contribute to the reduction of the

overall project duration?
The above drivers and alternative ways for reducing project duration do not come without
a cost. Problems encountered when reducing duration (fast track) are as a result of
increased number of specialist subcontractors and the overlapping of activities. An
increased level of subcontracting means that activities are not controlled fully and process
is not integrated. As the number of organisations on a project starts to grow, control
becomes difficult. Small subcontracting organisations cannot survive on high overhead
expenses (e.g. training, quality assurance procedures, investment, research and
innovation, etc.). In addition, long-term strategies are difficult to establish and maintain
across a large number of companies. Partnering and forming strategic alliances with a
number of specialist companies helps the project team to develop longer-term strategies
and to better integrate with other stakeholders such as suppliers and designers.
Construction projects are often referred to as unique (or one off). Site conditions and the
working environment may differ from one project to the next. This means that the
productivity of a particular construction activity varies across projects. Moreover, many
types of construction activities are affected by factors such as weather which makes the
productivity rate of a particular activity vary with time (inflow variation). In the case of
fast track, the project schedule is squeezed and as a result activities overlap (the gap
between two consecutive/interdependent activities becomes short). For example, building
a large brick wall is followed by plastering. In average track construction (not fast track)
the plastering activities could start when the brick laying activity is complete. In fast
track, the overall duration of the two activities is shortened by starting the plastering
activity during bricklaying. This cost of this however would be the increased sensitivity
to inflow variation. In other words if there was a delay in the ongoing bricklaying
activity, there will be disruption in plastering activity; it would either have to stop or slow
down. The result of this would be people waiting for work (idle) or working at a slower
rate (waste). The proliferation of prefabrication and pre-assembly will also contribute to
this problem. Just like in manufacturing, a continuous flow of processes that involve first
prefabrication, followed by off-site assembly and then on-site assembly would make the
production chain liable to disruption and stoppages. In order to ensure minimum
disruption of activities, planners should allocate buffers between these processes (see
later).
5.4. Are traditional planning techniques no longer appropriate?
Due to the aforementioned changes in construction and the pressures to ensure efficient
use of resources, are traditional planning techniques no longer appropriate? The main
factors that support the need for a rethinking of traditional planning systems are:
• They hide the relationships between design (engineering), procurement (material

supplies, prefabrication of components, or off site assembly) and assembly on site.
They focus on assembly.
• They cannot cope with complexity of projects (difficult to match actual progress with
initial plan)
• The emphasis on control affects human factors and the moral of workers.
A new planning system should address these issues and in particular the system should
encourage efficiency (lean), innovation and continuous improvement. Overmeasurement
or undermeasurement of resources or time needed to complete a task should be avoided.
The system should not only focus on negative performance but also encourage and
improve on good performance. It should also link construction activities with off site
activities (predecessors). And finally, it should ensure that a continuous flow of work is
planned, hence avoiding any disruption or workers standing idle and waiting for work in
process. This is often achieved by the introduction of buffers.
5.5. Functions of buffers

In manufacturing, the term ‘buffers’ often refer to physical stocks of raw material, work
in process (incomplete product waiting to be developed further by the remaining sub-
processes) or inventories (finished goods). In the case of a project (construction or
otherwise), a buffer could also be represented by the time allocated between the start of
two inter-related activities. In lean thinking, buffer is a waste. The more time allocated,
the more process inflow (often referred to in construction as work in progress) generated.
The example we referred to earlier about bricklaying and plastering is one where we can
appreciate how buffers are introduced. Whilst these are both construction (on-site)
activities, buffers also apply to the link between off-site and on-site activities (e.g.
fabrication and assembly of steel structures or pipelines, or material supplies and
construction of large highways). In many cases these are major activities and take a long
time, thus overlapping them is necessary.
So what are the reasons for allocating buffers (see Howell and Ballard 1994):
• To compensate for differing average rates of supply and use between two activities.
For example, if bricklaying takes more time than plastering, a buffer would be needed
to ensure that plastering does not run out of work in process (i.e. wall to plaster).
Obviously the larger the difference in productivity between the two activities, the
larger the buffer needed.
• To compensate for uncertainty in actual rates of supply and use (inflow variation).
Some activities are more likely to fluctuate in the rate of production (or be disrupted)
than others. Activities that use in process work from these fluctuating activities would
require buffers at their start, in order to shield them from such fluctuation. Take
foundations as an example. If the contractor decided to excavate the site and lay
foundations simultaneously, he or she will run the risk of disruptions in the
excavation activity (due to unforeseen circumstances such as soil condition or an
unexpected pipeline). This risk is exasperated by the fact that the foundation activity
is in progress.
• To allow differing work sequences by supplier and user activity. The site manager
may prefer to finish the erection of all columns before beams are installed between
and on top of these columns. The justification for this may be the efficiency gained as
a result of repetitive work (rather than the gang switching repeatedly between
columns and beams). A buffer in this case would allow the site manager to implement
these cost saving decisions.
The above three points emphasise the advantages of having buffers. However, buffers do
not come without a cost which is why the planner needs to avoid having more buffers
than necessary. The costs of buffers are summarised below.
Buffers can be very expensive. In the case of buffers between material supplies (or
prefabrication) and site based assembly, large buffers would result in the need for
extensive storage space. This may either be at source (the factory producing the material
or the prefab unit), on site or in some other storage area (more likely if the building site is
in a city centre and there is limited space and tight restrictions). The cost of storing is
either direct (paying of fees) or indirect. One obvious cost would be in the form of double
handling, i.e. placing the delivered goods in the store first then to be taken again and
placed at location of assembly. Other costs such as inventory management (the need to
employ people to monitor stocks), loss (vandalism, deterioration or stealing) and the
opportunity cost of idle cash could also be significant. In the case of buffers between two
site-based activities, the main cost would be longer project duration. For a company
trying to introduce a new product into the market, this time delay could be equal to a
significant amount of money being denied.
Another cost associated with buffers is the fact that they are hard to size. The true supply
and use rates are unknown and variable. Looking at historical productivity data (i.e. the
time taken to finish an activity) is misleading as waiting time (slow progress or idle
times) resulting from disruptions in predecessor activities is hidden. In other words,
buffers do not exist in current planning and delays and interruptions occur. Actual rates
of consumption are unknown because ‘normal rates’ includes delays due to waiting for
resources. Therefore the size of buffers is difficult to assess because of the lack of data
(or confidence in the reliability of data) on the productivity of activities. This is likely to
lead to overestimation of buffers which would result in the escalation of the
aforementioned storage and other costs.
In order to find the uninhibited use rates we must make it possible to work without
interruptions. According to Howell and Ballard (1994) allocating buffers has been proven
to be a very good thing and good managers hide resources in the face of strong pressures
to release them to others for use. Figure 5.2 shows the principle behind this argument.
The figure relates to the progress of an activity that uses the output of another (for
example, a delivery of materials or prefab units to the site). In traditional planning, no
buffers are allocated, so construction starts immediately after delivery, and hence delays
in subsequent delivery would result in the work force (and all related plant and machines)
having to wait. The rate of progress is depicted in the line starting at “0” and ending in
“End Date”. In the case of allocating a buffer (time between (0) and “Delayed Start”), the
work force in charge of this activity would complete the activity much faster (risk of
waiting is limited). Subsequently, the new activity duration (time between “Delayed
Start” and “End Date”) would now represent the true duration of this activity (no
disruptions because of previous activities are hidden). Once the true productivity level for
an activity is determined, the planner can reduce the size of the buffer and hence the
overall duration and cost of the project.
Figure 4.2: Reduce flow variation, then start sooner (Source: Ballard and Howell
1997)
5.5.1. How to allocate buffers

