Lean integrates and optimizes every stage of EPC Projects - Engineering, Procurement, and Construction

Large construction projects require large investments, involve many stakeholders, have long execution times and need a large number of suppliers and a large specialized technical team. In this scenario, the traditional DBB contracting model (Design-Bid – Build), by segmenting these stages, creates a number of problems well known in the sector, including potential disconnects and conflicts of responsibility between engineering and execution.

Defining a single point of contact for the entire project and seeking greater synergy and optimization among engineering, procurement and construction has led owners to increasingly use the EPC contract model (Engineering – Procurement – Construction).

The company that executes a project under the EPC model (known as the EPC contractor) has a great opportunity to integrate these stages, eliminating waste, optimizing processes, and encouraging and enabling moments of collaboration. It can thus reduce lead times and costs, maximize quality and the delivery of value to the customer, and at the same time increase its competitiveness and results.

Enormous competitive pressures make the integrated application of lean in EPC projects practically mandatory. Owners and EPC contractors who do not take this step waste enormous opportunities to maximize their objectives and results. Let us look at some examples of very effective ways of applying lean at each stage.

Lean in Engineering

Large projects demand complex technical solutions, and developing these solutions requires the interaction of multidisciplinary teams. Applying lean in engineering boosts innovation through collaborative project development sessions, known as CDS (Collaborative Design Sessions).

These sessions allow the various engineering disciplines, procurement, key suppliers, builders and owners to interact, come together and bring their specific knowledge to develop technical solutions suited to the specific context of the project. In doing so, they align objectives and maximize constructability.

Collaboration can be greatly enhanced by using BIM (Building Information Modeling), which makes it much easier to simulate and discuss alternatives, and which is being used more and more frequently in large projects.

In developing a project, other lean concepts can be applied, such as concurrent engineering, value engineering and target cost, aiming to simplify and generate creative solutions to improve quality and sustainability, as well as to minimize investment and operating costs, so as to maximize the value delivered to the customer.

Engineering management itself changes, using the lean concept of pull planning, in which all parties are involved. During these interactions, the demands of each area and the interferences are identified, seeking in an integrated way to maximize the final result of the project and addressing potential conflicts between the parties. For example, engineering defining advanced specifications for the purchase of long-lead-time items, and disciplines releasing detailed design stages, pulled by the fabrication and assembly sequence.

In addition, this collaboration can be stimulated by using yet another lean concept: IPD – Integrated Project Delivery, through which owners create mechanisms for sharing the risks and benefits arising from the improvements generated by the design and construction team.

Lean in Procurement

In the construction of large projects, it is common to hear that procurement can decide the outcome of the job. This is due to the importance of purchasing processes tied to the delivery logistics of materials and equipment, many of them imported. Added to these processes is the contracting of specialized services and labor.

With lean, in a macro pull system applied to the undertaking, the aim is to anticipate demands according to the needs of the construction pace. This allows procurement to carry out supplier selection processes effectively and close good price negotiations, while also making it possible to take timely action on long-lead-time items so that they do not compromise assembly on site.

In purchasing and logistics processes, communication and collaboration between departments are improved in the so-called constraint removal routines. In these routines, through weekly collaborative sessions between engineering, purchasing, production and site planning, the activities that could hold up the start of some field activity are identified in advance, generating rapid adjustment actions whenever necessary.

The delivery logistics of materials and equipment, when not well planned and executed, create major problems for the job. This failure generates waste related to providing storage space, the need to move materials and equipment, allocating labor for handling and transport, the loss of materials damaged during handling, among others.

The just-in-time concept, typical of lean, aims to make the right material or equipment available at the right time in the right way. This concept relies on detailed, precise planning that studies the needs of the job, evaluates the characteristics of materials and equipment, and analyzes and optimizes interferences during transport and handling up to the final destination point. It intensively applies principles such as visual management and the minimization of unnecessary movement on the construction site.

Lean in construction

This is the stage where lean has been applied the most, but in many cases only partially, without taking advantage of the concept's full potential.

During the construction phase, the application of Lean principles continues with pull planning for execution. For example, pulling the execution of stages of the job from the delivery and assembly sequence of the main equipment.

After defining the execution sequence of the construction work, efforts should be directed toward creating continuous flow of production. By adopting takt planning, it is possible to balance activities during the execution of each construction stage, minimizing the resources needed.

The execution of this paced plan is accompanied by lean weekly and daily management routines. One of the pillars of lean lies in people and in communication among them, which is why visual management and frequent interactions are used intensively. These practices seek to make standards and goals clear, expose any deviations that occur and encourage rapid reaction and correction at the front line, keeping what is executed closer to what was planned.

Many companies know and apply only the lean planning and control tools, which are fundamental and bring enormous results in increased productivity and shorter lead times, but it is also important to apply lean concepts to micro-optimization, which refers to how the work is done. In this sense, tools for eliminating waste and establishing standardized work are fundamental and should be applied with the participation and contribution of the field teams. Through these practices, a range of actions is studied and planned, aiming to make the work safer, more productive and of higher quality.

Lean in overall project management

More than being applied at each stage, lean will deliver more results if applied as a management philosophy across the entire project. Adopting lean principles from the project's conception is decisive in creating a culture of transparency and collaboration that generates greater engagement of the parties involved. This Lean Culture, in addition to improving communication between the client and the engineering, procurement and construction areas, seeks to bring key subcontractors in to interact and improve processes.

The concept of Obeya means big room and resembles the initiatives known as “War Room,” “control tower" and others. This lean routine consists of the combination of extensive visual management, collaborative meeting dynamics, and a focus on problem solving and anticipating scenarios, with clear, well-defined and agreed objectives. Obeya and the other lean management routines promote greater transparency and cooperation among those involved, and can be used at each stage as well as in the overall management of the undertaking.

Lean principles can also be adopted in the offices and administrative departments that support construction projects, which is called Lean Office. Its implementation has been combined with agile routines (which originate in lean) and with the application of technologies, in what we call digital lean transformation. It can be applied to optimize all the corporate office activities that support the project, as well as the information flows between specialties and stages. Lean office can also be applied to optimize administrative processes on site, reducing indirect costs, which are generally quite significant in large projects.

Heavy construction companies generally have sophisticated management systems, but these are often heavy and inefficient, which creates difficulties in the face of growing market demands. They miss a great opportunity to modernize and streamline their practices if they do not explore the enormous potential of intensive application of lean in EPC projects. This may be easier than one might think, if the lean principle of small learning cycles is used.