Impact of Project Delivery Systems on TQM Implementation in the Building Construction Industry

Hazem Elzarka, PhD

University of Cincinnati

Cincinnati, Ohio, USA

A project delivery system (PDS) is a general term describing the contracting methods and the types of contracts used on a construction project.  It also defines the parties involved, their responsibilities, rights, interactions, selection process and time of involvement.  The PDS used has a significant impact on project quality and the successful implementation of TQM programs.  An inadequate project delivery system creates adversarial relationships among the parties involved, increases the number of claims and disputes and prevents the free flow of information necessary for the successful completion of a quality project. The paper starts by presenting the attributes of an adequate project delivery system necessary for the successful implementation of TQM.  The paper then briefly describes three common project delivery systems used in building construction, discusses their quality-related advantages/disadvantages and present means that can be used to reduced these disadvantages. 

Key words: project delivery systems, quality management, TQM, design-build, at-risk construction management.

Introduction

Total quality management (TQM) is a company-wide effort to increase customer satisfaction, employee satisfaction and cost effectiveness by continuously improving performance of all functions of the company (Burati et al. 1993).  The goal of TQM is to achieve customer satisfaction without increasing cost by ensuring that all work is done right and free of defects the first time (Deming 1988). The TQM approach to managing quality is completely different than the traditional approach of managing quality.  TQM is proactive with a goal of continuous process improvement in order to prevent defects rather than detecting them (Deming 1988).  It does not only focus on the quality of the physical construction product but pays attention to service quality, project safety, environmental concerns and improved long-term relationships with owners, design firms and subcontractors (Maloney 2002, Koehn et al. 2003) . TQM also involves all employees in assuring quality and integrates quality improvement processes in all phases of the project instead of just involving quality control inspectors at the end of the project (Chase 1993).

The project delivery system has a great impact on TQM implementation as it determines which quality improvement processes can be performed.  For example, in a competitively bid lump sum project delivery system the contractor can only be involved after the design phase is over and the drawings and specifications are complete; this prevents the contractor’s involvement in preconstruction and eliminates many potentially useful quality improvement processes such as constructability reviews and value engineering. 

Method

The findings presented in this paper are part of the results of a large research project whose objective was to study the implementation of TQM in building construction. The objective of this research was to identify the ways in which building construction companies have implemented TQM. To achieve the research’s objective, interviews were conducted with quality personnel from 8 major construction firms specializing in building construction. The combined annual volume of the 8 firms exceeds $5 Billion.  The research relied on interviews more than standard surveys because the research was undertaken to establish basic conclusions, not to produce statistical data.  The interview process provided a better avenue for getting important feedback, insight, and comments from the experts without requiring them to complete lengthy survey forms.

The research project studied many other factors affecting the successful implementation of TQM and examined the various quality improvement processes that were successfully implemented by large construction firms throughout the various phases of the project.  The Quality Management Programs of the 8 firms were also reviewed and an extensive literature search was conducted.  Only findings related to the effect of project delivery system on the successful implementation of TQM are presented in this paper.

Results

The results of the research project have identified the following attributes of a quality producing project delivery system (PDS):

1.     The PDS should allow for early participation of the construction firm.  Such early participation allows the contractor to perform many value adding activities such as drawings and specifications’ reviews, bid packages’ selection, and studies on value engineering, constructability, scheduling, safety and quality.  Early participation also allows the contractor to develop accurate cost estimates to ensure that the project will be within the owner’s budget constraints.  In addition, the contractor’s early participation permits an early start of the partnering process.

2.    The PDS should consider quality & past experience and not low price alone in the contractor’s and the design professional’s selection process.  Contractors selected based on low price only do not have an incentive to enhance their reputations and perform quality work. They use the lowest priced subcontractors with little regard to quality. They also usually suggest lower priced material substitutions forcing the design professional to spend more time reviewing suggested changes, which often result in project delays.