Given the aforementioned advantages and disadvantages of buffers, it is important that
criteria for allocating buffers are established. The following three rules should be
considered:
1. Size of buffers should always limited to a minimum. This implies that there is a need
for better (and more confidence in the) assessment of activities duration. In-flow
variation is one of the most important problems that needs to be tackled if the
industry is to apply lean thinking. Reduction (or elimination) of inflow variation
would allow the industry to reduce the size of buffers and hence waste.
2. Buffers should be allocated between activities with different rates of production.
3. Buffers should be allocated between activities with high inflow variation

(uncertainty) (need to assess uncertainty progressively).
5.5.2. Ballard’s ‘Last Planner’: Reading exercise

Read the paper given in Appendix D (Implementing Lean Construction: Stabilising Work
Flow by Glenn Ballard and Greg Howell 1997)
‘The Last Planner’ is a planning system developed by Ballard to address some of the
problems of the traditional planning system. The main features of this system are:
• It gives power to the last planner. This is the person in charge of giving weekly tasks
to the work force. The idea behind this is that the person in charge of the work force
is the person in the best position – in terms of related experience and access to
information – to allocate work (in terms of amount and sequence) on a week by week
basis. This will ensure that work is selected in the right sequence (i.e. work in the
sequence that best moves the project towards its objectives: critical path,
workability). It will also ensure that the right amount of work is selected, i.e. the
amount of work that uses labour and equipment capacity to the full.
• It provides a structure to planning (according to level of detail and size of window).
The last planner relates the different planning stages together in that original project
level plans are used only as a basis for generating the weekly plans. The weekly plans
are then used to update the project plans on a continuous basis.
• The weekly plans (the last plans) are based on what can be done rather what should
be done. This in itself creates a planning buffer in that only work that can be done is
scheduled. In other words this is attempt to replace schedule buffers (physical
buffers) by planning buffers (‘should’, ‘can’, ‘will’, ‘did’). This results in efficiency
and less variability.
• The system encourages the application of PULL instead of PUSH strategies (see
Figure 5 in Appendix C). In other words downstream activities determine size of
workable backlog. The resources (e.g. materials to be delivered) or progress required
from upstream activities are determined by the progress of downstream activities i.e.
activities that depend on these resources. This pull type of system ensures that only
the necessary resources and work are being delivered, hence reducing the need for
physical buffers (storage space or time). Managers applying this concept must ensure
that the system will allow for true inflow variation of each activity or process,
otherwise the risk of disruption and stoppage becomes high.
• Finally, the system emphasises the need for a means of assessing the performance of
the various levels of the plans. The system should determine where to intervene. The
match between output and directive at each level should be measured and causes for
mismatch must be understood. For example, the match between ‘will’ and ‘did’ is
measured by Percent Plan Complete (PPC). In case of a mismatch the last planner
must investigate the sources of the problem and, in particular, that these mismatches
could not have been caused by the unavailability of resources or work in progress.
Similarly, project level plans can be based on true activity durations. Future
mismatches between progress and these plans must be thoroughly assessed. The
system therefore emphasises measurement of performance and continuous
improvement.

1. What are the main reasons for allocating physical buffers between overlapping
activities in a construction project?
2. Discuss the contradiction between lean principles and the call for increasing buffers
between construction processes.
3. How does the ‘last planner’ system contribute to lean principles and the reduction of
physical buffers?
4. When applying the ‘last planner’ system, how would project managers ensure that
projects are completed on time and within budget?
6: Performance Measurement and
Benchmarking

At the end of this unit you should be able to fully appreciate the need for
performance measurement in any business, system or process.
You should understand that traditional performance measurement systems

where the emphasis is placed on financial lagging indicators are inadequate
for modern management thinking. You will appreciate that in order to
develop measures that will help businesses and processes to improve,
leading indicators have to be introduced where financial and non-financial
measures are used. You will also develop a reasonable understanding of
several measurement systems that have recently been developed and used in
the industry.
At the end of this unit you will appreciate how benchmarking can be
implemented to identify best practice.
6.1. Introduction
This unit gives the student an understanding of the fundamental issues
surrounding performance measurement and the role benchmarking plays in
achieving best practice. Several performance measurement frameworks are
outlined including the Construction Best Practice Programme’s Key
Performance Indicators. The main objective is to discuss how the
construction industry can move towards best practice and continuous
improvement.
6.2. Need for Performance Measurement

Any construction company is involved in one way or another in
performance measurement. There are different reasons as to why companies
measure performance. Companies measure the amount of profit they
achieve every year in order to calculate the level of tax to be paid to
government. Progress on site is measured monthly in order to calculate the
interim payments to be requested from the client. Business performance
measurement is however needed to help the company take the right
decisions, strategically or operationally. Egan clearly stated that in order for
the construction industry to improve, it has to measure its performance

continuously. He introduced targets for improvements and emphasised the
need to measure performance against these targets.
Benchmarking is the process of achieving best practice by learning the

practices adopted by world leaders. A world-leading organisation is one that
has a superior performance to others. Identifying world leaders or top class
organisations requires performance to be measured. Therefore the benefits
of performance measurement can be summarised as follows:
1. It provides the information needed to take business (strategic and

operational) decisions
2. It provides the bases and incentives for continuous improvement
3. It provides the information needed to perform benchmarking.
Construction project performance measurement is difficult but very

important. For too long, construction organisations have focused on short-
term planning. If they are to remain competitive, they need to embrace
broader issues other than the traditional time, cost and quality metrics of
construction performance.
6.3. Background on Performance Measurement

Research in the field of performance measurement has been undertaken by a
diverse group of people from a variety of different disciplines. These
include business strategy, human resource management, manufacturing and
operations management and organisational behaviour. The subject is also
essential for construction. However, the transference of research from
various industries into construction has not been apparent, principally
because of the functional boundaries, such as language and the structure of
the industry.
Historically, performance management refers to measuring an organisation’s

performance and is a fundamental part of any management process. There
are many roles of measurement in the management process but, in general,
any activity that has a data requirement will inevitably involve
measurement. A typical measurement process defines what to measure, how
to collect and process the data and then how to evaluate it to provide the
facts needed for to make changes and improvements. Organisations can no
longer compete solely on the basis of cost effectiveness, but must formulate
competitive strategies. Furthermore, this need of ‘rethinking’ performance
in the construction industry has also been highlighted by the growing
number of new process methods and techniques that have been introduced
over the last two decades. These aim to shift the traditional paradigms in
order to improve performance.

6.4. History of performance measurement
There are three roles of performance measurement namely: co-ordinating,
monitoring and diagnostic. The development in performance related issues
appears to have progressed in two distinct phases, and its emergence may be
of interest to construction practitioners. The first phase began in the late
1880s and carried on through into the 1980s. This phase typically
concentrated upon financial measures such as profit, return on investment,
sales per employees, etc. These financial measures were heavily criticised
by both researchers and practitioners in that they were inadequate for
contemporary business. Financial measures are useful but they tend to
measure the past, and the easily measurable. These financial measures are
referred to as ‘lagging metrics’ which report on results and decisions made
in the past and therefore have little use in improving an organisation’s
current performance.
The second phase of performance measurement started in the late 1980s and
involved non-traditional or non-financial measures. The shift was in
reaction to the growing concern of the inadequacy of the financial metrics
alone. Financial measures often focus on short-term results. As a result, few
managers will choose to pursue long-term strategic objectives that will
jeopardise short-term financial targets. Therefore, an organisation should
ideally adopt multiple measures to achieve a balanced perspective and
should include financial and non-financial and performance drivers and
outcome measures.
In order to regain competitive edge, organisations not only shifted their

strategic priorities from low-cost production to quality and value for money
but they also implemented new technologies and philosophies such as TQM,
Lean, etc. These changes led to the need for broader, cross-functional
perspectives of how organisations operated, as compared to the traditional,
functionally driven approaches already utilised. The need to address these
issues led to the increasing development of new performance measurement
systems that provide information not supplied by traditional systems. The
implementation of these changes also revealed that traditional performance
measures had many limitations; the development of new measurement
systems was required if organisations were to achieve success. The focus
therefore shifted towards ‘leading’ indicators of performance, rather than
‘lagging’ metrics, and related to non-financial measures. In fact both
financial and non-financial measures are needed within organisations’
strategic frameworks.
6.5. Performance measurement frameworks

