Improving Profitability & Process with Lean Construction

By Robert J. Brewer, CPA, CCIFP

A large construction company was recently working on building a hospital in the Midwest when it encountered a common situation: most of the patient rooms were structurally identical, requiring structural, electrical, and plumbing components to be replicated hundreds of times within the same project.

Instead of building the hospital one subcontractor at a time, the company did something creative: It built a factory a few miles away dedicated solely to the creation of identical hospital rooms as complete units, and lifted them one at a time into the shell of the building as it was being built. This solution turned a job with an original estimate of 600-650 potential workers to one with only 350. This wasn’t a singular idea; it grew out of the principles of Lean Construction.

The idea of Lean Construction is simple: Rather than treating subcontractors as different entities operated by a central authority (such as a GC or construction manager), it suggests that architects and GCs analyze a project holistically from the perspective of a complete team. This encourages a horizontal (rather than hierarchical) decision-making structure that gathers the various subcontractors at the same table from the start of the project to plan and design the most efficient and cost-effective way to perform a job. These procedural innovations can apply both to tasks large (e.g., the aforementioned offsite factory) and small (e.g., a steel contractor installing plumbing hooks when building the structure’s framework, rather than the plumbing contractor doing so after the fact).

When utilizing Lean Construction, there is often an increase in job completion time due to the increased number of “cooks in the kitchen” and the reorganization of duties among subcontractors on a job-to-job basis, but the accompanying benefits are potentially tremendous. By approaching the job holistically, you can find the most effective ways to create a valuable piece of work that best fulfills your clients’ goals. Moreover, this model allows you to better estimate, measure, and complete practical work goals and reliably anticipate the flow of a project. Whatever Lean Construction loses in speed, it more than makes up for in stability, reliability, and value.

If you find your work orders to be unpredictable, scattershot affairs that lack communication among subcontractors, or if you’re just looking for a model that encourages innovation and holistic product delivery, Lean Construction could very well be right for you.

Robert J. Brewer, CPA, CCIFP is an Audit Partner at Grassi & Co., CPAs, where he leads the Architecture & Engineering Niche Practice. He can be reached at 516-336-2420 or rbrewer@grassicpas.com.