Construction Costs and Time Comparisons

The potential for Construction Costs savings in both time and cost through design partnering is well illustrated by a comparison between the construction of two identical chemical plants in Japan and the UK described by the former Chairman of the UK client ICI, Sir John Harvey – Jones, in his book, “Managing to Survive”.[1] The context for his text is that time is money. As the comparison is so relevant to the point we are making above, it is quoted in full:

Construction Costs Comparison
ICI chemical plant, UK

“Many years ago my division of ICI built a chemical plant in competition with the Japanese.  We were both building identical plants and decided to proceed at exactly the same time.  Moreover, the Japanese had some of our people helping them.  In the event the Japanese came into production, with a plant that worked, significantly more quickly than we did.

They achieve this by processes of parallel development, and the application of very large numbers of engineers, organised in small, self-standing teams.  They gain speed by having the teams continuously working together in a collective way, which ensures that each one of them is able to cover for the other and is involved in all the stages of decision making – despite enormous pressure for speedy results.

When I looked at the reasons why, there appeared to be three.  To my mind the most important was that the Japanese plant was built by a team which shared a single large office and lived, worked and dreamt together, twelve hours or more a day, during the whole time of the development and planning of the plant.  They were each in each other’s minds and did not have to send a memo, or make a telephone call, to check the effects of, for example, locating a valve somewhere else.  Any one of them could cover for anybody else.  Moreover, the whole lot were imbued with a sense of urgency and a determination to ensure that not only did their plant start up first, but that it worked perfectly. 

At that time there was not much difference in the numbers of people that we both deployed, but there was an enormous difference in the philosophy.  We had started breaking ground much sooner than they had and took solace out of commencing construction months before they began such activities.  In their case no work started on the site at all until the total design had been carried out and the materials had all been provided on site. 

The result of this was that nothing had to be redone, and the construction period itself went like greased lightning.  The second reason was that exactly the same team which had done the designing were also involved in the construction.  There was no handover, no communication problems – the thing just flowed.  These differences of approach stem from the belief in the value of time, and consistent efforts to ensure that time can be gained by reducing meetings, memoranda and reports to supervision”.

It goes without saying that if we can apply that philosophy, even just to the preparation of the enquiry document, never mind to the whole project, we will in our view make considerable savings in time and construction costs and improve working relationships beyond all recognition. Think what that will do for the recruiting of engineers and architects and for the industry as a whole. 

Summary of action items and estimated cost savings.

Applying some figures to the above-mentioned areas for potential cost savings may be evaluated as follows –

The savings are to the Client’s total cost of procurement which obviously includes his own costs as well as those of his professional teams and the construction contracts: 

Changing Client awareness, attitude and behaviour through adherence to a Construction Strategy Code of Practice and active membership of a Construction Clients Forum   3%
Introduction or improvement in overall management, value management, and correct application of the benefits of project management and collaboration.  (This could easily be shown to be a negative saving at construction stage but with an ultimate saving to life cycle costs of a substantial proportion of original capital expenditure.)   2%
Optimisation of risk allocation through the application of appropriate contract strategies and appropriate organisational design and decision making to minimise ambiguity and errors in contracts. 5%
Limit the adversarial and claim conscious behaviour with collaborative strategies 9%
Design partnering at the enquiry stage to improve the quality of project definition and contract documentation with subsequent claims reduction. 13%
Deduct additional manpower expenditure at enquiry stage (3%)
Potential saving 29 %

The cumulative total would not always apply as it depends to what extent the above best practices are already in place and the assumptions above may be subjective. Naturally the figures are open to being challenged and we would welcome such a challenge.  Our feeling after over 30 years of experience in the industry is that they a significant saving in construction costs are achievable.


[1] Sir John Harvey-Jones   Managing to Survive,  Chapter 8  The Time Capsule, pp137   Heinemann, London 1993

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