Project Management: Cures for Complexity

Guys in this business are guys who like to build things,” says Steve Setzer, spokesman for Constructware, an application service provider that supplies management support services to the construction sector. “They don’t like paperwork.” } Or, until recently, computers. } Setzer is struggling to untangle a paradox: IT is about managing complexity, and the average construction project is a sink of complexity. Gargantuan construction projects are veritable swamps. Yet the construction industry has tended to be a lagging adopter of IT. “Until recently, construction IT usually reported to the CFO because the only information technology in the business was that supporting accounting,” says Mark Napier, a vice president and systems manager at Bovis Lend Lease, the London-based construction giant currently building the AOL Time Warner tower in New York City (among other projects).

Instead of a consensus as to what has inhibited the spread of IT within the construction industry, there’s speculation. “Contractors see their business as living from project to project,” suggests Joel Koppelman, CEO of Primavera, a project management software company. “That [short-term] view might make them reluctant to add [continuing] overhead expenses, like an IT staff.”

No doubt the high stakes in construction?in terms of dollars and even lives?could lead to a reluctance to adopt new technologies. (Tort lawyers, for example, love to nail contractors who miss deadlines or incur on-the-job injuries for using methods that are considered “new and unproved.”)

Finally, the construction industry tends to be highly outsourced. Clients hire contractors who hire subcontractors who hire other subcontractors, and this may inhibit the kind of information-sharing that IT would facilitate. Scott Unger, president and CEO of Constructware, has stated that he feels there is a dark, lingering suspicion in construction that “making information readily available and transparent could be troublesome.”

Whatever the reason, in the past few years this resistance has begun to crumble. IT is starting to permeate the construction industry, helping it to manage issues such as centralization, facilitating collaboration among subcontractors, and streamlining scheduling and materials handling. And as construction projects grow in complexity?with larger jobs, more government regulation, and more sophisticated materials and building techniques?the role of IT in managing that complexity inevitably will grow along with it.

The world, as we know both intuitively and experientially, is becoming an increasingly complex place in which to live and work. And in many ways, the nature of complexity?its qualities, impact and the challenges it presents?is consistent across all endeavors and industries, whether in construction, retail, manufacturing or government. Fortunately, IT development efforts and innovations travel easily across sector boundaries. Adding a market as large as construction to the IT universe will advance the art of complexity management for us all.

10,000 Gas Stations, One (Flexible) Plan

Often the event precipitating IT adoption in the construction industry is the prospect of a project so big that it seems impossible to do using the old technology. Five years ago, two gasoline retailing giants, BP and Amoco, merged (the new company is also called BP). One consequence of this merger was that about 10,000 gas stations scattered across the Eastern United States needed to be renovated (or “reimaged”) in order to establish a nationally consistent look and feel for the new brand.

These were not slap-dash makeovers: An average station might need $100,000 of parts in a unique kit or set, with each kit drawing from the catalogs of nearly a dozen vendors. Each renovation required coordinating the operating needs and schedules of a surveyor, building crew, resource vendor, inventory manager, delivery service and station manager (who naturally wanted the disruption to his business to be as brief as possible). The deadline for completing the project was set for 2004. The only way to meet that was to work on at least 50 stations simultaneously.

Bovis Lend Lease was assigned construction manager for the project. It started work using the traditional manual technique in which designers, vendors, contractors and delivery personnel sent each other streams of faxes about how they never got the last fax, or had misread the date of delivery as the 13th rather than the 3rd, or thought it said “now” not “not” in the 123rd paragraph of the project plan. Of course, simultaneously managing 50 of these projects this way was stressful and potentially disastrous.

One day in the spring of 2001, Bovis managers were discussing the situation with their logistics provider, North American Logistics, or NAL (now known as Sirva Logistics). (A commercial logistics company is responsible for coordinating and scheduling the movement of goods and equipment up and down the supply chain.) NAL said it had initially developed a technique (known then as “in-transit merge” but since renamed “synchronized order merge”) for a client in the telecom sector that involved dynamically combining materials from several vendors to distribute as one package to an end site. Did that sound like it might be helpful? It did. Soon two projects were under way: the gas station reimaging program itself, and a collaboration among Bovis, NAL and Constructware to revolutionize management of large, multisite construction projects.

The specific idea was that surveyors would visit each gas station, document the site photographically, fill out forms that capture the current details of the station?what kinds of pumps, what sort of signage?and then upload the data and photos to a common Web portal. This Web-based project management system then applies rules to these inputs that infer an average of 70 percent of the parts needed for each job and generates a checklist for the project manager to use in selecting the remaining parts. “The time saved by having the computer determine most of the material requirements gives the project managers more time to manage the process and ensures a 100 percent complete and accurate bill of materials,” says Bovis’s Napier. These parts lists would then be combined across projects and the suppliers notified of the total number required of a given part and when that shipment would be picked up. NAL would carry the parts to a central warehouse, separate them, rebundle them into the site-specific combinations requested by the surveyors and truck the kits to the site on the day the contractor was scheduled to arrive. At the same time, other logic in the system calculates project budgets, defines and monitors schedules, and checks for errors.

