Target Value Delivery 10.17.17 Pikel

TARGET VALUE DELIVERY
Target Value Delivery

Christian Pikel, The ReAlignment Group
OCTOBER 17, 2017

LCI Education
© LEAN CONSTRUCTION INSTITUTE & Training
© LEAN CONSTRUCTION INSTITUTE
Lean Construction Institute

Provider Number H561
LCI Training Block: Target Value

Delivery
LCITB.TVD
Presenter Name
Presentation date

8 LU Credit(s) earned on completion of this This course is registered with AIA CES for
course will be reported to AIA CES for AIA continuing professional education. As such, it
members. Certificates of Completion for both does not include content that may be deemed
AIA members and non-AIA members are or construed to be an approval or endorsement
available upon request. by the AIA of any material of construction or
any method or manner of
handling, using, distributing, or dealing in any
material or product.
_______________________________________
Questions related to specific materials, methods, and services
will be addressed at the conclusion of this presentation.

Course Description
Participants will learn what is meant by Target Value

Delivery, how it differs from more traditional delivery
approaches and some key tools and techniques to
implementing the approach.
The training will include hands-on workshops to teach

the approaches for more integrated learning.

Learning Objectives
01. 02. 03. 04.

At the end of this At the end of this At the end of this At the end of this
presentation, presentation, presentation, presentation,
participants will be participants will participants will be able participants will be able
able to describe the understand how to align to describe the major to describe the tools that
culture required to project deliverables and phases in the Target support the Target Value
support Target Value customer-defined value. Value Delivery process Delivery process.
Delivery. and how they relate.

Learning Objectives
Participants will be able to describe the attributes of a team culture required
to support Target Value Delivery.
Participants will understand how to align project deliverables with customer-

defined value.
Participants will be able to describe the major phases in the Target Value
Delivery process and how they relate.
Participants will be able to have some first-hand experience with the types
of challenges and decisions which typically arise in TVD.
© LEAN CONSTRUCTION INSTITUTE 7

Lean Journey Road to Mastery
Mastery
Competency
Understanding Continuous
Learning Loop
Awareness
Unaware

8:00 AM – Introductions
8:30 AM – Target Value Delivery

Presentation/Simulation
9:45 AM – Break 15 minutes
12:00 PM – Lunch

1:00 PM – Continue
3:00 PM – Break 15 minutes
4:45 PM – Wrap up and Plus/Delta
5:00 PM – Adjourn

A New and Coherent way to Manage Work in Projects
THREE CONNECTED PROJECT ELEMENTS

OPPORTUNITIES
Impeccable Coordination
Production System
Design
Collective Enterprise
Operating System

Six Tenets of Lean Construction
1 Respect for people
2 Optimize the Whole
3 Generate Value
4 Eliminate Waste
5 Focus on Flow
6 Continuous Improvement
References

Target Value Delivery Simulation
Introduction of simulation
Participants to decide on contract arrangement:

• Lean Integrated Project Delivery (LIPD)
• Design-Build
• Other
10 MINUTES

Target Value Delivery (TVD) Overview
Business Case Validation Value Delivery: Steering to Target in Design

Value Post
Planning Chapter 3 and Construction
Construction
Chapter 2 Chapter 4
Chapter 4
TEAM FORMING/ORGANIZATION Chapters 6 & 7

BIG ROOM Chapter 8
PROJECT PLANNING Chapter 9 CORE
COMPONENTS
COST MODELING: PREDICTING COST AND VALUE Chapter 10 OF TVD
CONTINUOUS ESTIMATING Chapter 11 PROCESS
CONCEPTUAL DESIGN Chapter 12

PRODUCTION DESIGN Chapter 13
CONSTRUCTION Chapter 14
PHASES OF TVD
Image courtesy of InsideOut Consulting & Southland Industries

Target Value Delivery (TVD)
A disciplined management practice to be used throughout the

project to ensure:
• The facility meets the operational needs and values of the users
• The project is delivered within the allowable budget
• That innovation is promoted throughout the process to increase
value and eliminate waste.

TVD Culture
TVD is to be applied holistically to

obtain maximum value.
Regardless of the project delivery

framework, the owner, designers,
builders, and key trades must be
fully engaged from the onset.

