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2nd Edition   

The topics for this edition are:
  • Relational Contracting: The Key to Effective Collaboration
  • 5S Auditing - Some Recommendations and Suggestions


Greetings Construction Professional!  

This Lean newsletter is the result of the collaboration of three organizations:

Grunau Company
Ted Angelo, Executive Vice President

Creative Project Services LLC
Mike Schopp, Project Management

WCM Associates LLC
Larry Rubrich, President

Please give us feedback with your thoughts and ideas for this newsletter!

Relational Contracting: 

The Key to Effective Collaboration

In Lean Construction Relational Contracting, the goal is always "win-win" solutions 

by Mike Schopp

Owners continually raise expectations that increasingly complex projects will be delivered faster and cheaper. Customer satisfaction is often limited by what design firms and contractors will provide under a one-time agreement. Why do most procurement and contracting methods in use today establish adversarial relationships between parties that desperately need to cooperate? 


Transactional contracting methods that simply exchange goods and services for payments, determined under competitive bidding conditions, limit project improvement and coordination opportunities. Much of the transactional contract language describes punishments for less than requested results rather than rewards for cost and schedule reductions or quality improvements.


Relational contracts offer alternatives to these "win-lose" agreements. They offer a project delivery method in which the interests of the primary team members are aligned for optimal project performance. The owner, design firms, and contractors sign a single agreement. Contingencies and risks are shared. Fees and profits are at risk. Cost savings are likewise shared at pre-determined percentages.


Early engagement of project participants permits a quicker development of the project details and reduces the inevitable "work it out in the field" approach to construction.


Chart Edition #2


Not everyone is capable of working in a collaborative arrangement.  Management's role must change from "Control" (monitoring results) to "Enablement" (making things happen). They must establish conditions where the majority of communications are verbal commitments made in a trusting environment. All parties must understand that focusing on the main project objectives will produce a superior result to sub-optimizing every project task.


The relational contracting strategy offers opportunities for both increased employee contributions and satisfaction. In the book Drive, author Stephen Pink argues that management styles utilizing punishment and reward tactics have become obsolete for today's employees. Creative employees engaged in conceptual tasks now want a say in when, where and how they perform their work (autonomy); opportunities to use modern tools, technologies and methods that allow advancement in their specialization (mastery); and a sense their efforts are contributing to a worthwhile result (purpose). Incremental financial awards for helping someone "make their numbers" or simply increasing the organization's profit are no longer sufficient to inspire employees to their best performance. Being part of a team that is accomplishing something important can be a significant motivation and reward.


Engaging a relational contract starts with an owner, or sponsoring organization, that sees the potential benefits of this approach. Design firms and contractors with appropriate experience and success are interviewed for potential team membership. Target values for cost and schedule performance are then established. Co-location of team members significantly improves opportunities for success and improvements.


The next article in this series will focus on tools used by Lean Integrated Project Delivery teams.

FREE Lean Webinars - Archived on our website

All of our previous webinars can be viewed with Windows Media Player using the links below, or visit our website at http://wcmfg.com/Webinars.html.  

Lean Administration - Advanced

An Introduction to Applying Lean in Healthcare

Introduction to Policy Deployment & Lean Implementation Planning (2 Hour Version)


How to Handle Difficult Team Members


How to Prevent Lean Implementation Failures - 10 Reasons Why Failures Occur


Accounting for Lean - What Operations Needs to Know


Considerations & Guidelines for Starting a TPM Implementation


Kaizen Event Preparation


The Basics of Problem Solving


Calculating Kanban Quantities and Sizes


Introduction to Lean Supplier Development


Business Strategies for Competing in the Global Economy for Small and Medium Size (SMMs) Companies


