How Last Planner Motivates Subcontractors to Improve Plan Reliability – a Game Theory Model

Rafael Sacks1 & Michael Harel2

1Senior Lecturer, Faculty of Civil and Env. Engineering, Technion – Israel Institute of Technology, Haifa 32000, Israel Phone +972-4-8293190, cvsacks@techunix.technion.ac.il
2PhD Candidate, Faculty of Civil and Env. Engineering, Technion – Israel Institute of Technology, Haifa 32000, Israel Phone +972-4-8292245, harelm@techunix.technion.ac.il

Abstract

There is an inherent relationship between subcontractors’ labour resource allocation behaviour and the level of plan reliability they perceive. Under fixed-price or lump sum contracts, projects with low plan reliability can only be profitable for subcontractors when buffers of ready work are large enough to shield their productivity. A normal form game theory analysis can show that subcontractors will naturally tend to behave defensively whenever they perceive that plans are unreliable, resulting in unreliable labour allocation, and thus reducing plan reliability further, resulting in a vicious circle. The Last Planner System works to improve plan reliability. However, in order to achieve continuous improvement of the system, a rigorous model is needed to improve understanding of the mechanisms by which it affects labour resource allocation behaviour. The extended form game theory model presented in this research explains the relationship between project managers and subcontractors, and indicates at what levels of trust behaviour changes from competitive to collaborative. Ideas for enhancing construction procurement and production system design to make plans more reliable are discussed against the background of this theoretical explanation.

Keywords

Subcontracting, game theory, Last Planner, plan reliability

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Reference

Sacks, R. & Harel, M. 2006, 'How Last Planner Motivates Subcontractors to Improve Plan Reliability – a Game Theory Model' In:, 14th Annual Conference of the International Group for Lean Construction. Santiago, Chile, 1-. pp 443-454

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