Business Case Planning Phase

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Business Case
• The operational use/benefit proposition described by

the owner that initiates the development of the project.
• The owner-provided purpose or “why” that becomes
the anchor of the project.
• Sets the Allowable Cost.
• Includes Value Definition Statements by the owner
for the project.

Framing the Business Case
Could we build X thing for $Y and have it by Z date?
• Could we open a replacement hospital in Castro Valley, CA

for $300 million by early 2013?
• Could we find a way to increase overall visitor count by X%

for a capital expenditure of $1 billion by 2020?

Allowable Cost:
• The absolute maximum Project Cost based on the

Business Case.
• It becomes the subject of the Validation Phase

The Project
The following slides outline “The Project”

Business Case & relevant information
15 minutes total
Owner Business Case
OWNER:
Anytown Arizona Community Social Services Group
M I S S I O N S TAT E M E N T:
“Strengthen our community by creating living condition
stability, economic opportunity and supporting services
to those in need.”

Owner Business Case
• $4,500,000 Allowable Cost

• HUD grant and private donations
• ‘Tiny Home’ low income housing community of 45 units
• Approximately 40’x100’ lot sizes
• Unit diversity 250 – 750SF
• (Single, Single Parent, Couple + 1 Child)
• 10 year rent to own model
• Minimize Utility Costs (100 energy units / month)

Allowable Cost Breakdown
Land Purchase $1,141,000
Entitlements, Clearing/Grading & Utilities $550,000
Project Administration $225,000
Construction Funding
Building, Landscape/Hardscape & Furnish
$2,574,000
Rent-To-Own: $1/SF for 10 years, simple payback

• Max allowable cost = 10 year rent – 5% Admin/HOA
• E.g. 550SF X $1 X120 = $66K – 5% = $62,700 ($114/SF)

Project Site
• 4.6 Acre Parcel

• 40’x100’ Lot subdivisions
• Main site, utility and roadworks by owner

Project Plot
40’ 100’
40’
100’

Owner Provided Benchmark Project

Total SF 225
Notes Includes 40 SF Loft
$/SF $109
Total Cost $24,525
Foundation & Framing $3,188 13%

Skin & Roofing $3,679 15%
Glazing $1,962 8%
Systems (MEP/E) $4,415 18%
Interiors (Incl Carpentry & Doors) $4,905 20%
Finishes, Fixtures Furnish & Equip $2,943 12%
Design & Permitting $1,962 8%
Landscape & Hardscape $1,472 6%
Year Completed 2015

Inflation to 2017 5%
Location Cityville, MI
Geographic Cost Index Diff to Anytown,
AZ -8%
Yearly Energy Costs $55


Total SF 390
Notes Includes 90 SF 2nd Fl
$/SF $116
Total Cost $45,240

Glazing $2,943 12%
Year Completed 2015

AZ -8%


Total SF 360
Notes Single Floor
$/SF $108
Total Cost $38,880

Glazing $1,472 6%
Year Completed 2015

AZ -8%

Value Definition Statements
• Define what the customer wants from the process.

• Are composed of high level statements that
describe expected outcomes, or “value” that the
project will deliver.
• Should not be ranked or weighted.
• Should include all stakeholder input.

Value Definition Statements
To Create:
• Community & environment fosters respect and restoration of self
esteem.
• Sustainable design for reasonable future costs to residents and
association.
• Economic stabilizing opportunity for community residents.
• Safe environment for residents.
• Equity building opportunity based on target rent model.
• Stakeholder alignment from from all CCSS programs (Housing, Food,
Jobs, Health, Publications).
• Create added value opportunities through savings.
Transition to
Validation Phase

Validation Phase

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Validation Phase
• The project team determines whether the project is

viable based on the outputs of the Business Case
Phase.
• Output is team understanding and alignment:
• Scope definition
• Value Definition & CoS
• Target Cost

Target Cost
• The cost goal established by the delivery team as

the “target” for its design and delivery efforts.
• Should be set at less than best-in-class past
performance.
• Creates a sense of necessity to drive innovation
and waste reduction into the design and
construction process.

