Lean meets legal in control system integration
Attention to waste-reducing, "lean" practices is not new in the automation world. Far from it: it was a manufacturing company—Toyota—that more or less gave birth to the concept. Whether you have been exposed to "lean through the Toyota Way" or the many terminologies and sub-philosophies it has spawned ("continuous improvement," kaizen, gemba, Six Sigma, 5S), one thing is clear—lean is not fading into the background anytime soon. So what does lean have to do with managing legal risk?
This probably is not going to come as a major shock, but there is a wee bit of waste when companies come together to sign contracts to design and build something.
Let’s face it: The creation of an automated facility is inherently inefficient, both technically and legally. There are technical inefficiencies that arise from the sheer number of working parts and participants in even the simplest project. Participants have competing priorities. Designers and implementers do their work in silos-often at different times. There are legal inefficiencies that arise from locating the binding obligations of all those participants in separate documents that often conflict with each other; the fact that the obligations flow down through tiers (so that the top tier and the bottom tier usually have no direct communication); and the fact that most obligations are performed over a considerable period of time within an environment of constant change.
Design, bid, build
In the most common construction project delivery method, known as "design-bid-build," these inefficiencies are about as bad as they can get. An owner hires an architect or engineer to create a design. The design is then circulated among constructors, which have no input on the design but nevertheless bid on it. The winning constructor in turn contracts with subcontractors, which in turn hire their own sub-subcontractors and suppliers. This sequential, competitive yet disconnected, system discourages the sharing of ideas between constituencies and incentivizes a game in which bidders understate costs to win an award then are forced to attack the project performance of others to improve margins. Owners hope for quality while they simultaneously batten down the lid on this boiling cauldron by imposing a "guaranteed maximum price."
During the latter part of the last century and the first decade of the new one, various efforts have been made to attack these inefficiencies. First, the idea of a construction manager, separate from the designer and constructors, to coordinate the overall process was introduced. Next, the idea of consolidating responsibility for design and construction in one turnkey provider, called the "design-builder," introduced an additional set of improvements.
Trouble without input
But even with design-build (the predominant way in which control systems are implemented) there are inherent inefficiencies. Even the most resourceful control system integrator cannot ignore an intractable reality: It is almost always providing its solution within a realm created by others and over which it had no input whatsoever. This brings us to lean, a search for a better way. In the engineering and construction world, lean resides in a model called "integrated project delivery" or IPD (some call it "integrated lean project delivery" or ILPD).
Change risks, rewards
IPD asks what would happen if the "game" was changed at its core? What if, instead of dozens of contracts (for owner-engineer, owner-general contractor, general contractor-electrical contractor, electrical contractor-integrator), there was one contract? What if, instead of a zero sum game, there was a single shared profit pool? What if, instead of all contributors to the process doing most of their work in silos, all were both figuratively and literally working out of the same "big room" as part of a common enterprise?
IPD is an attempt to break down as many of the remaining boundaries between the traditional industrial engineering constituencies as possible in the interest of optimizing pro-project collaboration and minimizing anti-project gaming. The most expansive versions of IPD do this in four ways:
- There is one profit pool and one contingency shared by all key participating companies. If there are overruns caused by Company A, those overruns come out of the contingency shared by Companies B and C (and, if needed, from the common profit pool). If, on the hand, the project is more profitable because the design and implementation process is more efficient, all team members share in the savings.
- There is a complete waiver of liability between team members. Thus, if Company A’s error causes a common loss to the larger collective, it is suffered in silence. This new reality eliminates finger pointing because to do so is only to point a finger at one’s self.
- There is an actual big room (sometimes called a "studio") usually located at the project site, out of which all of the key design and engineering constituencies work.
- The owner is also included within this collaborative framework—although in a somewhat different way. Not only do the owners and future users work alongside the other team members, owners have stakes in the game as well. In return for the IPD team’s willingness to risk its entire profit, the owner assumes the risk of any overrun if the team’s profit and contingency are exhausted. In other words, along with changes to increase the likelihood of success, lean means no guaranteed maximum price!
Yes, this is radical stuff and requires culture change, but it’s exciting too. Lean certainly is not going away, and those who neglect or resist when "lean meets legal" might miss a revolution.
– Mark Voigtmann is a lawyer with Faegre Baker Daniels (U.S., U.K., and China). His group assists the automation and process industry in structuring projects and resolving disputes. He can be reached at Mark.Voigtmann@faegrebd.com. Edited by Mark T. Hoske, content manager, CFE Media, Control Engineering, firstname.lastname@example.org.
- Inefficiencies plague automation projects, small and large.
- Competing interests and contracts get in the way of common sense.
- Sharing risks and rewards among all parties has advantages.
Legalities of control system project management are simplified when goals align rather than conflict.
See other Mark Voigtmann Legalities advice.
Faegre Baker Daniels Industrial Automation area