In response to calls for improved performance measures, several
measurement frameworks emerged in the management literature. These
frameworks involved specifying a formula including the purpose of the
measure, the measurement system, the frequency of the measurement and

the re-evaluation of the measurement system. However different metrics
purposes pose different demands on a measurement system and a system
developer should consider why performance measurement is actually
required before defining and implementing a system.
It is often argued that companies that adopt performance measurement

systems perform better than companies that do not. Indeed there is broad
agreement that some form of performance measurement system is an
important component of organisational control, and furthermore, that there
is no general model that conveys a precise constitution of such a system.
Performance measurement systems can be described in many ways. They
can be simple or complex, general or specific. Some frameworks prescribe
methods of monitoring the whole organisation to guard against sub-
optimisation, whilst others develop audits to help organisations identify the
strengths and weaknesses of their measurement systems. Their importance,
it seems, has never been greater as they can either inhibit or enhance
success. Examples include the performance measurement matrix, the
performance pyramid, the balanced scorecard, Brown’s framework of
process metrics, and the business Excellence Model (EFQM). These
models not only provide a means for measuring overall performance but
they also provide a common baseline for benchmarking. Generally, they
provide the means for:
• Maintaining an alignment between strategic objectives and market

requirements
• Co-ordinating the effective use of company resources
• Monitoring progress toward the achievement of predetermined strategic
objectives.
The most popular frameworks, their objectives and misgivings are discussed
below.
6.5.1. The balanced scorecard (BSC)

Undoubtedly, one of the most widely recognised performance measurement
frameworks of today is the balanced scorecard. Developed by Robert
Kaplan and David Norton, it provides a ‘balanced presentation of both
financial and operational measures’ by translating the business mission and
strategy into a set of objectives and quantifiable measures built around four
perspectives as outlined below:
1. Financial: investors’ views

2. Customer: the performance attributes valued by customers
3. Internal processes: the long and short-term means to achieve the
financial and customer objectives
4. Learning and growth: capability to improve and create value.

Figure 5.1: The BSC (Source: Kaplan & Norton, 1992)
The BSC’s success lies in its balanced approach in assessing the seemingly
disparate elements of a company’s competitive agenda. It prevents sub-
optimisation by forcing consideration of all measures at the same time.
However, it has been criticised for its simplicity. Much work would need to
go on below the level of the scorecard to provide systems which could
deliver these aggregated measures (in particular, a mechanism for
specifying which objective should be met in a specific time horizon). It is
also not complete as a performance measurement system as it is primarily
designed for mangers to gain an overall view of performance, and may be
not apparent for all employees. Furthermore, it does not consider suppliers,
which is particularly relevant in the construction industry.
6.5.2. Performance measurement matrix

In 1989, Keegan et al developed the performance measurement matrix. As
with the balanced scorecard, the strength of the performance measurement
matrix lies in the way it seeks to integrate different classes of business
performance: financial, non-financial, internal and external. The matrix,
however, is not as well packaged as the balanced scorecard and does not
make explicit the links between the different dimensions of business
performance, which is arguably one of the greatest strengths of Kaplan and
Norton's system.

Figure 5.2: Performance measurement matrix (Source: Keegan et al,
1989)
6.5.3. The results and determinants framework

An alternative, which overcomes the criticism of the linkage between the
different dimensions, is the results and determinants framework. This
framework, which was developed by Fitzgerald et al (1991) following a
study of performance measurement in the service sector, is based on the
premise that there are two basic types of performance measures in any
organisation. That is, those that relate to results (such as competitiveness,
finance) and those that focus on the determinants of the results (for example,
quality, flexibility, resource utilisation and innovation). The appeal of this
distinction is that it highlights the fact that the results obtained are of past
business performance with regard to specific determinants (i.e. results are
lagging indicators, where as determinants are leading indicators).
Figure 5.3: Results and determinants framework (Source: Fitzgerald

et al, 1991)
6.5.4. Brown's framework of process metrics

The performance measurement frameworks discussed so far have tended to
be hierarchical in orientation. One of the most popular performance
frameworks dealing with the horizontal flows of materials and information

within the organisation, or the business processes, is the one developed by
Mark Brown, a US management consultant. Brown’s framework is useful
because it highlights the difference between input, process, output and
outcome measures, and it encourages the checking of micro processes. He
uses the analogy of baking a cake to explain this more fully:
• Input measures: quality and quantity of input e.g. the volume of flour
quality of eggs etc.
• Process measures: cycle time and process parameters e.g. oven
temperature, baking time etc.
• Output measures: monitors quality and dependability of output e.g.
quality of the cake etc.
• Outcome measures: tracks the impact of the output e.g. satisfaction of
the cake eaters etc.
Figure 5.4: Brown’s framework of process metrics
6.5.5. Performance pyramid

Lynch and Cross’s performance pyramid falls in the same continuum as
Brown’s framework. The strengths of this particular framework are that it
ties together the hierarchical view of business performance measurement
with the business process view. It also makes explicit the difference between
measures that are of interest to external parties (customer satisfaction,
quality and delivery) and the primary internal interests of the business
(productivity, cycle time, waste). However, some argue that this framework
is difficult to operationalise.

Figure 5.5: Performance pyramid (Source: Lynch & Cross, 1991)
6.5.6. The EFQM Excellence Model

Another wide-ranging and currently popular measurement framework is the
European Foundation for Quality Management’s Model (EFQM; USA), or
its counterpart European version, the Business Excellence Model that was
launched in 1992. This framework consists of two distinct subsets of
performance factors, broadly classified as ‘enablers’ and ‘results’. It is a
non-prescriptive framework, which recognises there are many approaches to
achieving sustainable excellence in all aspects of performance, based on the
premise that excellent results with respect to performance, customers,
people and society are achieved through partnerships, resources and
processes. The model’s 9 boxes, shown below, represent the criteria to
assess an organisation’s progress towards excellence. The theory
underpinning is that the enablers are the levers that management can pull to
deliver future results.
However, the terms used in the framework are so open, and can be
interpreted in so many ways, that a single organisation could decide to
capture any of the several dozen different measures of performance under
each of the headings.

Figure 5.6: The business excellence model (Source: EFQM, 2001)
6.5.7. Construction KPIs

(see http://www.m4i.org.uk/rc/publications/reports/kpi_report2000.pdf)
In 1999, in an attempt to improve the performance of the UK construction
industry, the government launched its Key Performance Indicators (KPIs)
under its Construction Best Practice Programme (CBPP). The indicators
were designed to enable the measurement of project and organisational
performance throughout the construction industry, by initially providing
firms with a means of measuring and comparing their own performance
with the rest of the industry, and collectively, to assess improvements in the
industry overall through benchmarking. Clients, for instance, can assess the
suitability of potential suppliers for a project, by asking them to provide
information about how they perform against a range of indicators, so they
can see how potential suppliers compare with the rest of the industry in a
number of different areas. Construction companies will also be able to
benchmark their performance to enable them to identify strengths and
weaknesses and assess their ability to improve over time.
The indicators cover the following issues:
• Client satisfaction: product

• Client satisfaction: service
• Defects
• Predictability: cost
• Predictability: Time
• Profitability
• Productivity
• Safety
• Construction cost
• Construction time.
More recently, CBPP (2002) has also launched a series of ‘respect for
people’ indicators that aim to examine stakeholder perspectives/culture on
the project. The indicators include:

• Employee satisfaction
• Staff turnover
• Sickness absence
• Safety
• Investors in people
• Working hours
• Pay
• Training
• Diversity
• Travelling time.
CBPP plans to extend these indicators in the near future.
6.6. How to design a measurement system