Steps to Defining Success

• Value Definition output informs
Conditions of Satisfaction (CoS)
• Value Definition Statements

Core Components

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Team Forming/Organization

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Early Team Involvement

Effort/Effect
PD: Pre-design
SD: Schematic design
2 DD: Design development
1
CD: Construction documentation
PR: Procurement
CA: Construction Administration
OP: Operation
4
1 Ability to impact cost and functional
capabilities
2 Cost of design changes
3 Traditional design process

3
4 IPD design process
Time
PD SD DD CD PR CA OP
Graphic courtesy of Patrick MacLeamy AIA / HOK

Characteristics of High Performing Teams
1 A high performing team is built on a strong

foundation of trust among all members.
2 There is a culture of respect that enables

members to effectively delivery against CoS.
3 High performing teams break down barriers

through innovation and continuous improvement.
4 They break down traditional silos to maximize

skills and optimize performance.

Team Forming Exercise
How would you go about building your team?

What characteristics would be important?
What interview questions might you ask?
15 MINUTES

Conditions of Satisfaction (CoS):
• Are developed by the team informed by the Value

Definition Statements.
• Measureable statements that inform a project team
about which tests a project must pass to be
accepted as a success.
• Inform the decision-making process of the team.

Conditions of Satisfaction Exercise:
Develop some CoS for the project
15 MINUTES

Team-Developed CoS:
Quantitative
• Energy efficient design • Regularly (weekly) updated progress signage at
• Low monthly utility cost visible location
• High % of daylighting • Social Media Updates (min. 3 per week)
• “Town Hall” community feedback events (min. 1
• Innovative water management system
per quarter)
• Meet the Allowable Cost • Robust, proactive protection of the safety of our
• 25% workforce inclusion (Underemployed / workers and community:
Community Residents – min. 10% each) • Weekly team safety walk-throughs
• Short-falls remediated immediately (no more
• Community engagement:
than 24 hours)
• Regularly (weekly) updated progress signage • System for immediate reporting of safety
at visible location problems identified by workers and
• Social Media Updates (min. 3 per week) community members
• All team members earn a fair profit
05 MINUTES
Team-Developed CoS:
Qualitative: Method of Measuring Success:

• TVD team actively builds and sustains a Monthly measurement of progress against CoS:
culture of respect for all team members
• Quantitative – Current results calculated and
• TVD team creates design that supports a reported by CM
culture self-respect for customer
• Qualitative– Survey completed by all TVD
• TVD team actively seeks innovation to team members
reduce waste and wasteful activities,
streamline processes, and improve the flow • Continuous Improvement session held to
of work review results, and determine steps to correct
short-falls against targets

Project Team Organization
Core Team
Senior or Executive Management
Work Clusters – cross discipline

representation

Work Cluster Exercise
Develop an initial Work Cluster organization

based on the next slide.
Assign cross discipline roles.
10 MINUTES

Work Cluster Organization
SMT - Facilitators Core Group - All

L SMT L
Finishes Fixtures & Furniture WC6 WC1 Landscape & Hardscape
A A
L
L Core
Interiors WC5 WC2 Skin Roofing & Insulation
Group
A A
L L
Plumbing Heating/Cooling & Energy WC4 WC3 Windows
A A
05 MINUTES
Big Room

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Big Room is:
• Mindset of intense focus on

advancing work.
• Enables cross-functional team

collaboration.
• Refers to the collaborative

behavior of a team and the work
they are producing.
Big Room is a commitment to a project, the team, and to working together!

Big Room
For the remainder of the day, we will operate as a Big Room:
Represent Core Team as a whole
Break into Work Clusters to problem Solve
Hold Core Team Integrating Events
02 MINUTES

Project Planning

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Last Planner® System in Construction
Set milestones
Milestone Planning
SHOULD
Specify handoffs
Phase “Pull” Planning
5 Connected CAN Make Ready Planning Make work ready
Conversations
WILL Weekly Work Planning Make promises
DID Learning/Improving PPC/Variance

LPS For Design
LPS CONSTRUCTION: LPS DESIGN:

• Is linear and the flow is “tangible materials” • Is continuously emerging based on new
information and the flow is “information”
• Milestones must be clearly defined by
expected outcome which will be • Milestones must be clearly defined by
observable expected outcome which will describe what
we expect to know
• Pull Plans identify work structure and
duration • Milestones should include work product
and work deliverables and may be
“decision points” as mini-milestones.
• Pull Plans identify work needed and date

needed

Last Planner® System in Design
Set milestones
Milestone Planning
SHOULD
Specify handoffs
Phase “Pull” Planning
5 Connected CAN Make Ready Planning Make work ready
Conversations
WILL Weekly Work Planning Make promises
DID Learning/Improving PPC/Variance

Milestone Planning

Project Milestone Plan
What might some of the milestones be for the project

starting with end of project and working backwards?
10 MINUTE GROUP DISCUSSION

Cost Modeling

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Cost Modeling
• Model of the cost components & systems of a project.

