Transfer of The Development Process and Project Organizational
Systems Between Japan and the U.S.
by
HIDEO OBITSU
B.Eng., Urban Engineering
The University of Tokyo
(1976)
Submitted to the Department of
Urban Studies and Planning
in Partial Fulfillment of the
Requirements for the Degree of
Master in City Planning
at the
Massachusetts Institute of Technology
May 1987
@ Hideo Obitsu
1987
The author hereby grants to MIT permission to produce and to
distribute copies of this thesis document in whole or in part.
Signature of Author
0
Department of Urban studies and Planning
May 11, 1987
A-.
Certified by
,.
Bernard J. Frieden
Professor, City Planning
Thesis Supervisor
Accepted by
Phillip L. Clay
Director fthe MCP Program
MASSACHUSE TTS INSTITUTE
OF TECHNOLOGY
JUN o 8 1987
LIBRAR'Ir-
FRdo
Transfer of The Development Process and Project Organizational
Systems Between Japan and the U.S.
by Hideo Obitsu
Submitted to the Department of Urban Studies and Planning
on May 11, 1987 in partial fulfillment of the
requirements for the Degree of Master in City Planning
ABSTRACT
The main subject of this thesis is the development project
process and the differences in project organizational systems in
different environments. Through the case study of the Toyota
Kentucky (KY) Project and three other comparable projects, Nissan
Smyrna (Tennessee), Toyota Tahara (Japan), and Fuji Gunma
(Japan), the differences in project development systems between
Japan and the U.S. are examined. It is found that the American
development environment is more flexible and dynamic, especially
because of the possibility of a fast-track program, than the
Japanese environment.
Specifically, differences and similarities in the project
organizational systems, such as, traditional, design-build, and
construction management, between the two countries are studied.
A framework of the project organizational systems is built and
used to analyze the project organizations in the four automotive
plant projects as well as to define the differences and
similarities between the two countries. The influence on the
project organization of a fast-track program to achieve the
shortest possible project duration time is examined in the Toyota
KY Project. For the base of the analysis of the four project
organizational systems, a theoretical model developed by Minden
is used and its validity is simultaneously evaluated by the
applicability to the projects. Additionally, the organizations
of the client (Toyota Motor Corporation) and the design-builder
(Ohbayashi Corporation) for the Toyota KY Project are analyzed.
Thesis Supervisor: Dr. Bernard J. Frieden
Title: Professor of City Planning
Acknowledgments
I would hereby like to acknowledge the following people for
their help and support with this thesis. The nature of my
research has required the cooperation and assistance of
professors, professionals in the field of building construction,
and my family.
Special thanks go to my thesis advisor, Professor Bernard
Frieden, and the readers, Professor Henry Irwig and Michael
Joroff, the Director of the Laboratory of Architecture and
Planning. I would like to thank Dr. James Womack for his
introduction to professors, professionals, and books regarding
automotive industry, and Dr. Chris Sawyer-Lancanno for his
careful English editing.
Special thanks go to many professionals and managers in the
Toyota KY Project for Ohbayashi Corporation, Mr. Ohba, Mr.
Mizoguchi, Mr. Robert Jordan, Mr. Suzuki, Mr. Nagashima, Mr.
Muro, Mr. Muramatsu, Mr. Kanai, Mr. Matsunaga, and many managers
and engineers. I would like to thank Mr. Noma for the
information on OHB in the U.S. and Mr. Robert Lefebvre for the
information on Giffles Associates. I am especially grateful for
the support of many managers and engineers from Ohbayashi
Corporation in Japan, Mr. Tanabe, Mr. Sato, Mr. Osaki regarding
the Toyota Tahara Project, Mr. Kuroki, Mr. Kujirai, Mr. Imagawa,
regarding the Fuji Gunma Project, Mr. Hanzawa, Mr. Kataoka, Mr.
Harada, Mr. Shouda, Mr. Aoyagi, and other managers and engineers
who provided much information about Japanese construction. I am
as well grateful to Dr. Koshizuka and Mr. Mizushima regarding
information about local governments' incentives for corporations
in Japan.
Ohbayashi Corporation also deserves special thanks for its
full financial support for our family's stay in Cambridge for two
years.
Finally, I am deeply indebted to my family, Hiromi, my wife,
and Sayaka, our daughter, and our parents who arranged a
comfortable and cheerful environment that is the real reason for
completing this thesis.
3
IFigures and Project Summairies
Lstf Tables,
Tabes
and
Projects
2-3-1:
Factories
2-3-'2:
Outline of History
2-3:
Subsidiaries
2-3-4:
Outl ine
3-2.
2-1:
Staties'
-2-:
Reouired
Host
if
Differences
1-1:
-actors
Importarit
of TMC
TMC
of
the U..
of TMC in
of
Companies
(roup
Toyota
for
Incentives
for
Permissions
Auto
Japanese
KY-
in
Projects
Manufacturers
IFiguresMarket
Construction
I-1:
International
1-2:
Where Top
I -3:
Japanese Contractors'
1-4:
Major
1 -5:
International
2-4-1-1-a:
Schematic
2-4--1-1-b:
Section
2-4-1-1:
Development
2-4-1-2:
Toyota Tahara Project
2-4-1-3:
Outline
of
2-4-1-4:
TMC' s
Organization
2-4-1-5:
OH's Site
2-4-2-1-a:
Schematic
2-4-2-1-b:
Section of Assembling
2-4-2--i:
Develtopment
2-4-2-2:
Fuji
2-4- 2-:
Outl ine
of
Tahara
in
of
Tahara
Toyota
Tahara
Tahara
Toyota
for
Tahara
Gunma
Fuji
Shop
Chart
Process
Project
Contractors
Project
Toyota
of
Toyota
for
Organization
Proj
Tahara
Organization
of
6
Schedule
Project
Plan
Top
Project
Chart
Process
Contractors
Japanese
O-f
Press Shop
of
Gunma
of
ects
International
Japanese
Contracts
Plan
Proj
Overseas
For
Market
Contracts
Foreign
250 Won
in
of
Fuji
Gunma
G unma
Fuji
Schedule
ect
Organization
4
of
Fuji
Gunma
Fi
ur g an i z at i on
C
2-4
2-4--4:
E - sr
OHb
gar i z at i on
2-4-1
Scherati
c
24-31:
2-4-3-2:
2-4 -3-3:
4:
2-4
Nissan
2-4-3-6:
Schedule
Project
Schedule
of
Plan
Schematic
3-1-c:
KY
Toyot a
Toyota KY
in
of
Drawing
Perspective
Smyrna
1987
Jan.
Section of Main Shop
31 -b:
KY
Toyota
Si te Plan of Toyota KY
3--d:
Toyota KY
Si te Plan of
Toyota KY Project
2-1
:
3-2-2:
Toyota
Diagr am of
of
Merit
Diagram
of Saturn
Outline
of
Project
(2)
Shop
Pact
Project
Oroanization
OHB's Organization Chart
Flow Chart
4- 1--2:
Outline
of
Framework
4-1-4:
Minden's
of
for
of
Classification
Toyota
Organi zati
Project
in
Deinition
5
KY
Toyota KY
Project
Contractual
Alternative
of
of
for Toyota KY
OHB's Site Organization Chart
4-1-1:
KY
Toyota
Schedule
Schedule
Project
KY
(2)
Process Chart
Development
3-1-
in
Nissan
Smyrna
Nissan
for
Organization
Toyota KY Project
3-1-a
of
Nissan Smyrna
for
Organization
Daniel's
(2)
Organization
Project
of
Outline
Smyrna
Ni ssan
Smyrna Project
Nissan Smyrna
NMMC's
of
Process Chart
Development
a
Gunma
Fu.j i
f or
Gun
Lu
i
Nissan Smyrna
of
Pl an
f or
the
Systems
Approach
onal
Framework
Systems
4.-1 -5
1--- i :
4-
c i ic L O rg a n i Zt
Pr (-:- r
eent
i on a L
Method
St-
DeF;i an
o
1odel
Four
i
Pro
Var-i abI eE
52-1:
C n
5-2-2-a:
Application
of
the
5-2-2-b:
Application
of
the Matrix
for
5-2-2-c:
ApDlication
of
the Matrix
for Toyota Tahara
5-2-2-d:
Appl i cati
the Matri
-for Fuj i
5-2- 3
iotnency Factors of
ActLUal
on -of
and Optimal
Four
Pro
a
ctS
ects in
the Mat ri
-For Toyota KY
latrix
Systems a-f
Nissan Smyrna
G unma
the Projects in
the
Fr amewor k
15-2-
Japanese Project
Fr amewor k
5-3-1:
Cost
Mechanism
Control
Mintzbergr s
Organizational
Framework
5--:
TMC
5-4-1:
OHB's Organization -or
in
for
Systems
Toyota
Organizational
and Nissan's Organization
Toyota
Schematic IPIroject Summaries
2--4-1-1:
1K.Y
Project
Summary
of
Toyota Tahara
2-4-2-1:
Project
Summary
of
Fuji
2-4-3-1:
Project
Summary
of
Nissan Smyrna
3-1
Project
Summary
of
Toyota
Gunma
KY
for
KY
and
the
in
Nissan
SmVrna
Analysis
the Projects
and
Projects
in
Japan
TARLE OF CONTENTS
Aic know l edgments
Li st
of
Tabl es.
F gures and
Proj ect SLmmar ies
1 I ntroduct i on
2
Back grouind
2-1
Trade
Toyota Kentucky
i nf ormationOf:
2-2 History of The Ohbayashi
2-4 Other
2-4-1
automotive
2-4-1-1
Project
2-4-1-2
Devel opment
Project
2-4-2-2
Development
Smyrna
Outline
of
Ni ssan
9
P.
18
P.
33
Corporation
P.
41
P.
52
F.
68
P.
32
Japan)
and
Organi
zati on
the U.P.)
Motor
Developmen t
Proc ess
Kentucky
and organization
(in
U.S.iA.
Manufact uring
and Organi z ati
Project
on
P. 102
summary
Process and Schedule
3-2- 1 Pl anni ng /F'r e-desi gn
3
F.
and
the U.S.
Japan)
Corporation
3-2 Development
3-2-2
(in
Project
2-4-3-2
Project
Toyota Motor
(in
Proc ess
Project suIMMarV
3-1
4
summary
2-4.-3-1
Toyota
in
constructions
Process
Project
Gunma
2-4-2--1
2-4-3-
P.
Summary
2-4-3 Nissan
3
plant
Tahara Project
Toyota
2-4-2 Fuji
Corporation
the History of
2-3 Outline of
investment,
3
(::ntractors
international
Japanese
direct
Japanese
friction,
Project
F'.
Design
st age
stage
Procurement
stagre
7
P. 109
3 --- 4 Con
r"t uc t. i on- st ce
SPr-oj ect
4
Procurement
Alternative
(includii-g4
Systems
of
Evaluation
Proj ect
5--1
Proj ect (Organizational
classi-fication
of
the Development
Organizational
Difff erences
in
construction
Evaluation
System of
in
systems for
Japan and
the
four
P. 167
automotive
Process And
the Toyota KY
Tovotaa's
P. 183
Project
process and
P. 186
an automotive plant
the U.S.
of the four automotive
construction procurement
5-3 Anal ysi s of
Project
the development
rganizational
5-2
Methods/
projects)
pl ait
5
P. 159
aion
rgaz.
r
plant
P. 192
methods
strategy for the Toyota KY
P. 201
Proj ect
5-4
Analysis
of
Ohbavashi's
strategy
for
the Toyota KY
P .214
Project
6
Conc1 usi onEs
and
Further
Research
P. 222
Ref e r en c es
P. 229
Bibli ography
P. 235
1
P. 241
A-ppendi x 2
P. 249
Appendi
P. 252
Appendix
x
A p p end i x
P. 256
4
8
INTRODCTION
The meeting of two different cultures is a significant
character
Project,
(KY)
of the Toyota Kentucky
the first
$800
million direct investment in the U.S. by Toyota Motor Corporation
The
(TMC/Toyota), the biggest Japanese automobile manufacturer.
main subject of
thesis is
this
and the differences in
different
leadership applying the Toyota
with Japanese management
plant,
systems in
organizational
Toyota is trying to build a Toyota style auto-
environments.
Total
the development project process
Quality Control
(TQC) system to the construction using a
Japanese construction manager, Ohbayashi Corporation
using American general
and sub contractors in
This thesis analyzes this
examining
1)
What
are the differences in
Japan and in
What
and
the U.S.
as a core case study
the following questions:
organizational
2)
project
(OHB),
the development process and
system for an automotive plant construction in
the U.S.?
kind of
project organizational
members' internal
system (including project
organization) do TMC and OHB build to cope- with
uncertainties, such as many change orders caused by a fast-track
program?
3)
What
kind of conceptual
project organizational
model
and design methodology of
systems should be used or developed for
future projects?
In
addition to these main
process in
questions,
TMC
the new business environment,
technology transfer
in
and OHB's
learning
and the difficulties
the construction industry are
9
of
cupple: I cent a Iy
uncertai ntie
in
the new
Ktky Project,
i
first
the
by the Toyota
of
one
the
project
Lsino
tLlrnkl::ev
contract
to
eCla
the
fst-trac.k
mi
125
ion
Because the
S out of
i
events . ab:::oL.t
be
wi
:construction
The
y i -Far plant;
with
such
as
ca
i
cs
a c:nstruction
4)
the U.S.
Corporation,
manages
the
by
manager
more
get
Toyota
than
and
or
$900
for
Ohbvasihi
construc:tion
of
th
of
t h
S.tud i ed
of
labor
beginni ng
i n the
thei
of
of
on
of
D)ecemriber
s...
in the
ieSccr i pt. i on
infli..enc:e
the end
conlstructio:4n.
r el aion
the
t he ir
as
under
on the
1abor
. c.
cat i on.s and
KY Project
still
isvcigqned
PA) i s- not
proj cct
i mpIrt ant
the projiect
ed
the
and
TMC
OHiB as.sociatedc w it h t.he pr oj ec t
4 ast--track
manaement,
Japanece
cocntractors,
AFL-CIO
Toyota
anli:
c-Ocets for
the proiject site,,
CIO.
r
the
labor rel
nresceItc:
those
of
f cuE
New"
are
-From
()
into
K.:entuc ki.y qovernment
i aid
i i
complete
the
the Tovota
in
Toyota will
the project
off
was
:i mpact
lthouLh the
case,
The Ohbavashi.
2)
3)
is analyzes thhe
"A
man c ae
to
construction.
though
1937.
198. the
cr
the
This c thes
January
in
agrcement
durino
HB
inves.tment
program
wit h Toyota
a project
un:i on
di rect
Japanese Cengi reer
Five
seeveralc
an, alyes
follows:
indi-vidual
milion ar-id 200000
made
the core
Iotor Corooration;
Bi g
and
by vIl
of
as
are
the thesis
l
environment.
coharacteritics
Special
This
F i na.
empoyoed
trategiec
alternative
1)
ned. e-
eai'
program,
turnk:y
and labor
dcision
c:ontract,
reiations
making
10
cost-plu-fe
tate
i ncenti ves
thOsie wiith
includino
ystem ,
contract
lon
for
AFL-
t eI- m r el at ion ship
between clients
and contractors, and TQC program are unusual
factors in the American construction industry.
Comparative studies using
the Nissan Smyrna Project,
Toyota Tahara Project, and the Fuji
find answers to the main questions.
would be an ideal
Gunma Project will
the
be done to
The Toyota Tahara project
comparable project in Japan with the Toyota KY
Project because they have many common factors, such as building
type, client, and prime contractor.
Therefore, the difference
between the U.S. and Japan's development process and organization
will be extracted.
special
The Fuji
Gunma Project will be used to check
features of Toyota's methods for its construction by
comparing the project with the Toyota Tahara Project.
This
comparison will be important to define the Japanese style of
development process and organization for
automotive plant
construction.
The Nissan Smyrna Project would be an
comparison
of the Toyota KY Project in
differences between the TMC's
risky
projects.
points:
the clients,
large direct
order to examine the
strategy and Nissan's in
Toyota and Nissan,
both projects are the
investment in the U.S. by Toyota and Nissan;
in
Tennessee;
Robert B.
the project manager,
in
are the two largest
car manufacturers;
the location of each project is
Ohbayashi
regard to
These two projects also have many similar
Japanese international
first
ideal project for the
the mid-South,
Jordan,
Toyota KY was the project manager
Construction in the Nissan Smyrna Project.
features or roles of Ohbayashi
11
in
for
Kentucky and
working for
Daniel
Therefore, special
the Toyota KY Project will
be
etr
acte(j
by the compar iso:r
of
Toy'ota KY with the Nissan
3Irvyrna
Prjcl I ect
Tabl e
1 -1
s umnmar i
i mportant
most
es the
factors.
pro
The
ects
di fferences;
process a nd organi Zati on w i
liie
will
be
Thu1h
T'
traditional
as
organi zati
on
fast-track
analvzed in
for
many
factors
seem
to
needs
to
analye
dc
ici
on
the
i nC rea'
the
necesity
of
procram
5.
c
a oart
its
of
w el l
development
the policy,
Namely,
of
Further,
and
ost -pl
cost
of
the
-fle1xibility
of
a
for
rime.s c ontr ad i :tsi=
TMC
coS.t
i nt.ensi ve
s TQCU procgram,
because
to el i mi nate
spare
cont
and
beciusi:e the
orders
used
use
of
or
ystem
to
quiCk
chancie or ders
the
the
ast-track
value eng i neer i no
excessive us
space
during
does not
Moreover
r.
.
in
a
OHB and
r act
manv
pilan
pln
desig
much
decisiion
:is not
us-fee
ffinal
bae
TMC
change
and
as
as the use of
uSes a giroup
probl ems,
the c
pajroicct
TMC
Japan
wivth
for
marv
to use
STC
orocess and
such
are undesirable
the
horiZontal
be
in
and a cost-p-olus--fee contract
stace.
tends
ngineering
ect may
const.ructi on
the
uncertai ntv
TMC
pro
I
plant
decisions
f inal
e1t
of
the
and
the
above
4
var ious factors-
guarant
factors sho..twn
Chapter
instant
mak: i n ..
b
the double
They
conStruc:tion
devel opment
belov
contradict
con tractors.
fast-track
each
Factors
s pol i cy for
rgram
ceneral
as
nes.
methods
ossible.,
the
li
in
Ie Iricc-s of the
d i 4'ff
be ep1 ai ned frai nl
differences bet ween t hese i mportant
dcuble horiz-ontal
t he
and
. L.e
o.fV
the posi
bsibility of
future changes.
TMc
s short constructi
urnc er t ai nty
of
the
future
c:'n
schedul e,
c omp act
12
c ar
probab
m11ar k et
in
v
due
to the
the U.
.. .
creates
TAB 1-
PR O
EC 1
PRO JECTC
T
5
AND
DI FFERENCES
i-TYOT A
KENTUCKY
LOCAT 1IN
'Ol0ST
OF
NISSANr
SMYRNfNA
U. SU.
I MF O RT ANT
TOY OTA
FU J I
TAHARA
GUNMA
JAPAN
JAAN
NAT I ONAL~ Y
CLIEN 1T, TYOTA
JAPANESE
YES
AMEiR ICAN
A
NO
JAPANESE
YES
PRIMEl
fOH BA YASHI
DAN IEL
OHBAYASHI
C'ONTRACTFOR,
STAZF
NOTIONALTY
Ame.':
FACTORS
Jap.
Ame.
A E
(OHBAYASHI)
GIFFLES
KAHN
PROJ ECT SIZE
(FLO:R AREA)
370, 000 SM
00,
1APANE
NO
OHBAYASHI
Jap.
Jap.
TOYOTA
(OHBAYASHI)
C) SM
73 000 SM
(FUJI)
OHBAYASHI
30, 000 SM
USI)
SS
ONSHIPS
LONG TERM
CLIENT &< CONTRACTOR!
RELA'
T
(MONTH)
CONTFUCTION
CONE
PERIOD
(PLAN)
22
(FAST
PROJ
CT
ORGA"C
IZ(AT ION
PHASED
DES I GN-
CT TYPE
< PRM. CONT.
METHED TO SELECT
PRIME CONTRACTOR
SELFE DERFORM BY
F'RTK CONTRACTOR
RELiATIONS
TOTA
QUALITY
6
TRADITIONAL
Cc)nt r ac tor
MlANAGE Const.
TRD IT I ONAL DESIGN-UILD
Mngt. (OWNER
COS T PLUS
FEE
:NEGOTIATION NEGOTIATION
NO
S
LUMP
SUM
SELECTIVE
BIDDING
Y YEYES
(:TRUCTURAL
MERI T SHOP
TO
YES
TRiD I TIONAL
'A/E)
COST PLUS
FEE
CLOSED
(BUILDING)
TRACK::)
FRAME WORKS)
LAPBD
LONG TERM
11
TRACK<I) (FAST
(TRUNKEY)
CONT
.L IE'
LONG TERM
(BUILDING)
(20)
METHOD PHASED
-UCTION
SHORT TERM
SELECTIVE
BIDDING
YES
(TEMFORARY
WORKS)
MFIT SHOPF MULTI--LAYER
(OPEN SHOP) SB-
SHOP
LUMP SUM
(TEMFORARY
WORKS)
MULTI--LAYER
SUB-
CONTFCT I NG CONTRACT I NG
NO
YES
NO
n.a.
ni.
CONT ~LD ( T QC)
I N C 1STRUCT I ON
INCE YTIVES
CLI. EJ5
BY
FOR
STATES
$125
mi
$19
mil
those undesirable
unintentionally because the schedule
factors
requires the fast-track program,
which needs the cost-plus-fee
contract.
The separation of the construction management function from
the use of the company's own forces
construction)
is
performance of
OHB's decision based on the policy and capacity,
but the decision basically fits
turnkey contract with OHB.
to many American
trade friction
(self
TMC's strategy which employs a
OHB tries
to distribute
the project
contractors to avoid unnecessary blame for
in
the construction
have enough Japanese staff
industry,
to use self
new
and OHB does not
performance in
addition to
construction management.
KY's incentives for TMC have influenced the strong reaction
by the AFL-CIO
they try
workers'
This is
(construction union)
to use local workers
against TMC and OHB because
(75"4 non-union)
labor relations rather
regardless of the
than only union contractors.
based on the local business conventions and probably is
based on the best effort
The difficulties
Quality Control
the difficulties
base agreement
of
between TMC and KY.
the implementation
program on the American
of American
managers'
of TMC's Total
construction system,
and
associating with TMC's
Japanese-style group decision process show the difference
in
business conventions and the potential difficulties for American
contractor's entry to the Japanese construction market.
There are many variables that affect
and organization
size
in
a development
(physically or monetary),
project;
a development
building type,
construction schedule,
14
process
project
location,
and contract type are important variables,
participants in
government,
manager,
a project,
such as a client,
an architect and engineer
a general
as are the
contractor,
a state or local
(A/E),
a construction
subcontractors,
and labor
union.
Environmental conditions around the project are important ,too,
such as political,
legal,
economical,
social conditions, and
business conventions.
To be more specific, differences and similarities of
construction management
or project procurement
Japan arid the U.S.
be studied.
will
methods between
Despite many text books and
articles
about construction management, they do not have a
rational
general
theory of the selection for an optimal
procurement method, and each author sets his/her individual
definition or terminology of alternative project management
methods,
Similarly,
transfer
process in
such as construction management
although there are many studies about technology
of construction in
the broad transfer of
the context of the developing areas,
no study about technology transfer
of
and design-build.
development process in
Construction
Management
is
there is
almost
(including management systems)
developed countries.
popularity and explicitness,
1
the development
Because of
the
Barrie and Paulson's Professional
used
as the text
book
to
alternative construction management methodologies.
define
Based on
B&<P's definition, the author develops a framework of project
organizational
For
systems in
a theoretical
38
model is employed
a triangular
framework,
shape in
Figure 4-1-3.
Minden's procurement
to define theoretically
15
optimal
decision making
project
organizational systems of the four automotive plant projects
because of this is probably the first and firm attempt to develop
a theoretical
procurement methodology.
applying the decision making model
projects,
the validity
of the model
At the same time,
for the four automotive
will
be evaluated.
Additionally for a framework for organizational
analysis of
TMC and OHB for the Toyota KY Project, the concepts built by
9
Mintzberg, Bronfman Professor of Management Policy at McGill
University is used.
This theory provides a framework for the
classification of organizations and for defining independent
variables known as contingency factors, to change or formulate
27
organizational structure.
Irwig's summary of Mintzberg's
framework is used to show the results of the analysis of TMC and
OHB's organization for the Toyota KY Project on
Irwig's pentagon
diagram after Mintzberg.
Finally,
the strategy of TMC and OHB for the project to cope
with uncertainties is analyzed.
actual
Several
alternatives of the
strategy are examined.
The thesis structure is
Chapter 2:
as follows:
Background information of the project.
includes four sections.
The first section presents historical
background on the economic and political
the U.S.
situation of Japan and
The second section describes the history of OHB in the
U.S.
The third
TMC.
The
last
section presents an outline and the history of
section describes three projects comparable with
the Toyota KY Project:
Smyrna,
This chapter
Toyota Tahara, Fuji
are explained respectively.
16
Gunma,
and Nissan
Chapter 3:
project
Toyota Kentucky Project.
summary,
The project
organization.
used
and
development
process and
summary
schedule section
presents
The project
events.
a detailed
project
important
factors
description
process
of
events on
of these
reasoning
describes the
section
organization
and
development
The
stage and the possible
each development
includes a
schedule,
presents
outline.
describe the project
to
This chapter
organizational structure and contract types of the project, and
Chapter
4:
systems
(including classification
Alternative procurement methods/project organizational
projects).
A new
presented.
Alternative
framework
of
of
procurement
Paulson's definition
automotive
the
5:
methods
systems is
comparing Barrie
and
38
and
plant
Minden's one
project
Evaluation
organizational
are
explained here.
organizations
will
The
be classified
process and
Project
are analyzed.
the organizational
about these points and
Several
studied.
in
OHB.
possibly
Chapter
Gunma
6:
the
in
projects,
Conclusions
between
strategies
Japan
procurement
using
and
the U.S.
Further
17
to
find
by TMC
methodology
for
TMC
OHB
to
and
Toyota Tahara,
these answers.
Research.
and
are examined
the Nissan Smyrna,
are used
and
the Toyota KY
employed
the new environment
studies
The development
strategies employed by TMC and OHB are
the optimal
Comparative
Fuji
process and the project
systems of
Differences
alternative
manage uncertainties
define
of the development
systems of the Toyota KY Project.
project
and
organizational
framework.
Chapter
to
the four automotive plant
project
1
four
the project.
of OHB's organization of
explanation
2.
Back groumd infatrnation of
Toyota Kentucky Project
This section includes on account of the general
situation between Japan and
the Toyota KY Projects.
history
of trade
operations.
The first part explains the brief
and
the U.S.,
Japanese
and Japanese international contractors
The next part describe the outline and history of
the Ohbayashi
of
the U.S. in projects comparable with
friction between Japan
direct investment,
economic
Corp.
in the U.S.
the Toyota Motor Corp. will
Then, an outline of the history
be explained.
Finally, three
projects, Toyota Tahara, Fuji Gunma, and Nissan Smyrna, will
described.
These projects will
Projects
section
in
2-1 Trade friction,
be
be compared with the Toyota KY
four.
Japanese direct investment,
and Japanese
inter-national contractors.
Special
of
features of
the study about
transfer
developed countries will
thesis.
of
the
current
increase
of
relationship
period was
support the importance of
is
in
the first
1976 to 1978;
features of
the
a symbolic event in the context
between
the U.S.
the project is
and Japanese
a symbol
of
the rapid
engineering
the U.S.
friction between
periods:
process between
the share by Japanese international
companies
Trade
development
definitely
At the same time,
construction
Special
of
The Toyota KY Project
industry.
three
the Toyota KY Project and the scarcity
the U.S.
period
was
the third
and
Japan is classified
1971
period
to
is
1972;
1981
into
the second
to date.
the third period is the sophistication of the
18
items that cause the trade friction.
In the first period, the
textile industry was the major problem.
period, the steel
Then in the second
industry was discussed.
Now the items are
expanded to automobiles, color televisions, semiconductors and
financial
services.
Japanese direct
friction.
investment overseas is
to trade
The first period of the direct investment boom was
1972 to 1973.
invested in
At this time, mostly the manufacturing industry
developing areas,
Only trading and financial
developed
related
countries.
such as Asia and South America.
service industries invested in
In 1973,
the investment yielded $3.5
billion due to the favorable environment for the direct
investment because of the scarcity of the domestic
(Japanese)
labor supply and the strong yen created by the "Nixon shock."
Backed up this
environment,
the textile
electric manufacturers invested
areas.
But
industry and some
in South east Asia and other
on the other hand, Japanese manufactures were not
strong enough to go to developed countries, such as the U.S. and
Europe.
The second direct
investment boom, begun
since 1980, has
been accelerated by the strong yen against U.S. dollar.
Compared
with the first period, the contents of the investment and the
target areas are very different.
electric, and mechanical
The transport machine,
industry have increased
Especially, in VTRs, semi-conductors, computers,
their share.
and
communication devices, which Japan has a technical
increasing.
advantage, are
In the automobile industry, after Honda and Nissan,
Toyota decided to invest in the U.S.
19
Mazda, Mitsubishi, Fuji,
and
ISuZu are following,
Because of
too.
the slow economic growth
Japan and the
in
economic slump in developing countries, the Japanese construction
target
industry has recently turned their
by Japanese corporations
investment
U.S.
in
to the direct
developed countries.
market
has become the most attractive
for them.
This total
in 1984.
Japanese contractors and their
The total
yen which was
contract amount overseas in 1985 was 11 billion
% more than
The
10
includes direct contract by
overseas subsidiaries.
Contracts
by the overseas subsidiaries have been increasing every year
8
since 1979.
Figure
1-1 shows the market trend of the international
and the share of Japanese contractors in
construction market
Figure
These graphs indicate the declining market
foreign contracts.
North America.
not still
contractors won
1-2 shows where the Top 250 international
of the Middle East
it.
and Asia,
and the relatively
steady market
of
The increasing share of Japanese contractors is
but it appears stable compared with the big
significant
ups and downs of the whole market.
Figure
1-3 shows
overseas operations.
13 years trend of Japanese contractors'
It
shows rapid expansion of
operations by Japanese contractors
The regional
in this decade.
share of the contract is
share of Asia has shrunk drastically,
international
changing.
North America,
While the
Europe,
Pacific region are increasing and occupy 46% of the total
overseas contract.
1)
The U.S.
The top five countries are as follows:
except Hawaii,
199 billion
20
yen;
and
-
L-
-..-.---
--
F~
C-.-
.4.:
-
'11
Ii.
R)
-
-
-I
LIJ
.
.
.,.....*
--
.
1
I
*
'1
-*
F
F"
Ljq rl
F
IijI~i:
.. I.
~,
r- r7.-
SOURCE: ENR
TOP 250 INTERNATIONAL CONTRACTORS
I
I
I
~*-,
I
:9..
-4K-
7.
-r
N)
N)j
S . . *- - * * *
*
-t
......- -
*
- -
..
1-.*,-1
~.
I~i
A7-5CA
r4
p
Ft ..f , - - ':r
T
- .- *-*-.'
*ThFh
SOURCE: ENR
TOP 250 TNTERNATTONA, CONTRAC'TORS
F IONJFPE 1
,J AF
~
"'4
F. J
M-SE
-T-.A.- f 'j1:§
Ff.,
E13 17
-
I.
I
I
r..
.
r
-/
I
-
r~~~
'e
7:1-
i ..e.
elI
lee".
-z
lo,
~1
.0
ei~
el
de
r
-
1*~
.e...-
ee
I
e-
e
I .-..
e
.0.I
....
e-
74
IOM t.1
:0
.
'I
}.*
el-eI
' 1e* :10 1i
t
.....
II
r
r :j
FCc
A
ee
I
j
-I
re'1'
i
t
LI.. I
11'
-
re.
ell
1 1
II
..
.
err
-j
7
I
SOURCE: THE WHITE PAPER OF CONSTRUCTION
JAPAN'S MINISTRY OF CONSTRUCTION
l
2)
Australia,
3)
Hongkong,
4)
Singapore, 86 billion yen;
5)
Hawaii,
Figure
176 billion
yen;
yen;
106 billion
77 billion yen.
1-4 shows the recent
change of major
market
international
for Japanese contractors.
1-5 shows the recent trend
Figure
of overseas operations by
the Japanese Big Five contractors plus Kumagai-gumi.
gumi
Kumagai-
has extended its business drastically, and the Big Five seem
to be starting new steps in the international market.
The Japan's ministry of Construction explains that the
reason for
the decline of contract
contractors from 59%
economy of ASEAN
in
84 to 36%
in
'85 is due to the inactive
(Association in South East Asian Nations) and
The reason for the increase of
the decrease of new projects.
contract
share of Asia for Japanese
share in the U.S. and Australia for Japanese contractors
is the increase of Japanese plants and offices in the U.S.
26
associated with the direct investment by Japanese corporations.
Additionally, the rapid increase of real
estate development by
Japanese contractors in the U.S. and Australia is another reason
for
the increased share in these areas for Japanese contractors.
The Ministry of Construction forecasts that the U.S. and
Australia will
continue to be major overseas markets for Japanese
contractors.
Reaction by the U.S. against the current
Japanese contractors'
gradually.
operations in
the U.S.
Because of the imbalance in
24
increase of
has begun to change
contracts between
[7i[
1
ii
'12
'-I
1-.!:
N)
-.7:
34
17A
NORTH AMERICA
-k
:
AUSTRALIA
S,
A
MALAYSIA
D
SINGAPORE
SOURCE: THE WHITE PAPER OF CONSTRUCTION
P
*
4.7:'
4
R)
(3)
Fi
5
[77
A
OHBAYASHI
~I]
KAJIMA
1
rx-r- r~i
5.
SHIMIZU
F
TAISEI
TAKENAKA
SOURCE:
KUMAGAI
TOP 250 INTERNATIONAL CONTRACTORS
Japanese contractors in
Japan,
the U.S.
market,
nothing in
'85.
and American
contractors in
government has asked Japan to open up its
construction market.
the U.S.
the U.S.
