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1 Please comply with the Lean Construction Institute s Usage Policies and Attribution Guidelines at when using this file. Thank you.

2 Target Value Design, in the beginning

3 Riley Hospital for Children, Simon Family Tower Phase 5 Simon Family Tower 10 Stories 675,000 square feet Total Project $475,000,000 Project Began in the Summer of 2006 Stopped Construction in 2009

4 Riley Hospital for Children, Simon Family Tower Phase 5 Construction resumed in 2010 Scope Changed for the Existing Team Research Group formed with IU Health Messer Construction Co BSA LifeStructures Baker & Daniels New IPD team selected in September 2010.

5 Riley Hospital for Children, Simon Family Tower Phase 5 November 2010 IPD team had their kick off meeting January 2011 Medical/ Surgical Floors opened on floors 7, 8, and 9.

6 Riley Hospital for Children, Simon Family Tower Phase 5 Project Divided into 3 Sequences of Work : Must be Complete by December 2013 Sequence 1 + Infrastructure Sequence 2 + Misc Support Sequence 3

7 Integrated Project Team Lead Designer Trade Contractors IPD Team Construction Manager Owner

8 Management Structure Executive Team Project Management Team Leads Project Management Team Hospital Operations Building Interiors Building Systems Building Exteriors Building Structure

9 Why Target Value Design? Commitment from Project Team to Design and Build according to scope and budget. Committed Target Cost for Design and Construction Basis of Financial Management and Value Decisions Lowest Product Cost and Highest Customer Value Quality in a product or service is not what the supplier puts in. It is what the customer puts out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality. -Peter Drucker.

10 Where do you lose the VALUE in a project? The Design/ Estimate/ Redesign and VE Cycle is full of waste for all players. Communication break downs and hand offs in a project are also a contributor to waste on a project. Not having a strong Value Statement and Operational Plan in a Healthcare setting opens opportunities for bad, or non value adding decisions during design and mind changing during the project.

11 Total Cost of Ownership

12 Total Cost of Ownership

13 Value gained in IPD IPD contract one contract, one insurance carrier, one profit pool. We thrive or die together. Integrated design with owner and constructor involvement The studio chemistry and communication Over the shoulder reviews vs. traditional submittal processes Budget development everyone owns and is expected to have a voice. Schedule development everyone participates 3-D coordination and clash detection Prefabrication

14 Value lost in Behaviors When traditional barriers (silos) go away, opportunities for value creation arise. The point is, TVD requires investment of time, $ and an acceptance of change mentality to overcome the inefficient processes that have become usual and customary in our business. Change and innovation are very scary to our business for some reason.

15 Integrated Project Team s Contract Multi Party Agreement Developed by research group IU Health Messer Baker Daniels BSA LifeStructures Had first meeting to review on October 7, 2010 Contract Signed June 24, 2011

16 Integrated Project Team s Contract All signatories agreed to share profit in a profit pool. Defining Profit, Direct Cost, and Overhead was the difficult task.

17 BUDGET TARGET COST VALIDATED EXPECTED COST Target Value Terms in Contract IU CONTRACT TERMS: IU Health Capital Budget for SFT WHAT YOU MAY HAVE SEEN: ALLOWABLE COST Fee Profit of the IPD Team Project Reserve Contingent Monetary Risks TVD GOAL Fee Profit of the IPD Team TARGET COST Reimbursable Costs Direct and Indirect Costs of IPD Team Cost of Work Direct and Indirect Costs of IPD Team

18 Conditions of Satisfaction Developed by the Team A Portion of our Fee is at Risk depending on scores. Both Construction, Design, and Operational Goals will be evaluated- Long and Short term. This is a VALUE Proposition for the team.

19 Value Path Score Card

20 Target Value Design Implementation All Team Members read the Target Value Design Manual. After 10 Minutes of Study we all worked perfect and harmoniously together. We were able to save $98M on our $100M budget and finished the project 2 years early. We interrupted our tropical vacation to be here with you today.

21 Target Value Design Constraints Integrated Contract took 8 months to Negotiate The Final Budget, COS, Portion of Fee at Risk was tied into the Contract Terms We had to base our plan on our assumptions. Contract Signed June 24, Final Budget Approved July 29

22 Target Value Design Constraints What is in the Target Cost? Project Reserve-Owner Costs Reimbursable Cost for the Team: LABOR/ OVERHEAD COST OF TEAM PAYMENTS TO TRADES ALL OWNER EQUIPMENT EXPENSES TO DO WORK MATERIALS AND EQUIPMENT FOR CONSTRUCTION

23 How we Accomplished Target Value Design Despite Constraints Entire Team Worked on the Original IU Health Project Budget All signatories are working on the same BIM connected to a remote server at Riley Hospital for Children. We spend 50% of our time working together in a Big Room environment. We have huddle meetings at the beginning of every day.

24 How we Accomplished Target Value Design Despite Constraints A3 S from every user meeting captured all information that was shared. This served as a meeting report, user review, basis of the program, start of equipment list, and was a valuable tool in cost estimation.

25 How we Accomplished Target Value Design Despite Constraints Messer- Harmon Developed Detailed Budgets with IPD Team. Trades that issued on Earlier portions of work met weekly to discuss budget. Had very high tech CONVERSATIONS about where we thought the money is and where we thought it should go. Had honest conversations with user groups on where we were with budget.

26 How we Accomplished Target Value Design Despite Constraints Design Members of the Team are included in interviews with non signatory trade selection. Design Members of the Team reviewed the early bids of the non signatory trades for mistakes, misunderstandings and explored opportunities. Trades part of the IPD contract were able to discuss opportunities directly with the PM team before they were implemented to save cost, or adjust costs where they were needed.

27 Future Outlook

28 What is going well Team Chemistry We finally put the guns away. Collaboration People are stepping out of their silos and shooting without cover. User Buy In The staff participating in the design effort is owning it.

29 What did not go so well New Idea for many team members Team members know they are supposed to do something different but don t know what to do. It is easier to do what you have been doing for the last 5, 10, 15, 30 years without having to rethink EVERYTHING. How are drawings/ information issued when I still think any minute I am going to get sued? Always ask yourself, who is your audience for any drawing issue or information exchange and what is the value in it.

30 Opportunities The hospital has done extensive Operational Improvement work and has determined their Ideal State for Operations. The design was based on that, and they will continue to model their operations and transitional plan on those studies. We have been able to validate the existing design and eliminate possible change orders through scenario testing.

31 Opportunities How we Communicate on the project- Owner, IPD Team Member- Patient How we are Evaluated- COS, Value Path Score Card How we are Compensated- Shared Profit Our Motivation:

32 Opportunities Because we are doing this over 3 times, we can evaluate what worked and didn t work and improve every process. Industry Needs to Evolve More Success More Fun

33 Where we Stand on Sequence 1 Construction underway on the Infrastructure. Construction will start on the Patient Floors in September. Sequence 1 has a $45 Million Target Cost, nearly 2 million dollars in savings, we are hoping to not touch the Project Reserve. All money under Target Cost 50% to owner for added value, 50% to the IPD Team.

34 Questions? Thanks for letting us tell our story. It is just a beginning stay tuned for more Graphics blatantly stolen from Messer s Integrated Project Delivery Implementation Guide- Sue Me.

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