Although such frameworks are undoubtedly valuable, their adoption is often
constrained by the fact that they are all generic and simple frameworks.
They suggest some areas in which measures of performance might be
useful, but provide little guidance on how the appropriate measures can be
identified and designed. This brings us to the problem of what to measure.
Good measurement systems do not just happen. They are designed, human
factors engineered, developed, implemented and constantly improved. This
issue has become topical in recent years, with several authors discussing it.
However, there is an overall agreement that the process of deciding what to
measure should consist of three main steps:
1. The first involves looking at strategy, defining the strategic objectives of

the company or a process selected and determining how they are
translated into divisional goals and individual management actions.
2. The second encompasses deriving an appropriate set of measures by

populating a performance measurement matrix.
3. The third focuses on instilling the performance measurement system into

management thinking. Critical here is closing the management loop and
ensuring that the measurement system actually drives day-to-day
decisions and actions, thereby ensuring the firm’s strategy is
implemented.
It is often argued that measures should be relevant and focused on current

strategies. Outdated measurement systems may inhibit success and so must
be continuously updated in accordance with organisational strategy. An
organisation’s performance must be measured on the criteria derived from
the overall strategy that has been set for the organisation. When measures
are no longer strategically relevant they should be eliminated. In addition,
measures are a very powerful motivation tool and therefore will have a
direct bearing on the motivation of the user. An organisation’s philosophy

of continual improvement must be supported by a system that encourages
improvement.
Measures should be as simple as possible; unnecessary complexity should

be eliminated. Criteria should be clearly stated and measures should be user
friendly i.e. simple, easy to use and be available promptly. Acceptance of
measures is increased by participation in goal setting and its design and
implementation. Moreover, measurement systems have to be integrated.
Measures should not operate in isolation; they have to be balanced with the
need and requirement of other systems in the organisation. Finally,
measures need to be demanding in that demanding targets are associated
with better performance compared to easy goals. Targets should be
ambitious but achievable.
When defining performance metrics that encompass balanced and coherent

characteristics, it is equally important to consider barriers to implementation
during the design process. The barriers emphasise peoples’ fears and
perceptions of effective performance measurement, to which training and
education is the ideal means to overcome these inhibitions. Examples of
these impediments are:
• Fear of exposing poor performance

• Fear of exposing good performance
• Perception of more time and effort
• Fear of loss of autonomy
• Information overload
• Previous misuse and abuse of measurement
• Lack of skill and measurement masters
• Fear of unknown outcomes and consequences of measurement
• Incompatible reward system
• Fear of distorting performance priorities, etc.
6.7. Benchmarking
Benchmarking involves comparing one company’s current performance
against the world leader in any particular area. During the 1990s, there was
considerable interest in benchmarking in manufacturing and service
industries. Its successful implementation is reflected in the large amount of
research that addresses its concept, application and limitations. Moreover, as
manufacturing has been a reference point and source of innovation for
construction over the years, it is no wonder that the construction industry is
now adopting such practices through CBPP’s KPIs.
Any company should benchmark if it wants to attain world-class

competitive capability, prosper in a global economy, and above all, if it
wants to survive. Companies today are competing in an international arena.
Therefore, in order to understand what practices are necessary to reach

world-class standards, many organisations have begun to use benchmarking
as a way of acquiring knowledge. There are four types of benchmarking:
1. Internal: where an organisation aims to identify improvement areas

within its structure through comparing its business operations with those
of more successful companies.
2. Project/competitive: where an organisation assesses the performance of

projects in which it is involved in and compares this with competitors in
the same market that have competing products, services or work
processes.
3. External/industry: where an organisation attempts to increase

productivity through developing tools and techniques successfully used
by other industries that are similar to that of their own.
4. Process/ generic: this focuses on the best work processes. Instead of

directing the benchmarking to the business practices of a company, the
similar procedures and functions are emphasised. Although this is
thought to be extremely effective, it is difficult to implement and
requires a broad conceptualisation of the entire process and careful
understanding of the procedures.
However, benchmarking in construction is not a straightforward task due to

the very nature of the industry in that, traditionally, it lacks solid data
gathering, and is subject to remarkable fluctuations in productivity due to
the economic climate. The temporary nature of the construction process,
where a number of organisations get involved in designing and constructing
a single project, adds to the complexity of the task in transferring practices
from other industries. Therefore, benchmarking attempts would face certain
difficulties such as incomplete or non-existent data, and even if data were
well recorded and retrievable, it would be highly dependent on the special
characteristics of the project, size, type and budget.
Benchmarking can be an effective tool to achieve best practice and

construction organisations should be effectively taking up internal
benchmarking to gain a thorough understanding of how they do business
and how their customers evaluate their services. Also, organisations have to
be more open to benchmark what has been successful in other industries and
assess if it is adaptable to construction. Finally, it should be seen as an
integrated part of an ongoing process aiming at improving productivity. A
fully implemented benchmarking environment within the industry will
significantly improve the quality of decision making related to design and
construction processes. The benchmarking process is modelled below:

Figure 5.7: Benchmarking process (Source: Elmuti & Kathawala,
1997)

1. What are the main problems with traditional performance measurement
systems?
2. Why would the use of non-financial performance indicators be
important in developing future business strategies?
3. What are the main criteria that need to be taken into account when
designing a performance measurement system?
4. What are the main objectives of benchmarking? Discuss the alternative
processes by which these objectives are achieved.

7: Power, Politics and Influence:
Project Teams

At the end of this unit you should be able to fully appreciate role of politics
in the world of project management.
You should understand that the positive control of persons, organisations

and authorities is essential to the successful discharge of the project
management function. You should be familiar with a range of leadership
styles, the types of contributors that will be found in typical projects and
how they may be classified and you should understand the need for project
managers to be competant vertical managers as well as horizontal or matrix
managers.
You should understand that the use of the term politics in project
management should not be misinterpreted to mean manipulation which
would be a negative approach to influence and will ultimately damage the
trust that is essential for effective project management.
Again, at the end of the unit you are expected to be capable of discussing
these issues fully in the context of improving project management
performance from that which was described in Unit 1.

ISBN: 0 7277 1693 X
Other to be confirmed.

7.1 Summary
In the unit on Project Management performance we concluded that project
management does not always deliver project objectives in a consistent or a
reliable manner. We saw that there were two aspects to the modern project
management discipline; organisation (strategy) and systems (tools).
We concluded that one possible reason for the failure of PM to consistently

deliver results was that there may be too great an influence placed upon
tools and systems and too little emphasis placed upon strategy, in the widest
definition of that term.
In this unit we explore strategy and we are particularly concerned with the
means by which project managers win support for their project and its
objectives. We deal with the role of power, influence and politics and we
see that these aspects are important concepts that must be grasped and
embraced by project managers to allow them to fulfil their leadership role
and therefore to improve the reliability of project delivery and
accomplishment.
We begin by examining the various sources of power and influence

available to the project manager. This is followed by an examination of the
various types of project participant that are involved in typical projects and
we mention some basic methods that are suitable for the management of
each. Finally we consider the need for project managers to be able to
manage upwards and some of the aspects that are key to the project manager
in achieving this function. The role of politics in project management is
vital and can have a dramatic influence on the propensity for project
success. This is what this unit aims to demonstrate.
Question
Why should we be concerned with politics and influence in project

management and is it a good thing for us to be concerned with?
7.2 Introduction
In the unit concerning the past performance of project management we saw
that the general record of project management in the specific context of UK
construction is not entirely healthy.
We saw that project management has two primary dimensions, the

organisational dimension and the operational dimension. Project
managements history, particularly in the cas eof the UK construction sector,
reveals that until recently there has been greater emphasis upon the

operational (tools) side of the project management discipline than there has
been upon the organisational (strategic) side. We saw that project
management has an inescapable burden to deliver projects within agreed
time, cost and quality standards and that this is true regardless of what other
criteria we may consider to be of additional relevance. The delivery of time,
cost and quality targets may be argued as the raison d’etre of the
contemporary project management discipline. However, in the previous
unit, various studies were examined and these led us to the conclusion that
project managements ability to deliver such targets consistently and reliably
may be viewed at best as highly questionable.
A number of possible reasons for the perceived PM failure were discussed,

however, what appeared clear, at least in the case of the UK construction
sector, was that there was insufficient emphasis placed upon the
organisational and strategic dimensions of PM in the typical UK
construction project and that it is likely that there is too great an emphasis
upon the operational dimension and on the numerous tools and systems that
are associated with that operational dimension.
For the time being, and in the absence of evidence to the contrary, we will
hold that the above hypothesis is in fact true. Consequently we will make
the large assumption that if PM in construction is to be made to work
consistently and reliably in a replicatable manner our attention must be
focused on the organisational and strategic dimension. Here we enter the
realm of project leadership.
We are now going to examine the role of project management in terms of

Power, Politics, Influence and Leadership.
7.3 Power, Politics and Influence!