3.    The PDS should improve working relationships among the parties involved.  Adversarial conditions increase the number of claims and disputes and prevent the free flow of information necessary for the successful completion of a quality project. Under adversarial conditions, project team members usually depend on attorneys to resolve any disputes or changes.  Also innovative suggestions to improve quality will be regarded with suspicions and most likely will not be implemented.  Adversarial relationships result from a project delivery system that promotes unfair dealings (such as bid shopping) and that transfers risk to a party not in a position to deal with the risk.  For example, a lump sum contract, when used with poorly developed construction documents, creates adversarial relationships between the contractor and the owner as it unjustly transfers risk to the contractor by forcing him/her to guarantee the project cost based on insufficient and incorrect information.  A quality-producing PDS should ensure that each party complete its obligations and get rewarded fairly for its success.

4.    The PDS should increase the owner’s involvement throughout the various phases of the project.  The ultimate test of a successful quality program is the degree of owner’s satisfaction.  It is usually too late at the end of the project to find out if the owner is satisfied.  Therefore a PDS should encourage the involvement of the owner throughout the project phases to ensure his/her needs and wants are achieved.  Sometimes these needs are different than those specified in the original contract documents: the owner may request a scope change, different equipment to be installed and/or shortening of the project schedule.  In this case, the PDS should be flexible enough to accommodate these changes in a timely manner and with a reasonable cost.

5.    The PDS should create an adequate environment for performing quality assurance and control activities.  Quality assurance and control practices should be proactive and based on the prevention of problems rather than inspection and detection of defects. Although inspection and testing are important tools of quality assurance, they should be only one component of a proactive and comprehensive QA/QC system.  A proactive QA/QC system must be incorporated during all phases of the project: preconstruction, construction and closeout.  Inspection and testing activities should be performed early on during the construction phase and not just at substantial and final completion.  Such proactive inspection will ensure that work performed early in the project is not covered up and that trades know the minimum standards of workmanship required of them in order to prevent mistakes from being repeated throughout the project.  A proactive QA/QC system also requires the contractor to submit a detailed written quality plan.  The plan establishes a quality control organization, develop procedures for processing submittals and mockups, provide an inspection and testing schedule and procedures, and develop documentation procedures.  The quality plan also details the construction means and methods and the contractor’s plan to coordinate subcontractors.  The written plan, informs the contractor’s personnel and his/her subcontractors of the quality control requirements before work is performed, in order to streamline the quality management process and to reduce quality related problems.  The owner uses the plan to determine if the contractor is performing adequately in the quality area. 

 Discussion

Three project delivery systems (PDS) commonly used in the building construction industry are:

The following sections discuss these common project delivery systems, their quality-related advantages/disadvantages and present means that can be used to reduced the disadvantages.

Lump-sum General Contracting

In the lump sum general contracting PDS, design and construction cannot overlap because the contract documents must be complete before the competitive bid process can begin (Dorsey 1997).  A competitive bid can only be solicited based on a complete set of project documents. The contractor, who becomes part of the project team after the design is complete, can’t provide any of its expertise in the selection of materials and systems, constructability studies, budgeting and scheduling (Kubal 1994).

In this PDS, contractors are selected based on low price only without any regard for past experience on similar projects or quality.  Once the contractor gets the job, he/she has no incentive for choosing quality subcontractors and material suppliers nor to get involved in quality management programs other than to keep his/her business reputation (Kubal 1994).  On private projects, owners have the right to allow only quality minded contractors to submit bids on their projects.  In such cases, the contractor has an incentive to produce quality work in order to get preferential treatment when bidding future projects (Committee on Engineering and Technical Systems, 1991).  On public projects, however, current laws and regulations do not allow for such preferential treatment; the contractor must compete in the same way for new public work, regardless of past quality, and thus has no incentive to perform quality work.

Adversarial relationships usually develop when the lump sum general contracting PDS is used because the three principal parties have different goals. The owner wants the best quality at lowest cost. The design firm wants an aesthetically pleasing project, meeting all code requirements that will satisfy the owner and be a credit to the firm’s professional reputation.  The contractor, working on a fixed price contract wants to complete the project on schedule at minimum cost to maximize profits.     Adversarial relationships especially develop if the contractor intentionally lowers his/her bid while planning to generate claims for extra payments through contractual loopholes or if the lowest bid has originated from inaccurate estimating, inaccurate project documents or deliberate decisions to use substandard resources and/or shopping subcontractors’ bids. 