Japanese contractors got
yen
280 billion
in
but on the other hand, American contractors got
The Kansai
International Airport Project is the
first target by the U.S. government.
Though there is little
visible movement in the Japanese government, Japan has a new
potential
problem in the construction industry in
1986.
Topics about Japanese contractors in the U.S. have recently
appeared both in professional
construction magazines such as
Engineerinq News record and national newspapers in the U.S.
Engineering News Record, Sep. 20,
'84, reports the recent rush of
Japanese contractors into the U.S. market comparing it with the
29
previous Canadian movements.
It explains the attractiveness of
the U.S. market as much space, political
loose restriction.
for
The magazine describes the general
Japanese international
activities
stability, relatively
situation
contractors and states their
as contractor developers in
the U.S.
for Japanese contractors has become the first
The U.S.
in
'84,
market
from the
fifth in '83.
In The New York Times, Bennet writes "Now, Japan
Inc. Wears
a Hard hat:
Japanese builders are beginning to win some big
17
contracts in the U.S."
The article begins with Ohbayashi Corp.'s
tunnel
construction for
the I-10 highway in
using the favorable comments for Ohbayashi
the American
joint
venture partner
Phoenix
and concludes
by Shank-Artukovich,
of Ohbayashi
for
the project.
Bennet explains the basic situation of the U.S. construction
27
market
$4
the more than $100
of
billion
the
('86),
"This year
as
no far- bellow the $5 billion
by Bechtel,
that
"some
John P.
last year
in domestic contracts won
construction companies'
In the
reactions
others are profiting."
builders are bitter,
American
Boone,
Companies,
American contracts -
in
billion
one of the nations top three builders."
he states American
article,
companies may capture
(Japanese)
senior vice president of
the Dallas based Vantage
one of the nation's largest private developers,
described briefly that "It
is a two way street.
While they are
learning about doing business here, we can tap technology from
Japan."
This statement seems to point out the essential
relationship between the U.S. and Japan's construction industry
to date,
though differences of building construction technology
between these countries seem to be little.
Though the drainage tunnels construction for the I-10
Japanese builder,
work
it
is
still
an exceptional
for Japanese contractors in
Japanese clients
or
event
in
the U.S.
terms of public construction done by a
in
industry
construction
a sensational
is
highway by Ohbayashi
the U.S.
case to date.
comes from their
Business
leading Tokyo-based construction firm
Inc.,
Information
and expanding along with leading firms
such as Ohbayashi
Hann and Krizan summarize this
that the bulk of the U.S.
a
says that medium-size
Japanese contractors are now setting up subsidiaries in
and offices
A
from development projects by themselves.
report prepared by international
and Kajima Corp.
Most
the U.S.
Corp.
report and
say
contracts have been for the factories
of Japanese companies setting
28
up shops in
the U.S.
including
24
Toyota, Nissan, Cannon, and Nippon Denso.
Bennet says
that the Japanese construction companies have strong ties
other Japanese corporations, because the traditional
with
Japanese way
of doing business insures long-lived relationships between
17
Actually this is the main reason why
builders and their clients.
Corp.
the Ohbayashi
the
Kentucky Project from
got the Toyota
important
Toyota Motor Corporation, one of Ohbayashi's most
clients.
Supplementally the following part of this section presents
the discussion about Japanese contractors' general
structuring
general
they are trying
capture overseas projects by Japanese investors,
manufacturers and financial
to
such as auto-
But competition among
institutions.
contractors is
Japanese contractors and local
unavoidable.
Therefore cooperation with the local construction
industry is
President Ohbayashi
to avoid new trade friction.
contracts like
the Toyota KY Project should be
with the local construction
actively used to ease friction
44
industry.
joint
Historically,
popular method for
and
ventures have been a traditional
Japanese engineering
construction companies to
Joint
avoid or reduce business risks
in
unfamiliar countries.
ventures are also very popular
in
the Japanese construction
industry,
from
says
venture with local contractors,or construction
that a joint
management
As a
a project organization especially in the U.S.
policy of Japanese contractors,
important
strategy of
though the emphasis of their
the usual
joint
venture concept,
29
merits are quite different
the distribution
of
business risks.
popular
Joint
because it
projects
to
small
venture construction
is
a convenient
or
mid-size
local
in
way to
Japan
is
distribute
public
companies maintaining
high quality guaranteed by the joint venture sponsor,
This type of
construction company.
engineering
very
the
a big
joint
venture
is
an effective way to transfer technology from a big and advanced
or
company to a small
medium sized
local
construction companies.
Another purpose of joint venture in Japan is coordination
for construction companies
by a client
construction companies themselves.
or sometimes by
For instance, when a
manufacturing company decides to rebuild its main factory, the
company
will
choose
some contractors who are usually building or
maintaining the company's facilities.
among contractors for
much.
If
Historically, the share
the manufacturing
the rebuilding project
manufacturing company may well
is
company does not
unusually big,
arrange
vary so
the
a joint venture whose
participating ratio will be similar to the historical
distribution
of
much
Through
international
demerits.
factor of
experience of
Diversification of
the joint
venture
important
local
purposes
venture with
between
for
of
application
international
the U.S.
and Japan,
in
it
is one of
contractors
construction
30
risks is
overseas construction
business conventions
a local
Japan,
Japanese
its merits as well
construction
in
the company.
for
venture in
joint
contractors are aware of
Knowledge about
difference
the contractors
despite the unusual
contractors
joint
among
contracts
company.
and their
to
an
as
important
for Japanese
Japan.
the most
structure
Considering
matured
a
the
industry,
construction
business conventions
companies without
knowledge of
in each country must get help to secure
their operations in the new environment.
from local
sufficient
The necessity for help
companies reduces as a company accumulates the know-
how of operations in
the new market.
Information about local
trade or jurisdiction of the
construction industry in the U.S. is very important to manage a
project effectively and successfully.
organization
including subcontracting in a reasonable way is a
key factor to achieve project goals.
traditional
Structuring project
Either
through a
construction process or construction management style
construction,
the input of
local construction conventions into
design and procurement is critical
Information about the local
and not an easy task.
construction industry in Japan
is important, too, because even in open shop areas in the U.S.,
local
It
information is
very important
may not be appropriate to describe the labor
Japan as open shop,
however,
Japanese labor relations
unions,
relations.
relations in
it has many similarities
and the open shop in
instance, the Japanese construction
in
including labor
so trade or jurisdictional
between
the U.S.
For
industry has no industrial
arrangement
is
not necessary
Japan.
Ohbayashi
tool
Corp.
for American
has used the joint
construction business as well
business risks since its first operation
some examples in
Kyoto
Inn Hotel
venture as a learning
Ohbayashi's history in
construction
in
31
as avoiding some
in the U.S.
the U.S.
There are
such as the
1974 and the Evertrust office
building in
a joint
to
1985.
Ohbayashi
did this
venture with American
avoid
In
construction by structuring
contractors to learn
business and
some risks.
the context of both the Japanese and American
construction
industry,
a Japanese construction
a greater reputation by doing construction management
contracting
as a sponsor
of
a joint
the construction management for
venture.
gain
than by
This is
because
Japanese contractors is
contracting style and challenging subject for them.
risky for
could
company
a new
It is too
unexperienced Japanese construction contractors who
seeking for Japanese clients
have come recently to the U.S.
because of the difficulty of getting information and hiring good
American
managers.
32
2-2 Chatline and the history of Ohbayashi Corporation in the U.S.
Ohbayashi
Corp. has been in
worked on relatively small
Coast until
1982.
the U.S. since
projects in Hawaii
1966, having
and on the West
It has gradually undertaken bigger projects,
primarily the building of factories and warehouses for Japanese
23
companies setting up operations in the U.S.
Ohbayashi began to
attach importance to the U.S.
to get heavy construction in
Though Ohbayashi
recently in
the U.S.,
Corp.
it
is
market
around
80
the U.S.
began
almost unknown except very
has been famous as one of the Big Five
engineering construction companies in
is
1982 because it
Japan.
The outline of
it
as follows:
1) name; Ohbayashi corporation,
2) head office;
3, 2-chome, Kanda Tsukasa-cho, Chiyoda-ku,
Japan,
3) establishment; Jan. 25, 1892,
4) capital assets; 32.6 billion yen (Mar. 31, 1986)
5) employees; 9,915 (ave. 39.4 years old) (Mar. 31, 1986)
6) subsidiaries in the U.S.
(1985)
a. Ohbayashi America Corporation, California
b. United Development Corporation, Washington
c. J. E. Roberts-Ohbayashi Corporation, California
d. Ohbayashi Hawaii Corporation, Hawaii
e. Ohbayashi Associates Hawaii Inc., Hawaii
f. Citadel Corporation, Georgia
7) Overseas office in the US.
(1985)
a. New York
b. Los Angels
c. San Francisco
d. Chicago
e. Atlanta
f. Honolulu
Important events of Ohbayashi
Tokyo,
corp. in the U.S. are as
follows:
1966-1971;
the first operation of Ohbayashi
the Surfrider hotel
in Honolulu, Hawaii.
Corp.
After
in the U.S. was
Ohbayashi got a
negotiated contract from a Japanese overseas subsidiary, Kyouya,
'33
Ohbayashi
registered as a foreign corporation, and then received
a contractor's licence in
construction was in
The completion of the
1967.
In addition, Ohbayashi
1969.
got an
enlarging and remodeling construction contract for the PrincessKailua Hotel,
and completed it in
Ohbayashi started real
construction in Hawaii.
estate development as well
Ohbayashi
(SM) parcel in downtown Waikiki
acquisition of overseas real
Ohbayashi
in 1971.
This acquisition was
set up its
(Japan)
regarding
the
estate for Japanese corporations.
in
local office
opened its
as
acquired a 1600 square meters
permit by the Ministry of Finance
the first
1972;
1969.
overseas subsidiary,
Honolulu in
Ohbayashi
Hawaii
1971.
Then,
Corp.,
in
it
1972.
Ohbayashi started its operations in North America by
setting up the overseas subsidiary, Ohbayashi America Corp. in
Los Angels
(L.A.).
It received a licence of a general
contractor
in the U.S. in 1973.
1973;
Ohbayashi set up the Department of Overseas Business in
the Tokyo Head Office.
opened a local
Besides Ohbayashi
America Corp.,
it
office, which mainly dealt with heavy construction
in Los Angeles.
1974-1975;
After two years of market research, Ohbayashi
started active operations on the West Coast.
construction of Hotel
The completion of
Kyoto
America
It got the
Inn from America Kintetsu Kougyou.
the construction was in 1975.
Ohbayashi chose
J.E.Roberts Co. as the joint venture partner for the
construction.
Actually, Ohbayashi
did not make a profit
it gave too many incentives to the partner.
34
Since then,
because
Ohbayashi
America
has gotten many projects mainly from Japanese
companies or their
subsidiaries.
construction by itself
Ohbayashi did this
with little
profit,
but
it
learned
the
construction business through these experiences.
1976-1977;
Ohbayashi America expanded
Angels to San Francisco
(S.F.)
project is
located in
network from Los
and Seattle.
took on a big project,
America
its
Then,
the Milcreak Project.
a suburb of Seattle,
Ohbayashi
manage the project.
project in
America
got
which does not exist
In
with Adlian Wilson Co.,
a big American
America's
Consequently,
it
it
for
America's
the first
time
company through competitive bidding with
construction business.
order
Nov.
1976,
in
Ohbayashi
America hooked up
design firm,
organization to manage
constructed the L.A.
the Japanese
office
and arranged
a turnkey program.
of American Komatsu
by turnkey contract.
Ohbayashi chose J.E.Roberts Co. as a strategic partner
to expand Ohbayashi's operations
into
public facility
construction because J.E.Roberts had much experience in
field.
to
project from an American
This event was a milestone in Ohbayashi
construction bonds,
1978;
Corporation
1988.
from an American
Ohbayashi
and
The corporation plans to complete the
history because Ohbayashi
Forklift,
Tokyuu Group.,
Corp.,
Ohbayashi got the Koncho Building
company.
on
facilities
investors set up the United Development
American
This
and developed about
3,200 private residents and various recreational
1,085 acres wilderness.
Ohbayashi
J.E.Roberts-Ohbayashi
succeeded
35
in
the
getting a public
in
housing project
in
north San
Ohbayashi
Department.
Francisco from the Federal
began to manage the Wilshire Building
this
one of the Ohbayashi's properties,
L.A.,
a sophisticated tunnel
both in
sensational
Japan,
Record,
the U.S.
came back to the U.S.
Sep.20,1979,
and Japan because of
which once the U.S.
from Japan.
advanced
had exported to
Ohbayashi's portrait
on
topic about Ohbayashi Corp.
public heavy
tunnel project was the first
because this
its
EngineerinQ News
used the president,
and wrote a special
the cover,
This project was
construction method.
engineering technology,
civil
year.
Construction Method,"
proposing "Slurry Shield Tunnel
Francisco,
in
got a sewage project of the City of San
Ohbayashi
1979-1980;
Housing
construction project done by a Japanese contractor in the U.S.
Ohbayashi
1982;
was to get business
purpose of opening the New York office
especially for American
information
Soon after some efforts
to Japan.
information,
The original
opened the New York office.
managers in
the office
companies that
to get such kind of
realized that someone who
does not give anything cannot get anything in
The first
Ohbayashi
success was the NEC
contracted this
the lump sum contract.
Hawaii,
Information's Boston factory.
Doing
the construction,
its
Ohbayashi
using
Ohbayashi
began
business relations.
the head of the New York office,
this relationship.
Then,
project with Turner Construction
to get business information through
Noma,
business.
began to get projects on the East Coast.
the office
managers in
planned to go
gave an example of
When a typhoon destroyed Ohbayashi's hotel
getting
had difficulties
36
insurance money.
An
in
the NEC project,
of
an underwriter
introduced a construction
for Ohbayashi.
insurance specialized lawyer
money from the insurance company than it
Ohbayashi
had not done business in
N.Y.,
80
Noma added.
such an appropriate person,
1983;
Ohbayashi
Urban Renewal
corp.
asked to introduce
which Ohbayashi
at Hartford,
inlLSUrance broker
It
received more
had expected.
If
it would not have found
got a public housing project from the L.A.
Department.
This was the first case for a Japanese
It
contractor to get a public building construction project.
also got the Westside Pump Facility from the City of
Francisco, and a condominium, Tokyo Villa in L.A.,
San
through
competitive bidding.
1984;
Ohbayashi Corp.
Ohbayashi got the drainage tunnel
17
It also got a big (324,000 SF)
I-10 in Phoenix.
Rothchild Realty Group,
construction for
high rise
(17F)
agreed to business cooperation with The
office
Ill.
building from Evertrust,
a subsidiary of
Ever Line, in Jersey City, New Jersey, on just the other side of
the river from
Manhattan.
This was the first case for a
Japanese contractor to get a project from a non-Japanese company
in
the greater New York
area.
Ohbayashi chose Sordoni,
in
New Jersey
( about one tenth of
joint venture partner.
from Ohbayashi
a medium size construction company
Turner
Turner Construction),
as a
Construction rejected the offer
Corp. to be the joint venture partner though
Turner had contracted the NEC Boston project with Ohbayashi.
According
to Noma,
the head of the N.Y.
office,
because Ohbayashi
tried to get involved in the construction and to learn the
37
business on the East Coast,
lump sum contract with an American
cautious enough
it
N.Y.
in
had not enough experience on
Why Ohbayashi could not do construction in
the East Coast.
despite
Ohbayashi was
was afraid of unforseen problems during and
the construction because it
Jersey,
contractor.
to avoid doing construction individually
At the same time, it
after
venture rather than
chose joint
it
in
doing construction individually
New
L.A.,
is
that the concessions related construction business especially in
construction union is one of the special
features of the
Noma explains that even
construction business in Manhattan.
Sordoni,
A very strong
extremely complicated.
New York is
greater
the joint venture partner, cannot do business in
Manhattan island.
To do construction business in Manhattan,
construction companies have to hire powerful project managers who
80
have much experience there and know who does what exactly.
Though several
for Japanese clients
Japanese contractors do tenant construction
in
Manhattan,
with American contractors,
usually by lump sum contract
Japanese contractors did not suffer
from obstructions by the union or others until
1985.
probably because the Japanese construction business is
for the union or others to pay it special
This is
too small
attention.
One of the reason that Ohbayashi does not do construction
independently on the East Coast
its
construction for
its
is
that Ohbayashi
Japanese clients.
cannot fail
in
Even in the U.S..,
failure of construction for Japanese clients causes a terrible
influence on Ohbayashi's business in
regard
their
Japan.
contracts with Ohbayashi for
38
Japanese clients
overseas projects as a
their long term relationships with Ohbayashi.
simple extension of
Ohbayashi
If
a Japanese client
in
fails
Japanese competitors will
for the client.
take some portion of Ohbayashi's share
At worst, Ohbayashi
for selective bidding of
and
may loose its reputation
it may loose chances even
advantage for the client;
historical
overseas,
project
the client's projects, which used to be
automatically contracted with Ohbayashi by negotiation.
Ohbayashi Corp. changed its operation system in the U.S.
1985;
It has
its first operation in the U.S.
after 20 years after
three main overseas offices in the U.S.,
N.Y.,
L.A.,
and S.F.
It
Ohbayashi added two other offices in Chicago and Atlanta.
completed the first full-turnkey project as a Japanese contractor
for the Sumitomo
Kinzoku Kouzan's semi-conductor factory in
Fremont.
Corp.
Ohbayashi set up Citadel
the increasing Japanese investment
necessity to set up an open
is
a closed
(union)
contract with open
area;
Atlanta,
a key city
The reason for setting up a new subsidiary in
Sun Bel t.
Belt is
in
(non-union)
in
the Sun
there and the
shop construction company.
shop company
the
in
the Sun Belt,
so it
Ohbayashi
cannot
shop companies which dominate
the
the contract between union and Ohbayashi prohibits
to use non-union contractors in
Ohbayashi
Sun Belt
is
contracted areas.
The
very popular for Japanese corporations partly because
it is largely non-union.
Japanese management tries to avoid
unfamiliar headaches which would be caused by labor unions.
Labor unions exist in
Japan,
too,
but most of them are individual
unions within their corporations rather than interindustry or
39
craft
is
unions.
Therefore, the concept of the labor union
Ohbayashi
the U.S.
in
from that
different
totally
in Japan
Corp. uses a so called
"Double Breast Strategy,"
that means the strategy for an owner of construction companies to
operational
possess two different
Most big American
companies.
in
strategy
closed and open shop
construction companies use this
the U.S.
A special
American.
companies,
feature of Citadel
Corp.
is
that all
management
Noma explains that because excellent American
is
managers
tend to avoid working under Japanese managers, Ohbayashi decided
to hire an American president for
its
new subsidiary.
Ohbayashi
simply gives policy but does not try to control the operations of
Citadel.
Though Citadel has gotten only small
1986, the top management of
Ohbayashi
projects as of
is looking for Citadel
to
get into the American construction market while Ohbayashi
provides business for it.
Management recognizes that the goal
of
its operations in the U.S. is to be able to get sufficient work
from American clients in all areas in the U.S.
At the end of
Citadel
1985, Ohbayashi
got the Toyota KY Project.
did a good job for Ohbayashi to gather information
regarding site selection or other project related matters, during
the planning stage of the project for Toyota Motor Corp.
Main
reason for Ohbayashi's success in getting the project was the
long-term relationships between Toyota and Ohbayashi
but the contribution
by Citadel
40
was significant
for
in Japan,
Ohbayashi.
2-3 History of Toyota Motor Corporation
This section has two parts:
the first
the second part
the history of TMC;
(T1C)
part is a summary of
a summary of the
is
historical relationship between TMC and Ohbayashi.
world
years.
famous
Toyoda)
1918 by Sakici
(established in
a
from Toyoda
independence
Since the
auto-manufacturer
TMC produced 3.4 million
1937,
Company
TMC has grown to
through ups
and downs
cars next to
the top,
during 50
GM's 5.7
1978 because its sales, and profit, both after
financing and taxes, were the most.
TMC has maintained the
in Japanese industry since
position
prestigious
then.
TMC
11 factories in Aichi prefecture in
employs 62,000 people and has
Japan.
in
Loom
TMC became the top Japanese manufacturing
million cars in 1984.
company in
Automatic
The products are automobiles, industrialized housing,
industrial
transporters,
The outline of
TMC
Name;
2)
Establishment;
3)
Location;
4)
Capital
5)
Employees;
parts.
is as follows
(1986):
Corporation
Toyota Motor
1)
and
28,1937
Aug.
I Toyota-Machi, Toyota City, Aichi
Assets;
Table 2-3-1
yen
133.2 billion
61,676
Prefecture, Japan
(m.:56,117, f.:5,579)
shows
its factories.
The Tahara
factory, one of
the comparable plants with the Toyota KY plant, is a relatively
new factory, the tenth factory of TMC.
oldest,
of
the dedication was
Toyota Motor
about one year after
Industry Co.
the TMC's plants in Japan.
The Honsha factory is the
Figure 2-3-1
the establishment
shows the
location of
All factories are located in Aichi
41
Factor-i.esE
Table r2--l
o+ TooaMotor
Cr.
EMFL.OYEES-
FLOOR
NA~ME'
DED I CA T' ION L AND
TAHAR
1979
3930
61 C)
H
1938
79C:
400
1959
1610
:,.
~73
1965
880
54
1966
1360
M I YOSH I
1968
0
1.40
TSUTSUMI
197C)
970
530
AKECH'
1973
30
140
AMA2
1.975
410
210
KOR 0MUR A
1978
820
230
TEIHCu
1986
320
90
MOTOMACHI
K MI GU
SHIMO
540)
PRODUCT S
4800 FPASS. CAF:.,
SMALL TRUCK
2400 TRUCK,:I Bus.
HOUS I NG
5200 PASS. CAR
3400 ENG INE,
TRANSMISSION
5 100 F'ASS. CAR
1900 SUSPENS ION.,
SMALL PARTS
5800 PA SS. CAR
900 DIECAST
PARTS
1600 ENGINE, ANTIPOLUT I ON DEV I CE
2300) TRANSMISSON,
POWER TRAIN
1400 MACHINE,
DI E
1985
AS OF DEC.
SOURCE: TOYOTA 1986 BY
42
TMC
LOcT
PL-ANTS
TM's
OF
ION
1. Location of Toyota City
2. Location of Takaoka Plant
Sanko 1 Honda-cho
t
bn
0m
~10ko
3km
3Oka
akaoka
67kma
ar
Toyota-shi Aichi-ken
6k
2k
2.5t
0565(52)1212
FIGURE 2-3-1
43
SOURCE: OUTLINE OF TAKAOKA PLAN'
BY TMC, 1983
Layout of T akaoka Plant
Monthly Production
Land space
50,000
1,370,000m 2 (336 acres)
510 ,000m2
Floor space
(5490,000 SF)
I'.
P
oti
te
ce
n Gate
3hop
Shop
SOURCE:
OUTLINE OF TAKAOKA PLANT
BY TMC, 1983
FIGURE 2-3-2
44
Prefecture and most of them are in
TMC's plant
shows a typical
plants use structural
layout
steel
Toyota City.
Figure 2-3-2
(Takaoka Plant).
Most TMC's
and are one-story buildings.
Table 2-3-2 gives a brief history of TMC.
Sakichi Toyada
a famous inventor of the Toyoda Automatic Loom in
(1867-1930),
He became
Japan, is the founder of the parent company of TMC.
interested in motor vehicles around
Kiichirou
eldest son,
(1894-1952),
graduation from the Mechanical
1910.
study automobiles.
After
of
Engineering Department
Kiichirou entered his father's
University,
Then, he had his
company.
Tokyo
Though
Kiichirou got an excellent education, he was not willing to enter
the automobile industry because the level of Japanese industry
was far behind the Western countries at that time.
reason for
Kiichirou to enter
father's personal wish,
The main
was his
a new business field
2
so it was emotional rather than logical.
After the independent establishment of Toyota Motor
Co.(Toyota),
built
its
overseas.
factories
Gradually, Toyota
and set up sales companies both
in
Japan and
It won the Deming Prize, an award for excellent
companies for
Total
there were many ups and downs.
industry
quality control
Quality Control
in 1965.
Toyota has developed
system further after that event.
'70s, Toyota has actively done social
and cultural
Since the
activities
including establishing the Toyota Foundation and the Toyota
Industrial
Institute.
The merger of Toyota and Toyota Motor
Sales was a big event in the
'80s.
45
Another big
its
issue is the
Table 2-3-2
Outline of
Year
1933
1935
1937
1938
1950
1956
1957
1961
1962
1965
1966
1967
1972
1974
1975
1976
1977
1980
1981
1982
1983
1984
1986
the History of Toyota Motor
Corporation
Events
Set up Department of Automobile in Toyoda Automobile
Loom Manufacturing Co.
Prototype of Al car
Establishment of Toyota Motor Industry Co.
Start of Honsha Plant's operation
Establishment of Toyota Jidousha Hanbai (Toyota Motor
Sales) Company
Establishment of Toyopet Shops (sales chain)
Establishment of Toyota Motor Sales U.S.A., Inc.
: Establishment of Toyota Publica shops (now, Toyota
Corolla Shops) (sales chain)
One million car production (accumulated total)
Wining the Deming Prize
:Business
cooperation with Hino Motor Industry Co.
Establishment of Toyota Auto Shops (sales chain);
Business cooperation with Daihatsu Industry Co.
Ten million car production (accumulated total)
Establishment of Toyota Foundation
Publication of Toyota Office (industrialized office
building)
20 million car production (accumulated total)
Publication of Toyota Home (industrialized housing)
: 30 million
car production (accumulated total);
Establishment of Toyota Vista Shops (sales chain)
Opening of Toyota Industrial Institute
Merger of Toyota Motor Industry Co. and Toyota Motor
Sales Co.; the new company name is Toyota Motor
Corporation
40 million
car production (accumulated total)
Start of NUMMI's operation, joint venture of TMC and GM
: 50 million car production (accumulated total);
Toyota KY Project
SOURCE:
46
TOYOTA 1986 BY TMC
TMC set up New United Mortar Manufacturing,
automobiles.
with GM in
(NUMMI)
preparation
especially about
and Japan,
between the U.S.
trade friction
order
Inc.
and a
to ease the trade friction
direct investment, the Toyota KY
for the individual
Project.
TMC has 30 overseas manufacturing
In
and Canada.
which was set up in
of NUMMI
Toyota Motor
Inc.
Sales,
the U.S.
TMC has two manufacturing companies:
the U.S.,
and Toyota Auto Body
NUMMI
plants in
also building manufacturing
is
It
countries.
20
or assembling plants in
Inc.
of
TMC invests 50 %
California.
1984 and has 2,500 employees.
U.S.A.,Inc.
invests 100 % of Toyota Auto Body
has 350
1964 and
of California which was set up in
emp Ioyees.
TMC has 24 overseas subsidiaries around the world.
are six subsidiaries in
the subsidiaries in
the U.S.
the U.S.
Toyota Motor Sales,
as of Jan.
U.S.A.,Inc.
subsidiary of TMC whose business is
Inc.
Motor Distributors,
Center-,
U.S.A.,Inc.
in
Research,
Inc.
in
Japan,
overseas
the import of TMC's cars and
in
one of four
the U.S.
Toyota
Toyota distributors
wholesale sales.
main research
automobiles in
institute,
which has 2000 employees.
is a research and development
in
The Toyota Technical
is a Research Laboratory for
though TMC has its
Ken kVu.jo,
design
is
whose business is
the U.S.
the first
of them to four distributors
the distribution
the U.S.
is
an outline of
1986:
Table 2-3-3.
shown in
is
There
Higashi
Fuji
Calty Design
company for car
the U.S.
TMC is
the core of the Toyota
47
Group which has
13 companies
2 -
Tabe
NAME
S
Su~bsiddiaries
cf
OF
RAT I
I NvESTMENT
CAP I TAL
ASSETS
(mi 1.$)
TOYOA MOTOR
TMC
100%
TM1C
in
U.
S.
55.00
1957
OPERAT IONS EMFLOYEES
IMPORT
&
DI )TR IBUTE
TMSUSA
100%/.
TOYOTA TECHNICAL
CENTER,USA,Inc.
TMC 80%
TMS,USA 10%
AISHINSEIKI
5%, NIHONDENSOU 5"w
CALTY DESIGN
TMC 60%
RESEARCH Inc.
TMSUSA 20%
YACHIDA
INDSTRY. 20%
TIS, USA
TOYOT AAUTO BODY
100 7.
Inc . ,OF CAL IFOR
NEW UNITED MOTO
MANUFACTURING, Inc.
SHIMO:YiMA"
the
EST ABL I SHMENT
S AIEE, USA, Inc.
(TMS. USA)
-rOYO~A MOTOR
DISTR IBUTORS, Inc.
-
TMC 50%
GM 50%
1975
1550-'.- -
5. 00
1958 WHOLESALES
630
1.80
1977 RESEARCH,
LAB. ABOUT
AUTO.
70
0.15
1973 R&D OF
CAR DESIGN
30
5.00
1974 PFRODUCTION
OF REARDECK
OF HI-LUX
1984 PRODUCTION
OF PASS.CAR
1600
200).OO
350
2500
A' OF FEB. 1986
SOURCE: TOYOTA 1.986
48
Table 2-3-4 summarizes
and two business cooperation companies.
the group member
is
Company
the parent company of
Toyota Group.
It
Loom Manufacturing
the second oldest in
TMC,
the
Most other group members' business is strongly
is
the second biggest company in
Nihon-Denso is
related with TMC.
the group.
Toyoda Automatic
companies.
also a world
manufacturing
famous electric
company.
Relationships between TMC and Ohbayashi have continued since
the first plant construction in
For
venture of
was the sponsor of the joint
instance, Ohbayashi
Toyota Tokyo Building Project,
building since 1980 to
1982.
has participated
as the dormitories and
in most plant constructions, as well
offices.
Ohbayashi
1937.
B5F,
49,000 SM
19F,
Doing maintenance and repair of
most of TMC's plants and buildings, Ohbayashi completed the Third
Body Shop of Tahara plant in 1986.
in
1986, too.
as well
of Ohbayashi's competitors have done construction
Takenaka Koumuten
got
its
Around
1967,
its
first
1955
project around
Kajima Construction began to participate in
the construction business for TMC.
Five Construction
Ohbayashi.
contract around
first
Shimizu Construction got
from Toyota.
the Big
TMC and
count more than 800 since the beginning.
Several
for TMC.
has done maintenance and repair
the contracts between
as new construction,
Ohbayashi
1965.
Because Ohbayashi
It got the Toyota KY Project
Ohbayashi
All
Companies in
has the longest
of them are members of
Japan as well
as
relationship with TMC.
TMC usually use selective bidding to choose the prime
contractor
Because TMC has strict criteria of
for a new project.
49
Table
Outl i ne o-F
NAMES
TCYODA
LOOtI!
FSTABL I SHMENT
A U TOMAT I C
M
ING
CO.
AICHI SEOK)V.OU
(STEEL MANINUFC, )
TOYODA KOUKI
(INDUSTRIAL
MACHINES)
TOYOTA BODY
TOYCDA TSULUSHOU
(TRADING)
AISHIN SE:IKI
(PRErISION
MA CHINES)
N I H[ N DENSOU
(ELECTRIC
MANIUFACTUR I NG)
TYODA BOUSHOKU
(TEX ISTILES)
TOU-'A REAL ESTATE
TOY DDA CENTRAL
LA PORATORY
2-3-4
Tocyota Grou~p Compnies
CAP ITAL
AS SET S
(BIL. YEN)
BUS I NESS
1926 MANUFACTURING 8
S-ALES OF LOOM,
CAR, I NDUSTRI AL
TR ANSPOR TER
EMPLOYEES
12.4
19-40 MANUFACTURING
<
6.9
SALES OF SPECIAL
STEEL & STEEL
PARTS
4.1
1941 MANUFACTURING <
SALES OF INDUSTRIAL
MACHINES & AUTO
PARTS
1945 MANUFACTURING
3.8
OF BODY 8< PARTS OF
PASS. CAR, TRUCK
Se SPECIAL CARS
1948 TRADE OF RAW
9. 6
MATERIALS
9.7
1949 MANUFACTURING &
SALES OF AUTO
INDUSTRIAL TOOLS.
e MACHINES
1949 MANUF A CTUR ING
34. 9
SALES OF ELECTRIC
PARTS, AVAC SYSTEM1,
8< ELECTRIC/GENERAL
TOOLS,
< MACHINES
3.6
1950 MANUFACTURING e
SALES OF TEXISTILES.
AOTO PARTS., &
HOME GOODS
5.C-0
1953 REAL ESTATE
MANAGEMANT.,
DE ALING, &
RENTING
3.0
1960 RESEARCH &
DEVELOPMENT OF
UNDAMENTAL
TECHNOLOGY
1946 MANUFACTUR I NG
OF AUTO BODY.,
PARTS, EQUIPMENTS
OF HOUSING. &
1949 MANUFACTURING e
SALES OF PLASTICS,
RUBBER, 3<
CORK GOODS
6 50 0C-
34 00
3900
1600
8200
3100.0oo
1100t
120
740
-
KiAN~OU AUTOMA T IVE
TOY DA GOUSE I
50
SOURCE:
5 70
4900
1985
AS OF DEC.
TOYOTA 1986 BY TMC
quality,
cost,
eliminates
projects
and
contractors
require
and
are more
for
TMC are
contractors
safety,
with
bad
more management
cost effective
literally
timeliness
than
for
bidders,
performance.
on every
usual
Because TMC's
phase
projects,
of construction,
selected bidders
selected and limited both in
and subcontractors.
