Within the pharmaceutical industry, new plant construction frequently exceeds the allocated budget and runs over the expected time. The problem contributes to the industry’s challenge to bolster drug output over the past decade, according to the consulting firm Turner & Townsend. The firm estimated that some 70% of pharma construction projects miss their original budget by about 15%.
Of course, the pandemic’s negative impact on the supply chain has only exacerbated the problem. But the problem has been common across construction sectors for years. In 2016, McKinsey estimated that large construction projects across industries generally take 20% longer to complete than anticipated and are up to 80% over budget.
Keeping construction projects on track
One philosophy to help keep projects on track is the lean management practice of Target Value Delivery (TVD), which offers a disciplined approach for determining expectations for cost, quality and schedule. TVD can help ensure that pharma and biotech companies are delivered a new facility that meets their needs and expectations, prioritizing value from project inception to closeout.
The TVD approach offers a framework to enable the project to meet a pharma company’s needs for cost, quality and safety without budget overruns or delays. Effectively using TVD, however, can prove elusive for pharmaceutical companies not well-versed in lean construction principles. Therefore, pharmaceutical companies interested in a TVD-based approach should prioritize it from the beginning with the help of experts. “A big part of TVD is taking the time up front to determine what adds value and what the constraints are,” said Clay Seese, ONEsolution director at CRB, a full-service provider of sustainable engineering, architecture, construction and consulting solutions to the life sciences industries.
Starting with the business case
The first step of CRB’s ONEsolution delivery model is known as the business case alignment phase. During this phase, pharma companies should articulate their needs for a new facility and communicate those needs to construction partners. “We make sure we have alignment on [business case phase] before we move forward and ramp up our team,” Seese said.
One of the core tenets of the philosophy is to see cost as an input of design to ensure the project remains within the pharmaceutical company’s allowable budget.
While it is common to see cost as an output rather than an input, TVD takes the opposite approach. The goal is to “bring reliability to an environment that has historically been unpredictable,” said Ryan Little, director, project cost control at CRB.
Again, achieving this elusive goal requires a foundational sense of what conditions will yield the desired result. Without a clear vision initially, it is challenging to navigate the decision-making process as the design progresses.
If the project begins to deviate from the plan based on a strong value statement, “we end up in a redesign or re-scoping situation,” Little said. “And as you can imagine, that costs money.”
Having a relatively small team of key stakeholders from the outset can simplify the goal of ensuring the business case phase has a clear scope.
After the initial team has a shared purpose, it is time to reach out to subject matter experts to ensure the project execution strategy aligns with the pharma company’s value statement.
One factor that can be helpful is the early involvement of trade partners while determining who will be responsible for various aspects of the eventual construction. Incorporating trade partners early on can help the project stay on track.
The next step: chartering
After the initial team has aligned on the project’s core values in the business case phase, the next steps are chartering, execution and, finally, turnover.
In the chartering phase, the team is expanded to validate the proposals in the business case phase. “The goal is to get to a cost model that sets the target value at the end of this phase,” Seese said. “We’re still trying to be very, very lean in what we’re doing, but we’re adding some of the detail and answering some of the questions left as assumptions in the first phase,” Seese said.
While the initial cost model tends to be based on historical benchmarks, the chartering phase relies on concrete data based on the quantities of goods needed for the project. Such data will help set the stage for ensuring the project stays within scope and budget.
To that end, maintaining alignment to the business case through chartering is crucial, according to Little. With a firm plan, the team can develop a timeline and expectations to achieve and set the target cost for the project. “Again, it’s all about trust and working together to meet that common goal,” Little said.
Execution and turnover
Execution can begin once the team has set the target value at the conclusion of the chartering phase. The execution phase is closely aligned to traditional detailed design and the construction phases of the project. “At this point, we’ve established most of the conceptual design reequirements, and we’re coordinating fabrication elements and phasing to match the build sequence that we’ve established,” added Little.
While this is the phase where construction occurs, there is considerable overlap between detail design and construction. Offsite construction can sometimes offer advantages here in terms of efficiency.
In the final phase, turnover, team members ensure that the project offers the desired results. “This is where we’re closing the job out in terms of mechanical completion, punch lists, and we’re beginning commissioning, qualification and validation activities,” Seese said.
The goal is to see the job from end to end. “It’s not just about getting to a point where we’ve got the certificate of occupancy or mechanical completion,” Seese said. “It’s about making sure the project is operational, functional and manufacturing products based on what the clients envisioned.”
Why culture is vital for TVD
It’s true. Efficiency is a cornerstone of lean philosophy and is especially important in the detailed execution phases of a project — whether it applies to manufacturing, lean startups or construction. But there is more to lean than waste elimination, Seese stressed. “In the early phases, a key part of lean is driving innovation,” he said. “It takes this cross-discipline team to do that.”
Expertise may be necessary for success, but it is not sufficient on its own. Pharmaceutical companies planning construction projects must establish the right culture. Even if an organization has multiple experts to oversee a project initially, a project can still go off the rails if there is poor communication and lack of trust between team members.
Sometimes, different team members can develop distinct solutions to a single problem without sufficiently communicating with other team members. Even if there is more than one solution, if communication breaks down, “you’re just setting yourself up for misalignment,” Seese said. “And that can be just as bad as the wrong decision.” That is, it can drive delays and cost overruns.
“We talk a lot on the front end about culture,” Little said. “Target Value Delivery is 80% culture and 20% tool and process.”
While some pharmaceutical companies building new plants can focus on the right tools or processes to ensure success, it will be hard to realize their value without a core team based on trust and mutual respect.
It can take time to build a culture of trust, but without it, “your team works in silos,” Little said. And every decision made within such a siloed approach is likely to hurt the project in the long run.
“Our natural instinct when we don’t trust others is to protect ourselves and look out for our own best interest,” Little said. Unfortunately, when different team factions are in that mindset, there can be a significant negative impact on the project.
How TVD can help deal with pandemic-driven supply chain delays
Much has been made about the pandemic’s impact on the supply chain, which has adversely affected construction projects worldwide.
Therefore, it is vital to get a handle on how the costs for construction goods and services are evolving. “Within the chartering phase, we’re trying to get to predictive quantities as a basis for the estimate,” Little said.
TVD provides tools to determine a projected increase in costs of construction materials during the chartering phase to develop data-driven trend projections. “We’re always looking through the lens of what is most valuable to the client,” Little said.
As soon as the team has a basis of estimate that relies on as much detail as possible aligned with the project scope, the team can begin a trending process that introduces variances to the basis of estimate.
Again, the process is based on a culture of trust,” Little said. “This is a healthy part of staying within target. We’re not going to be blame-shifting. It is a recognized part of the process where we’re open and completely conspicuous about potential target impacts.”
When cost variances occur, it is crucial to make collaborative decisions based on the latest details. All stakeholders need to get together to decide how to mitigate unforeseen issues as quickly as reasonably possible. “Traditional delivery would say, ‘Alright, let’s wait it out. I’m sure we’ll figure it out,’” Little said. “That’s really not the essence of target value delivery, which is about immediate offsets where possible to absorb such impacts with eroding contingency early on in the project.”