The debate we are about to enter is somewhat controversial! We have
already seen that PM as a discipline can be highly focused on tools and
systems to monitor and control project events. PM has been defined as a
systems management task that merely involves preplanning, monitoring and
controlling. At one level we can see that such a definition has considerable
merit and application, however, there is a large stumbling block that must be
overcome with such a definition and this is, how does the PM gain the
authorityto plan, monitor and control. Is it enough to simply train an
individual in advanced project management tools and techniques and
subsequently send them off into the field and expect them to be able to
implement those tools and expect them to gain the rewards as a matter of
course. It is highly likely that we would all agree that such an approach
would be highly unlikely to work; by themselves, the tools and techniques
merely represent a gun without any bullets or a bullet without a gun,
depending on how we might choose to look at it!! To be effective, the PM
must gain a position of authority and respect in order that he or she can
control the project without interference or buffeting from others who happen

to be involved. This is, of course, a task that is easier said than done! This
avenue of thought opens up the whole area of leadership; are leaders born or
can they be trained? Some in the PM discipline hold to the former position,
however, looking at the PM discipline from a wide perspective it is clear
that there is much faith and expectation in the latter, if we accept that PM is
about leadership rather than about tools and systems.
Given the background we have previously explored and given our

hypothesis that the problem with PM concerns a lack of effectiveness in the
organisational dimension, it is inevitable that we must conclude that the PM
must be a leader and that he or she must be in a position of leadership.
There is certainly no doubt that amongst human beings, some are what we
may like to term ‘natural born leaders’. Such individuals seem to exhibit a
natural charisma and an inherent ability to captivate and motivate others
towards the accomplishment of various goals. However, we may easily
contend that these individuals are few and far between (well in academia at
least!!). If project management and construction in general must rely on
such individuals, it seems apparent that we will always have trouble as there
are simply not enough of them to go around. We can be sure of this because
the past performance of project management, which included a smattering
of these individuals, is so universally dismal! Therefore, we must accept
that there is some degree of training that can be undertaken to try to enable
PM’s to be leaders. The leadership role that has to be accomplished by
project managers is one whereby they are able to gain support for their
project and its objectives by way of their interpersonal power and influence.
This is really about politics. A project manager really needs to become a

politician at some level if projects are to be delivered successfully. The
political role will change between the various stages in the project life cycle,
however, it will always be present. The PM must be skilled in dealing with
individuals or organisations who can either block or facilitate project
accomplishment and they must be skilled in managing upwards in terms of
managing key relationships with project sponsors and senior management.
The PM is first and foremost a politician and is concerned with power and
influence.
Contemporary project managers must have a keen understanding of this and

how these attributes relate to project performance and outcomes. Most
PM’s operate in project environments where they do not or cannot directly
control most of the people or organisations charged with delivering their
success. Our task now is to explore interpersonal power and influence and
leadership techniques.

7.4 Politics and Power: a good thing!
Often we can assume that politics and seeking to gain influence can be an
unhealthy and an undesirable thing; indeed these things can be damaging if
misdirected. This is because, in the workplace, politics can often be
associated with negative actions between individuals or between
departments or even between companies. However, politics can refer to the
positive actions of keeping peoples interest and motivation in a project and
in insuring that the necessary support and resources are being provided to
the project. It is in this arena that the project manager needs to use political
influence as opposed to in any negative or destructive (empire building)
way. We are going to examine a number of examples of positive political
actions that can be applied by project managers and we will look at a
number of methods for exercising upward influence and the challenges and
consequences that can follow when political action is enacted in a project. It
is important, nevertheless, to remember that power and political actions are
often affected by the precise cultural nature of the particular project that the
project manager is operating in. In other words, what works in one scenario
may not necessarily work in the next. Therefore the project manager must
be politically flexible between different projects.
7.5 Project Management Influence
Question
In your opinion, how can project managers exert influence in

order to secure the accomplishment of project objectives.
A number of research and empirical studies have identified 5 main sources

of influence that can be used by project managers to gain project support.
These are:-
(i) Authority
(ii) Reward Power
(iii) Punishment Power
(iv) Expert Power
(v) Referent Power
These will be briefly discussed below. The following text is largely based
upon a research paper presented by Wilemon (2002) at an international
conference on Project Management held in Singapore.
Authority
This refers to the formal authority that is given to a project manager at
appointment. This has always been a problem in the case of UK
construction projects. Therefore it is imperative that the project manager
insures that they are properly empowered with the appropriate formal

(contractual) authority at the start of the project. If such authority is not
secured, it is highly likely that the PM process will be largely emasculated
during the whole of the project life cycle.
Observers have commented that a project manager has as much authority as

others in the project think they have. Therefore, it is clear that the project
manager must have the appropriate contractual authority afforded to them,
however, they must then act in a way that is commensurate with that
authority. However, it is important to note that this is not about the project
manager being overly authoritative in terms of management style. This can,
in reality, be highly detrimental and damaging to a project. Rather it is
about properly commanding the influence and scope of control that has been
given to the project manager and using that to acquire the necessary support
for the project and for its objectives.
Reward Power
This influence source has been defined as the ability to gain support for the
project purely because the project participants value the reward that they
believe the project manager is capable of securing for them.
We may want to pause for thought here and question whether the project
manager in the typical UK construction project set up is afforded any reward
power at all!!! It appears to be a necessary commodity for successful
project management influence and therefore for Project Management per se.
Therefore we need to consider what we must do if we find it to be largely
absent.
The rewards include; the ability to promote, the ability to influence salary
increases, the ability to grant recognition, the ability to help in the
achievement of positive visibility, the ability to assign interesting work and
the ability to offer learning and development opportunities.
The project manager should have two broad types of reward power at their
disposal. The first is direct reward power the second is indirect reward
power. Clearly the direct reward power is that over which the project
manager has complete authority and control. The indirect is the power he or
she has to influence others who themselves have direct reward power to
dispense to project participants. Clearly in the construction context, because
of the contemporary set up, the project manager is more concerned with
indirect reward power since the project manager is often a consultant
managing other consultants or contractors that are employed by a client
rather than by the project manager per se. There may of course be
exceptions to this, however, in the general case that would be rare.
What we must recognise is that the indirect reward power is a legitimate

tool and it must be used by project managers as they seek to win support for
their project and its objectives.