51
TMC
general
2-4 Other Autanotive Plant Constructions
The Toyota
Nissi.an
Tahara
Smyrna Project
of the projects,
organization
Toyota
of
differences
between
style of
TQC
with
Fuji
Gunma
program
method
common
big direct
of
the
outline
the
of
is
towards
Therefore,
its
process and
without
these projects.
be used
and
also
to define the Japanese
organization
with
useful
for
automotive
the Toyota Tahara
to check
special
features
construction.
may well
Project
be the most
the clients, TMC and Nissan,
car manufacturers;
investment in
each project
is
the
prime
similar
case
KY Project because these two projects have
points:
location
comparable with
be extracted
the comparison
Japanese international
first
The
and Japan's development
Project will
The Nissan Smyrna
to the Toyota
are
construction.
comparison
The comparison
Toyota's
in
the U.S.
through
Project.
which
development process
construction
and
of the development process and
system will
it
the
section.
such as building type, client,
organizational
The
this
F'roject,
Tahara Project has many common factors with
and
confounding
in
Gunma
are examined here.
contractor,
of
are described
the projects,
Toyota KY Project,
project
the Fuji
and some details
KY Project
The Toyota
Project,
the U.S.
many
are the Big Two
both
projects
are the
by TMC and Nissan;
the
in the mid-South, Kentucky and
73
Tennessee;
in
the project
the Toyota Ky Project,
Construction
manager,
Robert
was the
in the Nissan Smyrna
these projects, the differences of
52
B.
project
Project.
Jordan,
working
manager
of
for
Daniel
By the comparison
both companies'
OHB
of
strategies for
developments
in
OHB from Daniel
uncertain
will
environments,
the differences
of
be studied.
2-4-1 Toyota Tahara Pr-oject
This section
and
(in
Japan).
includes a project
summary,
and development
process; and organization of the Toyota Tahara Project.
the long term relationship between
section
2
-3,
an outline of
TMC and OHB
is
the TMC's organization
Though
explained in
for its
facility construction and maintenance is additionally explained
as well
as the OHB's project
organization,
Most
86
83
section is provided by Tanabe, Sato, and
information of this
82
Ohsaki who were OHB's project manager,
and A/E
here.
manager for the project,
53
quality control
respectively.
officer,
2-4-1-1
Schematic Project Susasary.
Project summary is as follows:
1) Project name; Toyota Motor Corporation The Third Body Shop
Proj ect.
2)Project
location;
Prefecture,
3)
Tahara
town,
Atsumi
Architect/engineer,
Corporation.
Ohbayashi Corporation.
Toyota Motor
Time schedule;
Start of building works,
Completion
,
Site area; 983.5 acres (3,980,000 SM)
Floor area; 774,413 SF (71,943 SM)
(Total
floor
Registered
Corporation
and engineers.
Architects
5)
6)
Aichi
Japan.
organization;
Project
Owner,
Toyota Motor
General contractor,
4)
(county),
gun
area
in
Jan.6, 1986.
Oct.31,1986.
the Tahara
Plant
is
about
320,000 SF)
press and welding.
7) Type of shops;
8) Building outline;
a.
b.
c.
9)
steel
pile
and spread footing.
structural
steel.
-Autoclaved Lightweight
Concrete panel
water proofing.
finish
-Asrock,
colored steel
panel.
capacity;
340,000 cars/year.
Foundation
Structure
Roof
d.
Exterior
Production
--
--
(as of feb.
10)
Products;
8<
1984)
passenger cars: Soarer, Supra, Corona, Celica,
Corolla, Sprinter, and HiLux (small truck).
54
sheet
11I)
Sc-hema
n .-it ic
plA n of main
and
shops
this
project.
N
DERTH
FIGURE 2-4-1-1-a
12)
section of
press shop.
15
1
E
E
0m
FIGURE 2-4-1-1-b
55
Development
Process and
Organization.
The development process, schedule, and organization of the
Toyota Tahara Project is described
in this section.
TMC usually
does not hire an A/E because TMC has its own A/E department.
does all
the A/E's jobs by itself.
Except
TMC
for TMC's roles of
owner A/E, this project's development process and organization is
a usual
Japanese construction project.
The construction method
is
a traditional
sequential
method
because the Japanese building Code requires completed drawings
and specs for building permits.
and OHB is
a lump sum;
other
The contract type between TMC
contract types between clients
general
contractors for new buildings practically
Japan.
TMC used selective bidding to choose a general
for the project.
Though negotiated
as competitive bidding in
Japan,
and
do not exist in
contractor
contracts are popular as well
TMC usually employ competitive
bidding to select contractors or suppliers.
OHB uses its
own forces for
mainly for temporary
construction.
construction
work or does self-performance
works as a usual
practice in
There are no strong national
industry,
its
labor
unions in
general
there are several
contractor
As a special
construction,
for
For
The number of
layers varies by
but usually from two to four.
feature of
TMC applies its
its construction.
labor.
coordinators or brokers between a
and workers.
location and trades,
Japanese
relations are so-called "multi-
layer-subcontracting," which has a hierarchy of
example,
the Japanese
TMC's plant
or building
Total Quality Control
(TQC)
TMC has its own design-construction
56
program
management
that includes
manual
TMC's checking items and general
contractor's checking items on each development stage.
management
Construction
document control,
scheduling,
addition to this
manual,
in
items are classified
TMC also has many special formats,
many kinds of
report sheets, and a value engineering proposal
right.
Such
inspection and
sheet.
shows the development process of the project.
Figure 2-4-1-1
horizontal
In
and shop drawings.
inspections,
as a standard construction manual,
The vertical
such as,
four,
axis indicates the project participants and the
axis means the progressive order from the left to the
Important events from
"Need for Facility" to
Because the
"Construction" are allocated in boxes in the chart.
Tahara Project is an expansion of the plant, after the
confirmation of
checked
the need for a new facility, TMC must have
and adjusted the standard manual
management
of
its
for the new construction.
a little
advance almost all
TMC has known
the strategy are minimal.
The Toyota Tahara Project is a quite usual
so TMC uses the standard
the construction of the Tahara Project.
of
the A/E and uses a traditional
program,
that is,
in
the important factors for the new project;
TMC's work to set up
construction,
construction
methods of management
TMC does all
sequential
the construction starts
TMC's plant
for
functions
construction
after
the completion of
all construction documents including work drawings and
specifications.
Accordingly, Japanese clients including TMC use
only the lump sum contract with a prime contractor
buildings.
57
for new
MANAGING BLDG.& PRDL.
EQUIP. INSTALATION
TMC
OHB
SUBs
STRUjCTURKL
L
FIGURE 2-4-1-1
DEVELOPMENT PROCESS CHART OF TOYOTA TAHARA
At the design
stage,
asked OHB to do the structural
TMC
Though
design for the Tahara Project by a unit price contract.
cost of the design because of a
OHB cannot cover even the direct
very low unit price set by TMC, this cooperation does not affect
the competitive bidding of
sometimes
the project,
TMC
at least formally.
asks for some parts of design works from selected
general contractors or building equipment companies.
The type of
the design cooperation varies, such as, only architectural
drawings,
structural
drawings,
structural
drawings,
M/E drawings, architectural
drawings.
work
and all
and
At the procurement stage, TMC uses selective bidding to
choose a prime contractor for
general
contractors as bidders, such as OHB, Shimizu, Taisei,
TMC requires bidders to submit the
Takenaka, Kajima, and Mitsui.
following items:
itemized estimates, work plan schedule,
organization list,
site
construction planning,
items,
TMC selects six
its projects.
and value engineering
proposals.
TMC asked tenderers
make more than 50 value engineering proposals for
drawings and specs in
for
the Tahara Project.
value engineering proposals is
program for
assurance
quality
to
the original
This heavy requirement
a special feature of TMC's TOC
its construction.
Along with competitive bidding, TMC applies for a building
permit to the local
important
government.
permits among
construction.
Building permits are the most
many regulations for owners to start
Along with
many local government
during and after the construction,
permit
and
fire
safety permit
inspections
inspections for
occupancy
are the most important
59
the
for general
contractors
and
After
a
owners.
building construction.
is
the reasons for
One of
no cost-plus-fee
does not allow contractors to
Japanese business tradition
that
For example,
request explicit profit or fees from their clients.
during
asks the bidder to
owner
items,
owner
a bidder,
and
overhead
reduce its
cut or
cut them
even to
or
an
between
a negotiation
Japanese
not used in
is
A cost-plus-fee contract
subcontractors.
with
contract
price
a unit
lump sum and
a
OHB uses
work.
the
forces perform
own
its
and
using subcontractors
construction
TMC, OHB starts the
with
sum contract
lump
usually the
profit
and
all.
TMC asks OHB to make more than 30 value engineering
proposals during
the
in
phase
construction
proposals at the bidding stage in the Project.
own
(QC)
quality control
OHB's
engineers check
the concrete placement.
TMC
the project.
to
R-bar
OHB also
Many items of
the concrete works.
TMC applies its
requires
reports during construction.
inspection
OHB to submit many
example,
program
50
to
addition
works
and form works
inspects the form works
For
before
after
inspections are required
the
to be quantitative.
OHB also has
construction which
its own
has three grades.
by the importance of
complex-ity
different
of
quality control
The grades are determined
facilities, requirements by clients, size or
the projects,
and others.
from the OHB's QC program.
tries to make
program during
subcontractors
TMC's
Regarding
inspect their
work
program
inspectors,
not
so
OHB
and make reports,
but in reality, OHB does most inspections itself.
60
is
In the Tahara
Project,
OHB does many inspections of
subcontractors jobs during
construct ion.
Figure 2-4-1-2 shows the Toyota Tahara Project schedule.
The engineering and
design was completed in Nov. 1985. TMC
announced the tender on Nov.
date was Dec.
contractor
20,1985 to six contractors.
9 and TMC awarded OHB the contract as the general
-for the project in
Jan.6, 1986.
The bid
The structural
finished at the end of June.
completed at the end of Oct.
building construction.
steel work began in mid April
and
The building construction was
It took ten months for the
1986.
OHB does not contract most of M/E works
TMC usually contracts
or any production equipment works.
production equipment
The construction started
late Dec.
and installment with
individual suppliers
TMC often contracts building service equipment works,
directly.
such as HVAC,
plumbing,
and M/E,
with special
contractors of
distributing
building
these works.
Because TMC does A/E works,
construction,
building service equipment,
and production
contractors,
equipment works to many different
functions as "construction management" for
TMC actually
its construction
in
Japan.
Figure 2-4-1-3 shows the outline of organization and
contract types of the Toyota Tahara Project.
is
typical
for TMC's
in
Japanese manufacturing
in--house A/E.
contract as well
plant
This organization
construction except
TMC contracts with OHB by a lump sum
as a building service equipment contractor,
many production equipment
suppliers.
61
OHB contracts with many
and
Nov.20
Jan.6
Notice to Start
Bidders
Construction
Apr.14
Sep.1
Nov.12
Start
Structural
Steel
Start
M/E
Completion
FIGURE 2-4-1-2
TOYOTA TAHARA PROJECT SCHEDULE
CLIENT
A/E
LUMP SUM
BUILDIG
OHB
GENERAL CONTRACTOR
EQUIPMENT
CONTRACTORS
LUMP SUM/
UNIT PRICE
OWN FORCES1
SUBs
FIGURE 2-4-1-3
OUTLINE OF PROJECT ORGANIZATION AND CONTRACT TYPE
OF TOYOTA TAHARA
63
subcontractors by lump sum or unit
self performance mainly
for general
Figure 2-4-1-4 shows the TMC's
The Department
Project.
those of
Facility
a construction manager
is
Procurement
organization
The department of
purchases including
This department
of progress payment
application
is
for the Tahara
Environment's roles are
deals with progressive
The flow of
contractors during construction.
for
OHB does
condition works.
and A/E.
all
responsible for
construction contracts.
payment
of
price contracts.
OHB's
from the Tahara Project team
in the A/E section, through the manager of the Department of
Facility Environment, to the Department of Procurement that does
not only clerical
work but also checks the evaluations closely.
This system is applied to the Toyota KY Project, too.
The Department of Production Engineering inputs many
requirements
regarding production engineering during the design
phase into the drawings and specs.
The Department of
Facility
Environment coordinates various requirements from different
sections of
production engineering.
Figure 2-4-1-5 shows the OHB's site organization for the
Toyota Tahara Project.
the work on pits
for
includes many civil
the press machines,
the machine foundations.
with usual
It
engineers who did
the slab on grade,
Because the project is
and
big compared
Japanese projects, the site has two managers and eight
architects and engineers for shop drawings.
Generally, Japanese
A/E's drawings includes less details than American A/E's, so shop
drawings by general
contractors are important
substantial portion of the general
64
and share the
contractor's jobs.
There are
3'RWECT
------
(HB
L
-J
0n
}(TAH
PROJECT)
FIGURE 2-4-1-4: TMC'S ORGANIZATION FOR TAHARA PROJECT
SAFETY
GENERAL MNGR. FOR
ALL TMC'S PROJECTS
BY OHB
SUBs
L~.
FIGURE 2-4-1-5
OHB'S SITE ORGANIZATION FOR TOYOTA TAHARA PROJECT
two quality control
the
officers
construction line.
big project
Although
OHB sometimes assigns a QC officer
to a
implying how very strict TMC's OC program is.
there are some peculiarities
organization and
for this
apart from
like this, but two OC officers were used for the
Tahara Project,
organization
and one safety officer
in
the project
in the OHB's site organization, this
can be described as typical
scale of project.
67
in
Japanese construction
2-4-2 Fuji 6unma Project
(in
Japan)
This section includes the project summary, the development
process, and the organization of Fuji Gunma Project.
Most of
the information in this section is provided by the cooperation of
72
74
'75
who were OHB's A/E manager, deputy
and
Imagawa,
Kujirai,
Kuroki,
project manager,
respectively.
and the head of Takasaki
Project summary is
Project Summary.
68
office
presented in
for the project
2-4-2-1
Schematic
2-4-2-1
Schematic Project Stummary.
Project summary is
as follows:
1) Project
Name; Fuji
Heavy Industry
Co.,
Gunma Manufacturing
Division,
Yajima Plant, the Second Assemble and Paint Shops
Project
(Fuji
Gunma Project).
2)
Project
Location; Ohta City,
Gunma Prefecture,
Japan.
3) Project Organization;
Owner, Fuji
Heavy Industry Co.
General Contractor, Ohbayashi Corp.
4)
5)
6)
7)
8)
Architect/Engineer, Ohbayashi Corp.
Time Schedule; Start of building works, Feb.
Completion
, Aug.
Site Area; 134.6 acres (545,000 SM)
Floor area; 318,973 SF (29,633 SM)
Type of shops; Assemble and Paint shops.
Building Outline;
a.
b.
c.
Foundation
A-C pile
and spread footing.
Structure
-structural
steel.
Roof
-corrugated asbestos-cement
corrugated metal roofing.
d.
Exterior
9) Products;
10) Schematic
finish
--
insulated metal
passengers cars.
plan of main shops
and
25,
27,
roof,
1980.
1980.
and
siding.
this
project.
THE FUJI GUNMA PROJECT
pr ess
/
////
padint
FIGURE
2'4weldi
assemble
FIGURE
2-4-2-1-a
69
g
11)
Section of
Assembling Shop.
E
25.0 m
FIGURE
2-4-2-1-b
70
Development
Process and (O-ganization.
The development process, schedule, and organization of the
Fuji
Gunma Project is described in this section.
Gunma Project through
OHB as a design-builder of the Fuji
selective bidding after
is
the Fuji's
schematic design.
Japan,
a quite typical design-build in
in
contract.
Fuji
a traditional
horizontal
Important
is
Tahara
Fuji
OHB was a design
and
Fuji
tries
for
to confirm the cost effectiveness
time.
shows the development
process of the project.
axis indicates the project participants and the
axis the progressive order
events from the
boxes in
an expansion of
Project,
"Need
from the left
the chart.
Because the Fuji Gunma
the original
plant like
of need
for
of the standard procedure of
construction must have been minimal
to the right.
to "Construction"
for facility"
after the confirmation
adjustment
facility,
type between
uses selective bidding to choose a design-builder
are allocated in
Project
method
Though Fuji usually uses a negotiated contract with
Figure 2-4-2-1
The vertical
sequential
The contract
contract between
the project so that Fuji
of OHB this
also
the completion of the work drawings,
a lump sum after
though the first
OHB,
is
the Toyota Tahara Project.
and OHB is
though a negotiated
Japanese construction.
The construction method
like
The project
selective bidding is
contract with a design-builder without
popular
Fuji selected
the Toyota
a new
its
and the project process was
as usual.
At the planning/pre-design stage,
71
Fuji
planned to use OHB as
,BUILDING
PERMITS
|INSPECTION
MANAGING BLDG.& PRDC.
~EQUIP. INSTALATION
FUJ I
(USUAL Q.C.
1-
DESIGN
CONTRACT
OHB
ROK
DRAWINGS
BIDD ING
OUT
LUMP SUMi
CONTRACT
SELF PERFORM
(w/ FUJI),
LUMP SUM/
UNIT PRICEI
C N
SUBs
FIGURE 2-4-2-1
DEVELOPMENT PROCESS CHART OF FUJI GUNMA PROJECT
C
a design-builder
for
had built almost all
Yaj i ma Plant.
in
Fuji
the project
through negotiation,
because OHB
buildings by a design-build contract at the
But during Fuji's
schematic
design phase,
someone
proposed selective bidding for choosing a design builder
cost efficiency
to get the maximum
for
Finally,
the project.
Fuji decided to use selective bidding and sent notices to the
bidders on Dec.
30,
1979.
Figure 2-4-2-2 shows the project schedule.
Japanese construction companies set
its
official
Because all
holidays at
least between Dec.31 and Jan.3, the date of the notice
and hard for bidders to bid on
to the bidders is very unusual
Jan. 7.
Even in
the usual
is
Therefore,
the effects of Fuji's
is
too short
business time,
estimation
questionable.
for bidders to submit definite tenders.
attempt
to do selective bidding
OHB may not have done do their
seriously because of the unusual
of
only one week for an
Fuji selected seven bidders including OHB, but
the other contractors of
domination
factory
the Yajima Plant construction.
Fuji.
short.
in
If
estimate
schedule of bidding and OHB's
The design and construction schedule of
extremely
(Dec. 30)
OHB completed
the project
the construction of
only seven months after
the A/E and the general
a 300,000 SF
the design build contract with
contractor had been different,
the schedule of construction would have been prolonged at
one month because a roll
work drawing
phase is
order to a steel
almost
is
manufacturer
impossible without
least
during
a general
contractor.
Compared with other
industrial
73
buildings,
the construction
CONSTRUCTION
PILING
FOUNDATION
ROLL
STRUCTURAL STEEL
ROOF & WALL
ORDER
-
ERECTION
--
FABRICATOR
OPERATION &
MAINTENANCE
DUs
. 13u
M13. 10
NOTICE TO
BIDDERS
m'iN.- 10
APPLY
START
PERMIT
STRUCTURAL
STEEL
A!6
A
JAN.10 FEB.28
JUN.10
AWARD
BLDG.
START
PERMIT
M/E
AUG. 8
COMPLETION
FIGURE 2-4-2-2: FUJI GUNMA PROJECT SCHEDULE
SEP.1
START
OPERATION
period of about five
engineering
months,
and two months for
for a 300)C),000 SF factory
months for the Toyota Tahara Plant
project,
a
150,000 SF,
Paulson's Professional
structural
is
the design and
unusual.
It took
construction.
steel,
An example
warehouse,
Construction Management,
ten
in
and
Barrie
takes eight
months for the construction, though this
duration might include
I
some slack.
According to Barrie and Paulson's example, it takes
12 months by a sequential
program and takes nine months by a
phased program from the beginning of
completion of the construction.
construction
design and
Though the overlap of
piling
works
the Project within seven months.
machines had waited
pile
driving
the permission on the construction site.
There was no overlap of
and procurement
In
(the beginning of the construction)
actually started on the building permission day;
significant
design and
is impossible in Japan, OHB had done the detail
construction of
the Project,
detail design to the
design and construction,
were overlapped,
advantages of
and this
however,
design
overlap was one of
a design-build in
the
Japan.
Figure 2--4-2-3 shows the outline of organization and
contract
type of
Fuji Gunma.
the same as that of
placement of A/E
provided
all
The structure of
this
project is
the Toyota Tahara Project except the
function.
Fuji
did the schematic design and
production engineering for the project.
Fuji also
directly contracted with a building equipment contractor and with
many production equipment suppliers who supplied and installed
equipment.
especially in
Therefore,
the
later
Fuji
acted
as a construction manager
part of the construction,
75
as did Toyota.
CLIENT------------
LUMP SUM
A/E
GENERAL CONTRACTOR
(DESIGN-BUILDER)
OHB
BUILDING
EQUIPMENT
CONTRACTORS
PRODL
EQUII
SUPPI
LUMP SUM/
UNIT PRICE
SUBs
OWN FORCES
FIGURE 2-4-2-3
OUTLINE OF PROJECT ORGANIZATION AND CONTRACT TYPE
OF FUJI GUNMA
76
Figure 2-4-2-4 shows the organization
project.
The development
of Fuji
the organization
process in
the
for
as
is
fol1 Ows:
Along
1) The Engineering Department forms a plan of a new shop.
with the production equipment planning, it defines the building
outline, such as plan, clearance height, and transportation.
2)
The administrative manager and staff
in the Facility Section
checks the outline of the building defined by the Engineering
(negotiated or bid).
types
Department
Then,
the Material
is responsible for engineering
decisions regarding the construction
Section is
building equipments,
(production equipments),
responsible for
the building
(shell,
the Fuji
Gunma
Though OHB is the design builder for the project, OHB
does not have a general
for
project manager who is responsible both
One of the reasons for
design and construction.
a general project manager of
the lack of
as other
design-build in OHB as well
Japanese engineering contractors is due to almost independent
design and construction work during the design phase in
traditional
sequential
structure because their
who practically
a
method.
The four departments are parallel
Branch
and
and finish).
Figure 2-4-2-5 shows OHB's organization for
Project.
from the A/E,
or suppliers.
The Engineering Department
the Facility
and contract
Purchase
orders the design and the construction
contractors,
3)
the schedule,
the costs with the budget,
Department,
supervisor
is
in the organization
the head of the Tokyo
does not manage the specific projects.
77
MATERIAL PURCHASE
DEPT.
A/E s ------
PLANT ADMI. DEPT.
FACILITY SECTION
ADMINISTRATIVE
MANAGER
BUILDING
EQUIPMENT
(CONST. MNGR.)
POWER
EQUIPMENT
PLANT
MANAGER
ASSEMBLY SHOP
MNGR.
PRDC. EQUIP.
ENG. SECTION
ENGINEERING
DEPT.
PAINT SHOP
MNGR.
PRDC. EQUIP.
I.ENG. SECTION
I
FIGURE 2-4-2-4: FUJI'S ORGANIZATION FOR FUJI GUNMA PROJECT
---
OHB DESIGN TEAM
OHB SITE OFFICE
KD
FUJI-L--
--
CONST. SITE
MNGR.
OHB HEAD OFFICE
BLDG. CONST.
DEPT.
41
BLDG. CONST.
ENG. DEPT.
FIGURE 2-4-2-5: OHB'S ORGANIZATION FOR FUJI GUNMA PROJECT
The A/E
Departments
documents,
construction
supervision
of
Department
clients
obtaining
and
terms
managers are responsible
for
others.
scheduling,
for
quality control,
structuring
planning,
construction
sites,
and
kind of
project.
project
manager
A
of
because of
size
of
in
construction
engineering
of
of
The
of
service
large
section
the Fuji
for
is
this
the
with the client,
is the representative registered
manager
of
short
the building,
during
site
steel
and to
80
Site
in
stage.
order
to
usual
engineers
this
was
assigned
mange
the pre-
Manager
obtain
is
organization
schedule for
construction
phase
design
and cooperates
construction
building
Construction
the design
structural
is
staff
an A/E
the construction
the extremely
for
schedule
design
who corresponds
design
site
project.
purchase of
and
assistance
chief
the large number
the beginning
safety control,
organization,
the design
of
section
design team,
The structure
for
payroll,
is
short
the extremely
the construction
except
payment,
Engineering
architect for the application for
with
for
responsible
Department
providing
the number
Project,
manages the
site
the project
others.
Because of
Gunma
are
They
Construction
of
activities
all
The Building Construction
responsible
final
OHB's standard.
progressive
for
application
the
prices, and
the contracts with clients.
cost control,
and
estimation, negotiation with
on
subcontracting,
permissions,
The Building Construction
is responsible for
about contract
completion of
the building
projects based
after
for
for
the construction.
inspections of
site
are responsible
several
subcontractors
at
before
the
start
of
This overlap
by
advantage of
an
is
contract especially
for
equipment that was managed
schedule,
advantages of
design build
as a
its
for
The project
project
Project.
Finally,
their
construction
staff
than Fuji.
and very
The
the
of production
found
to
in the project.
of
a design build
though Fuji
choose a
structure
be similar
81
a short
process
quite
is
used selective
design builder.
OHB's organization
those in
for
the
in
a client
development
to
similar
the organization
is
for
drawings to
organization and
the
of
This project highlights
construction,
schematic
are usual
example
Japan.
in
important
coordination
installation
contract
a design-build
schedule construction
bidding
a good
is
project
build
short design and construction
plant construction.
industrial
usual
and
directly by Fuji
for the extremely
this
good
is
contract
phase
a design
Another
fast construction.
a design-build
of
advantage
important
building construction,
Except
and the procurement
the design phase
of
builder
a design
design,
the construction.
for the
the Toyota
of
Fuji
though TMC
and
Tahara
TMC
has more
for
2-4-3 Nissan Smyrna Project (in
This section
the U.S.)
includes the project
summary,
process, and
the organization of
section
includes outline of Nissan
also
Corporation U.S.A.
(NMMC).
the development
the Nissan Smyrna
Most of
the
Motor
Project.
This
Manufacturing
information
in this
73
section
in
is
OHB for
Daniel
on
provided
by Robert Jordan,
the Toyota KY Project
the Nissan Smyrna
Project,
41
in
Tennessee by NMMC.
82
who
is
the project
manager
and was the project manager
and
is
referred
for
from Nissan
2-4-3-1
Schemkatic Project Summeary
Project
summary
is
as -follows:
name; the Nissan Motor Manufacturing Corporation
1) Project
(NIssan Smyrna Project).
project
U.S.A. plant
Tennessee.
Smyrna,
location;
2) Project
organization;
Project
3)
(NMMC).
Owner,
Nissan Motor Manufacturing Corporation U.S.A.
Daniel Construction Company.
General contractor,
Inc.
Kahn Associates,
Albert
Architect/Engineer,
February, 1981.
Start of grading work,
1981.
Start of building work, April,
1983.
, April,
Completion
SM)
(3,166,000
782 acres
(315,864 SM)
3,400,000 SF
4)
Time schedule;
5)
6)
Site area;
Floor area;
7)
Types
of
shops
in
the project;
Body, Frame,
Paint Shop.
Trim and
8)
10)
11)
Shop.
Chassis Shop.
Building Outline;
a.
b.
c.
d.
e.
9)
Stamping
Foundation -Structure
--Roof
Exterior
finish
spread footing.
structural
steel.
roofing.
metal deck, built-up
-block & metal siding.
-slab on grade.
floor
Production capacity;
100,000 cars & 140,000 light
Products; passenger cars and light
Schematic plan of main shops (next
85
trucks.
page).
trucks/year
Test Track
Training Center
0O
Boiler House
0
Water Tower
Yard
Service
Parts
Warehouse
Mf
US41-70
Enon
Springs
Road
Parking
Parkin
L&N Railroad
Nissan Drive
1-24
North
Smyrna
N
Fmeaortms~
enlunpiss4
moltretha
78
acres. malerIt ro'f,
FIGURE 2-4-3-1-a:
there is amn;ile stoce for
amnt
SOURCE: NISSAN TENNESSEE
exp 1?nsum?.
SCHEMATIC PLAN OF MAIN SHOPS IN NISSAN SMYRNA
Outline of Nissan Motor- Manufacturing cor-por-ation U.S.A.
strategy
a
includes
This section
the development
for
summary
of
NMMC
as well
as
for
(NP9IC).
Nissan's
and
in
the business
the
U.S.
manufacturing
truck
strong
family's
before World
and
leadership
the history of
formation is
corporations.
Two.
War
which has close ties with the Ministry of
formation of
The
as well
development
step
This
Therefore,
responsible
Motor
this
organization
company
the construction
succeeded
in
become the president
Aug.
develop not
latitude
to
American
company
of
1930.
T.
and
He was given
a Japanese company
Japanese parentage.
85
Runyon,
and assembly
to
in
expected to
the new plant.
Company,
NMMC
intended
of
charge of
of
was
Japanese parentage
in
officer
body
the U.S. was the
of
President
Nissan's
TMC.
to
be
production engineering.
Marvin
inviting
in
that
company has been
operations except
American
for
Nissan
Vice
for all
from
company
manufacturing
local
for the
the U.S. are unique
and very different
the subsidiary's
localized.
responsible
the business in
as for
the new
for
of
formation
be
Bank,
Trade and
International
and Nissan's strategy
NMMC
Japanese corporations
first
Industrial
(MITI), and the Ministry of Finance.
Industry
for
of
In addition to the dynamic company history, Nissan
have been linked through the Japan
and Hitachi
the Toyoda
Nissan's
TMC,
separation
and
merger
to
Contrary
group-isms of
in
beginning
of TMC since their
the rival
Nissan has been
was
the former
operations of
a chief
Ford
executive
the widest possible
in
the U.S.
Zaitsu,
but
a chief
an
executive officer
of
NMMC,
explained that
" Most Japanese
companies with American subsidiaries have relied on Japanese
We decided to try a different
managers to run these enterprises.
way;
hire,
we would hire the most experienced American manager we could
and give him a free hand to build an American company with
American
leadership and American
outlined four objectives for NMMC,
Runyon hired four
manufacturing,
President for
NMMC
and gave Runyon the
and the authority to achieve them.
responsibility
appointment,
made up of
including three Nissan executives and Runyon,
four directors,
1980.
The board,
workers."
finance,
After
the
vice presidents for engineering,
and human
resources.
Vice
Alvin Folger,
Engineering came from the Ford Motor Company
in
Jerry Benefiled, Vice President for Manufacturing joined
from the Ford Motor Company in
came to NMMC in 1981
from
1980,
too.
James Stewart
Gulf+Western Manufacturing Company.
Wayne Write, Vice President for Human Resources, joined NMMC in
1982 from Texas Instruments
presidents came from Nissan:
Incorporated.
Shuichi
The other two vice
Yoshida for
assurance and Masuo Kiyota for production
quality
design.
All
six vice
presidents are responsible to Runyon.
Accordingly, Nissan's control on the development was
minimal.
been
It
Zaitsu since the preliminary planning phase.
construction,
five
NMMC.
formed a so-called C-30 task force whose leader has
individuals
a small team of Japanese coordinators
remained constant and
During
(C-30)
of
acted as consultants for
In addition to Nissan's commitment to NMMC, NMMC also
committed to Daniel
Construction regarding
86
decision authority of
orders.
change
or
less items by
did
not
$50,C)00
development
including
and a
American A/E
Timing of
fast-track
NMMC,
of
contract
also requires
At
a
uses only
it
so
relatively
fast-track
is
program
the project organization,
of
A/E
and
factors in
a general
between
a client
one
process.
A
factor that
requires a
and
contractors
complications
operational
is
contractor,
the development
important
is another
program
construction
1)
the formation
significant
cost-plus-fee
Some
in a
organization, though
the selection
the most
NMMC's
be very similar to that
well
contractor
of
project.
the
including
group
the new manufacturing
American company,
is an
general
project
traditional
of
the construction
NMMC
Ford Motor's.
used for
its
in this section.
manage most
Runyon to
strategy might
plant, the client's
and
time because of
of
process, the schedule, and the organization
Nissan committed
operations
of
decided change orders
the Nissan Smyrna project is described
Because
of
change orders.
on
Process and Organization.
Development
The
TMC
system.
making
decision
NMMC
KY Project,
Toyota
the
Japan
much
$50, 000
decide
representatives of
In
in
to
latitude
making power
spending
$10,000,
the
items.
head office
TMC's
than
given
Resident
give OHB decision
Moreover-,
more
was
itself.
than
more
decided
of
Daniel
general
during the design
and
stage.
focal
points
the conceptual
that is,
of
each
planning
development
stage,
is
Runyon's strategy
87
stage
the strategy
important.
is
as follows:
of
Nissan and
2)
At the planning/pre-design
are major
Runyon's previous association with Albert
is
Detroit,
3)
a key factor in
events.
A/E in
Kahn Associates,
the project formation.
At the engineering and design
(Nissan's task force),
selection and
the site
organization
the project
of
structuring
stage;
stage;
interaction between C-30
NMMC, Kahn, and Daniel
is an interesting
aspect.
4)
At the procurement
participants as well
5)
stage;
as labor relations
At the construction stage;
American style.
are important topics.
the construction is the quite usual
Daniel's self performance, and the use of night
and weekend shifts
are
early delivery of
important factors in
the success of the
the facility.
Figure 2-4-3-1
Smyrna Project.
contract types between project
shows the development process of the Nissan
The vertical
axis indicates the project
participants and the horizontal
the left to the right.
axis the progressive order
from
Important events from "Need for
Facility"to "Construction" are allocated in boxes in the chart.
Arrows between boxes shows the relations of events.
Among the
project participants, TN means Tennessee government or the local
government.
Nissan,
NMMC,
AFL-CIO means the national
Kahn,
Daniel
construction union.
and subs are the members of the
project organization.
The first events in the development process is Nissan's
confirmation of
the need for
preliminary survey
1970s.
Like TMC,
a new facility.
for a plant site
Nissan did political,
88
in
Nissan did
the U.S.
market,
in
the
the early
industrial,
and
END
START
PROJECT
PART ICIPANTS
=L
INCENTIVES .,ROAD CONST.
TN
FOR NISSAN
PROJECT PERMISSIONS
ETC.
AFL-CIO
INSPECTION
[PRESSURE ON NMMC & DANIEL
SELECTION
NEED FOR
NISSAN
FACILITY
SET UP
TRATEG
OF SI
C-30's CONSULTING
SLECTIOl\
COMMITMNETC
TO NMMC
STAFFING |
SNMIIC
NMCAPPOINT
RUNONSELECTO
LOF A/E
to
A. KAHN
~ONRAClrlrrT~~
E0
DANIEL
FEE
PRODUCTION ENG.
APPLICATION
[FOR PERMITS
_ SELECTION ~OFG.C.
MNITORING
ENG. & DESIGN
COST-PLUS-
CONST. MNGT.
