“Lean” as an Antidote to Labour Cost Escalation on Complex Mechanical and Electrical Projects

Peter F. Court1, Christine Pasquire2, Alistair Gibb3 & David Bower4

1Research Engineer, Dept of Civil and Building Engineering, Loughborough University, UK, p.court1@btinternet.com
2Dept of Civil and Building Engineering, Loughborough University, UK. c.l.pasquire@lboro.ac.uk
3Dept of Civil and Building Engineering, Loughborough University, UK, a.g.gibb@lboro.ac.uk
4Principal Fellow, Warwick Manufacturing Group, University of Warwick, UK, bowerdjer@aol.com

Abstract

This paper represents “work-in-progress” as part of a collaborative research project being undertaken at the Centre for Innovative Construction Engineering for anEngineering Doctorate at Loughborough University, UK.Theprogramme isfundedbytheEPSRCandissponsored byamajor UKmechanical and electrical contractor (the company). The project will have specific objectives, which will be capa- bleofmakingasignificantcontributiontotheperformanceofthecompany.Thatis,thetaskswillben- efit the company whether or not the Engineering Doctorate was being undertaken. It will not be a “student” project, which has only been selected to keep the research engineer busy, nor will the tasks be at the margin of the company’s interest. In the mechanical and electrical (M&E) sector in the UK, labour cost is one of the largest variables which can have a direct influence on the financial outcome of a project. Actual labour cost incurred has a dependency upon the productivity achieved on site, which in turn is dependant upon the conditions that prevail on that site. For a major UK M&E contractor, labour cost has escalated to such an extent that margin slippage has occurred. Margin slippage can be defined as the negative variation between the expected margin (gross profit) for aproject whenacquired, andthe final margin whenthe project is finished. Consequentially, the company, as part of a performance improvement initiative, have the objective of developing lean techniques to overcome the causes of the cost escalation—poor productivity, and see this research project and implementing lean as a result of it, as a vehicle to deliver the improvement. This paper will propose that lean techniques, when imposed upon a project, can be an antidote to the causes of poor productivity, and therefore prevent labour cost escalation, along with its impact on the project’s final profitability. These lean techniques, known as “interventions”, are applied to a case study project with positive results in terms final labour cost and margin.

Keywords

Margin slippage, Productivity, Labour, Mechanical sector, Electrical sector.

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Reference

Court, P.F. , Pasquire, C. , Gibb, A. & Bower, D. 2005, '“Lean” as an Antidote to Labour Cost Escalation on Complex Mechanical and Electrical Projects' In:, 13th Annual Conference of the International Group for Lean Construction. Sydney, Australia, 19-21 Jul 2005. pp 3-11

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