Partnering to a certain degree can be effective in reducing the adversarial relationships associated with the lump-sum system (AGC’s Quality in construction Committee 1995).  In addition, the owner’s involvement is minimal after the selection of the lowest bidder.  The contract documents used for this PDS usually specify that the contractor is responsible for construction means, methods and selection of subcontractors.  In an adversarial environment, the contractor may consider excessive involvement from the owner or the architect a reason for a change order.  As a result the owner loses control over the construction process and the selection of subcontractors.  Also, this PDS does not provide a flexible environment for managing changes in owner’s requirements (Haltenhoff 1999).  Because of the lack of communication and adversarial relationship associated with this PDS, such changes in many cases result in disputes and even litigation.  Furthermore, the contractor rarely gets any feedback regarding the owner’s satisfaction, which is the ultimate benchmark of quality.

The architect usually performs limited quality assurance activities when this PDS is utilized.  The architect visits the site periodically (e.g. bimonthly), to determine in general if the work is being performed in a manner that is consistent with the contract documents.  The problem with these site visits’ evaluations is that they are usually superficial, just detect obvious mistakes and don’t prevent similar mistakes from occurring somewhere else in the project (Haltenhoff 1999).  At substantial completion, toward the end of the project, the architect conducts a more thorough inspection of the work in place and prepares a punch list of uncompleted work or work that requires correction.  However, the thorough inspection at substantial completion is usually too late since nonconforming work performed early in the project may have been covered up and is not visible when the inspection takes place.

In the Lump sum PDS, the contractor seldom submits a written quality control plan (Kubal 1994). Despite the value of a quality plan, the short time period between contract award and the commencement of work prevents the contractor from developing the written plan.  The main priority of the general contractor during this short time period is getting construction underway. 

In summary, quality management with a lump sum general contracting project delivery system is difficult.  As a result, this PDS should only be used when a project has clear parameters, and when the design team is given sufficient time to develop complete accurate construction documents and adequate fee to actively participate in administering the contract during the construction phase.   The owner’s failure to pay adequately for design and engineering services will cause the design team to use off-the-shelf specifications and uncoordinated drawings, increasing the potential of change orders and the associated increases in project’s time and cost.

At-risk Construction Management with a GMP

Quality and past experience are considered when selecting an at-risk construction manager.  The selection of an at-risk CM firm is performed early on during the conceptual design phase long before the documents are complete (Dorsey 1997).  The construction manager is selected in a manner similar to that used for selecting the design team.  A two-steps qualifications-based selection approach is usually utilized.  First, construction firms are asked to respond to request for qualification (RFQ) by providing information on current work load, staff availability, past experience, quality improvement procedures, financial strength and safety record.  Construction firms who pass the first qualification step are then asked to respond to request for proposals (RFP).  A response to an RFP usually include a fee proposal to complete preconstruction services, a preconstruction schedule and in case the conceptual design is well developed, value engineering ideas to improve the design.  The construction management firm is selected based on its qualifications and its proposed fee for preconstruction services.  This selection process limits potential contractors to those with proven track records and ensures that a qualified construction manager who is capable of delivering a quality project successfully is chosen.

Toward the completion of the design phase when the construction documents are 85 to 95% complete, the CM firm is asked to submit a GMP.  If the owner accepts the GMP, the CM is selected to perform the construction services as well.  If the GMP is not accepted, the project is competitively bid and another CM firm is selected in a manner similar to that used for selecting a general contractor in a lump sum project delivery system.  In this case, however, the CM is selected primarily based on low price and considerations for quality and qualifications are neglected (Kubal 1994).

The at-risk construction management PDS allows for the contractor’s early participation in the preconstruction phase and permits the owner to take advantage of valuable contractor expertise during the important phases of design.  Early participation of the contractor also makes him/her more familiar with the project early on and increases his/her effectiveness in managing the construction process to the benefit of the owner.  However, this advantage is lost if the owner does not accept the CM’s GMP quote and decides to competitively bid the project after the preconstruction phase.   