Once the collaborators had the details worked out, the next step was to educate the suppliers. Napier called a meeting and asked two questions. The first was: “How many of you are prepared to process 2,500 orders per year, with changes, manually?” Appalled silence followed. After giving everyone a moment to contemplate that tide of paperwork, Napier asked, “How many of you are open to doing it a better way?

“Everybody,” he recalls, “raised their hand.”

The Fruits of Their Labors

According to Napier, the new system delivered a level of productivity that was close to astonishing. Seventy percent of the workflow transactions were automated, saving tens of thousands of manager hours. Program management staff was reduced to 50 people from 80. “Currently, we are generating accurate electronic orders and delivering parts for as many as 200 sites a week,” Napier says. “This would have been almost impossible using traditional processes.”

As is often the case with IT, the low-hanging fruit came in bunches. The system allows close design calls (cases where the station layout is too complicated to be captured by the program logic) to be concentrated in the hands of a single person: the design manager. In the old days, such decisions might have been made on any level?the contractor, the project manager for that individual job site?and given the subjectivity inherent in such calls, many of those decisions were wrong and, consequently, would have to be fixed down the road. That never happens now.

“This is a huge benefit for us,” says Napier. “We have a more consistent bill of materials, pay for fewer changes and get a faster cycle.”

Bovis also used the system to reorganize the top end of its supply chain from four warehouses to one. As part of this process, it migrated to a different set of suppliers?companies more comfortable with IT and better adapted to handling large order volumes. (These were picked in part through an online reverse auction handled by FreeMarkets. com.) Napier thinks this reorganization saved in the neighborhood of 30 percent on materials costs alone. All in all, he found the ROI on the synchronized order merge technology to be an amazing 521 percent annually (after amortizing the cost of the software during the four-year life of the program). And of course, the same tools have become a strategic asset for pursuing other large multisite construction contracts, just as globalization-driven consolidation has made this type of job increasingly important.

A Collaborative Slog Through a Swamp of Complexity

The Bovis answer to the problem posed by multisite management hinged on inventing a new solution for facilitating centralization. But the opposite is also true. Large projects must often be decentralized, and this can be a source of complexity as well. One of the most complicated construction projects now under way is the Comprehensive Everglades Restoration Plan (CERP), an $8 billion, 30-year program designed to restore the habitat and ecosystem of the alligators and manatees in the Florida swamps. It is certainly one of the largest?and most complex?initiatives of its kind in the world.

For most of the history of Florida, water management has had two ends: flood control and assuring adequate supplies of clean water to local communities and farmers. CERP is charged with adding ecological restoration and sustainability without compromising the gains made by earlier projects. It intends to do that by capturing 2 billion-plus gallons of the fresh water that now flows out of the swamp and into the ocean from rivers, streams and other outlets every day. The water will be reused to restore levels required to support native ecosystems, from Lake Okeechobee through the “River of Grass” (the Everglades), to Florida Bay. To do this, CERP will need to build more than 200,000 acres of reservoirs and wetland-based treatment areas, remove 240 miles of levees and canals, and build about 300 underground aquifer storage and recovery wells. And those are just the highlights.

This to-do list is divided into 55 construction projects, many of which, as in the BP case, have to be executed at the same time. (Simultaneous management of water projects is mind-bendingly tricky when those projects are in the same watershed, as the projects must then interact with each other, not to mention that water is notoriously hard to contain and order about.) An added complexity is that overall management of CERP is shared between the Army Corps of Engineers and the South Florida Water Management District (SFWMD). In fact, each of the 55 projects has two project managers, one from the Corps, one from SFWMD.

But where the complexity of CERP really hits the stratosphere is in the huge number of stakeholders. About 7 million citizens in Central and Southern Florida live in the 2.5 million acres that compose the affected watersheds. CERP cuts across the legal responsibilities and interest areas of a long list of government organizations?including federal and state parks, local, state and federal environmental regulators, Indian nations, 16 county governments, more than 100 municipalities, and an even longer list of private interest groups, including those that represent the environmentalists, farmers, consumers and tourists?all bent on ensuring that water supplies remain ample for their constituents’ needs and interests. The political reality is that a project of this scale needs to maintain positive relations with just about everybody in Florida.

CERP addressed that problem by setting up two huge websites. The internal one uses Primavera Enterprise to support short-term collaborations (editing, revisions, comments) among the members of each subproject’s delivery team. Everything else goes on the public site, www.evergladesplan.org. For instance, a project such as CERP naturally entails a great many meetings, especially since state and federal transparency laws mandate general access. The site is used to organize and publish all these schedules and locations, including agendas, downloadable versions of the texts, maps, photos and modeling studies that will form the basis of the discussion, and minutes. The names, postal and e-mail addresses, and phone numbers of each subproject’s managers are there. So is a zoomable mapping tool (gis.evergladesplan.org/cerp) and a sophisticated viewer that allows users to compare the models used to design different aspects of the system (modeling.cerpzone .org/cerp_recover/pmviewer/pmviewer.jsp).

