Large construction projects—including power plant and oil platform construction, civil and structural engineering, shipbuilding, and railway network construction and maintenance—are plagued by significant delays and cost overruns. Such problems are usually attributable to the increasing complexity of these projects as their size and technical challenges continue to grow. The result has been lower productivity and diminished profitability for many businesses involved in these projects, especially the general contractors that are responsible for project execution.
General contractors’ challenges in addressing the rising complexity of their operations stand in stark contrast to the successful efforts of leading manufacturers. Following Toyota’s innovative use of a lean approach to improve productivity in automotive manufacturing, many companies in discrete and process manufacturing industries have applied such an approach to manage complexity and secure step-change improvements in efficiency.
The time has come for general contractors to capture the benefits of applying a lean approach to project operations. The improvement opportunities are especially significant in the project realization phase, which includes engineering, procurement, and construction. General contractors applying a lean approach have reduced the time required to complete the project realization phase by up to 30 percent and reduced addressable costs by up to 15 percent, compared with the project’s initial plan, resulting in company-wide margin improvements of 2 to 3 percentage points. They have also improved quality and safety and, ultimately, accelerated the delivery of a completed project to the customer.