The at-risk CM project delivery system provides a better environment with improved working relationships among the owner, design firm and construction manager.  The early involvement of the construction manager improves the quality of the drawings and specifications and enables the CM to be extremely aware of the project and its special conditions.  As a result, the GMP that the CM proposes is much more accurate than the lump sum bid that a general contractor would propose with a lump sum general contracting PDS.  The early participation of the CM also improves the partnering process and permits the establishment of mutual goals and better communication early on in the project when it is most important. Such early cooperation among the parties of the contract generally results in fewer disagreements, disputes, and delays. The open book policy associated with the GMP contract also reduces the likelihood that the CM would deliberately engage in unethical behavior that could jeopardize working relationships such as using substandard materials or shopping subcontractors’ bids.  A high level of ethics and trust among all the parties is essential to the success of at-risk CM projects.

Because of the open book policy associated with the at-risk CM PDS, the owner’s involvement is much greater than in the case of the traditional lump sum general contracting PDS.  The owner is involved during the process of selecting subcontractors and can request a specific subcontractor to be hired.  However, if this subcontractor is not the lowest bidder, the owner has to increase the GMP accordingly. 

This PDS also permits the CM to be constantly aware of the owner’s needs and provide more flexibility to meeting these needs. For example, if shortening the schedule is important to the owner, the project can be fast-tracked by overlapping the design, procurement and construction phases.  However, the successful completion of a fast track project requires careful selection of the different bid packages and effective coordination of the design, procurement and construction activities in order to eliminate potential inconsistencies.  Owners should also understand that with fast track projects due the potential increase in design inconsistencies, a larger contingency amount is usually needed.

In the at-risk CM PDS, the change order management process is more effective because of the trust and improved communication developed as a result of the early participation of the CM (Haltenhoff 1999). The CM’s early participation during design also leads to discovering and eliminating many errors and inconsistencies that could have been reasons for change orders during construction.  In addition, changes to project scope needed to deal with unforeseen conditions can be executed more effectively than in the case of the traditional lump sum general contracting PDS.  Such scope changes may be needed if subcontractors’ bids for the early packages are higher then originally estimated.  The project team in this case can evaluate different means of staying within budget by making changes to a later bid package such as the “finishes” bid package (Dorsey 1997).   In contrast, the lump sum general contracting PDS does not allow such flexibility and in many cases, when this PDS is utilized, the project may be cancelled because of the “bid day surprise” which occurs when all the construction bids significantly exceed the budget.  Changes to project scope may also be needed because of site conditions that are more difficult than anticipated or are unforeseen.

Furthermore, the nature of the negotiated GMP contract typically used in this PDS allows the owner to use several incentives to accomplish his/her needs.  For example, the owner can provide a bonus for superior safety performance and/or a bonus for early completion. The owner can also create an incentive to save money by sharing savings from the GMP with the contractor (Haltenhoff 1999).  It is important to point out however, that savings that result from reduction in project scope as a result of an owner’s requested change order should not be shared and should be justly returned to the owner. Only savings that result from improved contractor’s performance should be shared.  These savings may result from lowering overhead, increasing competition among subcontractors and/or reducing project schedule.  However, sharing savings should not be a reason for the contractor to sacrifice project quality in any manner such as by shopping subcontractors’ bids or by hiring unqualified subcontractors.  

The CM’s early participation provided by this PDS enables the construction manager to perform quality improvement activities during all phases of the project and not just during the construction phase.  Quality improvement activities during the preconstruction phase ensure the production of quality construction documents that are complete and that meet the owner’s requirement. Quality improvement activities during the procurement phase ensure the timely procurement of long lead items and the selection of quality minded subcontractors and material suppliers.  Quality improvement activities during the closeout phase ensure adequate training of owner’s facility management personnel and also ensure timely completion of all closeout activities in order not to delay the owner’s occupancy.