EE CONTRACT
SELF PERFRM
f-'SUBCONTPACTING
SUBs
LUMP SUM/
UNIT PRICE]
CONSTRUCTION
FIGURE 2-4-3-1: DEVELOPMENT PROCESS CHART OF NISSAN SMYRNA
analyses
feasibility
In
19 7 9
formed
Nissan
,
the U.S.
production
the U.S.
in
in
C-30 planning
the company's
the 1970s.
team whose
Probably, Nissan decided the necessity of
head was Zaitsu.
plant in
for the new plant
around this
time.
for the new manufacturing
Although
a new
the initial
plant was small trucks,
even
at this stage, Nissan presumably had a plan to change or expand
the plant to produce compact cars in
As described in
the previous section,
Nissan set up a unique
Nissan decided that NMMC
NMMC.
new subsidiary,
strategy for its
the future.
should be an American company and should hire an american
president and give him/her
the widest possible authority to
structure and manage the new subsidiary.
Nissan succeeded
of the strategy,
in
responsibility of
Nissan's set up
inviting Runyon to NMMC as
he assumed full
NMMC,
Soon after his joining
the president.
After
the development project, becoming actively
involved in the negotiation with the Tennessee government
regarding
the site
selection,
Kahn as A/E for the new
and hiring
construction.
Though Nissan's site survey in the U.S. began in the early
1970s,
in
1979.
Since Nissan's first
investigation team five
In
began after
the intensive activities
early 1980,
of flat
to the site,
visit
C-30
Nissan sent the
times or more before Runyon joined NMMC.
Nissan refined its
requirements:
land were required within fifty
airport,
readily accessible to a railroad
highway;
the site
necessary utilities,
the formation of
miles of the Nashville
and an
must have an adequate water
and its
About 400 acres
interstate
supply and other
subsurface foundation must be firm
90
and
stable.
Nissan officially
manufacturing
announced
plant project
the new pickup truck
the U.S.
in
Nissan's negotiation with several
incorporated in
Aug.
1.
design,
July.
1980.
April,
During
states including TN, NMMC was
The president, Runyon started working on
in
Though his major work
construction,
in
his contribution to the site
and staffing,
selection was important.
the early months of NMMC was
on Oct.
incentives from TN.
Finally,
president of Nissan,
announced
30,
dollars in
19 million
Nissan got about
1980,
the
Ishihara,
the decision on the Smyrna site.
Runyon's first major decision was his selection of
Albert
Kahn and Associates as A/E, a prestigious Detroit A/E having
plenty of experience in auto plants.
several
Runyon and Folger had known
members of the firm personally through some previous
projects.
Additionally, Shahan, Kahn's president,
and his
associates helped the plant-site selection process to get the
project from NMMC.
After the selection of Kahn,
decision on the development,
for
the general
Runyon made another
Construction
the selection of Daniel
Though Daniel
contractor in early 1981.
had experience in automobile plant construction,
skills
and the manpower to manage the project.
office was located in South Carolina and
key
it
had not
had enough
Daniel's head
its operations were
world wide.
Daniel
Construction managed the fast-track
program so well
that NMMC could begin production two months ahead of the
5i2i
schedule.
Because Daniel
is
an open
91
shop contractor,
it
build a
for
the project.
merit
shop
(self
performance)
widely for
Daniel
the shell
280 of
performance,
60 staff
OHB's about
Jordan,
worked
Daniel's staff
the construction peak.
in
construction to
Because of
the fast-track program.
facilitate
The figure is
in
the self
at
office
the site
very large compared with
According
to
of the Nissan Smyrna Project,
if
the Toyota KY Project site.
Daniel's project manager
work,,
own forces'
used it
Daniel had operated in a pure construction management mode, the
staffing would probably have been in the range of 40 to 45
individuals.
Daniel,
one of the leading open-shop companies, built a
merit shop for the project.
As NMMC expected, the AFL-CIO
attacked the project demanding that NMMC use only union
construction workers in the project, though about 95'4 of
construction in middle Tennessee
Dec.
12,
1935).
the
is done by nonunion labor
(ENR,
For example, on the ground-breaking day, several
Runyon
hundred protestors came to interfere with the ceremony.
kept a firm stance against the unions saying that the union's
objectives did not match those of
Alexander,
TN and NMMC.
supported Runyon's attitude
Governor
expressing embarrassment
and disappointment that the hecklers had given such a rude
reception.
Despite continued pressure by the AFL-CIO,
NMMC carried out the project
Daniel
keeping the merit shop.
A fast-track program is an important factor in describing
the design and construction stage.
construction had Daniel
start
The overlap of design and
construction without Kahn's
detailed blueprints that would be provided as construction
92
and
Because of the big size of the project and the short
proceeded.
schedule,
were
both Kahn and Daniel's staff
hundred of
Kahn's
architects,
engineers,
large.
More than one
and draftsmen worked on
More than 250 of Daniel's staff managed more than
the design.
200 subcontractors which used nearly 4,000 construction workers
at a peak on the site.
kept construction going day and
Daniel
night with two ten-hour shifts working Monday through Thursday
and a thirteen-hour shift working Friday through Sunday.
Though Daniel
and Kahn worked very hard with excellent
proficiency, the most important factor
for the success in the
fast track-program is probably the good coordination between
NMMC,
and Daniel.
Kahn,
the plant
Following Nissan's basic
through the C-30 task force, NMMC working closely with
Nissan's consulting engineers, combined the local
,Japanese data.
information.
Daniel built
Finally
plant following Kahn's construction documents.
nature of a fast-track
program,
specific steps,
instructions,
team to deal
experience with
Kahn was the next party to make drawings
according to the NMMC's
projects.
information for
the
Because of the
there were far more decisions,
facts and figures for the project
with during construction than
in
traditional
NMMC reacted promptly not to terminate the flow of
construction.
Nissan's delegation of authority to NMMC must be
seen a key factor
in facilitating
the cooperation between the
project participants.
Figure 2-4-3-2 shows the outline of
Project schedule.
April
1981
From the start
to the start
of
the Nissan Smyrna
building construction in
of the test production in
93
Feb.
1983,
it
1980
1981
1982
1983
F'M A J14JJSNDlJFjAjMJjJAjSO~NDJF AHJJjAjSoNjDJFJ~JA
CONCEPTUAL
PLANNING
-10/30
SIlE
SELECTION
PREDESIGN/
PLANNING
PROJECT
ANNOUNCEMENT
ENGINEERING
& DESIGN
-- III--- --111----
9/15
DANIEL
PROCUREMENT
i
(0
!
0
1
f
I
i
!
1
SUBCONTRACTING
GRADING
-4-- f-,.- ;
I
CONSTRUCTION
I
BUILD.ING &
I-
-
-~
-1-
-I--
~
-
-
-
-
4-
-
-
4-4-4.-I
-
4-1-4.--- I--I-
lUIPMENTS
.J.- I - J. - .L- I - .3.- I - .3.- I - I - 1.....1.-
OPERATION &
MAINTENANCE
TEST
4OPERATION
I . j j
FIGURE 2-4-3-2:
NISSAN SMYRNA PROJECT SCHEDULE
took about
22 months.
engineering
in Apr.
15,
on Sep.
1981.
the building construction started
1980,
This timing of design and construction is almost
the same as the Toyota KY Project.
decision on the plant
make final
the start of design and
Seven months after
the project in Apr.
1980.
site
The general
schedule is
Smyrna Project
Nissan spent seven months to
of
after the announcement
proportion of the Nissan
similar to that of the Toyota KY
Project though grading work
is
less than in
the Toyota KY.
Figure 2-4--3-3 shows the design and construction schedule of
the project.
NMMC contracted with Daniel
breaking ceremony in
construction.
Mar.
1981.
The weekend shift
started
started
Feb.
Compared with the traditional
fast-track
Mar.
1982.
in
Dec.
These shifts
of design and building construction.
equipment
installment
coordination by Daniel
1981 and the
continued until
sequential
program saved about seven months,
production
before the ground-
Much work overlapped during the
night shift
1983.
in
just
which is
The early start
made for
program, the
the overlap
of
the complicated
between building construction work and
production engineering work.
Figure 2-4-3-4 shows the outline
contract types of
organization is
Chapter
4).
of
the organization
the Nissan Smyrna Project.
The project
classified as a contractor mode CM
A separate designer,
appointed before the completion of work drawings,
organization.
typical;
NMMC
(explained
the single general
subcontractors are factors of a contractor
first
95
in
contractor
and numerous
mode CM project
The process of the organization formation
selected Kahn
and
because of
its
is
also
good reputation
1980
OND J F
_____
_
1981
1982
1983
JA S ON D J FIM A M J JA S ON D J F A
DESIGN/ENG.
GRADING
BODY,
TEST RUN
ETIU
FOLJNDAION~
STRUCTURAL STEEL
FRAME,
STAMPING
& WALL
-ROOF
PRODUCTION E UIP.
liii
FOUNDATIOiN
TEST
M/E
T U TURAL STEEL
RCAFR&
PAINT
&AL L
0~'
T
STEEL
STRU=CTURAL
P.U
PRODUCTION
TEST
ROOF.&-.,ALL
TRIM & CHASSIS
.M/E
_
=R O.
=
-
mm
mmim m
A
9/15
START
DESIGN
I
m
I
QUP---.
ii~~~riJ p
11
T1
P-OJE
i
=
m
MIU
A
3/4
GROUND BRAKING
A
CONTRACT W/
DANIEL
START
WEEKEND
SHIFT
NTIL
A rEB.'8
START FEB.8
NIGHT
SHIFT
FIGURE 2-4-3-3
NISSAN SMYRNA PROJECT SCHEDULE (2)
(DESIGN & CONSTRUCTION)
2/14
START
PRODUCTION
CLIENT-------
NISSAN
COST-PLUS-AFIXED-FEE
% FEE
-----
A/E
GENERAL
CONTRACTOR
LUMP SUM/
UNIT PRICE
FIGURE 2-4-3-4
OUTLINE OF PROJECT ORGANIZATION AND CONTRACT TYPE OF
NISSAN SMYRNA PROJECT
97
experience with NMMC' s executives;
and previous work
and
clients
the most
fee contract,
a percentage
Because
A/E.
contracted with
by a
Daniel
the
of
popular
fast-track
contract
type
program,
NMMC
cost-plus-fee contract,
lump
is also
is
the same
which use basically
contracts,
price
unit
or
sum
which
between
Subcontracting
used often in American construction industry.
a
members
project
NMMC contracts with Kahn by
the U.S.
project in
as a development
types between
contract
in
unusual
is
Nothing
contractor.
the general
as
selected Daniel
then NMMC
rules as OHB in the Toyota KY Project.
to Jordan, Daniel's project
According
manager,
had
Daniel
and
the authority to spend up to $5,000 without Nissan approval
the
spend
to
authority
had
up
to
Purchase up to $100,000 could be approved by the
$50,000.
manager
manger
construction
Nissan site
of
Runyon's
All
engineering.
for
office
approval,
Runyon
and presumably
went
to
had the
authority is totally
This delegation of
ultimate authority.
the Toyota KY Project.
from that of
different
expenditures over this level
Figure 2-4-3-5 shows the organization of NMMC for the
project.
Former
the final
authority
force
acted
engineering.
and
with
NMMC
seemed
monitor
NMMC
regarding
process
staff
and effective
to have enoucgh
the project
Folger,
Nissan's C-30
the construction.
over
and
Runyon
executives,
and
to
correspond
had
task
and tool
with
Kahn
Daniel.
Figure
office
Motor
as a consultant
to
organization
Ford
for
2-4-3-6 shows the organization
the Nissan
Smyrna
Project.
98
of
Daniel's
The heavy use of
site
Daniel's
--
-
VICE PRESIDENTS
C30 TAST FORCE_
L(NISSAN)
FIGURE 2-4-3-5: NMMC'S ORGANIZATION FOR THE PROJECT
99
j
V
V
BODY FRAME
& STAMPING
PAINT
BLDG.
- PURE CM
FUNCTION
TOTAL 280 STAFF
AT THE PEAK
ADDITIONALLY, THERE
WERE 17 WEEKEND
STAFF IN THE SITE.
FIGURE 2-4-3-6
ORGANIZATION CHART OF DANIEL'S SITE OFFICE FOR
THE NISSAN SMYRNA PROJECT
100
own
feature at
the construction stage.
own forces'
Daniel's using its
program,
the Daniel's
pure function of
of
the own
responsibility
work
work to deal
"construction management"
forces work.
According
is
Because of
counted 280 at
staff
an interesting
235 to 240 of Daniel's staff
with the fast-track
the peak both
to Jordan,
for
the
supervision
and direct
the staff
the range of 40 to 45;
in
of
the flexibility
for the pure construction management
the Toyota KY Project was in
of
shell
work forces for the btilding
for
taking
OHB in
the function
the Nissan Project is
allocated to general contractors and subcontractors in the Toyota
73
organization was almost self contained
Daniel's site
KY Project.
as with medium or even large American
101
contractors organization.
3.
Toyota Kentucky Project
About
automotive
plant construction
structural
steel
in
site,
of
one year after the announcement
January,1987.
assembled
(see figure 3-0-1)
on
Kentucky,
the
1.300
The first
1987,
the end of Jan.
46
the construction was completed.
part of this
important items of
pictures.
section
(3-1)
when
summarizes the
the project including some drawings and
The second part
(3-2) describes the development
project organization
(3-3) explains the
The last part
process and schedule in detail.
Special
acres
The project has been
The thesis covers the project until
about 50% of
most
the U.S. and Japan since the planning stage.
both in
sensational
Scott County,
in
have been
frames
TMC's $800 million
including contract types.
features of the project are as follows:
1) This is the first individual
direct
investment into the U.S.
by TMC,
2)
a construction manager
3)
program as
Ohbayashi manages the project using the fast-track
TMC will
by turnkey contract
with TMC,
get more than or equal to $125 million
in
aid from
the Kentucky government,
4)
TMC and Ohbayashi made a project agreement
CIO,
construction labor
union,
(PA)
with the AFL-
during the construction.
102
FIGURE 3-0-1:
TOYOTA KY PROJECT IN JAN. 1987
The site diagrm identifies building name and location. Square footage for each is
shown below. Te completed facility will cover approximately 1,400 acres.
1. Press & Welding (1,170,016)
2. Trim &Assemblv (1,054,878)
3. Paint (869,336)
4. Plastics (343,175)
5. Administratim (91,964)
6. Test Laboratory(57028)
7 Electrical Pbwerhouse (13,300)
8. Utility Building (66,377)
9. Training Center (46,400)
10. Wastetaer Pmtreatment (1Z252)
SOURCE: OUTLINE, JAN. 1987
3-1 Schematic
Project Summary
as follows:
summary is
Project
name; Toyota Automotive Manufacturing
Project
Scott County, Kentucky
location;
Project
F'roject organization;
USA,Inc.
Toyota Motor Manufacturing,
Owner,
Corp.
Ohbayashi
Construction manager,
1)
2)
3)
facility
Project
Architect/Engineer, Giffles Associates Inc.
Time schedule; Start of grading work, Mar.3,1986
Start of building work, Aug.4,1986
1988
Completion (plan)
Site area; 1293.03 acres (5,232,763 SM)
Floor area; 3,980,189.00 SF (369,760 SM)
4)
5)
6)
7) Area names and general contractors
: Bldg.Area (SF) : General Contractor
Area Name
----------------------.---- - - ---- - - - - - - - - - --
#100 Press &
Welding
#200 Paint
#300 Trim &
:
:
International
1,344,389
: Daniel
753,718
1,230,831
NIC Constructors
: Blount Brothers Corp.
Corp.
Assembly
#400 Plastics
#500 Utility
#600
:
:
Admi .
Testlab
#700 Site Works
8)
d.
e.
9)
10)
Metric Const.,Inc.
3,980, 189
Outline;
Building
a.
b.
c.
153, 400
3,250
:
Total
James N Gray Const. Co.,Inc.
Inc.
: Beacon const. Co.,
384,901
109,700
caisson & spread
Foundation -steel
-structural
Structure
metal deck & insulation
Roof --
Exterior
Floor
--
Finish --
&
built-up
passenger
roofing
brick & block & insulated metal
slab on grade, hardener
Production capacity;
Products;
footing
200,000 cars per
cars of
year
2000cc class
104
siding
11)
Scfhematic plan of
main shops
436
176
PLA
UNIT:
7
(m)
PRESS & WELD
PAINT
-
ASSEMBLY'-
240
546
176!
PLAN
FIGURE 3-1-a
12)
Section
of
main building
E
EC)
-O
00
SECTION
C)
9,5
FIGURE 3-1-b
105
~Z7-~
4~
~
4
L
-'4
-
4
4
FIGURE 3-1-c: PERSPECTIVE DRAWING OF TOYOTA AUTOMOTIVE MANUFACTURING
FACILITY BY GIFFLES ASSOCIATES INC.
ZN
.
R c
S-
i3c
A.-
-
-
S
FUTURE AREA
-
--1 -4--L
- ~PRESS & WELDING,---
-7>!-
~ - AST[
RA1 PLANT
PAINTASSMBLYUTItITY AREA:
PARKING AH
PARKING
300 FT.WIDBE
BUF FEIR--74300FT.WIDIRO
_IADMI
6 -WASTE TREATHENI PLANT
FIGURE 3-1-d
107
S I E
P LA N
I EST TRUCK
I
/1'
664 m
I!
STORAGE AREA
PROCESS BLDG.
504
~505
OIL PUMP
0
#503
WAREHOUSE
"v
''"%
1GAS
& WATER
TREATMENT i
BLDG.
C01,1 STORAGE'
Li0
10
PAKIG
0Li00
0 0 f t BUFFER ZONE
GA3
/I
OADMINISTRAION
0
0
0
00
0
00
00
0
0
00
00
0
0
fB
I
cIRIcAL
aa
II#
MATERS
STATION
PARKING
GT
NEW US62
N
FIGURE 3-1-e
TOYOTA AUTOMOTIVE MANUFACTURING FACILITY
'SITE PLAN 2
3-2 Developent Process and Schedule
The development
Project is
development
process arid schedule of the Toyota KY
described in
this
section.
process and schedule,
following the order of
After
the outline of
will
be explained
details
the
development process from the conceptual
planning stage through the construction stage.
The timing of the formation of
the project organization,
which includes the selection of the construction manager and the
architect and engineer
the most important factors
(A/E) is one of
in the development process.
The fast-track program is another
important factor which has a critical
organization and operational
influence on the project
complications throughout the design
and construction stages.
There are several focal
On
planning stage,
the conceptual
project is an
points at each development stage.
TMC's
important issue as well
relationship with OHB.
strategy for the new
as its long term
Structuring the project organization and
selecting the site are major events during the planning/preInteraction between TMC, OHB, and Giffles
design stage.
Associates
(GIF)
design stage.
AFL-CIO
during
is
an interesting aspect
Labor relations
at the engineering and
including TMC,
is unavoidable arid one of the most
OHB,
procedures on procurement will
Implementation of the Total
interaction among TMC,
OHB,
Quality Control
GIF, and general
main topics at the construction stage.
109
and the
important factors
the procurement and construction stages.
and operational
KY,
Contract
types
be described here.
(TCC) program and
contractors are the
Figure 3-2-1 shows the development
axis indicates the project participants and
The vertical
horizontal
right.
process of the project.
axis means the progressive order from the left
"Need
Important events from
are allocated
"Construction"
for
the chart.
KY means the Kentucky government
County government.
union.
and the Scott
The AFL-CIO means the national
KY and the AFL-CIO
Arrows
Among the project
between boxes show the relations of events.
participants,
construction
parties
are the most influential
outside of the project organization.
to the
to
Facility"
boxes in
in
the
TMC, OHB, GIF,
general
contractors, and sub-contractors are the members of the project
Slanting arrows among GIF,
organization.
contractors),
and Subs
GCs
(general
(subcontractors) mean the overlap of
the
design and construction.
event of the development
The first
the new facility.
individual
TMC's
need for
marketing,
This includes political,
and feasibility
industrial,
process is
analyses for the TMC's first
direct investment for
After
the manufacturing plant.
the confirmation of the need for the facility, TMC has to set up
the strategy for the new automotive plant
operation of
including management,
the facility, and construction.
statement of TMC's policy for the
Though there is no clear
construction of
the project,
it
could be described that TMC has
tried to build a TMC-style plant in the U.S. using TMC's
traditional
construction management
though using American
involved in
contractors.
as much as possible,
even
Because TMC wants to be
the construction but does not have any experience of
110
END
START
PROJECT
PARTICIPANTS |:::
KY
INCENTIVES
SITE & INFRA.
FOR TMC
DEVELOP.ETC.
MONITOR. LOCAL INDST.& EMPLYMNT.
PROJECT PERMISSIONS
AFL-CIO
INSPECTION
PRESSURE ON
-JAO------
TMC,OHB,& KY
NEED FOR
FACILITY
TMC
SET UP
STRATEGY
SELECTION OF
APPLICATION
SITE
SELECTION OF
DESIGN-BUILDER
FOR PERMITS
DESIGN-BUILD
OHB
E-1
CONTRACT
PRODUCTION ENG.
SELECTION
HOF A/E
SELECTION
CONST.MNGT.
KG.C.s
ENR.&
GIF
0
CPS-PUSFE
CONTRACT-----
G. C.s
ICONTR--r
E
INVOLVEMENT
PROJECT
BIDDING OUT
OSRCIN
RT
LUMP SUM/
IUNIT PRICE
SUBs
CONSTRUCTION
FIGURE 3-2-1: DEVELOPMENT PROCESS CHART
construction in
the U.S.,
TMC decided to select a Japanese
design-builder from the most reliable contractors who have had
long term relationships with TMC.
According to this strategy,
TMC contracted with OHB by turnkey contract.
site
At the same time, TMC tried to select the construction
after the public announcement of
selected
Finally, TMC
the project.
KY because of the favorable incentives,
parts supply,
market
and some
KY does the grading of the site,
selection,
incentives.
as a part of the
the site
development around
infrastructure
quality,
After TMC's site
and others.
closeness,
labor
KY checks and approves
Along with this work,
several building permissions, and monitors labor relations for
the local
construction industry and workers.
After the design-build contract with TMC, OHB selected A/E,
Giffles Associates
(GIF), and got the approval
defines itself as a design-manager
in the project,
deals with design and construction management
the construction to six
cost-plus-fee contract,
without dealing
general
contractors with
who are selected by negotiation.
Consulting with TMC, OHB selects the type of labor
merit
shop,
contractors.
that
is,
favorable shop for the local
shop contractor
contractors,
in
relations as a
OHB uses both union and non-union
Talking with KY,
selected general
is, OHB
that
OHB assigns the operational
with the construction directly.
function of
OHB
from TMC.
KY),
OHB and TMC selects the most
contractors and workers.
All of the
except for Gray Construction
can contract
union sub-contractors.
112
both
(open
with union and non-
After
job
is,
that
the construction management,
is
OHB's main
contractors,
the general
the selection of
assistance for
TMC's
coordination between
involvement into design and construction,
A/E and contractors, monitoring the construction, labor
etc.
relations, public relations,
Though union contractors have a chance to get contracts from
open shop contractors dominate the
OHB because of the merit shop,
which enables them to offer
area,
this
lower bids than union-contractors.
to impose on the project an agreement
The building trades tried
to make the project union shop.
from the beginning of
in
higher productivity
contracts because of their
The AFL-CIO put strong pressure
the project on OHB,
KY.,
and TMC.
Finally, the AFL-CIO got the project agreement from TMC and
about 50% of the construction was completed in
OHEB after
Though
1986.
project
is
out of
contractors'
working
the actual
impact of
the project agreement on the
the scope of the thesis, the change in
labor relations,
conditions,
will
Dec.
higher wage rate,
the sub-
and change of
have about a three-month
delay of the
schedule.
of
Figure 3-2-2 shows the outline
scope of the thesis is
officially
appeared
announcement
of
in
until
the end of Jan.
in
the U.S.
states offered proposals to invite
TMC decided on the site
1987.
The project
public on July 23,1985 by TMC's
the decision of direct
manufacturing plant
The
the project schedule.
in
Scott
design began at the beginning of
113
Soon
investment
the auto
after the announcement
the plant.
County,
1986.
in
On Dec.
Kentucky.
11,
31
1985,
The schematic
Grading work began in
1985
1986
1987
AFMA__JJA__O__
ANNDJFWA
PREDESIGN/
PLANNING
& DESIGN
JJASONDJFMAWJJASO
FA
CONCEPTUAL
PLANNING
ENGINEERING
1988
SITE SELECTION
PROJECT
ANNOUNCEMENT
WORKING DESIGN
S E vLIC
GENERAL CONTRACTING
SUBCONTRACTING
PROCUREMENT
PRODUCTION EQUIP.
CONSTRUCTION
GRADING
-BUILD-NG
TEST
OPERATION &
MAINTENANCE
OPERAT ON
A
PROJECT AGREEMENT
FIGURE 3-2-2
TOYOTA KENTUCKY PROJECT SCHEDULE (1)(OUTLINE)
AS OF JAN. '87
first
the
produce
TMC plans
1988.
late
(including design
design
1986 took
Jan.
in
began
1988.
shows the design and construction schedule.
Figure 3-2-3
The schematic
or
mid
in
The
1986.
Aug.
early
in
to be completed
car
in
started
construction
is planned
construction
to
Building
1.986 and
Mar.
to
three months
complete.
The
During the
1986.
in Apr.
construction documents phase began
phase) that
development
phases, the A/E
design development
made
schematic
design and
schematic
drawings, outline specifications, and preliminary
estimates of
cost.
During
documents phase, the
the construction
documents.
A/E made working drawings, specifications, and bid
Grading began in Mar.
actually began
of
beginning
4 because of
on Aug.
and
the piling
effects of
the end of
work
steel
shops began in Sep.
obtaining the
After
the
the construction
Jan.
1987, when the
planned to
be completed
been assembled,
mechanical
M/E
work
was
in
Jan.
the end of
but
and
and Assembling
to
1987,
most of
and roof
and
(M/E)
work
begin
in Oct.
1986 and is
1987.
Mar.
electrical
planned
begin mid Feb.
shop began
the Paint
in
steel
frames have
in the Press, Welding,
1986 and was finished in Jan.1987.
Structural
of
work
the project agreement with AFL-CIO have not appeared
Structural
As
a delay in
foundation work,
went basically smoothly until
Jun.20, the
(EPA) permission.
Protection Agency's
Environmental
yet.
on
building work was planned to start
Though
1986.
1986 and was completed in Aug.
in
wall
steel
work have started,
have not
Dec.1986,
1987 after two and half
115
the structural
but the
started
yet.
work will
months delay from
the
1987
1986
J|FlM A M J J A S O NID J F MIA MiJ JIA SO N D
SCHEMATIC
I
DESIGN/ENG.
1988
J F M Al
i
WORQR, ING DRAWINGS
GR A ?ING
PILING
FOUNDATIPN
STRUCTURAL STEEL
I I
ROOF & WALL
ME
PRESS &
WELDING
PFDC. EQL IP
FOUNDATIONI
STRUCTURAL STEEL
PAINT
RTi
PRDC
& WALL
=-4.4T
EQ IP.
I/E
... 6-
INGI
ASSEMBLING
1 J
|
UE T4 TRH
ELAY OF 4
-T1
5/5
GROUND
BRAKING
FOU NATION
STRUCTURAL STEEL
WALL
R I
PRIDC. EQUIP.
E
.5 mo.
2ELAY
T
BLDG .CONST .
6/20
PLANNED START
BLDG. CONST.
2.5 Mo.
DELAY
u-11/25
PROJECT
AGREEMENT
11/21
TERMINATION OF
F1
3. m.
STAR
PUEI
A--
BIDDING FOR
ONE MONTH
FIGURE 3-2-3
TOYOTA KENTUCKY PROJECT SCHEDULE 2
(DESIGN & CONSTRUCTION)
PLANNED
COMPLETION
original
schedule.
one month
This is
after Nov.21,
because OHB
termination of the bidding,
In
Finally, installment of
Mar.1988,
due
to
it
in Sep.
1987.
which is
the Project
addition to the one month
takes about one and half months to
The Project Agreement
became effective as of Dec.
to start
bidding for
1986 due to the negotiation about the
project agreement with the AFL-CIO.
do re-bidding.
terminated
1,
between TMC and the AFL-CIO
1986.
the production equipment
is planned
OHB plans to complete the construction in
a three-month
Agreement
delay from the original
during
117
the construction.
schedule
3-2-1 Planning/Pr-e-design Stage
for
"Need
as
such
of
Site,""Selection
stage
this
is
Process Chart.
This
1977
of
in
main actor on
decided to build its
when Honda Motor
cycle manufacturing plant in
The
A/E"
70s,
begun in the late
was
stage
of
"Selection
Design-Builder, "and
TMC.
probably around
Strategy, ""Selection
LP
Facility,""Set
the Development
Figure 3-2-1,
the planning/pre-design stage are
during
events
Important
motor-
the U.S.
Need for Facility:
new manufacturing facility in
70s,
and Nissan studied
TMC
the U.S.
investment
of direct
the feasibility
to confirm the necessity for the
many factors
TMC examined
the U.S.
into
problems
13
The
that time.
Nissan at
TMC and
advantages for
the late
The
but they decided to postpone the investment.
exceeded the
in
advantages were as follows:
1)
Price of
energy and materials
Aluminum and
such as
low due to the appreciated yen and the depreciated U.S.
2)
3)
could
avoid
the
U.S.
1)
Though
in
TMC could
problem due to the appreciation of
suffer
would certainly
production
2)
TMC
by
cars.
as follows:
long run,
the
protectionism
government's
reducing the excessive export of Japanese
The disadvantages were
dollar.
and save shipping cost.
TMC could avoid tariffs
TMC
glass was
from
cost
solve the
the yen,
up
the short run,
in
for
cost inflation
a
TMC
240,000 car/year
capacity plant.
could not
TMC had enjoyed
in
expect the similar suppliers' cooperation that
Japan.
Japanese suppliers
118
could produce high
quai
a.
d
proDcicts
that
TMC could
doubtful
it
was
j.n
the U.S.
3)
The
labor
wage
o-f
productivity
control.
continued
This
TMC
the?
In
in
-
restri
its
for
TMC
in
to
cti
for
need
the
style,
of
that
the
do Japanese-style
long-
held
which
the UAW
of
more
ware
late
in
these above
considering
that
the U.S.
than
profitable
even
70s,
i f
yen
the
the
and
1979,
TIC
also the
19'80'
b:u i l d
the
But
Apr.9, 1980,
several
even
newspaper-
p1 ant s
U. S.
after
reported
that
it
was
import
avoid tightening
the
TMC
119
government
Japanese
a
had
investment.
direct
announced
into
investment
direct
TMC's
for
the
In
the U.S.
in
1itv
new faci
for
considerations
important
most
climate
Fe:'b.
ons.
than
to
fear
relations,
management
difficult
the
presents
against the
to
U.S.
Journa,
to
industrial
Dec.
the
whi 1 e,
pl
analysis
attitude
negat ive
the
to
due
1abor
lower
was
13
explains
Japan
was unfavorabl e,
U. S.
the Japanese,
appreciate.
the
70s,
late
to
define
to
from
the U.S.
in
produc.ti on
System
on
reduced
quality,
and corporate
had strong
Center
Research
exports
factors.
of
.,
some cases.
in
Ni kkou
Add t i onal 1 y
Producti
that
was
1abor
was
it
TMC
strikes
than
wages
labor
Americ:an
additionally
Japanese;
higher
of
system,
management
personnel
is
the
of
the Toyota
appl y
the differences
of
B ec.ause
term
the UAW
-for TMC.
constant I
the yen.
of
appreciation
quality
of
di ff erenc e
the
though
4)
l ow
c-, c:jt
studying
A fter
a
TMC
had
no
of
i mpor t
WallI
Street
restrictions.
reported
desp i te
thr
announcement,
sti11
production
studied
that
eats
the
the feasibility
newspapers
possil
reported that TMC
negoti ated
auto
product ion
joint
ie
venture
and
clearly
emerged
Jap anese
the
changed
the
by
the
Protectionism
investment.
the trade
ease
to
order
and
appeared
the Japanese
for
attitude
its
in
investment
direct
government
U. S.
direct
TMC's
of
Japan
and
U. S.
the
situation
changed
government
corporaitions'
between
f r i ct i on
trade
1981,
Around
agreement.
not reach
could
they
1981,
in
continued
negotiation
the
Though
the U. S.
in
on a
Motor
Ford
wi th
several
1980,
July
In
U.S.
the
in
vehiles
building
0f
friction.
the cancelation
Aft.er
Motors,
200 . 000
s:ubcompact
joint
Manufacturing, Inc.
I-1
a Corolla-type
t he biggaest
news about the auto
Nissan
Motor
i rdustrv
US1'1s
Manuf+actur i ng,
in
new
auto
OLIS
efough
plant
of
t hough
wa s
month
this
The
pla n
NUMMI:'s
1984,
odu c e
Motor
United
1 985 was reported,
Mar.
in
car
produc i ng
May
pr
plant.
New
is
venture
(NUMMI).
Fremont
1983.
Feb.
jointly
would
idl e
GM's
at
In
1983.
in
TMC
and
GM
cars/year
new
the
of
name
that
announced
newspapers
TMC
venture with
to
GM' s
the possibility of
re p or ted
newspapers
manufacturing
auto
joint
82,
Nov.
In
GM.
Ford
partner f r om
possible st r at eg i c
its
TMC changed
venture with Ford
joint
the planned
of
the
project at
Smyrna Te~neee.
A
the
big
b-
an ::ei _
necesitv
with
ioint
appr oach
venture
fc-4 TMC' s ooi ng
rie
Ei
.j i
at
individual
Tovoda
first
direct
to
had
a
avoid
is
cauti
to
the
pol icy
big
investment.
120
risks
U. G.
that
which
Addi. tionally,
for
TMC
Accordi ng
to avoi d
to
venture
joint
might
be
Weeklv
is
a
associated
the Ministry
of
Inter national
one
as
venture
Trade
of
and
Industry
the
strategies
to
TMC participated in
government to ease import restrictions while
1985,
stronger
became
government
beginning of
TMC
might
have
plan to establish its
announced the
1985.
policy of
change its
had to
the
Around
in
the
U.S.,
or
with GM might be one calculated step for
the collaborative effort
TMC's final
in
plant individually
building a new manufacturing
23,
the pressure by
on the contrary to TMC's expectation,
but
U.S.
the
trade friction.
avoid
economist, explained that TMC had expected the U.S.