“We put every ounce of detail out there,” says Randy Smith, spokesman for SFWMD, and in a project like this, that’s a lot of ounces. Indeed, an outsider is likely to be overwhelmed by all the data-sharing going on, a problem that Smith says CERP is aware of and working on. The system has 5 terabytes of storage in readiness, of which 250GB are in use today.

Alex Perez, director of the Program Controls Division for SFWMD, thinks the lesson of the CERP sites is that large, multisite programs that require broad political support probably have to think about a “parallelized” form of management, in which component projects manage relations with their specific constituencies and each other in a common IT environment. Exhibit A for his argument is the popularity CERP has enjoyed (a recent funding vote passed unanimously) despite meddling with perhaps the most critical and politically volatile resource in the state?water. Perez credits the huge transparency effort supported on Everglades.org with this acceptance.

The Stuff Pipe Dreams Are Made On

Farnham & Pfile (F&P) specializes in building coal “prep plants,” facilities that purify or concentrate the energy in coal by extracting noncoal material (water, rock) from the ore. Though its role is not widely known, coal processing is in fact a key component of the energy sector (and, as environmental issues grow more urgent, it’s becoming even more important). Most of our coal-burning plants depend on cleansed coal to keep them within performance standards. If the hundreds of prep plants scattered around the country had to close, so too would the energy plants.

Prep plants work by crushing coal ore into small pieces and then using a variety of processes (screens, filters, flotation tanks) to sort the resulting fragments into what is mostly coal and what is mostly not. (The sorting process never achieves 100 percent purity.) Typically, plants process between 500 and 1,000 tons an hour, and many do better than that. Moving this huge volume of material around a plant takes a significant quantity of high-end pipe, easily tens of thousands of feet. The pipe weaves back and forth, over and under the plant equipment and structural elements of the building in an immensely complicated knot. Much of the work of building a prep plant lies in designing the geometry of this knot. No two designs are alike, and they vary with site, client needs and ore quality.

And to add another layer of complexity and difficulty, because coal is so acidic, much of the pipe has to have a thick ceramic lining. Ceramic has to be baked, so those lined pipes are designed and made offsite, as opposed to being cut and welded in place as needed, as is done with simple steel pipe. Historically, according to Tom Porterfield, F&P’s vice president for operations, the enormous complexity of a prep plant has prevented contractors from predetermining the correct measurements for those pipes, meaning they are forced to throw away a lot of pipe. And ceramic pipe is not cheap. “If one elbow is wrong, you might end up having to rip out a whole line,” he says, “and a line might have 10 elbows in it at $6,000 each.” Even pipes cut onsite (water-carrying pipes, for instance) often need to be redone several times to accommodate design changes and unexpected twists and turns. As a result, contractors such as F&P typically allow 30 percent or more of their initial bids for correcting piping errors.

In 2001, IBM/Dassault Systemes introduced a major upgrade of a 3-D CAD tool called CATIA (Computer-Aided Three-dimensional Interactive Applications). The upgrade not only managed spatial relations but knew enough physics to test components for physical conflicts, performance logic, loading stress, connection compatibilities and general standards adherence. Suddenly it was possible to generate pipe designs that were right every time. The 30 percent that had had to be allocated for errors fell right to the bottom line. This saving was especially important to F&P, since prep plants are the backbone of its business.

As was the case with Bovis, F&P found that digitizing its work brought several added benefits. In particular, the logical structure generated during design, in which all the parts and their physical relations are modeled, turns out to constitute a useful backbone for organizing the huge library of operations and maintenance documentation that makes up plant operating manuals. That’s a big plus for F&P’s clients, since running a plant requires continuous consultation with the operating manual, and one of the frustrations of running any kind of industrial facility is that operating manuals deteriorate over time. Volumes disappear. Pages fall out. Corrections scrawled by one operator are unreadable by his successor, and so on. With CATIA it’s possible to link all information, from operating instructions to maintenance histories, and keep that information updated, backed-up and ubiquitously accessible. If instructions need to be animated, CATIA can generate those as well.

Second, the tool allows F&P to expand out of its niche, both horizontally, into new markets (power plants, synfuel and waste fuel plants), and vertically, into maintenance services. Once operating histories and lifecycle standards are entered into the program, CATIA can manage inventory and schedule replacements of parts. So now, instead of just building a project and handing the customer the keys, P&F offers a maintenance service, turning customer relationships that were episodic into continuous revenue streams.

Help in a Complex World

At present, most of the IT solutions being adopted in the construction industry were developed in other sectors. But construction is a huge industry. It embraces virtually every category of complexity management, from simulation to resource location to collaboration to centralization. The stakes are high, and the industry requires very high degrees of accuracy in real-time. As a result, construction is closer to joining the IT development community as a full partner. And when it does, a flood of solutions will start to flow back the other way.