At risk CM firms take quality more seriously than low bid general contractors.  The at-risk CM contracts are usually negotiated and the selection process is based on qualifications.  Delivering high quality is good business practice for the at-risk CM firm, since it will increase opportunities for repeat business.  For this reason, most at-risk CM firms develop formal written quality plans for their projects.  These plans are usually proactive with the objective of preventing problems before they occur.  They may require inspection and testing activities to be performed early on during the construction phase when materials are received and when mockups are completed and not just at substantial and final completion.  The written project plan also contains detailed inspection checklist for the various building’s components and systems.

In summary, Quality performance improves with the at-risk CM PDS.  Projects completed under this PDS are executed faster and with better quality and fewer disputes than traditional lump sum general contracting projects.  The CM’s early participation permits the implementation of quality improvement processes in all phases of the project and not just in the construction phase.  The increased owner’s involvement make the CM constantly aware of the owner’s needs and provide him/her a chance to meet these needs to ensure owner’s satisfaction at the end of the project. The cost plus with a GMP contract that is typically used with this PDS make the contractor’s books available to the owner and reduces the likelihood that the CM would use substandard materials or engage in subcontractors’ bid shopping.  However, for this open book policy to be successful owners should have the necessary expertise to monitor and audit project costs.   On projects where risks can’t be clearly identified during the bidding phase such as on remodeling project or complex time driven projects, it is recommended to use a cost plus contract without a GMP.  A GMP on these projects may unjustly transfer risk to the contractor, thereby jeopardizing working relationships between the owner and contractor.

Design Build

Not only does the design build PDS allow for the contractor’s early involvement in quality improvement activities during preconstruction, it also maximizes the integration of design and construction.  The design and construction professionals are part of the same entity in this PDS and can work together as a team to improve the overall efficiency of the project without having to deal with competing financial goals (Kubal 1994).  The design build PDS is thus ideal for performing effective constructability and value engineering studies.  The integration of design and construction is most complete when the design build contractor has in-house design capabilities.  Where the design is subcontracted, some of the effectiveness of design integration is lost.

Quality and past experiences are considered when selecting a design build contractor. However, the selection criteria are more detailed than those used in the case of a construction management PDS since the design build (D/B) contractor has to develop some preliminary drawings to communicate his/her proposed conceptual design to the owner.  The D/B contractor also has to come up with a proposed lump sum or a GMP depending on the type of contract used.  A two steps qualification process is usually utilized in the D/B project delivery system (Dorsey 1997).  In the first step, general company information is requested such as past project experiences, resumes of proposed personnel, financial data, safety record and company’s quality improvement procedures.  In the second step, only short listed contractors who have the required qualifications are asked to submit a detailed proposal including conceptual drawings and budgeted costs.  

When the design-build PDS is used, the owner is contractually obligated to only a single entity: the design build contractor.  The working relationship between the owner and design/build contractor is improved since the traditional finger pointing between the architect and the general contractor is eliminated (Dorsey 1997).  Fewer changes, disputes, and claims occur in design-build than in lump sum general contracting. On the other hand, the working relationship between the D/B contractor and the owner can deteriorate if there are many disagreements over the design.  This may occur when the owner’s request for proposal (RFP) does not clearly and accurately describe the owner’s requirements.  For this reason, the owner’s RFP should be carefully developed and should contain a comprehensive set of performance specifications required for the project. 

In case of complex projects and especially if the owner doesn’t have the in-house capability to produce such a comprehensive RFP, a variation of the D/B PDS, called Bridging should be used. When bridging is used, the owner first hires a bridging consultant, a design professional who develops a conceptual design that is complete enough to convey owner’s requirements (Dorsey 1997).  Design build contractors then bid the project based on the conceptual design developed by the bridging consultant.  The selected design build contractor then completes the construction drawings and constructs the project.  The owner can continue retaining the bridging consultant to oversee the completion of the detailed design and construction processes in order to ensure that they meet the requirements of the conceptual design. Design disagreements when bridging is used are greatly reduced since the owner’s requirements are much clearer to the design build contractors who are bidding the job.  Another advantage of bridging is that it makes the design build contractor’s selection process more objective since all contractors’ proposals are based on the same design concept.  This also increases competition among contractors who are now bidding on a well-defined conceptual design package that the owner has accepted and signed off on.