Kajiwara, an
NUMMI,
the joint
advocated
(MITI)
the U.S.
plant in
TMC
Finally,
plant project on July
new automotive manufacturing
consideration.
1985, probably on the basis of political
Set up Strategy:
Along
with
facility, TMC
the
confirmation
of
the
need
through
UAW
Though TMC has
established with
industry including the
auto manufacturing
American
experience
its
in
the
NUMMI,
the production and sales still
remained.
automobile
in
situation
important factors for
TMC's
the
Especially
U.S.
1989
is
very
manufacturers
U.S.:
Nissan
plans 300,00)
TMC because
for
plan to increase or
car/year
to
in
the future
new plant.
competitive
plans
venture
one of the most
is
The expected automobile market condition in
or
joint
problems related with
GM in California, several
market
new
up the strategy for the new manufacturing
had set
plant's management, operation, and construction.
learned about
the
for
produce
1988;
start
car
the U.S.
121
and
1988
many Japanese car
in
production
120,000 car/year
Mazda
in
in
1987;
Mitsubishi
the
Honda
plan to
start
production
in
1987 or
1988.
In addition to those Japanese
companies' activities, GM also plans to
1989
by
the
Saturn
the
of a saturated market
U.S.
is
the
probably
construction as the first
Because
has confidence
in
of small cars or
reason for
of
priority
Toyota's
enhance the keen competition.
main
for
TMC has many staff
the plant
production system,
the U.S.
methods as much
management
American
in
builders.
as
Then,
well
as
much
avoid
risks
in
TMC's
setting fast
construction,
possible
TMC tries
TMC
even
to build a
construction
experience in
the design
associated
using only
though
to
decided
and
TMC's policy for
using TMC's traditional
design-builder who has much
can participate
Japanese cars in
the construction.
the new construction may well be as follows:
TMC-style plant
in
Hyundai's participation in the
in the U.S. will
automobile market
Fear
project.
cars
produce compact
choose a Japanese
so that TMC
the U.S.
and construction process as
with
projects
in
the
new
environment.
Site
Selection:
Though TMC
conduct
asked three
feasibility
investigation in
the new project
1980,
The interaction
:7'9
fol los:
May,
1984;
practical activities
the first
the
Japanese companies to
including
studies,
started with
project on July 23,
American and
official
of
possible
site
site
selection for
of
announcement
the
1985.
between TMC and KY can be summarized
KY's
Far-East
regarding possible plant site.
122
office's
contact
as
with TMC
May,
1984;
representatives of
KY visited TMC.
Jul.
1984;
KY submitted basic information
Mar.
1985;
the Ministry of Foreign
by the invitation of
visited Japan
Governor Collins
Affairs.
to TMC.
about KY
Yamamoto, vice
met
Collins
director- of TMC.
Jun.
1985;
KY
submitted
for
data
industrial
an
site
in
Georgetown.
Jul.
2,
1985;
Nihon
individual
reported TMC's
(Japan Economic Newspaper),
Shinbun
Keizai
investment
direct
in
the U.S. as the
top news.
Jul.
9,
1985; Wall
Indiana,
Jul.
TMC
sent
TMC
investment.
officially
the
Kentucky,
for the plant.
as possible sites
and Missouri
23,1985;
mentioned Tennessee,
Street Journal
announced
the individual
questionnaires
first
to
direct
states
governors.
Oct.
1985;
Oct.
15,
TMC sent the second questionnaires to selected states.
investigation team arrived at KY, and
TMC's first
1985;
stayed for two days.
Oct. 25,
1985;
president,
Nov.
8,
Collins met Toyoda, the president,
Kusunoki,
vice
and others of TMC.
1985;
TMC's
second
investigation team visited KY and
stayed for nine days.
Nov.
14,
1985;
Kusunoki,
Dec.
3,
Tennessee,
visited
1985;
each
Three of TMC's vice presidents, Tsuji,
KY
TMC
team
and
stayed for
sent
a
having
two
days.
investigation team to KY and
third
12
Kamio, and
or
13
members.
KY
acquired the possible site near Georgetown at this stage.
123
finally
KY and
TMC had
while TMC
incentives,
about
negotiation-r
a final
seemed
to do the same procedure with Tennessee.
8,
Dec.
the director of
Mr.and Mrs.Toyoda,
1985;
TMC,
visited
Lexington,KY and met Collins.
in
1985;
11,
Dec.
announced the decision
TMC officially
K.*Y
the largest such deal
these
offer
to
$25
ac qui sit ion
fo r
in
workers at
for
legal
is
the
possibly by
the unions
could
be
as
interpreted
excessive incentives for
the
might well
reported
f or 3 ,000
incenti ves from
shown in
Table 3-2-1.
over direct
investment
incentives,
investment tax credit
strong opposition
reaction
against
The AFLand
the
in the new
against TMC,
the
possibly
TMC.
As TMC used three consultants for
1990, TMC
and $47
almost $500
gain
is the biggest.
KY's
against
to
biggest as
the absolute amount
also
a
industries.
KY's incentives
challenges
training,
news
land
on for
milli
$10
as employment
as well
related
TMC to get
law,
expects
in
disqualification for
tax
The
manufacturers as
Japanese auto
Though the percentage of
CIO's
employee
for
20 yea rs
the pl ant and more
million for
$10
preparation,
site
st ate
the
t ax es over
not the highest,
follows:
constru ction.
KY's i ncenti ves for TMC
states to
as
$33 million
that
the s tate law
69
to Automotive News, the
KY amended
history.
is
incentive package,
million
According
million
hig hway
Collins' co mment
million
KY's
incentives.
training fa cility
million
in
the i ncentives
contents of
a $125
KY offered
TMC,
To invite
is
on the site
use several
124
the feasibility
study in
consultants including OHB for
TABLE
STATE'INCENT IVES
FOR
i2APNES--E
E-UC2--1
A&TOMOT IVE MANUF ACTURERS
(BD)
I NVESTMENT PROJECT
COMPLETION
IL
($
(A)
CORPORATI ON
& STATE
(C)
CAR/YEjAR
(D)
EMPLOYEE
(E)
INCEINTIVE
MIL.
($
E /A
(%/)
TMC
KENTUCKY
800)
19I8
20000000
MAZUIjDA, & FORD)
MICHIGAN
450
1987
240000
3500
52
12
NI SSAN
TENNESSEE
450
1983
1 200
0
2600
19
4
HONDA
OHIO
25 0
1982
150000
2000
MITSUBISHICHRYSLER
I L.L I NO I
50)
1 988
180000
2500
SOURCE:
125
00
125
0)
83
B3UNtGE I SUNJUU, DEC. 1986
BY TAKEO MIYAUCHI
17
decide
labor,
1985.
in
evaluation
site
on
As TMC's spokesmen said that
sites,
plant
TMC would
considering such factors as quality of
TMC evaluated possible sites from
parts proc.Irement, etc.,
many points.
According to
in
evaluated items
six
OHB's site
such
areas,
questionnaires counted
the
as
evaluation sheet
and
industrial
1)
These six areas could
as follows:
regulations;
Administrative
regulations,
in
transportation, site
84
the site.
incentives for
classified
be further
97 classified
administrative regulations, labor quality,
welfare and amenity for living,
conditions,
for the project,
building
code,
tax,
labor
environmental
law,
charge, efficiency of the
welfare
government.
2)
Labor
3)
quality;
Welfare
and
labor, residents, wage rate.
amenity
recreation, medical
4)
Industrial
materials,
for
living;
education
and training,
service, etc.
transportation;
Complete Knock Down Box,
assembled
accessibility
cars,
parts,
raw
to highway and
railway.
5)
Site
other
6)
conditions;
building, public service, parcel,
auto manufacturers'
Incentives for
education
and
location,
industrial
training
climate,
construction labor.
investment;
assistance,
financial
assistance
assistance,
in
site
development, etc.
Having gotten the
from
selected states,
team to several
responses
to
TMC sent the first
states in
order to get
126
the
second questionnaires
and second investigation
detailed information.
At
this
industry
conditions,
public utilities,
to
agricultural
the
to change the zoning,
been working
site,
in
and the planning department of
zone,
industrial
or his agent,
of the project
procedure
usual
the
County had
Scott
of
application for rezoning by a landlord
from the
rezoning begins
zone next to the
including that
Though
zone.
industrial
the
development.
and site
was
site
The project
geographical
and
geotechnical
tracks,
permissions,
rezoning,
discussed:
were
points
following
the
stage,
the area
Scott County allowed the county to rezone
rather than by the TMC's application.
selection stage, TMC investigated the details
At the site
of
policy, and
environmental
regulations regarding city
planning,
building and construction.
The details are explained in the part
of
"project permissions"
Selection
at
the design phase.
of Design-Builder:
Following the setup of TMC's
it
started
strategy
negotiation with several
for the construction,
general
contractors including
of the new
OHB to select the design-builder
Though it
project.
is
not clear when TMC decided to choose OHB as the design-builder
of
the new facility,
the
OHB assisted
design-build
relationship among
experience
in
site
to gather
TMC's
Because
contract.
the competitors with
U.S.
construction,
reasonable selection for TMC.
TMC's
in
selection using its
information,
OHB
site
OHB
TMC,
was
selection before
has
and
the
has
probably
20 years
the most
Additionally, OHB's assistance for
all
American subsidiary,
was probably the key point for OHB
the turnkey contract with
longest
TMC.
127
Citadel,
to get
Contractor Agreement Form not
probably
is
construction
TMC's
a
choose
to
construction cost
new
who is
Cost-plus-fee contract
guarantee the
cannot
it
among possible
price competition
nor utilize
the
for
contractor
reliable
basically unfavorable for TMC because
"Owner-
TMC and OHB did
A111,
priority
first
the project process.
responsible for all
is
standard form of
Cost Plus Fee,"
because
this
use
has a
the AIA
Though
form.
than
design-build type
have a
because the AIA does riot
the AIA form,
contract
form rather
OHB use the AGC's turnkey contract
TMC and
prime contractors.
the
Because
contract is
is
this
Based
project without
the
start
definite completion
with a
kind
this
through the long term
trust
to
proceeded
fee, nor
to make
TMC and OHB
mutual
on the
relationship, OHB has
setting OHB's
been
Because the
the cost-plus-fee contract.
case for
the first
of contract.
has
is rarely used in building construction in
cost-plus-fee contract
Japan,
contract
turnkey
contract, the nature of the AGC's
the negotiated
developed from
design-build
or
design--build
date of the
construction.
period
Because the shortest construction
cost effective
price may well
be TMC's goal
and OHB confirmed the shortest schedule
as the
first priority.
date because it
The
this
reasonable or
for the project, TMC
on the
best effort base
set the exact completion
to set the
was unrealistic
uncertainties at
Selection
did not
They
at
date because
of
many
stage.
of A/E:
first
important
task
128
of
OHB
after the design-build
(A/E)
,
Nov.
in
design office.
of
2)
Location
of main
3)
Type
of
The
follows:
are as
Location
1)
OHB
A/E,
for
the evaluation.
them for
about
factors
considerations
important
Inc.
A ssoc i ates 4,
candidate
potential
ten
important
gathered
the
1985.
identifying
After
Gi f fi1es
cost
of
scheduling
the
on
on
decisions
important
selected
OHB
and engineer
arch itect
a.,n
as
as wel1
ding
devel opmen t.
bui l di ng
(GIF)
bui
the
o-f
quality
and
o+
most
the
one of
may be
this
sel c t i
was the
TMC
w.i tI-h
c nt.ratc t
design works.
firm;
the
and
Engineer/Architect,
Engineer.
Architect/
Ar chi tect /Engi neer /Pl anner .
Specialization
5)
ElNR rank ing
6)
Current
mechani cal
7)
load;
on
major
backlog,
dollars,
in
amount
project
total
projects.
projects
yeaEirs,
in
main
Experience
1C))
Proposed
hourly
of
projects
the past
five
years,
in
this
five
clients
9)
with
Japanese
rate,
an organized
cost
pluS
process is
manner
cli
automotive
floor
total
number
assembly;
this
in
area
of
five
years.
ents.
approach
alternate
list
fee section;
No selection
in
engi neer.
engineer.
industrial
and
architect,
the staff;
electrical
engineer.
structural
work
of
classification
aind
engineer,
Experience
sum,
plant.
power
building,
manufacturing,
1984.
manpower
Current
major
8)
ir
engineer.,
civil
works;
of
4)
fee,
as
etc.
but gathering
foolproof,
can provide
129
such
a
clearer
image
of
information
A/E
lumo
57
c(andidat es for
GI.F' s
1)
/Es
2)
Location
MI,
ou
of
Location
4)
Type
5)
Speci-fic ation
of
ENR
to
accor di ng
i f-f leS Associ.ates
off
heiad
and
ice
eval uati on
OHB' s
sheet
is as
MI,
Troy,
Inc.
branches:
Southfield,
GA.
3)
of
e
tin
name;
Atl1 ansta,
6)
the client.
design works;
main
the firm;
West,
and Southwest.
Architect/Engineer.
of
ranking
Midwest,
the fTirm;
in
manufac tur
1984;
44th,
ing 66%,
power
plant
million dollars
46.3
15%.
(design
contract)
7)
manpower
Current
architects,
40
Cu rren t
8
in
past
five
(Hircshima
11)
Fee,
1.2)
Other
on
24
maior
million
Ex--perien(ce
Mazda
90
147 mechanical
1 oad;
work
Ex per i ence
projects,
10)
o-f
engineers,
staff;
total
structural
765,
engineers,
engineers,
proj ects.
main cli ents are Ford
amounrt)
(all
classification
and 54
125
83
industrial
.
erig ine
9)
civil
engineers,
electri cal
8)
and
SF,
and
ect s
proi
(clients)
1658
General
of
mill ion
(oro i ec:t
Dynamics.
automotive
GMFord,
VW,
assembly;
22
and Nihondensou
years).
with Japanese
plant).
NEC
clients;
Nihondensou
(Southfield),
(GA).
3. 25%
comments;
the
1arqest A/E
130
among
Detroit
A'/Es.
3-2-2 Desi gn Stage:
Important
"Engineering
the
3-2-1,
during the
and Design, " and
Development
stage is GIF.
Jan.
events
1986
design stage are those such as
"Bui I ding Permi ssi ons, "
Process
Chart.
The main
The main jobs of engineering
and
finished
in
Jan.
Figure
actor on this
and design
1987.
issuing various permits regarding
in
began in
KY is responsible for
environmental
city planning,
policy, and construction.
Engineering and Design:
the
After
architectural
contract
schematic design through discussion
Though GIF
with
with
OHB,
TMC
has had much experience both in
GIF started
assisted
by OHB.
automotive plants and
with Japanese clients, OHB's role as a bridge between TMC and GIF
is
important
higher
because
involvement
in
of
communication difficulties, and TMC's
design than other Japanese clients.
began at
The schematic design phase
1986 and
almost finished in late Feb.
design, OHB started
Feb. 27.
in
selection
of
1986.
of Jan.
Using the schematic
general
contractors from
Schematic design and design development phases finished
late Mar.
began and
1986.
finished
working drawings,
drawings
the
the beginning
total
categories;
mechanical,
After that, the
construction documents phase
in
During
Jan.
specifications,
more
than
architecture,
and
1987.
1500
bid
documents.
which are classified
steel
electrical.
preliminary cost estimation.
and
this phase, GIF made
GIF
into five
structure,
does
foundation,
quantity
GIF divided the bid
Working
survey
documents into
47 to manage the design process for the fast track program.
131
and
of
One
for the facility
division
In
members.
TMC
division,
the
registered
a
has
about
which has
engineering office,
which has about 200
Bu),
Kankyou
(Shisetsu
construction
maintenance and
including
environment
100 staff.
staff
design and
Because TMC has
groups having
sophisticated planning and facility
has a large
it
that
is
TMC
of
pec:Lliarities
the
the knowledge
and ability to do everything of an A/E's functions for its plants
TMC's
in Japan, the level of
the plant
design i s
one of the heaviest among
design is
time,
the same
one of the reasons to select
of
Toyota KY plant
a Japanese design-builder
of building
experience
At
GIF's clients.
in the
heavy involvement
TMC's
to cover the lack
and requirements for
involvement in
development
in the
U.S.
Though TMC
is a competent company in engineering and design
in
the U.S.
industrial
clients
client
organization
client
corporate
industrial
classification
of
industrial
ordinary
representing the division
engineering,
plant
requiring
ordinary major
be an
According to the
76
the major
Lefebvre,
by
has
a planning group
facility,
a corporate
the coordinator of the
among the division, top
management,
for the Toyota KY Project may well be
though TMC
ordinary client,
this
the
group,
construction
development of the project
35
situation
TMC's
and A/E.
like
may well
it
Japan,
for the facilities in
communicates through OHB
with GIF.
While TMC
is
famous for
its
Just-in-time production
it is one of the leading companies which employ the Total
Control
program.
TMC
applies the
132
system,
Quality
TQC program to all phases of
the
company
operations,
procurement,
such as
and construction.
management,
production,
sales,
Feigenbaum argued
rather
programs should focus on defect prevention
that QC
than
Though his proposals did not impress American
inspection.
corporations, his basic ideas were accepted and modified in some
parts by many Japanese corporations including TMC.
special
features of
for various steps in
(VE)
engineering
the intensive use of
value
company's operations
plant construction caused some stress between TMC
including its
and American
the TQC program,
Among many
construction industry during the project.
TMC's policy, applying the TOC program for
its construction,
Japanese automotive plant construction
is unusual
even in
projects.
TMC has developed the application of TOC for
management
of construction by long time association with selected
general. contractors including OHB in
selected general
respond to TMC
Jzpan.
through long time experience with TMC's projects.
TQC program for
the construction works well
the long term relationship with limited
project
general
by
contractors in
the excessive application of the TUC program for the new
in
the U.S.
This aspect will
caused some stress among
be discussed further
Construction Stage.
in
in
the project members.
section 3-2-4,
Even a Japanese contractor that has no prior
experience of TMC's project would
difficulties
OHB and other
contractors have developed their own programs to
Because TMC's
Japan,
its
certainly
have some
responding appropriately with TMC's requirements.
GIF, supported by OHB,
basically does its
133
design and engineering
GIF's surprises in the association with
Possible reasons for
follows:
TMC are as
1)
GIF's
lack
of
previous experience
2)
TMC's lack
of
experience with
projects.
TMC's
and
program
the fast-track
Differences of business relationships of clients with the A/E
between
4)
of
the U.S.
in
construction
3)
things for
interaction with TMC.
its
in
GIF
there are many surprising
but certainly
works well,
Japan
and the U.S.
system including
Japanese management
system of
Group decision
TMC's.
5)
program
and
mismatch
stage.
and design
usual
in
Though
program
their
flexibility
a
is
costs
it
TMC understands
traditional
it
has
management
space efficiency,
auto manufacturers,
tentative
little)
more
the
important
have to
items that
some
of
are
include
items.
conceptually,
instance,
the engineering
Therefore the
very detailed analysis for
some undecided
program
change orders during construction
(though
the
TMC and GIF,
and GIF at
OHB,
program.
drawings
tentative
than
Many
fast-track
the TQC
the fast-track
VE with
for TMC,
generates some stress
of
as a part
between
buffer
as a
intensive
of
VE
program.
the fast-track
though OHB works
Even
inherent
intensive
between
Some conflicts
had
which
has caused
TMC
for
is
a
to
drawings for design changes.
134
its
adjusting
For
construction.
goal
typical
lose flexibility
In
fast-tack
in
difficulties
some
style
the
of
features
special
the
Japanese
for
of
fast-track
program.,
of
construction
defining the building service equipment,
easily into each shop,
building
layout
designed during
efficiency
Therefore,
of building
the fast-track
in
VE on
intensive
program,
that
equipment
service
be
will
to get space
TMC tried
the shell construction.
through
plumbing,
gives flexibility
space that
should have enough
the connections
for
as HVAC,
the building service equipment need to be
as one system.
connected
such
can be divided relatively
Though the building shell
and M/E.
without
begins
shell
building
the
stage of design.
the early
As
a result, this caused costly joints of building equipment between
buildings.
The
slow decision
of
commitment
in
the
has many
needs minimal
delay of
VE
disadvantages than
A/E.
1)
2)
of
process
fast-track
program
by the excessive use
more
cause
program,
the client
between
at
cultural
the design
and
stage related to
follows:
process for
information or
Japanese clients'
plant
in
construction
the fast-track
difficulties
differences are as
provide some
inefficiency
in the TQC
V/E
the
process may well
may cause some frustrations
The complicated
some
advantages by VE.
Some cause for
cultural
in
but
less
and
or
the office
from appropriate timing
Besides the complexity
difference
Intensive use of
change orders,
decision
TMC
GIF creates
and
advantages in
decision
group
and
of
procedure
especially in the traditional
development
of
to OHB
authority
fast-track program.
framework
that
making
the A/E
to ask
Japanese clients to
to give permissions.
unorganized
135
manner
to request
design
c han g? e s.
3)
Di fference of
4)
Different
For
language.
conceptions on
the same words.
OHB, TMC's policy of heavy involvement in the design and
construction of the Toyota KY Project
important
than
the most
do the design and construction of
OHB's goal
new facility
of
satisfactory quality
requirement.
the
within the budget and
service that fulfills
Coordination between TMC, GIF,
general. contractors is
be the most
rather
is to satisfy TMC by not only providing the
schedule but also offering appropriate
TMC's
one of
reasons to become the design-builder by itself
to have Citadel
project.
is
important
a very complicated matter;
factor
and the
this
may well
why OHB got the project from TMC.
Project Per-missions:
Kentucky state and Scott County governments are responsible
for
approving the project,
checking various issues such as city
planning, environmental policy, and building design and
construction.
Time and
the complexity of obtaining permits are
very important for a short--schedule project.
selection stage,
and OHB.
all
Assistance
Even at the site
permissions were studied carefully
and some simplification
of permission
procedures by KY were considered as an important
incentives for
1)
by TMC
part of
TMC.
City Planning Act:
As explained in
the site
decided to rezone the project
planning commission,
selection stage,
site
Scott County
area by itself.
consisting of Scott County,
136
Actually,
Georgetown,
the
and Stamping
Sadieville,
influence on
has a direct
(more
(I-1)
zone
industrial
size
administers comprehensive
building permits and others.
zoning,
for
Ground,
than or equal
most 50 ".)., set back
back),
and
Only the zoning ordinance
includes such factors as minimum
usages.
and side,
(at
25 feet for
No serious obstacles exist
in
the zoning ordinance for the project.
2)
Environmental
Protection Act:
Environmental
protection
for industrial
regulations are complicated and
building developments.
time and complexity to obtain environmental
selection stage,
the site
lot
building coverage
acres),
(50 feet for front
allowable facility
very important
the regulating
the Toyota KY project;
to five
plan,
the start
Through
regulation permits at
of building construction was
delayed by one and half months because of the delay of obtaining
EPA permission.
KY does not have a State Environmental
which many other
Impact Statement
through the time-taking procedures
hearing,
etc.)
(not
Department
Federal
(EIS)
(SEPA),
TMC does not
or to go
(public announcement,
which are required by SEPA
KY requires developers to get
3-2-2
Therefore,
states have legislated.
need to make an Environmental
Policy Act
in
some other states.
the permissions shown in
including those at the plant operation stage)
of Environmental
law,
Protection
such as the Clean Air Act,
in
KY.
applications and
of
Waste Management,
157
Water
from the
Act,
and
The Division of Air
and of Water
issue permissions individually.
table
These are based on
the Clean
the Resource Conservation and Recovery Act.
Pollution Control,
public
The
evaluate
Required
Table 3-2-2
Permissions Regarding Environmental
Construction Stage in KY
:1.
of Air Pollution:
A.
Control
:
Persmissions
Administrative
Division
Comments
source and
Air pollution
Construction
:
Permit
Policy or
:
construction
pollution
of air
control
:2.
:
:
:
:
Prevention of
:
Significant
:
Deterioration
(PSD) Construction:
:
Permit
:
:
facilities.
Similar permission to the
above. Some criteria are
PSD
different from 1.
is
applicable
permission
for facilities that
prodece more than 250
ton/year pollution.
B.
:3.
Hazardous Waste
Sources of
of Waste
Management
:
:
Generator
Registration
:
C.
of Water
non-poison
: waste 1 ton/month or
poisonous waste i kg/
month.
:5.
Hazardous Waste
Facility Permit
: The following facilities'
: construction and
:
:
:
a.
b.
c.
Storage
Treatment
Disposal
:
operations.
:1.
:
:
:
:
Construction of waste
water treatment
facilities.
:
:
Operation of waste water
facilities.
:
Waste Water
Facility
Construction
Permit
Waste Water
Facility
Operating
:
Permi t
:2.
:4. Flood Plain
Construction
:
Permit
: Change of natural
waterway or flood plain.
Source:
138
OHB's internal
paper.
permit
construction
the most
is
(A-1)
3)
permission for
building foundation work.
of
TMC to obtain before the start
important
Construction Permissions:
and the local
state government
The KY
The applicable law is
issue building permits.
Building Code, the National
achieve TMC's
Electrical
and
government check
the Kentucky
To
Code, and others.
schedule, TMC and OHB studied
short construction
the time and complexity of obtaining building and construction
permits as well
of
as the possibility
phase,, GIF applies for permissions;
Department
at
During the design or construction
selection stage.
the the site
the fast-track program
on the other hand,
of building of the KY government
is
the
responsible for
issuing most permissions.
A fast-track
can get partial
program is
possible in
permits according
KY because developers
The
to the design progress.
following six permits are needed for developers to get
individually:
1)
Foundation permit;
foundation,
fire
This permit
machine foundation,
is
for the building
and foundation pile.
Preliminary
sprinkler plan drawings and plumbing drawings related to the
foundation are required for
regarding environmental
necessary.
Individual
the application.
permits
regulations before the application
is
application for building foundation from
the machine foundation, or individual
building in
Getting all
one project that
application for each
has several
buildings is
possibletoo.
Given that the Department
of Building in
1;9
KY and GIF
keep
continuous and close contact,
days after GIF's applications.
permits within several
2)
not
Shell Permit;
This permit is for the building shell that does
such as structural
works.
finish
include interior
roof,
steel,
Improvement
Further
or exterior
divided applications,
are possible.
wall,
Permit.
3)
Interior
4)
HVAC Permit.
5)
Fire Sprinkler Permit.
6)
Electrical.
Building does not do plan to check for
The department of
equipment or production electrical
building service electrical
Resident inspectors inspect and approve the
equipment.
works.
electrical
Another
'grading
This
the following permissions:
applicable for
condition is
issue
Building will
the Department
advantage for TMC is the non-requirement for a
permit
in
KY,
that
is,
site
clearing,
grading, and
excavation can proceed without permission.
KY appointed an officer
clerical
procedure
for the project to facilitate the
of permissions.
KY
also suggested that TMC
submit applications to the local government
government
and the state
simultaneously though usually developers submit
applications only to the local government.
This simultaneous
application facilitated
the permission procedure because approval
by the state government
is
necessary for the local
to
government
issue permits.
Permissions for the installment of
flexible.
If
production
safety by OHB's
KY judges the site
140
equipment
is
submission of
machine
laVoLIt
has some past
that
certificate
of
Japanese
the
Department
waste water
the
for
examines drawings of
scape work
does not
necessary;
the state
boilers,
need
government
141
the permissions
for
of
and
plumbing
the Occupancy Permit;
compressors,
permission;
design
the production by obtaining
before
Occupancy Permit
a
the procedures during
Protection
TMC can start
Japanese
no problem.
TMC needs
Environmental
drawings;
Temporary
or
the site,
or has
the U.S.
in
is
authority
as follows:
are
construction
occupancy permit.
records
permissions
Other- important
and
the
without
at
methods
safety
by the signs of
can start
installment
equipment
and
and
the retention
sends all
resident
fuel
tanks;
pond
KY
land
won't
inspectors.
be
3-2-3 Procurement Stage
events during
Important
as
(including labor relations)
Contractors,"
"Selection of General
On this
GIF,
GCs,
and Subs,
KY government
and labor
Process Chart.
role in
OHB assumes a very important
stage,
Out,"
"Bidding
the Development
Figure 3-2-1,
relations shown in
stage are those such
the procurement
coordinating
negotiating with the AFL-CIO and the
and in
objectives of
Different
as an agent of TMC.
TMC,
and the AFL-CIO are a cause of a labor-management
OHB, KY,
battle.
Selection of GCs:
OHB selected six general contractors from
contractors in late Mar.
schematic design.
1986, after the finishing of the
Before the selection of
as a design-manager
itself
construction
13 as area general
GCs, OHB defined
who does not employ any hourly wage
on its
workers directly
payroll.
OHB also decided a
hiring plan as the merit shop after the investigation of
relations in KY.
All
labor
selected GCs except for Gray Construction,
All
an open shop contractor in KY are merit shop contractors.
contractors are capable of
union workers
in
case of
dealing with self-performance by non-
troubles with the union.
OHB contracts with the general
with guaranteed maximum
between
cost.
OHB and NIC, a general
the AIA form.
In
overhead and profit;
means site
office
contractors by cost-plus-fee
Appendix
1 shows a contract
contractor.
the contract,
This form is
draft
based on
Schedule A means the contractor's
Schedule B means personnel
cost;
Schedule C
expenses.
OHB uses a procedure manual
142
in
contracts with general
contractors.
The procedure
Manufacturing
following
Facility
manual,
Project
"Toyota
Procedure
Automotive
Manual,"
includes
the
items:
1)
Scope and
2)
Provided
3)
Cost
Procedures -Project
Project
Purchasing.
Services.
Code Requirements.
4) Planning and Scheduling.
5)
Document
6)
General
7)
Accounting
Control.
Contractor
Report
Invoice and
(Forms and
Application for- Payment.
Instructions for
Submission
of
Monthly Progress Report).
8)
Cash Forecasting.
9)
Quality
Control
Procedure.
10)
Contractor/Subcontractor
11)
Site Security
Scope and
Advantages for
OHB
New-Hire Safety Orientation.
Responsibilities.
to select
the six
general
contractors a re
as follows:
1)
it
can reduce the risks
contractor
that might
of
losing control
act freely,
over
in case of the
a general
single general
contractor.
2)
in
the case of
limit the damage
unit
3)
of
area
OHB can
4)
of
strike
or
a slow down
and cope with
it
by the
union,
relatively easily
OHB can
because the
smaller.
reduce the
contractors.
number
is
a
risk
of
collusion
among
The possibility of collusion
general
contractors
Dividing the project
is
two or
into six
general
will
increase
the
three.
areas, OHB could
143
if
choose GCs fr om
general
13 selected
Because most
contractors.
that
contractors
could contract the whole project are closed shop contractors,
merit shop contractors capable of contracting the whole project
are very limited.
OHB to
The disadvantages for
are
1)
as
contractors
general
follows:
OHB's coordination work
For
necessary.
between the general contractors is
areas,
between
joints
instance,
need
building service equipment,
2)
six
select
especially of
OHB's coordination.
Redundancy of common information
OHB
areas appears.
all
for
has to explain or provide the same information to six
contractors.
3)
in
Increased difficulties
became apparent
relations
getting a consensus regarding
labor
agreement with the AFL-
at the project
CIO during construction.
OHB defined
itself
as a design-manager
construction
industry by cutting off
the operational
to American
part of construction
executional
from the American
attack
avoid an unnecessary political
to
tried
because it
or
contractors,
and
probably because OHB does not have enough Japanese managers,
engineers,
or own forces for
organization
is
explained in
the self
performance.
OHB's project
Project Organization.
section 3-3,
Bidding Out:
OHB set the procurement policy of
all
subcontracting rather
than general
the general
contractors'
Therefore most subcontracts are fixed price
lump
sum
and unit
price.
Usual
bidding
144
contractors as
self perform.
contracts such as
process of
the project
is
as follows:
selects several
contractor
qualified bidders.
1)
A general
2)
The
3)
OHB checks the evaluation and makes the report
TMC.
general
evaluates the bids.
contractor
Japanese and most
reports to TMC should be written in
All
the bid for
of
of them should have data or value engineering reports.
4)
TMC approves the bidder.
Report making work of
amount of OHB's work.
3)
above,
As TMC's
account for a substantial
tradition
competition of suppliers and contracts in
in
uses price
it
Japan,
but
every case,
sometimes price competition principles do not work in a fasttrack program because general
equal
to two bidders in some cases, because of the strong
linkages of several
of
contractors cannot get more than or
some sequential
contractor
of
and surprising
Then, some future work that is part
jobs.
work
may automatically be done by the
the up front
works.
This kind of
situation
for TMC, so the phenomenon may well
is
new
cause TMC's
possible frustration.
The basic principle to decide the bidder
lowest price.
original
course, the
But OHB's hiring plan was affected by the AFL-CIO,
even before the project agreement
the project
is, of
from a merit
hiring
(PA) in Nov.
1986 that changes
shop to an almost union shop.
The
plan before the PA actually favors union
participation by guaranteeing that
45
should be union contractors.
at least 50 percent of bidders
Labor Relations:
A strong construction union is
145
a special feature of the
construction
American
aspect of the Toyota
important
of the labor
thesis,
industry.
of
relations
A labor-management
covers from the beginning of
this
the negotiation between
(PA)
OHB and the AFL-CIO to the project agreement
from a
the project
that changed
to a closed shop in
"merit shop"
the
the scope of
out of
is
an
Though the analysis
KY Project.
the project
is
battle
Nov.
1986.
TMC, OHB, KY., and the AFL-CIO have different objectives which
relations of the project complicated.
make the labor
The "merit
shop"
a market where union and non-union
reflects
contractors work side be side.
schematic structure of
a merit
Figure 3-2-3-1
81
shop.
of
As a background of the labor relations
Nissan Smyrna Project,
but the GM Saturn
AFL-CIO that
agreement."
was built
the
the project,
with a merit
shop,
Project signed a project agreement with the
made the project practically a closed shop.