Punishment Power
This is the power or influence to block or withhold the rewards we have
already spoken about. This is a source of influence that is best avoided or
guarded against by wise project managers. This is because punishment
scenarios tend to result in a strongly negative impact on the project at one or
more levels. If punishment is offered as a motivator, it is unlikely that the
contributors will offer the project (or the project manager) their whole
hearted commitment. Rather contributors may ‘work to rule’, that is do the
minimum necessary to avoid punishment or worse, they may remove
themselves from the project all together or refuse to become involved in the
first place.
However, when project targets are being compromised, it may be necessary

to exercise punishment power in order to bring the project back on track.
This requires skill and great dilligence on the part of the project manager if
the negative consequences of an adversarial action are to be avoided or
minimised/ controlled. In the case of the UK construction sector, many of
the punishment power vehicles reside in the formal contracts, however,
these are often highly adversarial and are normally unhelpful to the needs of
a particular project at the time when the need is greatest.
Expert Power
Expert power is defined as the ability to gain support or influence because
the contributors have respect for the project managers knowledge and
expertise. There are two types: the first comes from the specific technical
knowledge the project manager brings to the project. The second comes
from the project managers known general management competencies.
Referent Power
Referent power is the ability to gain support or influence for a project
because the contributors identify with the personality or some other attribute
of the project manager. The attractiveness of a project to a contributor is
also a major source of referent power. This is where the contributor can see
what they will gain from the project as a result of their contributing to its
successful completion. This source of influence could also be described as
project identification and it is a particularly fruitful source for project
managers.
7.6 Leadership Styles

Evidence suggests that there are two main leadership styles that are evident
within the project management discipline. The first relies heavily on the use
of formal authority, reward power and punishment. The second is more
concerned with the use of referent power. It is difficult to identify which
style is prominent or even most desirable in the case of the UK construction
sector. Few project managers working in the UK environment are afforded
the extent of formal authority that would enable them to be fully effective in
the use of that authority or indeed in the realm of reward or punishment for

which the formal authority is prerequisite. This means that the use of
referent power is more likely to be the norm. However, we have seen that
project management in the UK does not work in an effective way.
This tends to suggest that project managers cannot rely on the use of
referent power alone and do indeed need a degree of formal authority,
reward power and punishment power to progress toward the effective
control of projects.
There is no one way to determine which power sources will be the most
effective in different project management situations or scenarios.
Nevertheless the following diagnostic questions (as suggested by Wilemon,
2000) may be asked in each project scenario to assist the project manager in
determining which power sources are likely to work and which are not:-
(i) What is the relationship of the project manager to the project client,
the project sponsors and how credible is the project manager to each
of the major stakeholder groups.
(ii) How important is this project to this client.
(iii) How much experience does the client have in managing projects.
(iv) How much freedom is being provided to the project manager to plan
and execute the project.
(v) What is the relationship between the project manager and the other
expert consultants in the project.
(vi) How much formal authority has been afforded the project manager.
(vii) What direct rewards is the project manager capable of dispensing.
(viii) What indirect rewards will be meaningful to project contributors.
(ix) What rewards can the project manager withhold from project
contributors.
(x) What is the experience and background of the project manager in

managing projects of this type and what is the perceived track record
amongst project contributors.
(xi) What technical skills are particularly important to the accomplishment

of this project.
(xii) How attractive is this project to project contributors.

Answers to some of these questions can better help the project manager to
appreciate the power sources that will be of most value in progressing a
project towards its targets. One thing that must always be remembered is
that how the project manager deals with the individuals or contributing
organisations in the project environment can significantly impact the
projects propensity for success or failure and this holds true regardless of
what systems, processes or tools may be subsequently applied.
7.7 Political strategies for managing project

participants
Projects are constantly changing. The PM has a role to play in progressing a
project through all of the various project life cycle stages. During those
various phases of the project life cycle the project manager will encounter
many different organisations who may make or break the project. Some
parties to the project will be continuous throughout the project, for example,
the Architect, the Client etc.; others will have a more transitory role, for
example, planners, suppliers etc. The project manager has to recognise that
his or her role as politician will change during the different phases of the
project and that the different parties to the project will require differing
political management. Past research has identified that project participants
may be categorised into five main groups, depending upon their role in the
project and dependent upon their view as to its content, scope and success
factors.
The categories that can be used to describe the parties involved in projects
are as follows:-
(i) Allies
(ii) Opponents
(iii) Bedfellows
(iv) Fencesitters
(v) Adversaries
We will briefly consider each in turn.
Allies
These are parties or organisations that believe in the project that is being
managed. There is a high degree of mutual trust between project managers
and allies. The project manager can rely on the support of allies and often
the allies will go out and win support for the project independently of the
project manager. What is important here for the project manager is to insure
that the bond between them and their allies is strong and will be enduring.
It is important to keep allies ‘on-side’ and to fully involve them and

communicate with them concerning ideas and strategies for project planning
delivery and completion. Good management of allies ends up with them

empowering the project to a greater or lesser degree and clearly this can be
significant in increasing a projects propensity for success.
Opponents
In the case of opponents, there is trust between them and the project
manager, however, they disagree with the projects objectives, purpose or
direction. For example, there could be a high degree of trust between a
project manager and an environmental group. Each party trusts the integrity
of the other but they have a different outlook on what the project will
achieve. Opponents can be useful because they help the project manager
and the client think the projects objectives through. They may also help to
refine the project or to improve it. Opponents can also be useful sounding
boards during the early phases of a project. The more credible an opponent
is, the more attentative must be in addressing their concerns. Often, in the
case of opponents there will be areas of agreement as well as disagreement;
it is therefore possible to progress projects through various stages even
though there are areas of disagreement. What is important is that these areas
of disagreement and agreement are clearly understood. Anticipating
objections is also a necessary part of managing opponents.
Bedfellows
In this case, the contributor or other party may well be in agreement with the
project and its objectives, however, there is a low level of trust between
them and the project manager. Project managers need to be careful when
dealing with bedfellows. One key in dealing with bedfellows is to
continually work on the basis of the agreement that exists between them.
Most of the project support can be won on the basis of agreement. The vital
ingredient is to guard against doing anything that would further degregate
trust. Thus, if it is known that future project developments are likely to
affect the relationship it is vital that the project manager manage that so that
broad agreement on the main project outcomes can be maintained. If the
bedfellow ends up in disagreement over an objective as a result of a change
the project may be jeapordised in some way. On the plus side, when a
bedfellow is carefully managed on the basis of agreement, they can be
turned into an ally when the level of mutual trust is increased.
Fence Sitters
These are organisations that do not have a particular view on the outcomes
of the project, for or against. They may be involved but they perhaps don’t
have an interest in the way things turn out. Dealing with a fencesitter can be
a very frustrating experience for a project manager. A recommended
approach is to confront them and ascertain exactly where they stand on
particular project issues. If the project manager can establish where the
fencesitter really stands that can be the basis for useful progress and
management. The least recommended approach in the case of fencesitters is
for the project manager to take a passive approach; rather assertiveness and
willingness to confront is the key management requirement.

Adversaries
Parties to projects become adversaries when the project manager has been
unable to secure agreement or trust at any level. This is the most difficult
type of project participant that the project manager must deal with. An
adversary, lets say planning authorities or local residents, can become a
serious obstacle that can prevent a project from being progressed. In this
case it is often necessary to try to change one aspect of the project to try to
accommodate the adversaries objection without jeapordising the wider
objectives of the project. Where this cannot be done, or where the adversary
is blocking the project on unreasonable grounds, the project manager may
have no ability to change the situation by themselves and may have to
appeal to a higher authority.
The project manager must adopt a different political response for each
category of project participant with the aim of securing the projects core
aims or perhaps refining them so they enhance the overall aims of the
project. How the project manager manages each type is critical to the
success or failure of the project. One thing that does not work is managing
each party in the same way. The project manager may have to be highly
flexible and adaptable and adopt different leadership styles with different
parties. It is also necessary to note that the role adopted by a particular
organisation may alter during the different stages of the project life cycle,
therefore, the project manager may need to continually monitor the situation
and adapt/ adjust the management style accordingly.
7.8 Managing upwards (Clients and Stakeholders)