The integration of design and construction enabled by the design-build PDS provides a flexible environment to meeting owner’s needs and wants.  Early on during the conceptual design phase, owners can get more informed answers on the effects of design decisions on construction costs and schedule (Kubal 1994).  The Design/ Build PDS system also enables project fast tracking and can produce even shorter project schedules than negotiated GMP contract, mainly because the efficiency resulting from the merger of the design and construction teams and the shorter project closeout phase since fewer parties are involved in determining the project’s completion.  In addition, the merger of the design and construction teams permit the design build contractor to determine the project cost long before the design is complete.  If the owner uses a negotiated GMP contract with the design/build contractor he/she can attain other benefits including participation in the selection of subcontractors and creating incentives to meeting cost, schedule and quality requirements.  

A quality concern with the design build PDS is that the owner may loose some control over the design process (Dorsey 1997). Because the designers are in direct employment of contractors, the owner may loose direct communication with the designer.  Also the designer in some cases may be compelled to sacrifice some aspects of the design to protect against a potential design builder’s cost overrun by approving for example inferior products.  Bridging as described above is a good approach to resolve this concern as it provides the owner, through the bridging consultant, control over the most important phase of the design where the owner’s needs are defined: the conceptual design.  Another way to resolve this concern is the use of contracting methods that provide the owner access to the contractor’s books such as cost plus contracts with or without a GMP.

The merger of the design and construction teams made possible by the design build PDS naturally encourages the designers to actively participate in the QA/QC activities during the construction phase of the project.  The designers’ active participation during construction is invaluable; they have developed the drawings and specifications, and they are the most qualified to provide suggestions and clarification on how to meet design intent and to determine if conformance to the design is achieved. Most other project delivery systems do not promote the designer’s active participation during construction, mainly because of the owner’s need to reduce the designer’s fee.  As a result, the designer’s role during construction becomes very narrow in these PDS and is usually limited to superficial periodic site inspections and hasty review of submittals and shop drawings.

On the other hand, a quality assurance concern with the design build PDS is the potential loss of the traditional checks and balances between designers and constructors (Dorsey 1997).  In the design build PDS; quality assurance is performed by the same entity constructing the project.  To resolve this concern, the owner can mandate in the contract that quality assurance be separated from production operations.  This means that although employed by the same company, the quality assurance professionals are organizationally independent of the project manager and the operations’ department. The objective of separating the two groups is to provide the quality assurance professionals with the independence and autonomy to effectively control quality on site without fear of censure from the project manager.  Also to resolve this concern, the owner can hire an independent representative to oversee the construction process or in case bridging is used, retain the bridging consultant during construction.

In summary, the merger of the design and construction teams in the design-build PDS presents several opportunities to improve a project’s quality.  The integration of design and construction offers a perfect environment for conducting value engineering/constructability studies, provides more flexibility to meeting owner’s budget and schedule requirements and encourages the designers’ active participation in QA/QC activities during construction.  The single contract between the owner and the contractor associated with the design build PDS has the potential for improving working relationships as it eliminates the traditional finger pointing between the architect and the general contractor.  However, it is extremely important when using this PDS that the owner develops a clear project description before selecting the design-build contractor.  The project description must include clearly defined performance specifications.  On complex project and where the owner can’t adequately develop the project description in-house, the use of a bridging consultant can be advantageous.  Bridging also alleviates some of the other concerns associated with the design build PDS such as the potential loss of traditional checks and balances between designers and constructors and the owner’s loss of control over the design process.

Conclusions

Although some of the components of a comprehensive quality management system are directly applicable to the traditional lump sum general contracting project delivery system, alternative project delivery systems, which permit early involvement of the contractor, are the systems that have the potential to provide the full benefits from the quality management system.  Alternative project delivery systems provide more flexibility in meeting the owner’s budget, schedule and quality needs.  However, since these project delivery systems are relatively new and the roles and responsibilities of parties on the construction project may still not be clearly understood, it is extremely important that the scope of work for each party be accurately described in the contract documents to prevent potential disputes. There is no single project delivery system that is adequate for all projects and the owner should carefully select the best PDS for his/her project.

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