Saturn project pact is
tier shall
Tennessee,
shows the
"all
The
execution contractors of whatever
sign, accept and be bound by the terms of this project
This includes agreeing
the sole and exclusive bargaining
"to recognize the union(s) as
representative for all
craft
employees on the project" and using their hiring halls.
Figure
3-2-3-2 shows the difference between a merit shop and
81
the Saturn project pact.
Because non-union workers can register
for the project
work for
in
a union hiring
hall,
an open shop contractor
in
they have a chance to
the project,
but
the open
shop contractor has to use both union and non-union workers.
Though union workers have a chance to work
will
be assigned to the jobs after
146
all
in
the project,
they
union workers are assigned
SUBs
--
LOWEST BIDDER
--- BIDDERS
NON-UNION
CONTRACTOR
UNION
CONTRACTOR
FIGURE 3-2-3-1: DIAGRAM OF MERIT SHOP
147
UNION HIRING HALL
NEW APPLICANT 0
LIST
0OOO---
0000--I,
2,3,'(
~~
1
1,v-
1
00),0)1)
0
2c
SATURN PROJECT PACT
MERIT SHOP
UNION WORKER
O0
NON-UNION WORKER
UNION CONTRACTOR
NON-UNION CONTRACTOR
FIGURE 3-2-3-2
DIAGRAM OF MERIT SHOP AND SATURN PROJECT PACT
148
workers share the top portion
because union
the waiting list
For open shop contractors, they lose a chance
in a hiring hall.
workers,
affiliate
to hire their
of
but on the contrary, they have
to use many union workers who have no previous experience or
Open shop contractors also dislike
to the companies.
loyalty
workers than the usual
affiliate
rate for their
A higher wage
workers being unionized.
long term affiliate
their
open shop rate is
another cause for the open shop contractors to hesitate to
in
participate
the project.
The nature of
CIO is
very similar
beginning of
a project agreement
between OHB and the AFL-
to that of the Saturn pact.
From the
the negotiation about the Toyota project pact, the
union's policy was to use the contents of the Saturn pact for the
Toyota pact.
Finally, the AFL-CIO got it.
As the Saturn project
pact does not match
the labor
in middle Tennessee where about 95% of construction is
55
the Toyota pact does not
contractors,
shop
performed by open
situation
match the labor situation of
the Lexington, Kentucky, area where
75% of the construction work force is non-union now, up from
42
Some estimates indicate that open shop
ago.
about 30% a decade
1980,
in
60% of the national total
12
compared with only 30% as recently as 1973; the national trend of
construction accounted
labor relations
in
for
construction is
similar
to that
in
KY.
Though many meetings have been held between OHB and the AFLCIO,
and between other related parties,
national
publications regarding
some important events or
labor relations of
the project
from the beginning of the construction to the project agreement
149
are as follows:
1985;
Dec.
plan of
OHB decided the hiring
the project as a merit
OHB made the decision after a careful
shop.
KY and also after several
qualified labor in
survey of the
with KY and
talks
Building trades did not oppose the merit shop so much at
TMC.
this stage.
1986;
May,
Local
union were going to sign OHB's proposed project
free hiring of
agreement that included non-strike, non-lockout,
labor,
no contesting employers'
installment
or suppliers'
enforcement,
permission for TMC
of production equipments,
and non-
objection against prefabricated construction methods.
other hand, the AFL--CIO sued the Budget
legality
of
June,
1986;
Director
On the
of KY about
the state incentives for TMC on May 7.
The Building and Construction Trades Department
(BCTD) of the AFL-CIO rejected OHB's project agreement.
decided a project boycott on June 19.
Then, it
Georgine, the president of
In
BCTD, sent appealing letters to the president and senators.
KY,
two building tradesmen
the union's suit
against KY.
On the
local unions proceeded to sign a revised local
agreement that
July,
to allow them to
petitioned the court
the court about
intervene in
other hand,
the
1986;
included most
BTCD's
of OHB's proposals.
objections against the local
towards the agreement with OHB became active.
with Georgine from July 2 to July 9,
reach agreement.
After
the meeting with BCTD,
continue the project with the merit
with TMC, KY,
however,
and six area general
150
unions' movement
OHB held meetings
they failed
to
OHB decided to
shop based on the agreement
contractors.
OHB issued a
letter
of
ENR,
July
He
trades
a union
are
on
works
foundation
15.
July
On
"Building trades target Toyota."
the negative reactions
He cited
Georgine.
and
caisson
Krizan reported
17,
explained
"local
of
intent
local
of
building
it
against
comment
executive's
contractor
agreeable to
unions
merit
that
shop."
According to the article, BCT's policy was that it would not give
Toyota anything better than Saturn.
the
pact,
the Saturn
In
union
to refer workers to jobs only through
union had the right
halls.
in The New York Times, on Sept.
Rebirth Mired in Labor Dispute,"
42
8.
Industrial
Noble reported the project as "Town's
1986;
Sep.
of
differences
He explained the basic
between
the objectives
OHB and BCTD, though both parties express that their objectives
are
for
the Labor
members of
House and
Senate
time, urged
to
1986;
and
improve
to
the
its
business
the Kentucky
could
image.
workers
mar
Around
this
announced
a
Toyota products.
buying
smoothly
progressed
The construction
of
union effort
the sheet metal
against
several
article,
his
Committees
Industry
by Georgine,
campaign
national
According
complained that
effort
Kentuck:'s
Oct.
workers.
Kentucky
despite the
continued pressure by the AFL-CIO.
Nov.
TMC's
1986;
The union drew 500 for a rally
policies
labor
Washington
against
on
TMC
challenges to
KY's
incentives
in
Nov.
New
in
17.
TMC.
also
The union
21.
waste
water
Kraker
in
the Japanese embassy
of
York on Nov.
the plant's
for
front
to protest OHB and
drew
The
union
demonstrate
continues
discharge permit
reported
151
1,500 to
the project
legal
by KY,
progress
and
as
union pact, " in
"Tovyota plant plows ahead wit.h no sign of
31
had progressed
project
The
Nov.27.
Suddenly,
a picture of
assembled steel
a Plant
in
(ABC),
great deal
structure frames.
an agreement calling
(except contracts
43
On The New York Times, Nov. 26, Noble
Kentucky."
Workers To
Agrees on Union
as "Toyota
He cited a comment of
executive vice president of the Associated
Contractors
plant
for the project
workers
on Nov. 25.
reported the agreement
Construct
states "Kentucky
OHB and the AFL-CIO reached
for the hiring of union
already held),
high pace regardless of
some union despite boycott,"
workers on site,
1 10)
as a comment with
He
state.
the union's pressure on this
has more than
at a
ENR,
Bennet,
Building and
reporting that the agreement
would create "a
Three provisions of the agreement
of discrimination."
are as follows:
1)
"makes
It
a strong commitment
to the preference to employment
of Kentucky residents."
2)
"confirms that there will
It
be no discrimination
on any basis
with regard to applicants to employment."
3)
"contains a unique three-member
It
one each from management
to assure that
and labor,
employment review board,
with an impartial
chairman,
will
referral
any questions regarding employment
be resolved expeditiously and fairly."
Dec.
1.986;
Recio. Usui,
flops,
The project agreement was to take effect
and Krizan wrote the agreement
signs union pact at
KY plant,"
reported Georgine's and OHB's comments
sources'
Dec.1.
comments
in
Japan.
in
,
as "Toyota flip--49
ENR, Dec.4.
They
ABC's comments,
Krizan and Schwartz
152
and
reported
the
i mpact
of
the PA
stated
"Kentucky
former
Secretary of
that
Project
our
The
article
reported
chair
Kentucky
is
the
"We
as follows:
Corporation,
project
are very
our
reached between
in
spirit
a
Kentucky
of
representative
and
We
Trades Department.
and Construction
continuing
to
would
Dunl1op
has been
the Ohbayashi
Manager,
the Building
to
the accord
understanding
an
stream."
T.
John
Labor
on
comment
TMC's
mid
have a
ever
board.
review
employment
may be thei largest
implemented
and also
new ground, "
pact breaks
"Toyota
project
agreement
project
happy
as
of
look
forward
cooperation
and
51
harmony."
OHB's
explanation of the
union is as follows:
support by
afraid
of
possibly
the local
of
Japanese
shop
the merit
the labor
disputes
as trade friction
the U.S.
place
of
Finally,
labor
if
in
union's
attack
in
the union
of
developing
KY.
into
the construction
OHB tried
50
shop had
153
against
TMC
or
OHB would
against
have
TMC/OHB
had
Additionally, OHB does not
a
political
problem,
industry between Japan
to avoid KY's
disputes.
the
gotten strong
the U.S.
attacks
with
workers, OHB was
industry and
corporations
-theborder
not expanded beyond
want
the
the agreement
for
the merit
construction
an escalation
other
continued
Though
reason
such
and
continuing to be the
3-2-4 Canstruction Stage
program
probably the
is
construction stage of
simple
relatively
the fast-track
and
of
change
there
is
program,
with
order
Smyrna
and the American
to get
and
frame,
quality
as of
but
control
smoothly
Jan.
1987.
to use value engineering
(VE) in
every change
efficiency, though
in
the cost of
If
many cases
the decision on
a VE case
exceeds the cost down by the VE,
TMC will
from not
workers,
the subcontractors,
contractors.
This mechanism
manufacturing
than
manufacturing
is
of
loss
cycles, the
one time
only
also the bad effects caused by de-motivation of
construction
cost
suffer
in
a very
cost
loss by VE.
clearly
construction.
the cost
savings by VE
This multiplier
154-
in
automotive
automotive
production cycle,
down
by VE
in most
effect
the
general
different
Because
repetitive
time exceeds
total
is
and the
it
loss time or
waiting time due to the delay of
but
But
system.
is practically unable to apply VE.
the cost
in
the TOC program, the fast-track
construction
the maximum cost
many directions
has progressed
Project,
easy to
is
steel
cost control,
some friction between
TMC tries
from
structural
The construction
the Nissan
construction
The project
are accessible
orders,
in
complicated because
is
many contractors.
is
project
aspect
management
the
at
Though this
physical
a one story
is
are complicated.
comparison
of
buildings
the structure
management
terms
topic
interesting
the project.
and
because
construct
most
the construction
engineering,
of
in
TOC program to the fast-track
TMC's
The application of
in
one
even
or
case will
of
VE
if
the
several
exceed
the
is very rare
in
on
c(nstructi
and varies
tremendouslV
the
with
of
subjects
the
VE.
In
emphasized
construction and de-motivation
to eliminate delay of
of workers waiting for decisions.
be different.
may well
execution stage, especially after
decision
automotive manufacturing
During the construction
the completion of work
of supervisor's decision making may well
the priority
drawings,
of
The priority
making on the production process between
and construction
instant decisions is
importance of
program,
a fast-track
be as follows:
1)
(not
quick and sufficient
promptness of the decision;
necessary to be the best).
2)
avoiding rework;
3)
safety,
preventing from overdoing.
high
cost effective,
supervisor's decision making
1)
or the
the lowest cost/quality,
quality.
In
etc.
any case,
In
construction sites,
decisions guarantees cost savings and
buildings because it
promotes productivity
construction workers.
both
in
importance of
to
automotive manufactures never give priority
promptness of decisions.
sites
be as follows:
quality/cost.
3) safety,
of
may well
the maximum cost efficiency;
highest
2)
of the auto-manufacturing
priority
On the other hand,
etc.
quality,
the U.S.
All
most promptness
good quality of
and motivation of
managers and engineers in
and Japan will
quick decisions in
155
certainly
construction.
construction
agree on the
Samelson
and
Borcherding's
Construction
imany
study about "Motivating Foremen on Large
53
They summarizes after
idea.
Projects" supports this
foremen
bidding for any purchase,
so general
prefers
contractors bid out most
price contracts with
and make lump sum or unit
contractors have to negotiate the
But general
cost of change orders with
out.
problems for
of pursuing maximum cost efficiency
tradition
subcontractors.
important
and rework.
are waiting for decisions
TMC's
jobs,
that the most
interviews with foremen
subcontractors rather
than bidding
Sometimes the costs of change orders counts for 50 '4 of
original
contract
in
the project.
the
Though the principle of VE
and TQC is recently widely accepted by Japanese construction
companies including OHB, it
contractors.
is not popular for American general
Their unfamiliarity
with VE and
decision on VE cases may well
VE by American
TMC's slow
cause a negative response against
contractors and sometimes even by OHB.
The differences of
the Japanese quality control
system from
the American system cause some friction between TMC, OHB, and the
general
contractors.
OHB does not try to use its QC program in
the U.S. because OHB knows the differences between the
QC system and the difficulties
in applying the Japanese system
for American subcontractors or general contractors.
quality of the final
inferior to that
One of
control
American
products in
the U.S.
If the
were apparently
in Japan, OHB would use its QC program actively.
the special
features of
Japanese-style QC is
process
methods that require many checks during the production
process rather than
inspecting the final
156
products only.
American
general
contractors do not accept Cor understand the concept of
American
process control.
general
for the subcontractors'
unnecessrary responsibilities
general
contractors'
of
contractor
inspections,
be responsible for
will
subcontractor's
system in
of the setting of
most work,
construction.
for
anchor bolts
For example,
structural
be checked by erectors before their work, if
In Japan,
done by another subcontractor.
of inspection
General
accuracy
steel columns will
the bolt setting
general
is
contractors are
contractors should keep the record
quantitatively in
many cases.
general contractors do statistical
evaluate subcontractors and
works
anchor bolts before and after
expected to check the setting of
the concrete works.
a subsequent
job functions as a quality
the former's
American
In
the previous subcontractor's
inspection of
at the beginning of
the general
the jobs that the subsequent
claim.
definitely
subcontractor will
control
contractor approves some defective jobs
through the
a subcontractor
jobs by
inspections on subcontractors jobs during
a general
If
the tasks.
to avoid
contractors try
Moreover, many big
analysis of the data to
to improve construction process using
the Japanese QC program.
In
labs for
the Toyota KY Project,
structural
steel.
services are quite usual
other subcontractors in
OHB uses inspection firms or test
geotechnical,
and concrete.
These
because these works are not checked by
the construction process,
and they are a
the legal requirement. OHB also provides basic survey
79
General contractors are responsible for other quality
control.
part of
control
work and OHB witnesses their
157
works.
This system is
quite
usu:Al
U.S.
for
gceneral
contractors and a construction manager in
But TMC tries to use its OC program
construction.
in
the
the
construction process.
For
program
the client satisfaction, OHB tries to use TMC's QC
as much as possible
requests).
As expected,
very negative.
responding to 30"4 of TMC's
the general
This causes TMC's
OHB to inspect several
however,
(maybe
contractors reactions are
frustration.
Then,
TMC asks
works directly as OHB does in Japan,
OHB does not do so by itself because it has to avoid
unnecessary responsibility
avoid disorder at
by approving subcontractors jobs,
the site.
-158
and
3-3 Project Drganization
This section explains the project organization including
contract types.
Three organizational
used to explain the organizational
project organization is
explained
showing the roles of each member.
charts of
structure.
in
the project
Especially OHB's
detailed organization charts
Appendix 2 shows the operation
charts at every project development stage.
These charts
summarize the interaction between TMC,
GIF, GCs,
and the AFL-CIO.
OHB,
Subs,
Because the history of organizational
3
-2-3,
Procurement stage,
KY,
formation
including contract types is explained in 3-2-1, Planning
design stage, and
are
/Pre-
this section mainly
describes the structure of the project organization and roles of
the members
in
OHB.
Figure 3-3-1
shows the outline of
and contract types of
of the definition
in
this
General
structure is
either.
systems is
a design-build and design-
because they basically
do not use their
A contract between TMC and OHB is a cost-
plus-fee contract because of the fast-track program.
contracts GIF by a percentage fee contract
OHB
with a fee-adjustment
clause for the project cost changes by change orders.
between OHB and general
guaranteed
Contracts
contractors are a cost-plus-fee with
maximum general
by the general
done
contractors also have some functions of
construction management
own forces,
structure
Though detailed explanation
of the project organizational
section 4-1.
manage type.
the project.
organizational
contractors'
cost.
All
subcontracts
contractors are a lump sum or unit price
contracts.
-159
- - -
CLIENT
COST-PLUS-FEE
---
DESIGN-MANAGER
PERCENTAGE FEE
COST-PLUS-FEE
A/E
- - -
LUMP SUM/
UNIT PRICE
FIGURE 3-3-1
OUTLINE OF PROJECT ORGANIZATION AND CONTRACT TYPE
OF TOYOTA KY PROJECT
160
OHB
and
general
reasonable
contractors,
OHB has passed
management
method,
1)
in
contract
the case of
price is
above
2)
calculation
price
unit
the unit
is
percent
is
as follows:
of
minus
the unit
contractors,
TMC's
construction
must
payments of
the
orders
change
increase change orders,
cost decrease change
the base price
less
a
fast-
a
in
the new total
quantity times 20 percent
price.
Because TMC has
has a
a total
in
fee adjustment
a
after
price
of
cost
example of
the base price plus additional
in the case of
price
For
types
are the usual
subcontractors,
in the U.S.
track program
between general
GIF, and
Contracts between OHB and
and
construction
some portion of
out
with general
them.
tasks to
contractors
contract
By the contracts
contract.
was the most
design
a cost-plus-fee
documents),
(without construction
phase
Because OHB and
the schematic
after
just
contracted
contractors
too.
contract,
by a cost-plus-fee
contractors
general
with
OHB contracts
industry.
the U.S.
in
good reputation
its
or obtain
construction
Japan's
in
keep
to
are
motivation
OHB's
of
factors
Important
the project.
on
money
loses
is,
that
cost,
the project
of
of uncertainties
takd:es no risks
OHB never
completion to TMC,
responsible for the project
OHB is
Though
the
used a
lump
limited
decreased
the
new total
times
quantity
20
price.
lump
experience of
be
orders,
checking the project
practically
sum contract
very detailed cost checking
161
its
with
sum contract
for
to
cost
the check of
general
system for
general
progress
contractors.
its
during
TMC
construction,
may not be able to apply cost checking to a cost-
it
however,
checked
in
a cost-plus-fee contract
much more
large number
Moreover,
progress payments.
is
TMC.
probably are a new experience for
items to be
The number of
plus-fee contract during construction.
In
than that of
of change orders
Japanese construction,
OHB sometimes accepts TMC's change orders without extra charge.
But
in
OHB charges all
project,
this
change orders to TMC.
may be upset because of OHB's very
It
operations in
different
costs and cost changes of
the U.S.
conceptually understands this
from that
in
though TMC
Japan,
mechanism.
Figure 3-3-2 shows the organization structure of OHB for the
important decision making functions of OHB
project.
All
regarding
the project are in
has some staff
in
KY,
of
all
large amount
because TMC's
the Tokyo office
decision making functions are in
manager
but OHB's project organization
TMC's
Toyota City.
projects by OHB in
as a client
for OHB in
main office
is
located in
Detroit,
for
the general
the importance of TMC
the long-term relationship.
Detroit, to coordinate TMC and GIF.
design staff
OHB is
Japan because of the
TMC's orders and because of
of
important
Because GIF's
OHB has the design team in
OHB also has the project
a design department in
the project in
the Tokyo
head office.
Figure 3-3-3 shows the organizational
site office.
working in
1987.
There were 21
Japanese and 36 American
the Georgetown site
According
staff
Jan.
structure chart,
the
seems to be well
162
staff
in
and Lexington offices
to the organizational
Japanese and American
structure of OHB's
integrated.
The
TMC
'-----
OHE
HEf
- --
(JAPAN)
(THE U.S.)
L
TTM,USA |--------
I
/,'
GENERAL MNGR.
-
GIF
L(A/E)
-- i
FOR ALL TMC'S
PRJCTS BY OHB
AREA
LG.C.s
TOYOTA KY
PROJECT TEAM
IN TOKYO OFFICE
SUBs
L - -
(JAPAN)
(THE U.S.)
FIGURE 3-3-2
OHB'S ORGANIZATION CHART FOR TOYOTA KY PROJECT (1)
- -.
(DETROIT)
LEGEND
SURVEYORS
NSPECTORS
GENERAL CONTRACTORS
rizziziz
o :
E~]:
O :
:
JAPANESE
JAPANESE
AMERICAN
AMERICAN
(AS OF JAN.1987)
FIGURE 3-3-3
ORGANIZATION CHART OF OHB'S TOYOTA KY SITE OFFICE
(2)
organization basically
the A/E,
coordinates the client,
that
manager
construction
and the general
or sub
Because OHB has to adjust to the large gap between
contractors.
TMC and American contractors,
substructures;
OHB' s organization has two
structure and the American
the Japanese staff
structure.
staff
as a
works well
The
substructure of
the Japanese staff
mostly dealing with correspondence with TMC.
is
The other American
staff substructure is mostly dealing with the management of
general
contractors and suppliers.
The Engineering section,
which has two Japanese engineering managers, could be described
as the junction of the two substructures in OHB's organization.
81
The Project director, Ohba, seems to have two direct
77
the Deputy Project
Mizoguchi,
office;
subordinates in the site
73
Mizoguchi is at the
Manager, and Jordan, the Project Manager.
top of
of
substructure and
the Japanese staff
the American staff.
Because of
the tendency of members'
Jordan is
communication
the leader
and
difficulties
following only a substructure,
or simply
because of the matter of their personality, some difficulties of
cooperation between Area Managers and Area Engineers seem to be
the weakest point of the organization.
from
On the other hand,
learning experience for the Japanese staff,
78
79
Managers and Area Engineers are in an excellent
the viewpoint of
Engineering
situation
because of the necessity of cooperation with American
Managers,
and actually in
Appendix
OHB's site
several
areas they cooperate well.
3 describes the detailed roles of
organization.
Except
for
some managers
the Area Engineers in
the
organization, the basic structure of OHB's organization in the
165
in
To(:ota
organization
KY
Project
in
is
very
the Nissan
similar
Smyrna
166
to
that
Project.
of
Daniel 's
site
4 Alternative Procurement
methods
(including classification of
the four automotive plant development
lack of consensus or standards on terminology of
Because of
procurement methods,
build,
projects).
such as construction management,
and prefabrication systems,
it
design-
necessary to define
is
it
to discuss the advantages and disadvantages of each method.
the popularity and explicitness,
Because of
the author chooses
1
Barrie and Paulson's
(B&P)
construction management
as the text book to define alternative
in
the author developed a
Based on B&P's definition,
methodologies.
framework
Construction Management
Professional
systems in
of project organizational
Figure 4-1-3.
Because Minden's procurement
a triangular shape
38
methodology is
used to examine automotive plant construction projects in
5,
his terminology is
summarized here
that the author mainly uses to classify
section.
After a brief
Nissan Smyrna,
in
comparison
Fuji
with B&P's
the four- projects in
review of terminology,
Toyota Tahara,
Chapter
this
the Toyota KY,
Gunma projects are classified
according to the framework.
The author does not intend to cover the detailed variation
of
the project organization but to present
approaches.
If
we try to define alternate organizational
structures of projects,
chapter.
simplified contractual
For example,
the description will
easily overflow one
Walker uses 42 alternatives including two
clients, three types of design teams, and seven types of
14
contractor's appointment in Project Management in Construction.
types of
B&P uses six main types including a traditional,
turnkey,
an Owner-Builder,
and two types of
167
two types of
construction
uses
five
major
managi.7ement.
Mirden
traditional,
design-construction-management,
desi gn-bui l d ,
construc t i on -managemen t,
such
classification,
contractor-
and systems.
project organization or
Basic elements to classify
procurement methods are project participants,
between members, and
as
relationships
timing of project members' participation.
Project
participants are those such as an owner,
general
contractor,
a designer,
a
subcontractors, own forces work, a
construction manager, design-builder, and a systems contractor
(manufacturer).
Important relationships between project
participants are contractual
rather than normative.
Cost-plus
contracts, an important construction contract, are further
4
according to J.P.Frein, as follows:
classified
plus a percentage fee.
1)
Cost
2)
Cost plus a fixed fee.
3)
Cost
4)
Cost plus a fixed fee with guaranteed
5)
Target estimate with incentive fee and penalty.
6)
Turnkey proposals
7)
Construction management
plus
award fee.
maximum.
(variable conditions).
Timing of the project
contracts.
members'
participation
important element to define procurement
is
another
methods though B(P do not
explicitly introduce this idea to their definition but rather
treat
the timing as a consequence of the procurement
Minden uses this
concept indirectly
combining organizational
Minden's definition of
in
his definition
structure and its
the traditional
168
phasing.
method
methods.
by
Especially
is more explicit
than
method
traditional
members'
completion
very
follows:
of
timing
of
important
employed
of
-feature
described as
the
the concept of
is
participation
the traditional
separation
total
If
phases.
construction
is
is
the
the
because the Nissan
well be classified
method
a prime
documents
by
contractor
the A/E.
method
will
the
and
project
of
feature
be
method
the traditional
Smyrna Project
as a traditional
of
the key
explicitly,
key feature of
of
the design
the timing
traditional
an appointment
construction
between
the
of
key feature
the
that
B&P because he clearl-y states
after
the
This concept
organization
is
may
the timing of
if
Daniel's participation is ignored.
1
BI3&P's definition
of
procurement
methods is
as follows:
General
Associate
The Traditional Approach: Members of the
advocated and
have generally
of America (AGC)
contractors
Here the owner employs a
operated under the traditional method.
or Engineers) who
Architects/Engineers,
designer (Architects,
then exercises some
prepares the plans and specifications,
first
during construction.
or control
monitoring,
degree of inspection,
general
of a single
the responsibility
is
Construction itself
Much of the work may
to the owner.
under contract
contractor
under
contractors
trade
be performed by individual
actually
Although the
the general contractor.
subcontract to
of the owner's plans
normally bid upon a portion
subcontractors
are
relationships
legal contractual
their
and specifications,
is
in turn,
the latter,
with the general contractor;
directly
which
that
including
the work,
the owner for all
to
responsible
subcontracted.
is
Design-Construct or- Design-M4anage (Turnkey): Some authorities
General
and "turnkey."
between "design-construct"
differentiate
method, all
In this
them interchangeably.
treats
usage, however,
from concept through design and
phases of a project,
are handled by the same organization.
construction,
acts as a
the constructor
In the case of desion-construct,
all
of
control
single-firm
with
contractor
general.
some form of
Usually, but not always, there is
subcontractors.
In the
and owner.
between design-constructor
negotiated contract
of
a
number
by
performed
is
construction
design-manage,
case of
professional
the
to
similar
manner
a
in
contractors
independent
design-construct
Under either
management concept.
construction
under a
performed
be
readily
can
construction
or design-manage,
this
duration.
project
minimize
to
program
construction
phased
of
the majority
has been used for
form of completing project
169
process--ori ented heavy industrial projects constructed in the
Reference to E-nqineerin~q
United States in the last few decades.
of the 500 1argest designers shows that
News--Record's annual list
the design--contructors are heavily represented in the top 20.
Professional construction
Professional Construction Management:
management unites a three party team consisting of owner,
designer, and construction manager in a non-adversary
provides the owner with an opportunity to
relationship, and it
is competitive
It
in the construction process.
fully
participate
in overall design-construct time with a negotiated contract under
method and with the turnkey (designthe traditional
It usually features a number
construct/design-build) approach.
construction contracts which,
of separate lump-sum or unit-price
under certain circumstances, may prove more competitive than
If
either the general contract or the cost-plus-a--fee approach.
phased construction under
like
phased construction is used, it,
in
other methods, involves the owner in some degree of risk
overrunning budgets.
of "The Owner-Builder" because
(The author omits B4P's definition
application in automotive plant construction.)
of little
3e
of procurement methods is
A summary of Minden's definition
as follows:
Traditional Method; Typically this is the "default" method
selected in the absence of unusual project requirements or market
management capability,
constraints by owners without significant
adverse and/or required to
they are risk
if
particularly
competitively bid work.
Construction Management (CM); At the very minimum, some degree of
feed back construction
cost estimating and contractibility
management services are useful on almost any project where cost
and time are significant constraint, even if a conventional
if
However,
schedule and single responsibility contract is used.
fast-track
scheduling,
work
multiple
packages or
systems are
used, some form of CM, either in-house or by an outside CM is
generally called for.
However to use CM in this way, the owner either has to be
associated with multiple contracts
prepared to accept most risk
as with in-house or design-CM, or he must be able to
directly,
risk
negotiate with the CM to avoid an inflated
effectively
In either
premium as in contractor-CM with a guaranteed price.
inmanagement capability
case the owner should have sufficient
If these conditions cannot be
house to "manage the managers."
met, the owner is limited to design-CM with a single
general contractor, (which is essentially the
responsibility
method with enhanced value engineering), or, in some
traditional
cases, he may use design-build.
Design-Build; The main contingency factor governing the decision
to use design-build is the extent to which the project can be
defined in terms of scope and generic standards, as opposed to
without compromising quality or other
prescriptive detail,
the
for/with
Because the designer works directly
requirements.
170
c:ontractor, not the owner, the owner must have the management
capability
and/or the negotiation power to ensure that the
requirements
meets technical
project
a fair
at
these
If
price.
conditions are met, then design build may offer not only a means
of obtaining an early, competitive, fixed price, single
responsibility
contract, but also optimal fast-track scheduling
and value-engineering, owing to the high level of design and
construction integration.
(The author omits Minden's explanation of "Systems Methods"
because of little
application in automotive plant construction.)
minor differences between Minden
Though there are several
and B&P's definition
categories,
regarding
traditional,
design-build
construct/turnkey),
defined.
methods,
three
basic
(design-
and construction management,
The concept of the traditional
Because
them.
procurement
are similarly
method is common between
of Minden's orientation to public agencies that
need accountability,
especially of
design-build and contractor
spending,
his definition
mode CM are relatively
of
narrow because
of the emphasis of possible fixed price contracts in these
methods.
In this sense, B&P's definition is more flexible and
easier to classifv
various procurement
Therefore,
organizations than Minden's.
employed in
is
this
section,
methods,
Fuji
order to classify
four
Procurement
Figure 4-1-1,
methods,
uses different
is
automotive plant construction
The first
used.
A/Es from
the project will
variations,
Toyota Tahara,
a Flow chart for the Classification
especially in
be a traditional
its
the
appointed
If the answer
is
method that has some
contract types,
171
and
of
check is whether
a single contractor
after the completion of detailed design.
positive,
is
with B&P's.
such as the Toyota KY, Nissan Smyrna,
Gunma,
project
B&P's definition
supplementally Minden's definition
and
used to explain the relation
In
methods or project
between
an owner
DIFFERENT A/E FROM A SINGLE G.C.
APPOINTED AFTER THE COMPLETION OF
DETAILED DESIGN?
YES
YES
SINGLE FIRM RESPONSIBLE FOR
DESIGN AND CONSTRUCTION?
YES
CONSTRUCTION
MANAGEMENT
YES
NO
FIGURE 4-1-1
FLOW CHART OF THE CLASSIFICATION OF
PROJECT ORGANIZATIONAL SYSTEMS
172
contractor.
general
an
Ia
question
seccond
c1assi f ed
f±urther
If
wi 11
be a turn
key /desi gn-build
management
construction
Contractor
mode.
Though
definitive
classif
ication,
be
be
will
have some
to
and
mode
of
impression
system can
organizational
project
each
an
the
as a
classified
give
may
chart
this
If
Design/CM
has two modes,
that
scme extent
to
adjustable
the project
is
that
gn-manage.
or desi
desi gn-bui ld
as
turnkey,
not
is
ect
proj
pro.j ec t
the
t i ve
posi
is
answer
the
construction.
t e
firm
single
and
desig n
for
e
responsiblf
tradi tiona,
not
has a
the pro-ject
whether
is
is
the proj ect
I
of
characteristics
systems.
other
4-1-2
Figure
organization
B<P's project
gives a simplified
I
each major
of
chart
added
expression,
the owner--bui 1 der
traditi
between
contract
in
popular
to
methods
difference
of
form a
to
a
Other
and
CM
mode
and
it
CM,
the
is
enhance design constructi on
program
is
The most
timing
an
both
distinctive
of
the appointment
of
a general
to
or
integration
important
the most
for
possible
still
sum
contract
cost-plus-fee
a
appointment
Early
contractor.
is
a lump
is
contractor
type-.
contract
methods are the
Though
methods.
graphical
and omitted
model,
confusinq
a general
and
method
similar
fast-track
constructi on
build
an owner
these two methods
of
contractor
most
mode
the traditior-al
the general
manage
The
the contractor
in
usual
model) .
contractor
aid
onal
on
onal
ti
the tradi
comments
has modified
author
(the
approach
aspect of
the
mode CM.
confusing
contractual
desi gn-manage
in
approaches
desi gn-buil d/turnkey.
173
may
well
If
be
design-
a design-
is
* APPOINTED AFTER THE
TRADITIONAL
COMPLETION OF
DETAILED DESIGN.
(THE AUTHOR ADDS)
TURNKEY/DESIGN-BUILD
1) DESIGN-BUILD
2) DESIGN-MANAGE
**
OWNER
_TI
AEd
x
THE AUTHOR DEFINES
THE AREA OF
DESIGN-BUILDER.
CM/G.C.