Much of the above is focused on the project manager handling parties in the
horizontal project structure ie. Other consultants, contractors and the like.
The project manager may will think of such as his or her peer group.
Managing these relationships well is vital in securing project success,
however, of equal importance is the task of managing upwards. There are
four important concepts that PM’s need to be aware of in managing
superiors (whether they be superior managers or clients, other stakeholders
or all of these). These are:-
(i) Visibility
(ii) Priority
(iii) Accessibility
(iv) Credibility
Each will be briefly addressed.
Visibility
It is important that the project and its progress are transparent to
stakeholders, however, the level of transparency or visibility needs to be
managed depending on the project situation at given times. When the
project is performing well and good progress is being made the level of

transparency or visibility needs to be increased; it is important that those
funding the project can see that objectives are being fulfilled since this will
guarantee the future commitment of funds. When the project develops
problems (as all projects will) visibility needs to be reduced not so that
problems are hidden, but so time can be purchased to fix the problem. This
way the problem can be presented as solved at the right time. The project
can be presented as solved at the right time. The project manager must
never attempt to conceal problems that are unresolvable without the
involvement of superiors as nothing will be quicker to destroy the project
managers credibility.
Priority
The project manager must be aware that it will be necessary to fight for
resources to accomplish the project that he or she is responsible for. Most
clients will be funding more than one project at any single point in time and
new projects will be starting during the lifespan of existing projects. It is
therefore essential to ensure that the particular project that the project
manager is progressing always has appropriate priority in the clients
commitments. Again, this is an aspect of project management that must be
cultivated since it is far removed from the systems and tools concerned with
the operational dimension.
Accessibility
Accessibility is unlikely to be a problem in the case of most construction
project management scenarios as the project manager, as the clients
representative, will almost always be granted accessibility to the senior
management within that client. Nevertheless, it is important that
accessibility is there so that the project manager can secure visibility and
priority for the project. In a construction scenario, a lack of accessibility
may occur if the project manager is not managing horizontal relationships
with other consultants in an appropriate way. In other words, an Architect
or Engineer could end up dominating project meetings with a client and this
could unbalance a project if the client ends up placing too much emphasis or
resource on one particular area. The project manager must guard against
this. Here the leadership issue is clear and the need for accessibility to be
carefully managed is apparent.
Credibility
Credibility is vital. The client must be able to trust the project managers
ability, judgement and performance. To a large degree this depends on the
performance of the project but it also depends on the openness and
truthfulness that exists between the project manager and the client.
The project manager needs to be continually managing these four criteria to

make sure that each is approproiate to the projects needs at any given time.
Again, it is clear that the control of these variables can considerably
influence a projects propensity for success. Clients are often blamed for
poor project outcomes as a result of changing project specifications and
such like. The project manager must politically manage the client as well as

the contributors to guard against unhelpful and unnecessary alterations
which may well compromise the overall quality of the project outcomes.
7.9 Self Assessment Questions
(i) Successful project management is primarily concerned with power,

politics and influence.
Evaluate this statement
(ii) A project manager must be a politician.
Fully Evaluate this statement.

8: SCM, Partnering and Strategic
Alliances

At the end of this unit you should more properly understand the real nature
of supply chain management and strategic alliances in project management.
You should appreciate the difference between buzz and spin and the real
thing and you should have grasped the reality that if project management is
about anything it is about ‘managing the supply chain’. However, you
should also appreciate that this is a task not merely concerned with
following systems, procedures or using devices that are designed to ensure
that you keep the supplier on side so to speak; rather the concept of
managing the supply chain is much deeper and more fundemental than this.
It is the heart of project organisation and design and therefore it is the heart
of project management itself. Without this PM will be a dead duck!
You should also understand the need for strategic alliances that are long
term and founded on trust and mutual benefit if continuous performance
enhancement in the UK construction industry (or any industry) is to take
place.

ISBN: 0 7277 1693 X

8.1 Summary
So far we have examined the general performance of Project Management
and its apparent failure to successfully deliver construction projects. Further
to that we have investigated the role of power, influence and politics in
project management, particularly with respect to the leadership role of the
PM. We now turn our attention towards the PM’s role in connection with
the Supply Chain.
Supply Chain Management is what we could term a ‘buzzword’ in PM

circles at the present time. There are a number of guru’s promoting the area
and as such it has gained importance and credibility in construction cicles.
We explore this briefly, however, we conclude that in reality SCM is a

fundemental part of the integration and teambuilding role that has always
been embedded in the PM discipline since its origin. There is a danger for
PM’s in getting hung up on buzzwords or key themes and numerous
methodologies concerning their implementation while missing something
deeper.
What is important for PM’s and for construction in general is the

development and fostering of strategic alliances and partnerships. This is
clearly a core component with PM and it is embedded within the political
influence issues that we previously examined concerning how PM’s foster
allies so that long term project aims are accomplished. Issues concerning
partnering and continuous improvement are explored in relation to how PM
and construction in a wider context can become more easily associated with
success rather than with failure.
8.2 Introduction
Do we, as project managers, fully appreciate what is required to make
projects successful? Are we going to learn what Latham, Egan and the
various recent industry think tanks tell us about how success can be
achieved. Do we appreciate the terms used, for example, partnering the
supply chain, supply chain management, and partnering and will any of it
be useful if it isn’t implemented at the highest levels throughout the
industry.
We now move on to briefly consider these questions.
8.3 Buzz and spin!! ; where is the substance?

We now consider a number of key ‘buzzwords’ that are presently used
frequently in the context of solving the construction performance problem.
Nearly all relate to project implementation and strategic project

management, ie. that part of the complete project management process that
we have already concluded to be largely missing.
You will notice that so far in this module virtually nothing has been said
about project management at the operational level. This will not change.
The operational aspects of the project management process are very well
defined and they work, there is, therefore, no need to spend time on them.
Some of the ideas in vogue at the present time are certainly not new and
some may be more important than others. This will be pointed out as we
discuss each, however, you should be able to understand and critically
appraise all of the following ideas and concepts. Hopefully it will become
clear that many of these idea’s have always been key aspects of PM; merely
titling them with fashionable terminology and adding positive spin will not
permit their successful implementation any more than they ever were. It
doesn’t matter where we head with this module; we can’t escape the key
themes we have already expounded; Strategy and Leadership in the PM role
are absolutes if success is to be approached. We will see this as we go
through each of these ‘new’ idea’s briefly.
8.4 Partnering (Strategic Alliances)

We could study for a complete module on this subject, however, we do not
have that luxury so we will keep this discussion brief and consider only the
salient points.
Partnering is not a new concept. The partnering concept was pioneered by

the Japanese auto industry. It had its origin in the Japanese philosophies
relating to Total Quality Management. In the case of construction partnering
was applied successfully in the USA and Australian construction industries
prior to its recent popularity with Latham and Egan.
The basic idea involves the establishment of medium- to- long term
relationships between clients and their suppliers; in the case of construction
between clients and principal contractors. The benefits come from the
identification of long term common goals and the synergies that result.
The suppliers or contractors business needs become more closely aligned

with those of the client organisation. In Latham’s language this may be
viewed as a form of ‘incentivisation’.
On a more practical level cost savings are generated as the supplier or

contractor need not price for wasted time and effort in failed tender offers
and from the economies of scale that come from working with the same
individuals over a period of time. In addition, trust between the parties can
be improved and adversarial disputes reduced or eliminated.