• Structured to allow the costs to be continually updated.
• Provides the team with a constantly up to date cost
model.
• Should allow for projecting ‘what-if’ scenarios based on
value decisions that have yet to be made.

Continuous Estimating

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

TVD Continuous Estimating Model
SD DD CD Pricing Construction
TRADITIONAL PRICING / VALUE ENGINEERING MODEL
TVD DESIGN MODEL

Types of Estimating
1 Cost Benchmarking
2 Conceptual
3 Production

Cost Benchmarking
Level of Accuracy: Best +/- 10% Good +/- 15%

• Starts at Business Case Phase
• Refined during Validation Phase
• Informs the Cost Model
• Establishes project assumptions
• Normalizing project to allow comparison
• Identify risks
• Informs team of what ‘can be done’

Develop Cost Model
What systems and components ?

What benchmarks to create the model?
What should a cost model track?
20 MINUTES

Cost Model
Benchmark Base Cost TVD Options Path Back
Component Model
%
(Knowns)
Risk
(Range) (Opportunity)
Current
Landscape & Hardscape
Skin & Roofing (& Insulation)
Windows
Plumbing, Heating/Cooling &

Energy
Interiors
Finishes, Fixtures & Furniture
GCs, Design Fees & Profit
Total

Cost Model (Simple Approach)
Risk Hot Topics
Path Back
CWE/ Cost Model
Tracking
Conceptual Estimating

• Goal is to provide cost information before the team moves forward
with decisions based on conversation, sketches, and conceptual
information.
• Convert CoS & Business Case (Program) into a budget – what we
desire.
• Gain just enough detail to inform team decisions.
• Implemented with Set-based Design approaches.

Budget Tracker Summary
Component Current Projection Allowable Target Delta +/-
Landscape & Hardscape
Skin & Roofing (& Insulation)
Windows
Plumbing, Heating/Cooling & Energy
Interiors
Finishes, Fixtures & Furniture
Total

Production Estimating

• Most traditional form of estimating.
• Driven by what has been documented in the design phase and
confirms estimates developed during earlier conceptual stages.

Conceptual Design

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Conceptual Design
1 Criteria development
2 Organize information
3 Set-based design
4 Integration
Photo Credit: InsideOut Consulting, Inc.

Set-Based Design
“Product Development for the Lean Enterprise”, Michael Kennedy

Set-Based Example
From CPR Program

Integration Event
From CPR Program

Work Cluster Flow
Brainstorm
Project
• Identify ideas/sets
Team
• Create Set Log
Set/Idea
Set/Idea
Set Log
• Identify ideas/sets
Work Work Work • Status
Cluster Cluster Cluster • Date of LRM Decision
Create A3
• Set Alternates
• CoS Alignment Recommendation Integration Event
Project • Evaluate
• Cost Model Impact Team
• Schedule Impact Recommendations
• Integrate into design

Decision Flow Model
Create Analyze Converge Decide

To Accept
Initiate Analyze Recommend Core Reject
Ideas Options Team Revise
Identify Include Analyze

To
Stake- $$$
Cost
Integration
holders Impact
Model Event
Analyze
Work To
CoS
Cluster

Validation Phase
Each table represents a Work Cluster to study a component.
Work Clusters study and evaluate sets per the Cost Model:
• Target Cost
• CoS
• Alignment with Business Case
• Schedule
• Other
50 MINUTES

Validation Phase Integration Event
Report by Work Cluster

• Align on 1 concept to move into Value Delivery Phase
• Align on Target Cost
Challenge Question
Are there any changes to the original Business Case that
would create a more compelling value proposition?
30 MINUTES

Transition to
Value Delivery Phase

Value Delivery: Steering to the Target

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

• Work progresses in small batches toward intermediate

milestones/decision points.
• The design is continually evaluated to the Target Cost
& CoS.
• Teams explore innovative ways to achieve goals and
add more value.