CONSTRUCTION
MANAGEMENT (CM)
1) DESIGN/CM MODE
(AIA MODE)
2) CONTRACTOR MODE
(AGC MODE)
(POSSIBILITY OF
GMP BY G.Q/CM)
AFTER BARRIE & PAULSON
FIGURE 4-1-2
BARRIE & PAULSON'S OUTLINE OF ALTERNATE CONTRACTUAL APPROACH
174
work:,
builder
acts as a constructor
design-builder
is.
a design-manager
its
uses
own
major function
because its
rather
a
If
of design and construction
as
be classified
the firm will
performance,
as a manager
it
the construction phase.
in
or the prime contractor
does not execute self
if
be design build because the design-
the method will
forces'
phase is
that
perfarmance,
bui1der does self
the construction
in
can be said
It
than as a builder.
that the design-build method corresponds to the contractor mode
CM and that the design--manager
a framework
Figure 4-1-3,
systems,
of
the project organizational
gives the relationships of alternate procurement
the author
To construct the diagram,
methods.
idea of
does design/CM mode CM.
uses loosely the
For
the Mintzberg's contingency theory of organization.
the simplification, the contract types and the timing of general
are selected as contingency factors.
contractor's participation
The most conventional
competitive bidding.
is
located at the top of
Some variations,
negotiated contract with a general
on a general
contractor will
method downward.
management
method
as a lump sum contract with a general
the diagram
after
procurement
pull
contractor
level because their
such as design and construction
possibility
of a fast-track
method upward,
that
exogenous factors,
is,
program,
integration,
are the common
the location of
approaching a traditional
the necessity of a fast-track
175
and early decision
and Construction
advantages,
The fixed price contract pulls
such as a
the location of a procurement
Turnkey/design-build
are located at the same
contractor
and the
features.
a turnkey or CM
method.
program or
As
INFLEXIBLE, ACCOUNTABLE,
LESS CONTROLABLE BY OWNER AFTER THE CONTRACT,
DIFFICULT TO MAKE CHANGE ORDERS
/
FIXED PRICE
/
/
TRADITIONAL
/\
DESIGN/CONSTRUCTION
INTEGRATION
EARLY DECISION OF
G.C. BY NEGOTIATON
FAST-TRACK
COST-PLUS
FIXED PRICE
SINGLE CONTRACTOR
GN MODE
US
MULTIPLE SUBs
FIXED FEE
COST-PLUS
( DESIGN-MANAGE)
/
\
DESIGN-BUILD
VARIABLE FEE
N
VARIABLE FEE
/
FLEXIBLE, LESS ACCOUNTABLE,
CONTROLABLE BY OWNER,
EASY TO MAKE CHANGE ORDERS
FIGURE 4-1-3
FRAMEWORK OF PROJECT ORGANIZATIONAL SYSTEMS:
RELATIONSHIPS OF PROJECT ORGANIZATIONAL SYSTEMS
176
or
1d
Desig
n-ui
part
of
less
controllcable
matke
change
mode
and
build
the decision
are
CM
management
with
mode CM
contractor
the two methods
4-1-4
Figure
these rel
of
the
and
Tahara.
f ramework
pro.j e(ts.
and
Because
on
desicn-build
is
no
explicit
construction
of
in
the
program,
industry
are
methods using
of
concept
are
projec:ts
the four
lack of
classified
Figure
practically
a lump
4-1-'5
shows
practice
in
methods
Japanese
contract.
AIctually,
J3apaIese
177
on
traditional
construction
the projects
based
limited to
sum
some
Smyrna,
contract
cost-plus-fee
Projects:
construction
plant
automotive
the procurement
perform
Therefore,
Nissan
Toyota KY,
the previous part.
though
practice,
have in--house A/E and
management.
at i ons.
the
of
Gunma
Fuji
methods of
no fast-track
constructi
methods
presented
the procurement
purposes.
the Four Autom tive Plant Development
The p:rocurement
royota
gener al
for
strict
of
definition
his
contract,
price
be excessi vel y
mav
illustrates
Classi-fication
fixed
a
and
are design-build
methods
alternative
the most
that
think
to
tries
presumably
methods
procurement
and he may well
applicable
:i y
the design-
Because Minden
areas.
of
model
making
of
his
and
fix.ed price
part
the upper
in
located
institutions,
practical
to
difficult
and
build with
design
of
construction
build
public
accountable.
C,
orders.
definition
contractor
in-flex,ible
the contract,
after
by owner
inden's
for
idicates systems of
the diagram
the higher
Generally,
on Management.
Corstructi
the
in
desi gn/constr ucti on 1 nt egrati orn requi r es a system
highr
there
Japanese
management
in
automotive
manufacturers
of
functions
in
and
Japan
construction
are
located
in
the
MINDEN'S
DESIGN-BUILD
-
MINDEN'S
CONSTRUCTION-CM
~
(WITH GMP)
/ TRODITIONAL
/\\
Ai~
/
/
\
_ __ _
/
/ DESIGN-BUILD
CONSTRUCTION \
MANAGEMENT
/
I
(MINDEN'S DESIGN-CM)
-
-
-
-
-
-
-.1
/
FIGURE 4-1-4
MINDEN'S DEFINITION OF DESIGN-BUILD AND CONSTRUCTION-CM
IN THE FRAMEWORK OF PROJECT ORGANIZATIONAL SYSTEMS
178
7TRADITIONAL
* LUMP SUM CONTRACT AFTER
COMPETITIVE BIDDING
* LUMP SUM CONTRACT
(TRADITIONAL)\
BEFORE THE START
OF CONSTRUCTION
OYOT
AHAR\
FUJI
HEAVY USE OF VE
(IN-HOUSE DESIGN MODE CM)
* OWNER'S DIRECT CONTRACT WITH
(DESIGN-BUILD)
BLDG. EQUIP. CONTRACTORS, &
PRDC. EQUIP. SUPPLIERS
IDESIGN-BUILDI
CONSTRUCTION
IMANAGEMENT
,-',>
ISSA
SMYRNA
TOYOTA
Y
(DESIGN-MANAGE)
(CONTRACTOR MODE CM)
I
SCOST -PLUS-A- FIXED -FEE
L
WITHOUT GMP
-
-
* COST -PLUS-A-FIXED-FEE
WITHOUT GMP
FIGURE 4-1-5
PROJECT ORGANIZATIONAL SYSTEMS OF THE FOUR AUTOMOTIVE
PLANT CONSTRUCTION PROJECTS
179
tr ad i t i onal
of
or upper part
desi gn--bui l d area.
the project organizational
Despite the differences in
the Toyota KY and Nissan Smyrna projects,
structures of
their
This means that the
location in Figure 4-1-5 is adjacent.
characteristics of the two project organizations are similar.
Both projects are located
in the lower part and near the border
of design-build and CM in
the diagram.
Both projects have a
contractor mode construction management function and cost-plusfee contracts between the owner and the design-builder or general
The most influential
contractor.
(contingency factor) may well
track program for
Procurement Methods.
Jan.1.987,
time.
this
until
Jan.
1987,
Because the construction progressed
On the other hand,
to Figure 4-1-1,
Nissan and Daniel
its
cost variance risks
OHB had not taken the risks
had taken business risks
as a
the Nissan Smyrna Project
as contractor mode CM.
classified
is
a
be fixed during the construction
and professional.
According
fee for
for the Classification of
TMC had taken most
of cost variance though it
contractor
in
TMC and OHB are under negotiation about a
fixed fee and OHB's cost.
about 50"4 in
as design-manage
classified
The contract type between TMC and OHB is
whose fee will
As of
phase.
is
the Flow Chart
cost-plus-fee
be the requirement of the fast-
both projects.
The Toyota KY Project
Figure 4-1-1,
independent variable
The
contract type between
a cost--plus-a-fixed-fee.
construction management
is
service is
Though Daniel's
fixed,
the total
fee associated with Daniel's own forces work varies because this
180
fee
mechanism,
without
Daniel
has the possibility
risks.
Regarding
big
OHB
with
program,
track
The Toyota Tahara Project
Figure
management
Toyota
Tahara
has some
Project
mode
though the general
of
OHB
by a
design.
detailed
management
the upper
over. 1ap with
In
the
short,
also has
an
the
in
right
KY
the
contracts
Fuii
the
of
with
directly
the production
area
design-build
equipment
in
the project
the
Figure
4-1-
with some
on management.
constructi
through
and Nissan
traditional.
in-house construction
of
location
the
mode CM even
the completion
contracts
and
the
classification
automotive construction
four
Toyota
after
contractors
Therefore,
on
contract
because Fuji
function
suppliers.
is
Fuji
equipment
building
5
sum
lump
design
a design-build.
The Fuji Gunma Project is
with
is
of
organization
of
features
the project
and
procurement
the project
Therefore,
phase.
construction
equipment
in-house A/E that performs
the
through
value engineering
intensive
in
with the
directly
the production
TMC has an
Additionally,
suppliers.
and
contractors
equipment
building
fast-
in-house construction
contracts
because TMC
function
the
is classified as traditional
has some
TMC
though
4-1-1,
a very
is
work
shop workers.
open
of
consists
it
and
shop compared
the complexity of
handle
to
Daniel
for
arm
effective
work,
forces'
forces'
Daniel's
the Toyota KY because
in
own
its
a closed
stance against
a very strong
takes
Daniel
use of
the
profit
additional
raise
to
Through this
cost.
the con'struction
of
part
as a
reqarded
is
Smyrna,
projects,
and between
181
of
the project
the
similarity
Toyota Tahara
types of
between
and Fuji
Gunma become clear
in
factors used to divide two groups
procurement
is
the most
significant
a fast-track program.
The
methods of Toyota KY and Nissan Smyrna are very
less accountable.
flexible
but
projects
(one of the most flexible
construction)
projects in
One of
Figure 4-1-5.
are less flexible
The Toyota Tahara and Fuji
types in
Gunma
Japanese
but more accountable than the two
the U.S.
182
5.
process and the organizational
Evaluation of the development
systems of the Toyota KY Project.
In
system of the Toyota KY Project are analyzed.
organizational
1)
are as follows:
questions
Critical
the development project process and the
chapter,
this
the development process and
What are the differences in
organizational
systems for automotive plant construction
in
Japan
and the U.S.?
2)
What
members'
kind of project organizational
do TMC and OHB build to cope with
organization)
internal
(including project
system
uncertainties, such as many change orders caused by a fast-track
program?
3)
What
kind of
conceptual model
project organizational
and design methodology of
systems should be used or developed for
future projects?
Several
alternative strategies employed by TMC and OHB to manage
uncertainties in
the new environment
optimal procurement
possibly
Comparative
are examined to define
methodology for
TMC and OHB.
studies using the Nissan Smyrna Project,
Tahara Project,
and Fuji
Toyota
Gunma Project are used to find these
answers.
Though there are many text books and articles
construction management
a rational
or
procurement
theory of
general
methods,
about
they do not have
the selection for an optimal
for a theoretical framework, Minden's
38
procurement method decision making model is used because its
procurement method.
purpose fits
this
Then,
chapter and probably this
183
is
the first
attempt
to
a
build
theory
Although
of
methodology.
application
chapter
this
the main purpose of
theory,
procurement
procurement
and another
not to build a
is
interpretation
his theory including some recommendation to improve it will
presented here.
sector:
A Case Study of The Commonwealth of Massachusetts
Planning and operations
Project For Three Correctional Facilities,"
a case study of
is based on
(DCPO) Design-Build
indicates, his theory
public project management as well
analysis of procurement methods.
of his matrix
as
Therefore, the nature
is relatively normative rather than predictive.
analyze TMC's strategy for
To
similarities
the Toyota KY Project,
and differences between public agencies and
as well
be
As his thesis title, "Design-Build in The Public
Division of Capital
logical
of
TMC will
be examined
as the comparison between TMC in the KY Project and
Nissan in
the Smyrna Project.
a framework for organizational analysis of TMC and OHB,
9
by Henry Mintzberg, Bronfman Professor of
the concepts built
For
Management
Policy at McGill
provides a framework
University,
This theory
is used.
for the classification
of organizations and
variables known as contingency factors,
for defining
independent
to change or
formulate organization structure.
Henry
Irwig's
27
summary of
Mintzberg's framework
is
used to show the results of
the analysis on the Irwig's pentagon diagram after
The first
section examines the differences in
process and organizational
construction in
factors.
Mintzberg.
system for automotive
Japan and the U.S.
plant
referring Minden's contingency
The second part analyzes the four
184
development
automotive
plant
development projects- based on Minden's
Matrix
(presented
compared with
Matrix.
in
Appendix
4). "
the theoretically
The third
Toyota KY Project.
Finally,
examined.
In
project,
their
The actual
optimal
Method
Design
strategy -for the
The project organization
including contract
for the Toyota KY Project are
OHB's strategy for the Toyota KY Project
the evaluation of
Design
methods are
methods by the
section analyzes TMC's
types and the TMC's organization
studied.
"Procurement
is
TMC and OHB's strategy for the
learning process in
the new business environment
and the difficulties of technology transfer in the construction
industry are supplementally examined.
185
5-1 Differences in
the development
process and organizational
Japan and the U.S.
systems for automotive plant construction in
The differences in
organizational
systems for automotive plant
are examined in
and the U.S.
several
parts of the thesis,
Building Code,
strong
special constraints of the Japanese
procedure regarding the
preference for
fixed price contracts
requires the sequential construction method.
strong
construction practice)
concept of
industry though
value engineering is
Consequently,
not well
currently
widely accepted
the U.S.
in
the Japanese
in
clients
service is
construction management
The construction environment
and
unilateral
(caused mainly by
constraints.
are other
the Japanese construction
concept of
and contractors
relationships of stronger
the historical
in
Limitation of
independent subcontractors and the relatively
relationships between clients
Japan
construction in
As mentioned in
section.
this
administrative
inflexible
and the owners'
Code,
the development process and
is
in
the
developed
the
Japan.
more flexible
allows more alternative procurement methods than in
To extract the differences of project organizational
Japan.
systems
between Japan and the U.S., Minden's framework of procurement
38
He summarizes the procurement
methods formation is used here.
method
decision model
organized
variables in
Figure 5-1-1,
and covers most factors though
which is
well
they should include
factor
in
U.S.
Because detailed analysis of Minden's decision model
is
out
variables regarding
labor relations,
an important
construction.
of the scope of the thesis, only a brief explanation about
186
Procurement Method Decision Model Variables
F Igure
(CONTIGENCY FACTORS)
(PROCUREMENT METHOD VARIABLES)
INDEPENDENT
VARIABLES
INTERMEDIATE
VARIABLES
DEPENDENT
VARIABLES
PROJECT
REQUIREMENTS
*delivery time
*size/ complexity/
environmental risk
*cost
SCHEDULING
MANAGEMENT
METHOD
*sequential
|*fast-track i
*pre-engineering
-design mode
*management
capability
*bid/ negotiating
constraints
MARKET CONSTRAINTS
*bidding climate
*risk aversion
*benefits of project
disaggregation
*systems
CONTRACTOR
SELECTION
*bid
*negotiate
SYSTEMS
APPLICATION
*develop new system
PRICING
A
*apply existing
available systems
system
*aggregation potential
*fixed
*shared savings/
incentive
*cost plus
I-
I
A RATIONAL THEORY
IN JAPAN
INOT EXIST
SOURCE:
FIGURE 5-1-1:
-contractor mode
*design/build
WORK PACKAGING
*single
responsibility
*early work pkgs
w/ transfer
*multiple work
packages
OWNER ATTRIBUTES
*
*traditional
A*CM
MINDEN'S THESIS AT MIT,
I
1986
MINDEN'S PROCUREMENT METHOD DESIGN MODEL VARIABLES AND
UNFAMILIAR VARIABLES FOR JAPANESE CONSTRUCTION INDUSTRY
187
several
He uses three factors,
constraints,
and market
are further
requirements,
items.
Japanese construction.
aversion means the contractors'
ability
shop,
merit
relations as a variable
labor
Supplementally., explanation of
1)
Shared savings/incentives;
contracts where the contractor
costs over or under
4
follows:
is
Fee =
Using this
x (2'P-C)
formula,
one of cost-plus-fee
costs.
where:
for
actual
formula for sharing in
A sample formula is
P C x -
as
price
target
actual cost
base percentage
a contractor can get a higher fee in
188
the
4-2-1 are as follows:
receives reimbursement
target
shop,
(open
some confusing terms in
Figure
this
shop
variables.
costs plus compensation based on a special
actual
are
projects respectively.
to dependent
procurement method variables in
the patterns
and aggregation potential
also adding types of
and closed shop)
types
prefabricated building systems.
advocates adding local
constraints and
risk
fixed price contracts.
very large projects or small
Available systems are related to
of market
reflected in
case of
in
premiums
constraints,
to bear different
Benefits of project disaggregation,
The author
These factors
In project
market
This is
notably cost risks.
applied for
attributes,
and the economic and political
logistic,
risk
owner
includes factors such as unknown
risk
In
of contractors'
presented here.
independent variables
All
conditions affecting a project.
of risk,
is
as contingency factors.
environmental
weather,
site,
project requirements,
divided into ten
are applicable for
expl anati on,
than full
rather
terms,
case of
a
the target
2)
a
and
cost,
lower
of
effects
construction
time,
Work
packaging;
4)
a
associated with
actors.
5)
work
Early
is
using a
the
a
packages
compromise
while
of
multiple
separate package
fast-track
risk
packages;
management,
applicable
and/or
an
shared
to
attempt
procurement
for
the owner's
the owner's
to
throughout
contracts
use these packages may
by desegreqating
Among
refers
this
work
to
minimizing
and
risk
requirement.
Multiple
decision
the requirements
satisfy
sometimes
can
approach
fast--track
management
that
responsibility;
single
to
transfer
with
6)
The
design
contractor,
and contractor CM with CM holding specialty contractors
are main
this
owner
an entire
for
general
a traditional
an
usually
construction
the
for
guaranteed price
or
between
a contract
means
responsible
fixed
work.
packages.
this
example,
For
proiect.
build,
work
contractor
single
and a
and
packages with
work
early
responsibility,
responsibility;
Single
design
construction
to
primarily
refers
this
and multiple
transfer,
of
are usable.
single
are
Variations
as reduction
such
pre--engineering,
of
kind
are available,
systems
"off-the-shelf"
If
some
associated with
is
concept
this
application.
systems
3)
on
cost based
price.
Pre-engineering;
the
a higher
case of
in
fee
lower
be dictated
the project.
by the use
competition
enhance
hold
direct
and
manage
the project.
and
savings/incentives,
the Japanese
construction
fast-track.
variables,
development
189
cost-plus
project.
are not
These
of
variables
are
the di-fferences
exactly
owners,
some
though
as TMC
provide some
to
capability
such
and
of
part
between
developed
design mode
and
Japan
in
Japan,
have the
and A/E
Fuji,
cost control,
contracting,
as value engineering,
not well
is
management
C.
I'onstruction
U.
the
broadly
methods,
systems,
process and organizational
development
the
procurement
in
services
CM
and
such
quality
control.
procurement
construction
systems
framework.
methods
procurement
and the traditional
applicable
as no
for
fast-track
image of the Japanese
gives the graphical
Figure 5-i-2
Because the
in
the project
area of
the combination
is
method,
Japanese
and
methods
his
matrix
construction
no cost-plus.
190
organizational
Japanese construction
of
Minden's
is supposed
with
some
design-build
to be
restrictions,
such
JAPANESE PROJECT
ORGANIZATIONAL SYSTEMS
CM
D&B
N
/
/
/
FIGURE 5-1-2
JAPANESE PROJECT ORGANIZATIONAL SYSTEMS
IN THE PROJECT ORGANIZATIONAL SYSTEM FRAMEWORK
191
the Four Automotive
5-2 Evaluation of
Plant construction
Procurement Methods.
the four automotive plant
The project organization of
development
Tahara,
projects,
and Fuji Gunma,
Method
is
methods.
of Massachusetts and the theoretical
is
After
in
the successful projects.
matched results between the optimal
in
rather
than a surgical operation
the Toyota KY Project
system is necessary to improve
First,
design matrix
Design Matrix"
is
examined.
is
presented
Figures 5-2-i
method
the
and the actual
of the project organizational
it
in
the project.
method design matrix
is
done,
is
applied
Minden's whole
in
of the
while applicability
Appendix
"Procurement
Method
4.
includes contingency factors of
automotive plant projects.
the four
Figures 5-2-2-a contains the results
the application for the Toyota KY Project.
and 5-2-2-d,
Consequently,
a comparison between the optimal
Then,
methods and actual methods
the
suggest that only fine tuning
Minden's procurement
to the four projects.
of
the
matched results with the actual
method
-c,
the nature of his
the validity
for the projects,
supported by the well
methods employed
of
reasoning,
is relatively normative rather than predictive.
application of the matrix
well
developed
is
of design-build projects by DCPO
based on the close examination
matrix
Toyota
are analyzed here based on Minden's
Because Minden's design matrix
also examined.
matrix
Nissan Smyrna,
The applicability of Minden's
38
Design Matrix" for automotive plant projects
theoretically optimal
"Procurement
the Toyota KY,
contain the results
192
Figure 5-2-2-b,
of the application for the
A: TOYOTA KY
B: NISSAN SMYRNA
C: TOYOTA TAHARA
D: FUJI GUNMA
***
Ln
WEIGHT IS EVEN ON EACH VARIABLE.
,
Weight
>
O
L
Procurement Method Contioece. Factors
Early Accelerated Delivery Required
SOURCE: MINDEN, 1986
'1
delivery time
Normal Sequencing Adequate, Deliver Time Not Critical
>
u
n o
0 0:Z0
Project Large &/or Complex &/or High Risk &/or Poor Definition
Project Moderate in Size &/or Complexity
size/complexity/risk
Project Simple, Straightforward, Governed by Generic Standards
o0
o
>
(D
Based on Scope/Quality/Time, Budget Appears Tight
Owner has SophisticatedCapable & Extensive Management Resources
Owner has Sophisticated but Limited Management Resources
0
cost
manement
2
Owner lacks Management Resources & Know-how
0
>
C)
i:J
LU
0 c'
>WAble
U)
00
CZ
>
LU
>
w
00
>
0
H-'
C) CJ
Type I Owner, Weak Negotiating Position, or Required to Bid
Type i Owner, Strong Negotiating Position, No Bidding Restraints
Requires Fixed Price Before Commiting to Bid
to Bear Most Cost Risk
bibbing/negotiating
constraints
0
risk aversion
Weak Competition, Limited Qualified Contractors
Good Competition, Bidding Viable
Qualified Contractors Unable -to Offer Fixed Price w/o High Premium
Qualified Contractors Can Offer Fixed Price w/o Excessive Premium
Competition May Be Improved or Risk Managed by Disaggregating Project
No Significant Benefit by Disaggregating Project
Building Systems Meeting Project Requirements Available
Building Systems Not Available but Potential Market
building systems
availability or
Aggregations Maiy Justify
market potentitl
U)
contractor risk
aversion
advantages of
disaggregation
0o
C
d
Procurement Method Attributes
Normal Seuential Design/ Bid/ Build Schedule
-
Accelerated Design &/or Construction
Fast-Track
Pre-Engineering
Single Responsibility Contract
F
Early Work Packages w/ Transfer
Multiple Work Packages
Use Existing System
Develop New Building System
Use Open Systems or Conventional TechnologyO
Traditional Method
Design-CM
Construction-CM (CM w/GMP)
Design- Build
t
Systems
T
Bid Competitively+
Negotiate*
Fixed or Unit Price*
Shared Savings*
Cost Plus*
*
Fr ovve// protxI. 1nt /XV
speate wm-k pwkages
Xx
0
X .
v
V
X
x
/
..2
2 v V
1.
1Sv
:2v
ari/y
LEGEND:
POSSIBLE CONSIDERATION
0: RECOMMENDATION BY THE MATRIX
Q: ACTUAL METHODS IN TOYOTA KY
v:
SOURCE:
MINDEN'S THESIS AT MIT, 1986
FIGURE 5-2-2-at:MINDEN'S PROCUREMENT METHOD DESIGN MATRIX (part c)
AND ITS APPLICATION FOR TOYOTA KY PROJECT
194
C
Procurement Method Attributes
Normal Se-uential Design/ Sid/ Build Schedule
Accelerated Design &/or Construction
Fast-Track
Pre-Engineering
1
Xx
:
V
-1
Single Responsibility Contract
Early Work Packages w/ TransferX.
Multiple Work Packages
2
Use Existing System
Develop New Building System
Use Open Systems or Conventional Technology
Traditional Method
Design-CM
0
Construction-CM (CM w/GMP)
Design-Build
t
Systems
XX
0
-
O06
3
0
Bid Competitively*
Negotiate*
Fixed or Unit Price*
Shared Savings*
c -2
2
Cost Plus*
*
Far overe// pro;t, wt nassxrily
seperate umr* p~Xkap
LEGEND:
v: POSSIBLE CONSIDERATION
0: RECOMMENDATION BY THE MATRIX
-:
ACTUAL METHODS IN NISSAN SMYRNA
SOURCE: MINDEN'S THESIS AT MIT,1986
FIGURE 5-2-2-b: APPLICATION OF MINDEN'S MATRIX FOR
NISSAN SMYRNA PROJECT
195
C
Normal
eouential
Design/ Bid/ Build Schedulel
1 1,7 I v
O|
O
Accelerated Design &/or Construction
Fast-Track
Pre-Engineering
Single Responsibility Contract
Early Work Pckages w/ Transfer
Multiple Work Packages
Use Existing System
v
Develop New Building System
Use Open Systems or Conventional Technology
Traditional Method
*
(CM w/GMP)
2 v
-1
X
X-
-(x
X
0o
3 v
C
t
a1O
2
O
-
3
Vv
v
Cost Plus*
FAX ovra/ pro;gt, /7t
seperate zrVk pks-
v
O
0
Negotiate*
Fixed or Unit Price*
Shared Savings*
*
XX-
X
Bid Competitively*
d
1
1
Design-CM
Construction-CM
Design-Build
Systems
I
! j
Procurement Method Attributes
-1
d
s:Sr//y
LEGEND:
v: POSSIBLE CONSIDERATION
0: RECOMMENDATION BY THE MATRIX
Q: ACTUAL METHODS IN TOYOTA TAHARA
SOURCE: MINDEN'S THESIS AT MIT, 1986
FIGURE 5-2-2-c:
APPLICATION OF MINDEN'S MATRIX FOR
TOYOTA TAHARA PROJECT
196
C
Procurement Method Attributes
No.rmal Secuentia Design/
;id/ Suild Scheduli
Accelerated Design &/or Constr uction
Single Responsibility Contract
Early Work Packages w/ Transfer
I
Develop New Building System
Use Open Systems or Conventional Technology I
I
d
*
Ftr over// proixt,rwt ntexssrly
seertenzk pwxesLEGEND:
v:
0:
Q:
POSSIBLE CONSIDERATION
RECOMMENDATION BY THE MATRIX
ACTUAL METHODS IN FUJI GUNMA
SOURCE: MINDEN'S THESIS AT MIT,
FIGURE 5-2-2-dt:
APPLICATION OF MINDEN'S MATRIX FOR
FUJI GUNMA PROJECT
197
1986
Gunma projects
Fuji
Nissan Smyrna,
'Toyota Tahara,
and
respectively.
The section of
the project procurement
of Construction-CM
definition
general
Actually,
methods
in
the framework
or
sub-optimal
Design-CM
in
of Figure 5-2-3,
but,
methods
is
found to be
seems to be favorable for
uses Design-CM as a default-
methods.
alternative
is
without
a Design-Build
guaranteed
project using a
and
maximum price,
the
as design-manage by B&P's definition.
classified
is
project
from
the discrepancy of the optimal
methods from the actual
contract
somewhat
the Toyota KY and Nissan Smyrna cases,
The Toyota KY Project
cost-plus
quite strict
results seem to be different
probably because Minden
option for
is
results represented by the
Minden's decision matrix
very small.
Minden's
evaluated against these two methods.
the optimal
the actual
to evaluate project
and Design-Build
so the optimal
purposes,
may be strictly
model
important
the previous section,
in
As explained
systems.
for
especially
the figure is
shown in
method
Minden's design-build does not contain the concept of designmanage
that will
Therefore,
definition.
recommendation
Project.
possible options or
methods of
the optimal
it
can be said that
matches the actual
Additionally,
Contrary
as design-CM according to his
be classified
method in
the optimal
the Toyota KY
design-build and construction-CM are
sub-optimal
of
the matrix.
to the Toyota KY Project,
the actual
procurement
the Nissan Smyrna Project seem to match perfectly with
methods of the matrix,
Minden's construction-CM
(with GMP)
198
but the project
because Daniel,
is
not exactly
the
A:
/
TOYOTA KY
B: NISSAN SMYRNA
C: TOYOTA TAHARA
D: FUJI GUNMA
TRAD
ACTUAL SYSTEM
/: OPTIMAL SYSTEM BY
MINDEN'S MATRIX
/0:
MINDEN'S D&B
MINDEN'S
----
D&B
CONSTRUCTION CM
CM
/@
FIGURE 5-2-3
ACTUAL AND POSSIBLY OPTIMAL PROJECT SYSTEMS OF THE FOUR PROJECTS
IN THE PROJECT ORGANIZATIONAL SYSTEM FRAMEWORK
199
constructor-CM,
of
did
not
is
best
second
In
the
Toyota KY
in
should be
factors,
as the Type
Type 2 Owner
as the
as the Type
classified
the
Nissan
Smyrna
factors
contingency
the
same
Nissan
by
this
is
very
of
be
well,
In
factors,
system or
rather
method
automotive
by
If Nissan
project system of
CM
than
the matrix.
actual
of
methods
projects
and the
Smyrna projects may
of
the misjudgment
the possibility
exactly
method of
development
the improvement
of
because the
KY become
actual
the
plant
methods in Nissan
possibility of
organizational,
considering
with NMMC.
and Toyota
differences between the
theoretically optimal
suggest the
quite certain,
design mode
this case,
Though
constraints.
that Minden's theoretically optimal
successful
small
the
Nissan Smyrna
Smyrna matches the optimal
the four
Daniel
the
the
so certain
not
definition.
only
1 Owner, the optimal
will
change.
Considering
cover
Project
is
1 Owner
the strong negotiating position of
is
is
the owner
in
his
to
between
Project
methods
as a design-CM,
classified
tkhe difference
constraints
TMC's classification
the actual
accorcding
and Nissan Smvrna
bidding/negotiating
Nissan's one
Therefore,
the matrix,
contingency
Project
a GMF'.
Project
the Nissan Smyrna
which
set
the
the project's
on
the contingency
improvement
of
his
model.
As predicted
in
actually,
optimal
in
the
methods
perfec-tly.
This
the previous
cases of
by
Toyota
the matrix
may well
section
Tahara
and the
support
using
Figure
and Fuji
actual
the validity
5-1-2,
Gunma,
the
methods coincide
of
his
algorithm
and suggest applicability for other public projects in the U.S.
200
of TMC's strategy for the Toyota KY Project.
5-3 Analysis
project
First, a brief overview of the TMC's
studied.
is
project,
strategy for the development
project organization
cost control
Next,
project is
presented.
the Toyota KY Project,
of
mechanism
Smyrna Project.
organization for the
system and the TMC's
organizational
which contains the
the Toyota KY Project,
TMC's strategy for
is
comparing it
studied,
TMC's organization
Then, the
especially its
with the Nissan
for the KY Project is
framework of organizational analysis for TMC,
27
9
Mintzberg's theory, summarized by Irwig, in his pentagon diagram
For a
analyzed.
is
Finally, alternative methods or possible
employed.
improvements
for TMC for
questions in
Critical
studied.
a risky/large/complex project are
section are as follows:
this
1) How does TMC cope with uncertainties in the new environment?
2)
What
are the alternatives or possible improvements for
project
a risky
like
TMC for
the Toyota KY Project?
TMC's strategy for- the Toycyta KY Project:
Though there are no clear
strategy for
the Toyota KY Project,
strategy rather
because
it
is
statements by TMC about
large,
complex
,and
and the strategy for
the project.
TMC' s general
for the project
The strategy seems to
risky.
general
management of the new subsidiary,
selection,
must have set up a new
than using a standard manual
into three steps:
be classified
it
its
strategy
for the
the strategy for the site
the design
and construction of
strateav may well
be typical of
,Japanese corporations having overseas subsidiaries that rely on
Japanese management
to run the subsidiaries.
201
Though
it
is
not
about the degree of
clear
operations,
the new subsidiary's autonomy
the construction
until
TMC retains most control
for its
phase.
TMC formed
In order to choose the plant site,
a site
investigation team, though the team did not continue to the
Through the intensive negotiation
design and construction phase.
TMC
states,
several
a competitive environment of
with KY in
succeeded in getting $125 million in incentives from KY.
For
two of the most
the plant construction,
plant
objectives are to make a Toyota style
in
Additional
the shortest duration.
involvement of
cost and higher
important TMC
KY and to make it
in
requirements are reasonable
construction management
TMC in
(especially technically) using TMC's methods as much as possible.
Because of the large scale, complexity, and uncertainties of
in
the construction environment
OHB as
KY,
a buffer against the risks.
TMC must have decided to use
TMC tries
to be involved in
the design and construction through OHB, so TMC contracted
design-build with OHB by negotiation.
By contracting design-
build with OHB, TMC can avoid any possible contractual
with American
A/Es or contractors.
troubles
Through the negotiation with
OHB, TMC contracts with OHB by a cost-plus contract because of
the necessity of
a fast-track program to achieve the shortest
project duration.
of
the project
(this
enables to TMC to control
to be involved heavily in
many change orders,
Presumably,
TMC assumes the financial risks
Consequently,
the project)
the project because of
feature of
a special
TMC's intention
in
its
202
and
the necessity of
a fast-track.
involvement
in
the project is
ma in1y for
quali t/ control
but not cost control
prefers competitive
because TMC traditionally
construction,
during
bidding and a l ump sum contr act.
Because probably TMC did not expect the complexity
necessity
of
large amount of
track program,
TMC did not
intensive cost control
problem of
potential
of TMC's
program
traditional
in
in
change orders
adjust its
and
caused by the fast-
organization for the
the KY Project.
This causes a
delay of the project because of the mismatch
cost
system with the fast-track
control
the KY Project.
The Cost Control Mechanism in
The Project O1rganization of the
Toyota KY Project.
As analyzed in
chapter 4 especially shown in
the project organizational
Smyrna
type of the Toyota KY and Nissan
are very similar and classified
flexible
types,
as one of the most
but some potential
friction
between
which did not exist between NMMC and Daniel,
especially in the cost control.
progressed
smoothly and successfully in
the similar contractual
but in
the different
illustrates
the mechanism of the cost control
the Toyota KY and Nissan Smyrna projects.
subcontracting,
contracts,
seems to exist
of the cost control.
Figure 5-3-1
system in
TMC and OHB,
Both projects generally have
type between owners and contractors
mechanism
Figure 4-1-5,
both projects use basically fixed price
so the owners do not
need to control
Regarding
assume cost variance risks
costs after the subcontracts if
no change orders.
Different
cost
203
control
or
the owners make
mechanisms between
the
1I CONTROL (RISK TAKING)
DELEGATION (RISK PREMIUM)
JAPAN
THE U.S.