Until recently one of the most successful examples of this in a UK
construction context involved the relationship between Marks and Spencer
and Bovis Construction which lasted approximately 20 years.
If the benefits of partnering are to be achieved both partners must be fully

committed and leadership must be solid. Recently, Sainsbury’s have
implemented partnering arrangements and have achieved cost reductions of
20% on a number of projects.
However, the real aim of partnering and the real measurable benefits are
much more strategic for construction clients than simply achieving cost
reductions individual projects or even on a number of projects. The heart of
the partnering concept involves continuous improvement of the kind that
Egan eluded to in his report. This is crucial and can be missed in only a
superficial analysis. Egan has set continuous improvement targets; a
reminder, 10% per year on cost and 20% on defects. To many this seems an
impossible, unrealistic, unobtainable and in the minds of some an
undesirable aim. As you study this subject you will almost certainly
encounter such views or you may hold them yourself!!
If we only consider partnering at a superficial level, from client to client,

from project to project, the reality is that Egan’s goals will not be achieved.
It is obvious really!!! Project Management cannot deliver continuous
improvement year on year without technological advance both in process
and product.
However, if those who participate in the industry, remembering that it is a

very competitive industry, enter into long term relationships with one
another, one contractor with a given client and another contractor with a
different client, there will be a competitive element to delivering a year on
year performance improvement. We have yet to bring in the supply chain,
however, for the moment just keep thinking about this in connection with
the main contractor and the client. . There are only so many savings we can
squeeze out of the present approach to delivering projects. If partnering
only goes as far as squeezing these savings out of the existing process then
as a concept, it fails!
Continuous performance improvement requires new technology in both

process and product. New technology requires research and development
and research and development involves cost and risk. Partners can share
those cost and risk burdens to compete to deliver new technologies that beat
those used by their competitors. The car industry is a reasonable (though
not perfect) example. The partnerships forged between manufacturers and
suppliers to bring a technological advance to the market first at the lowest
cost is intense. Ultimately everyone else catches up and the cycle begins
again, there are year on year improvements. For illustration purposes, an
extreme example you will probably be familiar with is the sport of Formula
One. Each team involves a strategic partnership between manufacturers,
suppliers, drivers and so on. It would be natural to assume there must be a

maximum speed that a car can travel round a given race track. The
governing body continuously change the regulations controlling the sport
with the aim of slowing the cars down and improving safety. The reality is
one of continuous improvement. Year on year the teams and their strategic
partners (the term used by the McLaren Team) manufacture cars that are
quicker than the previous year. This is a particularly good example of the
ultimate benefits that partnering could bring to construction. The industry
needs to continue to find ways of delivering quality, value for money
buildings in shorter time periods. This cannot happen without technological
advance. The partners may change from time to time as they do in Formula
1, however, the continuous improvement continues.
Construction needs new technologies to improve on a continuous basis.

Until now it has been one of the slowest industries to innovate; it is retarded
in its commitment to research and development. Partnering and Strategic
Alliances present a vehicle to change this and in the context of technological
advancement could and should be a powerful tool. This is the heart of what
Latham and Egan are attempting to drive the industry towards.
This said, what we must now consider is this; is partnering a project

management strategy or a strategy that falls into a wider category of the
management of projects generally.
In principle the partners are client organisations and (in this case) the
principal constructor (and as we will see in a moment, the sub contractors
and the wider supply chain). If the client is using an internal project
management approach, then we can clearly see that partnering offers a
strategic approach to securing medium- to- long term cost improvements.
Moreover, the increased trust and reduction in adversarial disputes is likely
to increase the probability of on- time completion and zero defect project
handover. If the project management input is external, the same benefits are
likely to accrue to the individual(s) managing the projects yet the strategic
decision to enter into the partnering arrangement may be outside of those
project managers’ direct control.
There is a further issue worth considering here. Is it possible for Clients to

enter into strategic partnerships with external project management
consultants and would this offer both partners advantages similar to those
that can be achieved between a Client and a Constructor. Another way of
considering this is who fulfils the project management role in a conventional
partnering arrangement and which party or parties actually do the
construction work.
8.5 Partnering the Supply Chain

Of course, the same discussion applies here as above except we now bring
in the wider supply chain including subcontractors, product manufacturers,
materials suppliers and fabricators. The synergy which could be expected,

together with the competitive impetus and risk sharing have the potential to
create an industry far more dynamic and orientated towards continuous
performance improvement than we have previously seen.
You can reason this through.
However, to touch base once again, we have to return to our underlying

theme that has featured throughout. That is to say that without strong
leadership and project management or rather, we now need to be speaking in
terms of the management of projects (in line with the reasoning argued by
Morris (Morris 1994)) this will not happen.
Morris wrote that one of the qualities that successful project managers tend
to possess is vision. You should clearly see that without this quality,
partnering will simply remain little more than a cost saving strategy. Yet
with vision we can see the potential that the concept could realise if it is
fully exploited and if partners are prepared to engage in such exploitation.
Exploiting partnering to the full, across the wider supply chain, will require
project organisations to be formed in informal, dynamic, changing patterns;
organisations that are capable of adapting to suit the changing needs of
projects and technological development. It requires organisations like those
used for the Manhatten Project or like those used by NASA to land man on
the moon.
These issues cannot be laboured enough. Technological complexity and

advance and project organisation are the reason project management exists.
These issues lie at the heart of project management.
Partnering is a key part of project organisation design and incentivisation;

remember the first lecture where we saw that the project manager had to be
able to mobilise a large number of people and companies to work together
towards delivering the overall objectives of a project which may be complex
and uncertain while still satisfying their own personal and commercial
needs. Partnering and Partnering the Supply Chain are core aspects within
this goal.
8.6 Self Assessment Questions

(i) Current wisdom indicates that supply chain management (SCM) is
crucial in the successful delivery of construction projects.
SCM may appear somewhat remote from ‘mainstream’ project

management activities (PM) yet evidence suggests it has always
been fundemental to the PM function.

Discuss the role of the contemporary PM in relation to SCM and
evaluate the importance of SCM in the delivery of successful
(ii) Discuss the role of strategic alliances and partnerships in improving

construction project performance and describe the form that strategic
alliances should take if they are to be successful in a construction
context.


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1: The Construction Industry: Practices,

Performance and Development

Learning outcomes from this unit

You should understand that traditional procurement systems and construction

1.3 The Construction Industry: Performance

a) High cost and duration of the project

According to the National Audit Office’s report ‘Modernising Construction’ (2000),

A recent survey by the Design Build Foundation in the UK shows that:

1.3.2 The supply team is not satisfied

• Tend to be white males (the current proportion of women in all positions in

1.3.3 Industry’s bad reputation (not attractive to young generation)

1.3.4 Low profitability (short cuts, bankruptcy, lack of investment in

Causes of low profitability are:

1.3.5 Lack of innovation and development

According to Egan’s rethinking construction report, the construction industry invests

1.4 Current State: Industry and Practice

• Architect is the project leader. This leads to:

• Competitive tendering is the most common way in which contractors and

• The industry is fragmented and construction is performed by specialist

• Project team responsibility ends at completion of construction. This means that:

• Need to price before production. This causes:

1.5 Current State: Project Management

• PM in the main is to do with maximising efficiency and predictability given the

In traditional project management, a project has a well-defined scope and can be

1.6 Questions to be asked

• What are the developments needed?

1.7 Initiatives to influence the construction industry

• Major government led studies and investigations (Technology Foresights, Latham,

• Related organisations and departments (DTI, CRISP, Rethinking Construction)

1.8 Main findings and the change agenda

• Tackle fragmentation and adversarial culture by partnering and teambuilding

• Briefing the team (client empowerment, visualisation)

• Incorporate whole life-cycle costing (WLCC) and sustainability in design

• More use of standardisation and pre-assembly

• Take full advantage of IT and other new technology

• Develop people and culture necessary to facilitate all of the above.

Self Assessment Questions

Learning outcomes from this unit

You should understand that project management is a mature discipline and

Recommended reading for Unit 2

Heriot-Watt University Unit 2 - 1

The first use of project management practices in construction came by way

Despite project management’s emergence as a major discipline, both in

Morris undertook a study in the early 1980’s in which he examined 1449

Heriot-Watt University Unit 2 - 2

Mounting evidence tends to suggest that the client frequently acquires an

Clearly, the procurement phase of a new capital building asset represents

This is a complex area of study because a plethora of variables are known to

We begin by investigating the origins of the project management profession

Heriot-Watt University Unit 2 - 3

2.3. What is PM?

Therefore, modern building project management has two main functions.

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Considered significant in the management of building projects [Bennett, J;

Whilst of substantial importance to the management of building projects and

2.5. Project organisation and project management

Clearly as all of the contributors will be organised towards profit

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Heriot-Watt University Unit 2 - 6