Work Clusters explore extreme ideas for carrying the

concept forward
Challenge Questions
• Are there design options at the system level that can be designed to
meet the CoS within the Target Cost?
• What implications for overall value and costs should be explored during
Design?
• What design, procurement and construction options should be
considered to generate value & eliminate waste?
50 MINUTES
Integration Event
Work Clusters share outcomes
30 MINUTES

Production Design

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Construction

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4
BIG ROOM Chapter 8

COMPONENTS

PHASES OF TVD

Transition to Value Post Construction

Value Post Construction

Value Post
Construction
Chapter 2 Chapter 4
Chapter 4

BIG ROOM Chapter 8
COMPONENTS

PHASES OF TVD

Value Post Construction
• For the owner, value is realized only after the facility is

constructed and serving it intended purpose.
• The business case and values are reviewed for actual

outcomes.

Measuring Outcomes
Business outcomes Project process outcomes Value outcomes
• Final cost of design • Project quality, safety & • Revisit the value-based
& construction appropriate integration of decisions team made
• Final schedule stakeholder input throughout process
• Operational performance
of finished building
• Quality & use

Discussion Question
What new actions or ideas that you learned

today can you take back to your project?
Write down on Take Away Sheet

5 MINUTES
Share with your neighbor

5 MINUTES

Lean Journey Road to Mastery
Mastery
Competency
Understanding Continuous
Learning Loop
Awareness
Unaware

Plus/Delta

This concludes The American Institute of Architects

Continuing Education Systems Course
Lean Construction Institute info@leanconstruction.org

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TARGET VALUE DELIVERY

Target Value Delivery

OCTOBER 17, 2017

Lean Construction Institute

LCI Training Block: Target Value

© LEAN CONSTRUCTION INSTITUTE

© LEAN CONSTRUCTION INSTITUTE

Participants will learn what is meant by Target Value

The training will include hands-on workshops to teach

© LEAN CONSTRUCTION INSTITUTE

01. 02. 03. 04.

© LEAN CONSTRUCTION INSTITUTE

Participants will understand how to align project deliverables with customer-

© LEAN CONSTRUCTION INSTITUTE 7

Lean Journey Road to Mastery

© LEAN CONSTRUCTION INSTITUTE 8

Target Value Delivery

8:30 AM – Target Value Delivery

9:45 AM – Break 15 minutes

© LEAN CONSTRUCTION INSTITUTE 9

Target Value Delivery

3:00 PM – Break 15 minutes

4:45 PM – Wrap up and Plus/Delta

© LEAN CONSTRUCTION INSTITUTE 10

A New and Coherent way to Manage Work in Projects

THREE CONNECTED PROJECT ELEMENTS

© LEAN CONSTRUCTION INSTITUTE 12

Six Tenets of Lean Construction

1 Respect for people

2 Optimize the Whole

© LEAN CONSTRUCTION INSTITUTE 14

Target Value Delivery Simulation

Participants to decide on contract arrangement:

© LEAN CONSTRUCTION INSTITUTE 15

Target Value Delivery (TVD) Overview

Business Case Validation Value Delivery: Steering to Target in Design

TEAM FORMING/ORGANIZATION Chapters 6 & 7

CONCEPTUAL DESIGN Chapter 12

© LEAN CONSTRUCTION INSTITUTE 16

Target Value Delivery (TVD)

A disciplined management practice to be used throughout the

© LEAN CONSTRUCTION INSTITUTE 17

TVD is to be applied holistically to

Regardless of the project delivery

© LEAN CONSTRUCTION INSTITUTE 18

Business Case Planning Phase

Business Case Validation Value Delivery: Steering to Target in Design

TEAM FORMING/ORGANIZATION Chapters 6 & 7

CONCEPTUAL DESIGN Chapter 12

© LEAN CONSTRUCTION INSTITUTE 19

• The operational use/benefit proposition described by

© LEAN CONSTRUCTION INSTITUTE 20

Framing the Business Case

Could we build X thing for $Y and have it by Z date?

• Could we open a replacement hospital in Castro Valley, CA

• Could we find a way to increase overall visitor count by X%

© LEAN CONSTRUCTION INSTITUTE 21

• The absolute maximum Project Cost based on the

© LEAN CONSTRUCTION INSTITUTE 22

The following slides outline “The Project”

Owner Business Case

© LEAN CONSTRUCTION INSTITUTE 24

Owner Business Case

• $4,500,000 Allowable Cost