Reflections on Money and Lean Construction

Federico Orrechia1 & Gregory A. Howell2

1M.S., President, PIC – Produtividade Counstultora LTDA. Rua Pedro de Cunha, 65 Sao Paulo, SP, CEP 05010-020 Brazil, 55-011/3872-6595, orecchia@uninet.com.br
2P.E., Director, Lean Construction Institute, Box 1003, Ketchum, ID 83340, 208/726- 9989, fax 208 726 0699, ghowell@micron.net

Abstract

Money is a particularly tricky resource to manage because it comes with its own set of rules. Value is created by the application of cost concerns to choices in design. Likewise cash flow considerations during construction may lead to adjusting design to minimize risk of schedule overrun. Here again the role of money is to help clarify value for the client. In some cases the speed of the project may be limited by the rate of cash flow and while managing to assure no overrun how ever small is simplified by reliable work flow, some additional time should be added to the schedule to account for variations in cash flow. By contrast, if a precise and rapid completion date established early in the project is important to an owner, steps must be taken to insure the project is not sensitive to disruptions which might cause the project to be late. In this case, a buffer of additional money is prudent. In either case, the problem of matching cash flow to construction demands is eased by reliable workflow.

Keywords

Money, financing, lean construction, lean production, production management

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Reference

Orrechia, F. & Howell, G.A. 1999, 'Reflections on Money and Lean Construction' In:, 7th Annual Conference of the International Group for Lean Construction. Berkeley, USA, 26-28 Jul 1999. pp 253-262

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