Dealing with Resistance to Lean at the Supervisory and Middle Management Levels


Introduction To Setup Reduction


How Lean and Six Sigma Work Together


Standard Work


Introduction to A3 Problem Solving


Optimizing Your 5S Implementation - Some Considerations


Developing a Lean Culture - An Elements Checklist


Leading Organizational Change - The Five Prerequisites


5S Auditing -
Some Recommmendations and Suggestions 
When 5S fails to be successfully implemented in a construction company, it fails because we did not properly implement the 4th S (Schedule/Standardize) and there was no follow up using the 5th S (Sustain).
by Larry Rubrich 

The 5th S, Sustain, is all about developing the discipline to use and maintain the 5S's on a daily basis everywhere within the organization. Sustain means understanding how 5S eliminates organizational waste and then making the first 4S's a habit and part of the company's culture. Sustain, for most organizations, even after the 5S training and 5S Kaizen Events, means 5S audits.   

Some Recommendations and Suggestions on 5S Auditing
  • Audit scores range from 0.0 - 5.0. We use scores in tenths. More on this below.
  • First, understand that audits, like 3rd party inspection, are wasteful activities. Like product or service quality, 5S is an activity that we and the customer expect to pay one person to do it right the first time. Audits do serve the short term purpose of both the reinforcement of the new process we are implementing (necessary if your organization has had many "programs of the month") and advanced 5S training activities (how do we achieve a score of a "5.0" on an audit of our work area).
  • The audit team should consist of both factory and office associates, an hourly and salary mix. General guidelines are 4-6 auditors (not including the Lean Facilitator, per 250 person organization). The audit team should do practice audits to get everyone on the same page and develop a baseline. Also, consider how government regulations can set baseline scores. For example, if your organization produces food or medical products, meeting the FDA workplace requirements might mean that the minimum 5S score for the first 4S's is a 3.0. Scores less than 3.0 might mean the FDA requirements are not being met.  
  • In the beginning, audits should occur at least every two weeks. Remember, it is both process reinforcment and a learning experience. As the average audit score climbs, the audit time span can be increased. The organization should determine what the operational criteria will be for eliminating audits.     
  • 5S job instructions (4th S) and audit areas should be established by natural work groups and teams in both manufacturing and the office.
  • It is suggested that 5S office guidelines be developed for each organization. Office areas, unlike manufacturing areas, can be categorized into basically one group. The organization should create common 5S job instructions (part of the 4th S) that define the organization's office 5S expectations. Some examples are shown below

    Typical 5S Office Guidelines

  • A typical 5S scoring guideline sheet is shown below for the first 3S's (Electronic copies of all 5S guidelines, scoring, and grading charts are available upon request at kelly@wcmfg.com). 

5S Scoring

  • It should be noted that there are special 5S audit circumstances for safety violations. First, the "S" that the safety violation is covered by gets a score of a "zero." Typically these are 2nd S violations that occur on the job site or in the shops. The audit team must immediately notify the responsible supervisor and the safety violation must be corrected immediately. The audit must confirm the correction (the score does not change after correction).    
  • A typical 5S grading sheet is shown below. Note that as important as the score is, comments on what needs to be improved to achieve a score of 5.0 must be also be included.

5S Audit Grading

  • In the beginning, we believe audit scores should be posted (high to low) in several very visible areas of the organization so everyone can see how the organization is doing. The high scores and the 5S activities, in general, should be one topic in the organization's monthly "all hands" meeting.
  • Over time, the business will develop its own 5S expertise when new 5S safety, organizing methods, clean up techniques, and other 5S methods are established. Audit procedures and scoring should be adjusted to these developments, thus raising the bar to the new baseline.
  • One of the required measures for the success of your audits and 5S implementation in general includes never having to clean up in advance of customer or other special company, shop, or work site visitors. Always being "tour" or "visit" ready is an important 5S measure.
Integrated Project Delivery is a Trademark of Westbrook Commercial Services
Last Planner is a Trademark of the Lean Construction Institute
Larry Rubrich
WCM Associates LLC
2010 WCM Associates
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