Construction (Archived)

RT-017a Topic Summary
RT 017a

Overview

Cost effectiveness is a key performance indicator for construction projects and the construction industry as a whole. The Business Roundtable’s Construction Industry Cost Effectiveness (CICE) Project was conducted to evaluate the areas of the construction industry, which lacked proper cost effectiveness, and to provide recommendations to improve these areas. These principles and recommendations will become very important as projects change in the future. 

The basic purpose of this research is to identify current levels of utilization of good project management practices and levels of project performance, to identify key determinants of utilization, and to determine whether or not increased use of the practices improves performance.

RT-17 investigated the cost benefits/effectiveness of utilizing the recommendations and principles provided by the Construction Industry Institute (CII) and the CICE Project. It was determined that a potential annual net savings of $16.8 billion could be achieved with maximum utilization of these principles and recommendations. Seven study objectives were developed in order to evaluate the cost benefits/effectiveness of these recommendations and principles. 

In addition, this research presents findings regarding project-driving forces and actions to prepare for projects of the future, gives implications for construction and the industries it serves, and emphasizes the need to prepare for the future now. 

Key Findings and Implementation Tools

1 : Practice Assessment

Industry utilization of key principles and recommendations on projects range from 66% to 70% across architect/engineer, contractor, and owner groups.

The utilization of the key principles and recommendations provided by the CII and CICE varies from project to project. RT-17 determined that the current level of utilization of these key principles and recommendations ranged from high 50 percent to low 80 percent on the construction projects investigated in this study. Tables showing a summary of the results from the study for the Owner, Architect / Engineer, and Contractor are presented in the research:

  • Owner results 
  • Architect/Engineer
  • Contractor
Human Resource Management was a key management category that scored very low in Average Percent Utilization. Human Resource Management will be a key area that the Construction Industry can improve on. (SD-62, p. 241)
Reference: (SD-62)

2 : CII/CICE Principles

The level of utilization of CII and CICE principles and recommendations were found to increase with project size. The levels of utilization of CII and CICE principles and recommendations were investigated based on different project variables (i.e., project size, project type, contract approach, funding source, etc.). Higher Project Cost showed higher levels of utilization by Owner, Architect/Engineer, and Contractor. Examples of the effect of project cost on the level of utilization of CII and CICE principles and recommendations:

  • Owner results (SD-62, p. 248)
  • Architect/Engineer
  • Contractor results 
Reference: (SD-62)

3 : Project Managers

More highly-rated Project Managers were found to have higher utilization of CII and CICE principles and recommendations on projects.

The effectiveness of the Project Manager was shown to have a large affect on the levels of utilization of CII and CICE principles and recommendations. Project Managers with above average skills in Human Relations, Leadership, Technical Experience, and Administrative Experience corresponded to a higher level of utilization of CII/CICE principles for Owner, as shown in Table 9.5. (SD-62, p. 248)

Similar results for Architect/Engineer and Contractor are also detailed in the research:

  • Architect/Engineer 
  • Contractor 
Reference: (SD-62)

4 : Project Performance

Higher levels of utilization of CII and CICE principles relate to better performance on all project sizes.

For all project sizes, as the levels of utilization of CII and CICE principles and recommendations are increased, the performance of the project also increases. The level of utilization has a very large influence on the performance of the project as shown in Table 12.1 (SD-62, p. 328).

Reference: (SD-62)

5 : Savings and Benefits

Maximum utilization of CII and CICE principles and recommendations was found to have a potential cost savings of 25% with a benefit to cost ratio of 15 to 1.

It was determined that a maximum utilization of CII and CICE principles and recommendations would lead to a net cost savings of 25 percent or $18 billion annually, based on a combined industry cost of $240 billion. In order to implement the process necessary to achieve the 25 percent net cost savings, an implementation cost was estimated to be $1.2 billion. The potential net cost savings for maximum utilization of CII and CICE principles and recommendations was determined to be $16.8 billion. (SD-62, p. 334)

Reference: (SD-62)

6 : CII/CICE Implementation

Emphasize implementation on projects by management categories in the following order of priority:

  1. Strategic Project Organization
  2. Design Effectiveness, Human Resource Management, and Project Controls
  3. Management of Quality
  4. Contracting, Materials Management, and Safety
RT-17 determined that there were many areas where improvement could be made in reference to the utilization of the CII and CICE principles and recommendations in the Construction Industry. These areas should all be addressed in implementation efforts to fully realize the benefits of the CII and CICE recommendations. After initial focus on Project Strategic Organization the implementation should move through other categories including Human Resource Management, Management of Quality, and Materials Management.
Reference: (SD-62)

7 : Project Driving Forces for the 1990’s

This research includes general and industry segment trends expected for the 1990s.

  1. General Trends (SD-65, p 12)
  • Political
  • Social
  • Economic
  • Environmental
  • Energy
  • Technology
  • Organization, Management, and Research
  • Changes in Relationships
  • Construction Trends 2000  
  1. Industry Segment Trends 
  • Process Segment
  • Industrial Segment
  • Buildings, Transportation, and Environmental
  • Construction Group
  • Changes in Construction Markets 2000
  • Needed Breakthroughs for Construction 2000
  • Influences on Company Objectives and Facility Requirements
Reference: (SD-65)
rt-017a

Key Performance Indicators

Improved cost, Improved schedule, Improved safety, Improved quality

Research Publications

Driving Forces and Capabilities for Projects of the Future - SD-65

Publication Date: 05/1991 Type: Source Document Pages: 157 Status: Archived Reference

Potential for Construction Industry Improvement, Volume I - Assessment Methodology - SD-61

Publication Date: 11/1990 Type: Source Document Pages: 324 Status: Archived Reference

Potential for Construction Industry Improvement, Volume II - Assessment Results, Conclusions, and Re - SD-62

Publication Date: 11/1990 Type: Source Document Pages: 218 Status: Archived Reference


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