LJil
I
I
I
L.L
SUBs
UNCERTAINTIES
TRACK
*FAST
PROJECT
*BIG
UNFAMILIAR PLACE
* LABOR RELATIONS
* ETC.
*
FIGURE 5-3-1
DIAGRAM OF COST CONTROL MECHANISM IN THE
TOYOTA KY AND NISSAN SMYRNA PROJECT
204
two projects
.Y
to
TMC
Project,
OHB
of
a
on
change
the flow of
the nature
As
to
quick decisions
make
TMC
because
system
the project.
for
valve to
as a safety
is
facilitate
works by deciding emergency work without getting the
TMC's approval
function is
OHB acts
project,
the actual
is
Japan.
in
cost control
many
Therefore,
it seems to be difficult
but
the Toyota
change orders
of
directly.
required
is
TMC
the traditional
Just using
any authority
head office
TMC's
In
change orders.
the subsidiary
program,
orders,
of
delegate
does not
go to
fast-track
before the start
informal.
of
Certainly,
though this
the works,
TMC may feel
uncomfortable to
the
after
decision making
individual
approve OHB's
work.
the case
TMC controls
and
change orders
In
in
appear
start
of
this
Despite the very cooperative contract type between TMC and
OHB, TMC has had to
because of
excessive distance
keep
unilateral
the traditional
from OHB perhaps
relationships between them
in Japan.
the Nissan Smyrna
In
flexible
than OHB
position
of
Daniel
Project,
in
the KY Project
delegation
use
of
its
and
Daniel,
seems to cooperate well.
for
NMMC is
less accountability
work
though,
C-30
in
forces.
The
done by Daniel's
its
task
utilizing
own
learning
force
project
much
because
management
of
forces.
opportunities
about
TMC
development
205
cost
From
are
and Nissan
One of
the
the development
the American
Compared with
a
in
team,
the
of
of
decision making and permission
formal
own
is
more
NMMC's
Daniel's
NMMC, Kahn,
disadvantages
effectiveness of
the
Nissan's viewpoint,
limited
only
process.
It
through
the
has succeeded
system fully.
in each project,
TMC has more
for
opportuni ties
the project than has
business through
construction or general
learn Ameri can
to
Japanese managers
its
Ni ssan.
Though TMC's higher involvement
OHB's informal
advantages,
in
the project has certain
function as a safety valve regarding
of
decision on urgent change orders suggests the possibility
improvements
of the project
Regarding the
organization.
of the setting of GMP by OHB or Daniel,
possibility
is
said that
Daniel
the owner
than OHB because Daniel's formal
associated with the owner's
risks
Coincidentally,
optimal
latitude
can be
it
less risk
a position to offer
in
some
premium
to
and less
cooperation with the project.
analysis corresponds to the theoretically
this
that recommends
method by the Decision Matrix
construction-CM with GMP for the Nissan Smyrna Project.
TMC's organization for the Toyota KY Project.
Though TMC's total
subject
organizational
of the thesis,
his pentagon diagram,
analysis is
not the
Mintzberg's theory summarized by
is
Irwig
employed for the analysis of TMC's
organization regarding the Toyota KY Project.
Because of the strictly
departments,
configuration of TMC's
functional
a high demand for
accountability of cost
effectiveness,
and highly standardized manual for operations in
11
most areas by the TOC program, TMC has many common
characteristics with the public institute.
size and old age,
classified
TMC's organization
as a fairly
Mintzberg's framework.
Despite its large
for
the KY project is
pure type of machine bureaucracy in
For
reference,
206
Nissan's organization
in
regardi ng
total
NMMC's
because of
form
a di vi si onal. i zed
f ied as
cl assi
is
Smyrna Project
the
autonomy.
9
organizational
for
framework
Mintzberg's
5-3-2 gives
Figure
28
pure
five
Mintzberg's
is
this
2)
The
of
authority
of
to
professionals.
this
type.
Machine
The
Bureaucracy;
procedures
activities.
For
and
other
Motors is
The
For
based
Because
KY,
TMC
team,
example,
in
a
of
control
type.
this
is
are
which
segments
each
For
instance, Sloan's General
addition
have
organization
to
which
lines
relatively
is
construction company
system
less
is
the
to
delegation
project
207
using a
type.
this
the
consistent
an inter-departmental
for
include
-typically
these groups
within
large
manager
project
does not
TMC's
on
heavily
independent of
has matrix
this
Coordination
groups.
field
are
type.
this
informal.
firm
type.
relatively
the headquarters.
of
Adhocracy;
project
has some
this
and
market
to
and
the coordination
a
this
that
This relies
a mass--production
Form;
related
strongly
for
example,
The Divisionalized
has departments
functions.
by their
separated
is
a university
instance,
this
is
supervision
Less direct
For
standardized
5)
company
owner-managed
has considerable delegation
this
Bureaucracy;
Professional
strictly
4)
small
the
are relatively
type.
character
3)
operations
Typical
example,
For
undifferentiated.
as follows:
are
organization
has centralized authority that
this
supervision.
executes direct
of
features
Special
types of
The Simple Structure;
1)
Irwig.
by
as summarized
analysis,
is
removed
subsidiary
in
project
from the
two
direct supervision by
Strategic apex
SIMPLE
STRUCTURE
) new firm, entreprene urship
0,
4*1s
standardization
of work
processes by
tecrinostructure
4
rationalization,
external control
complexity
A
mass production firm
public bureaucracy
andardized skills of
professional ized
operating
core
personal serviCe
organization
craf t enterprise
MACHINE
BUREAUCRACY
0
PROFESSIONAL
BUREACRACY
S
*0
,4
0
*00
too,
o0
DIVISIONALIZED
FORM
I0
c' * ,t, . s
conglomerate
federation
ADHOCRACY
mammoth
complexity, dynamism
divisional
interdependencies
project
reduced interdepencies across
markets
middle line balkanization,
standardization of outputs
support staff collaboration.
through mutual adjustment
after
FIGURE 5-3-2:
MINTZBERG
(1979)
MINTZBERG'S FRAMEWORK FOR ORGANIZATIONAL ANALYSIS
SUMMARIZED BY IRWIG
208
Figure
projects
arrow
under
TMC
TMC's
projects.
risky
for
of
movement
dot
The
framework.
the recommended
gives
for
organization
and Nissan's
Mintzberg's
in
the U.S.
type
organizational
TMC
illustrates
5-3-3
in
their
actions.
and prompt
flexible,
dvnamic,
requires
that
project
development
and risky
a big
for
adhocracy,
and
form
divisionalized
types,
organizational
more desirable
for- TMC to a Risky
Alterative Methods or Possible Improvements
Project.
Given that TMC
there
As studied
Other
alterative.
feasible
Maximum
If
responsibility.
possible
organization,
TMC's
organization
team.
project
some
delegating
Because
design-mange,
actual
who can
Another
the project
by
the
about
authority
actual
is
limited,
merits
questionable.
provide construction
extremely
project
though
209
considerable
inter-departmental
actively
OHB more
utilize
change orders.
OHB
of
Because
many
as
classified
is
TMC's using
management
there are
to
add more flexibility
the
to
savings
single
to
delegating
design-build,
the additional
method
is
shared
using
structuring
adjustment
a
set the Guaranteed
are to
or
is
are to
adjustments
the subsidiary
to
authority
for
Design-CM,
Design-Manage,
maintains the current
TMC
method
actual
transfer
work packages with
and early
contract,
variations
unchanged,
5-2,
the Construction-CM,
(GMP),
Price
section
as the
same
the
almost
is
in
is
actual
the
though
alternatives,
works well.
whose nature
the
strategy for the project
be several
will
generally
by
's
design-CM
Japanese
services
American
in
in
companies
the U.S.
CMs,
as
are
long
as
direct supervision by
strategic apex
SIMPLE
STRUCTURE
new firm. entreprene urship
'P
4.-
q~No
t
standardization
of work
processes by
technostructure
0
Complexity
rationalization,
external control
ii..1
tandardized skills of
prof essionalized
operating
core
mass production firm
public bureaucracy
MACHINE
craf
BUREAUCRACY
personal service
or ganization
enterprise
PROFESSIONAL
BUREACRACY
0
0
)
0il
10 ?
TMC
0
0o
0
NISOSAN
DIVISIONALIZED
FORM
4)
conglomerate
ADHOCRACY
federation
mammoth
complexity, dynamism
divisional
interdependencies
middle line balkanization.
standardization of outputs
~projAct
project
reduced interdepencies across
markets
supoort staff collaboration.
through mutual adjustme-it
after
MINTZBERG
(1979)
FIGURE 5-3-3: TMC AND NISSAN'S ORGANIZATION FOR THEIR PROJECTS
IN THE U.S. IN THE MINTZBERG"S FRAMEWORK
SUMMARIZED BY IRWIG
210
TMC
ex-pects commurni cation
alterative
TMC
If
the development
of
experience
learning
construction
management
American
project
with
about
regarding
alternatives
associated with
place,
unfamiliar
project,
with the design-builder,
from OHB
GMP
from
TMC's familiar
the
of
the
GMP pulls
change of
and the
In
the
in
it
to
TMC because
be similar
4-1-3,
the
to
framework
conceptual
of
the setting
the traditional
system toward
the organizational
labor
invalid.
for
Figure
reactions
TMC had gotten the
Even if
system
one.
are mostly
TMC to get the GMP
be attractive
systems
organizational
project
and
big
and TMC's
would have made
the GMP will
traditional
methods
very hard for
is
it
changes the organizational
action
of
be inconvenient
as fast-track,
relations,
labor
construction
setting
Nevertheless,
the
such
it,
scope changes
various
during
relations
may
Because of the many
without big risk premiums.
OHB,
CM
style
American
procurement
related to the setting of the GMP.
uncertainties
The
CMs.
the American
may well
it
although
TMC
project.
for the first
Other
with the CM,
several
opportunities
provide good
risky
from
this
the actual
for
communication
English
the design-CM
select
can
accepts
with CM,
1language
no benefit
have practically
will
method.
the Japanese
in
system.
One of
OHB
or
the
most
is
the design-builder
aqencies for
proposals
specifications
design-build
(RFP)
is
ways for
practical
the key
and generic
apply the
to
where
TMC
making
point.
an
The RFP
standards rather
211
to
get
methods
excellent
must
than
the GMP
from
used by public
request
for
be performance
prescriptive
opti mal
specifications to get
any
get
a
work
monitoring
becomes
to
project
team
for
improve TMC's
the owner's
for
the contract),
"special
formed a
the design-build
team)for
a
of
the formulation
certainly
process will
projects.
and risky
large
for
organization
of
Division
which used the fixed
development
the entire
the owner
time,
Massachusetts
of
process,
the entire
implement
project
the same
(DCPO),
after
the owner's
the design and construction.
in
(inter-departmental project
unit"
at the design
the contract,
at
made
institutions
even
builder
To
construction.
the
requirements
(minimum
in the project
involvement
the
minimum but
Planning and Operations
design-build
price
with
even The Commonwealth
Because
Capital
contract
after
be involved
loses the chance to
lump sum
some public
This means,
stage.
development
without
design
a
with
contract
SLIm
lump
time
duration,
project
the shortest
delivery
set before
be
should
that
builder
design
a
after
by the owner
control
and
quality
In
9
Mintzberg's
framework,
toward
organization
TMC's
complex
and risky
U.S.A.,
because this
Another
based
framework,
orqanizational
toward
organization
ef fective
In
for
short,
possible
Project are the use of
improvement
prompt
making.
to
form
for
the
decision
TMM,
and
In Mintzberg's
TMC's
pulls
delegation
the divisionalized
overseas operati
for
the delegation
decision
this
team pulls
flexibility
possible
promotes
adjustment
the project
facilitates
is
the project
for
organization
TMC's
has
adhocracy that
projects.
a project
of
formulation
the
that
is
usually
ons.
alternatives
for
TMC
to
the
Toyota KY
the design-CM, design-build with the GMP,
212
the formati on of an
the delegation of
i nter-departmental
proj ect team
aLthority to the subsidiary.
213
i n TMC,
and
5-4 Analysis of (JHB's strategy fOr the Toyota KY Project.
examined
summary
and
of
OHB's
strategy,
2)
What
are the
a risky
project like
ThrouIgh
the evaluation
or
project.
the new
in
environment?
OHB
for
improvements
possible
for
the Toyota KY Project?
strategy,
of OHB's
its
technology transfer
are supplementally
industry
the construction
process in
learning
of
and the difficulties
the new environment
in
a risky
the project,
as follows:
section are
alternatives
includes a
for
with uncertainties
does OHB cope
How
organization
to avoid
OHB
this
in
questions
1)
for
methods
alterative
Critical
OHB s
are
organization
section
this
5-3,
the previous section
in
studied.
is
Project
the project
of
methods
alternative
Because the
KY
the Toyota
for
strategy
OHB's
examined.
OH's strategy far- the Toyota KY Project:
OHB got
After
as a
itself
strategy
of
design-manager
the
its
client's
OHB had
the neqotiation
choices of
more
systems than
organizational
Before
for
strategy
operation
and using Citadel,
As
a project
Toyota
The
latitude
to
usEual
style,
itself
as
such
the local
with
inherent
greatly
influenced
KY
Project
is
select
with
by
not an
project
TMC was more
OHB
than
a design-manager,
as structuring
in
a
is
because
OHB's subsidiary
214
is
defined
venture with
joint
with
ease friction
about the contract
OHB defined
or
OHB
the general
following
management
the U.S.
requirements.
exception but
in
in
industry
construction
contractor,
the project
in
to
actively
from TMC,
contract
using construction
contractors
local
a design-build
the U.S.
flexible
usual.
OHB had
a joint
venture
The joint
was
venture plan
impression on
good
and there
TMC
OHB's
practical
method than the joint
from
project
an American
TMC's
in
involvement
project
and
determined
OHB's direct
also expected that
OHB
project
American
the big
size
would
it
manager
who
and
the project
of
and the
be able to
manage
OHB' s
have
of
Japanese
an
hire
reason,
excellent
because of
the project
network
information
the
in
participation
addition to this
In
could
OHB would
construction
rather than using Citadel.
the
the high requirements
But
the design
language requirement
and
favorable
manufacture,
project.
OHB
that
OHB had gotten
If
venture.
automotive
to manage the
Citadel
used
more
a much
was
a
make
venture partners.
joint
control
using Citadel
Moreover,
did not
style
some possibility
was
to
difficulties
have had
mi ght
because this
favorable
not
through
Citadel.
in
succeeded
OHB
Based
contract
using
thesis,
of
it
project.
with
TMC
proj
ect.
subcontractors)
with
is
TMC
of
and K Y,
4
on
the
arid has
Consequently,
are
limited
the
a cost-plus-fee
a big
out
of
to
build
a
merit
on this
shop
general
to
shop contractors
215
the
kind
and discussion
possible
merit
focus of
influence
labor relations
local
OHB decided
American
and construction
made
is
relations
labor
very important
Based
and
to
form.
AGC's design-build
analysis
Though
in
and
Nissan's with
to
programs
fast-track
OHB negotiated
management,
organization
similar
experience
rich
on Jordan's
including
construction,
is
This strategy
manage the project.
Runyon.
OHB's site
structuring
in
latitude
possible
Jordan and gave him the widest
hiring
for
contractors
the
(not
and open
Because many large general
shop contractors.
contract
this
kind of
decision of
the merit
general
of
market
possible
are union shop contractors,
shop limits
the availability
problems
of
opportunities
the selection
the project
divide
labor
disaggregation of
of
big project
of
the
capable
significantly.
contractors
OHB decided to
risk
contractors who can
with
general
six
for
reduce the
increase
The
contractors.
also increased the
contractors
to
areas
unions and to
capable general
the project
of
to
accountability
TMC.
CMB's organization for- the Toyota KY Project:
Though
scope of
OHB's
analysis
is
out of the
9
27
thesis, Mintzberg's theory summarized by Irwig in
the
total
his pentagon diagram,
organizational
Project,
of
is used here as was the
TMC's
analysis.
Because of
as a
organizational
the almost
total
field
autonomy
this
OHB's organization regarding
divisionalized
form
like
Nissan's
for
the KY
project
is
classified
regarding NMMC.
overseas operations, OHB's organization
is a
In
fairly pure
divisionalized
form because of
engineering
administrative departments, though OHB's
operations
or
in
organization
project
for
Japan are
because of
manager
the Toyota
framework
of
Because
low technical
system.
KY
Project
Irwig's
of the
less
interaction with
done through
its
matrix
Figure
and
pentagon,
large size
requirements,
5-4--1
for
its
after
of
OHB's
216
relatively
lines
terms
its main
adhocratic
the field
using
gives OHB's
operations
based
organization
in
Japan
in
the
Mintzberg.
the project
field
and
autonomy
the relatively
for
-the
project
direct supervision by
Strategic apex
SIMPLE STRUCTURE
new firm. entrepreneurship
C=!
5&
c**4# ,
standardization
of work
processes by
technostructure
standardized skills of
professionalized
operating
core
00..
rationalizati on,
external co ntrol
comPlexity
mass production firm
public bureaucracy
personal service
organization
craft enterprise
PROFESSIONAL
MACHINE
BUREAUCRACY
BUREACRACY
0
n
j
0
04
* toa.,
10
0/1
0e.'
*,,,
5
J.
0I
*. *
.
,
FOR TOYOTA KY
OHBi
:OHB)
DIVISIONALIZED
FORM
conglomerate
IN JAPAN
ADHOCRACY
federation
complexity, dynamism
divisional
interdependencies
mammoth
project
reduced interdepencies across
markets
middle line balkanization.
standardization of outouts
supoort staff collaboration.
through mutual adjustment
after
FIGURE 5-4-1:
MINTZBERG
(1979)
OHB'S ORGANIZATION FOR THE TOYOTA KY PROJECT
AND FOR ITS OPERATIONS IN JAPAN IN MINTZBERG'S
FRAMEWORK SUMMARIZED BY IRWIG
217
be optimal
certainly
will
maki ng.
decision
prefabricated
But in
case of
may well
As described
in
Project,
KY
projects
technically-complex
the full
to utilize
3-3, Project
Organization
there are
two subsystems
Jordan's
leadership,
general
controlling
of
OHB's
and
contractors
TMC.
corresponding with
American
and
suppliers,
especially
organization
This
works
and
at
provides
Japanese
engineers
American
construction
an
and
managers
learn
in
Japanese staff
environment
to
is
section.
American and
excellent
by
are integrated
engineering
the
division of
functional
well
two subsystems
These
the
OHB's e
in
Ohba and Mizoguchi's leadership, OHB's Japanese staff
the
or
form for
OHB's divisionalized
be inefficient
section
Thorough
organization.
is
based
and project
quick
OHB.
of
potential
staff
promote
system buildings,
overseas operations
Toyota
to
especially
extensively
for
about
the
business.
-for OCB to a risky
Alternate methods or possible improvements
project:
TMC's
Many of
overlap
with those of
Project
are
informed
program
similar
and
the
TMC.
closely
owner's
mode project
suggestion
TMC's
latitude
OHB.
in
As
the
U.S.
analyzed
in
the
complexity
responsibi
design-manage
of
In this respect,
of
organization.
might well
a
roles
project
have been
5-3,
218
fast-track
in
Especially
inter-departmental
section
and
the Toyota KY
OHB should have
of
1 i ties
OHB
acts
5-3,
section
OHB because OHB's roles in
to
TMC more
in
explained
alternatives,
the
team
beneficial
as
a
OHB's
strong
assuming
for
safety
wide
TMC and
valve
the decision process of change orders for
informally regarding
and
i mportant
and
engineering
management
with
agreement
general
and
the
change from
the
decision
market opportunities
between
OHB's
to
the single package
the project and
off
had
OHB
of
coordination
additional
the
contractors.
focus of
of
analysis
Though
decision
the union
shop
for
Assessment
OHB.
shop
at
of
of
the beginning
of
the early
benefit
least,
stage of
disputes with the AFL-CIO.
agreement
on
are
very
219
cost
of
OHB"
the project
the labor
the contracts
stage.
the project
and
but at
merit
a
is
the project
of
relations
the procurement
complicated,
is
decision
at
at
labor
the selection
the thesis,
important
union
value
the project
of
result
the strategic
Actually
the trade
contractors
general
As a
regarding
shop.
of
between disaggregation
depends on
to
might
contractors
construction,
during
contractors
general
merit shop to the union
contract
OHB.
for
the AFL-CIO
coordinate six
such as
six
to
project
the
strategy
be the optimal
and
program,
functions,
the
control.
quality
disaggregation of
The
for
TMC and OHB in
fast-track
the
facilitate
OHB's construction
activate
not
to
formally,
project
will
This delegation
improve the relationship between
definitely
the
of
some authority to decide
permission.
TMC's
without
change orders
very
the beginning
at
authorized
OHB should have gotten
is,
that
project,
have been
should
is
This function
the sake o-f smooth project progress.
shop
The
is
of
was a really
of
selection
the alternative
the alternative
selection
of
could have
The impacts of
big.
oLit
the
avoided
the project
The agreement
made most
of
price
contract
invalid,
and
fixed
the
contractors
GHB
between
in
a change
the
and
general
conditions
original
the
of
the contracts.
but
relations,
labor
including
it
In
participants.
the
management
project
by OHB's
construction
take.
Though
learn
American
program
control
differences
possibility
some
American
of
research
apart
good
institute
good
of American
of
Japanese
of
business conventions,
to
learn
to
industry
a special
and
from
the actual
idea.
Probably,
some
unit,
site
organization,
too much
of
220
some
the QC program by
the
from
details
engineering
including
engineering
there is
to apply
improve
quality
impossible because of
is
construction
the
not utilize
aspect
the
to
managers
the
OHB does
transfer
OHB could
that
for
environment
management,
the direct
American
an option
is
team
special
on
the GMP.
of
investigation
American
construction
structuring
of
setting
learn the engineering
and
the project
the
to
adjustments,
TMC does not make big
sense for
Japanese contractors
for
Then, OHB will
after
construction
Though
construction.
stage.
OHB can get the widest latitude
OHB creates a
opportunity to
good
contractors
case,
the technical
Finally,
the
this
If
TMC.
make
will
offer
this
scope changes,
uncertainties
have the general
offer the GMP the during the construction
be able to propose the GMP for
be
well
may
a considerable
still
is
OHB may well be able to
alternative.
so many
because of
the project
in
unrealistic
cost)
maximum
(not guaranteed
the GMP
Setting
the program.
OHB's
its
technical
staff
department
From
for
may well
a divisionalized
the
project,
have been
form of
a
OHB's
organi Zation
attempt.
overseas
for
There+ore,
operati
collaborating
research
OHB's
some
shift
of
hinders
the
this
organization
kind of
form
of
the
on-s toward adhocracy by the overseas divi sion' s
with other
institute
operations
overseas
and
departments,
the
engineering
overseas oper ati ons.
221
such
as the technical
department,
may ameliorate
6.
Conclusions and Further
Resear-ch.
Through the case study of the Toyota KY Project and the
other
three comparable projects,
and Fuji
development
the American
than the Japanese environment.
can be
in
recognized
program,
fast-track
as a
part
high-level
coordination of design
managed by the traditional
alternative
project
A fast-track
project
in
exist
systems,
that
system is
is
the higher
it
conStruction management
and best
Another
important
integration of
design
a hybrid of design-
can be said that Japanese
systems are the residual
all
Japan.
Japan and this
the most flexible
build and construction management,
systems minus
but not in
Japan.
such as
has a design-mode
exists in
Because design-manage is
project organizational
exists
system.
the U.S.
with a lump sum contract
organizational
A
and construction that cannot be
organizational
advantage of the design-build
All
systems.
program requires
and construction management
and construction.
more dynamic
Japan primarily because the
system for short duration projects in
American
the American
organizational
and a construction-mode,
is
requires the traditional
development process.
Design-build
of
in
sequential
design-- r-manage
is
a dynamic phased construction process,
Japanese Building Code strictly
Some
environment
it
Japanese project organizational
construction but not
American
process and
systems between Japan and the U.S.,
project organizational
systerms
Toyota Tahara,
the differences of the development
Gunma,
found that
Nissan Smyrna,
construction
of the all
management
type methods.
types usually employ cost--pl.us-fee
contracts that also do not exist
practically
222
in
Japanese building
construct i on.
Consi dering one of the most
management
construction
with early
associated
lift off
process
of
in
management
industry.
the
Japan on
may
are
contractors
a
of
special
the
sequential
formal
strong
independent
for
the
of
projects.
of
the
process
the construction
of Japanese
skills
of management
use of
limited
choosing possibly financially
methods.
systems is
to define the project organizational
systems clearly
the design of appropriate systems for various
Using the framework
systems presented in
of
owners and
immaturity
A framework of the project organizational
and to facilitate
development
construction
between
deregulation
resources by allowing the owners'
developed
the
the Japanese c:onstruction
reason
project development
of
influences
contractors and contribute to the effective
optimal
program
fast-track
relationships
a potential
advantages of
facility,
of
for
limitation
and
a
requirements of
promote the development
may well
of
the elaboration
management,
construction
of
be beneficial
Though
sLAbcontractors
the use
is
delivery
strict
important
of
Figure 4--I-3,
the project organizational
the project organization types
the Toyota KY and Nissan Smyrna are found to be very similar
because they are very flex,ible
(controllable by owners)
but less
accountable systems despite the different configuration of
project organizations.
classified
as traditional,
In
the framework,
Toyota Tahara is
with some owner's in-house
construction management functions,
classified
their
as a design-build with
225
and the Fuji
a lump-sum,
Gunma is
also with some
owiner' s
i n-house
In
construct i on managqement
order to figure out
fuIcti
ons.
the theoretical ly optimal
project
organizational
"Procurement
systems or procurement methods, Minden''s
38
Method Design Matrix" is applied for the four
automotive
plant construction projects.
the theoretically
optimal
methods employed
in
procurement
the four
matched results of
methods with the actual
successful projects support the
validity of his design matrix,
projects.
Well
Because his matrix
at least for automotive plant
is
presumably made for public
projects originally, his definition of design-build and
construction-CM seems to be excessively strict
purposes,
however,
if
some
project organizational
useful
systems is
made,
general
the definition
for
the design matrix will
be
for many types of projects.
Despite TMC's tendency
its
adjustment of
for
traditional
Project,
methods
for
(or presumably its
its
construction
policy)
in
the project organization is unusual
Japan
to
in
for TMC.
use
the KY
This
implies that OHB's suggestion was implemented regarding the
project organizational systems to achieve possibly the shortest
project duration.
Though the project organizational
definitely be one of the optimal
design matrix,
many factors of
methods analyzed in
system will
Minden's
the development process and
organization seem to be undesirable for TMC because instant
decision making
and many change orders during construction
required by the fast-track
construction management
program contradict TMC's traditional
methods.
Further,
contract does not guarantee the final
224
the cost-plus-fee
project cost for TMC,
and
many
for
the
in KY
subsidiary
decision
certainly
work
addition,
formation of
may well
be
of
big,
but
most
TMC
and
is
may
well
practical
prefer
ways for
to
OHB
will
In
mechanism.
project
give some
to
team for
the
flexibility
uncertainties associated
with
project.
and risky
which changes the type of the actual
to
in
it
on
OHB's
cost control
a
more
procurement
practical
less delegation
some extent
orders to
this
to cope with
comple.,
not
(in
to the
TMC's delegation
a good prescription
the optimal
not
cost
making process
inter-departmental
an
system greatly
oroanizational
and
To activate
more,
in
Setting the GMP by OHB,
Project
Because of
less delegation
decision
smoothly.
oil
motor
TMC's organization
kind
TMC's
on change
making
regarding
as
for
change orders, TMC's headquarters
function
management
construction
probably
and OHB.
the development,
regarding
may not work
change orders
this
TMC
the project,
change orders,
OHB about
make
the
orders implies
between
many
framework) for
Mintzberg's
to
TMC's machine bureaucratic organization
Because of
control.
project
TMC
seems to hold excessive authority regarding
in Japan
to
and
cost-plus contract
the
to
some adjustments
of
good
valve for
as a safety
function
some urgent change
decision making on
necessity
informal
OHB's
but
sake),
its
for
flex.ible
is
is
assumes cost variance risks
TMC
(though
change orders
many
it
because
program
fast-track
cost.
the final
the KY Project
systems in
organizational
The project
of
the uncertainties
increase
change orders
this
because
TMC to get
225
method
risky
it
inflexible
is
for
project
type,
is
the Toyota
KY
environment,
accountable.
One of
the
a reasonable GMP from OHB is
appl y
If
TMC makes
should
and
lump
sum contract.
In
would have become
it
TMC had gotten the GMP from OHB,
even if
reality,
a
after
the owner's control
time without
delivery
quality
optimal
get
be able to
TMC will
specifications,
than prescriptive
that
(RFP)
standards rather
generic
and
specifications
be performance
desi gn-bui Id.
for
proposals
for
requirement
excellent
an
agenci es
by public:
used
the methods
to
agreement with
the project
invalid because of
the AFL-CIO during construction that changed the original
in
are big uncertainties
labor relations
the
Actually,
conditions.
the Toyota KY Project.
the viewpoint
From
OHB
provides
organization
of
the higher
involvement
the design
and
surprising
things,
steps.
manaqers
between
interactions
rich
American
next
good
for Japanese
business because of
construction
American
is
managers
many
encounter
their
for
vital
organization
OHB's site
learn
to
are
in
taking)
risk
higher
they may well
Though
these experiences
Especially,
them because
for
environment
(associated with
construction.
the project
business,
an excellent
and
TMC
for
experience
learning
the
construction
the American
about
of
the
and Japanese
managers.
The
probably
autonomy of
American
American
and
for
and
the
of
size
to
manage
the
requirements.
into
Japanese staff
managers
seems
organization
site
the big
low engineering
relatively
of
of
because
OHB's
two
the general
Japanese managers to
well,
and the
project
division
The functional
subsystems works well
contractors
correspond
226
work
to
with
and
TMC.
suppliers
for
Al thoug~h
01-B
the American
indifferent
construction
Despite
The
methods,
system,
well
it
and
ac:t i vel y
seems to
Toyota
OHB having
as construction
control
ect
enough
quality,
provides good
as American
staff
to
study aspects,
productivity,
OHB has not formulated
learns
be relatively
Project
KY
as well
study engineering
to
management.
proj
business,
engineering.
to
opportunities
such
manages the
this
and
of
kind
quality
study team.
Though the Toyota KY Project
may not be appropriate to study the
engineering
its
phase because of
quite
simple structure,
seems to have lost a good opportunity.
Probably,
OHB
too
its
9
divisionalized
form
(in
overseas operations prevents
consisting of
shift of
toward
in
OHB
adhocracy by
kind of
would
overseas operations
and will
technology
between
beneficial
a study team
Therefore, some
the overseas division
for
improve OHB's
contribute
Japan
for
from divisionalized form
between
would be
adjustment
transfer
systems
collaboration
departments
structuring
from
non-overseas departments.
OHB's organizational
and other
this
staff
framework)
organizational
Mintzberg's
to
and
OHB.
Hopefully,
organization
the promotion
for
of
the U.S.
Further- Research:
This
thesis
development
Toyota
KY
studies a very
projects.
Project,
Even
there are
remaining,
such as,
the social
and economic
Theoretical
organizational
in
aspect of
project,
for
of
systems or development
227
to
site
on
define
process
in
the
topics
the project
methodology
a real
example,
interesting
engineering,
impact
of
one
several
relations,
development
limited
selection,
the region.
optimal
in
and
various
project
conditions,
firm
and
differences
developing a
Comparative
general
such
projects,
housing,
developments
urban
and
developments,
Japan of
renewal
usual
and for
several
sector
the third
projects,
projects,
center
shopping
and
the
systems.
organizational
the U.S.
as public
partnership)
private
(public
between
case studies
and Japan,
the U.S.
project
theory for
understanding
for
both
between
similarities
a
theory.
are necessary
studies
Extensive
kinds of
the general
toward
step
as
theory
Minden's
evaluate
does
thesis
this
though
projects,
building
office
out.
should be carried
48
predicted
Boyd Paulson
concern may gather
clouds"
in
approaching.
commerce
between
benefits
of
countries
the U.S.
consumers and
because
of
his research on
"the
that
a storm of
into
participation
are
after
1979,
construction,
Japanese transportation
contractors")
in
to
protectionist
the U.S.
market;"
of
clouds of
distant
(Japanese
"distant
the
and
information
A two-way
flow
and Japan
is really necessary for
the construction
the presumable
advantage.
228
industry
existence of
in
both
comparative
the
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for
author.
to
Head of Takasaki Office
72.Imagawa,
Letter
Japan: February 1987.
KY
for
Project
Gunma Proj ect
Manager of Fuji
Deputy Pro Ject
74. Ku.j i rai,
1987. Letter
February
Japan:
Ohbayashi Corp. Gunma,
author.
-/E
75. Kuro.k:i,
manager
February
Tokyo:
of
Gunma
Fuji
1987.
Letter
Ohbayashi
for
Project
for
to
Corp.
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76.Lefebvre, R.J., Project Manager of Toyota KY Project for
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Interview.
77.Mizoguchi, Deputy Project Director of Toyota KY Project
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for
Interview.
Ohbayashi
for
Interview
Area Engineer of Toyota KY Project
78.Muramatsu,
and January 1987.
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KY: August 1986,
79.Nagashima, Engineering
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author.
to
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84.Shouda, Chief of Overseas Operations Section for
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MI:
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234
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Ohbayashi Corp.
1
Appendix
OliBAYASHI
AGREEMENT
BETWEEN
COIPORATION
CONTRACTOR
AND
CONSTRUCTION
MANAGER
FOR CONSTRUCTION
Contract No.
200
Contract Date
June 26,
1986
PROJECT:
Toyota Automotive Manufacturing Facility
LOCATION:
Scott County, Kentucky
CONSTRUCTION
MANAGER:
Ohbayashi Corporation, a foreign corporation of Osaka, Japan - authorized to
transact business in the Commonwealth of
Kentucky with offices at Suite 200, 880
Corporate Drive, Lexington, Kentucky
40503-2749
For the Contract Price herein stated, CONTRACTOR agrees to
perform and complete the work in accordance with Drawings and
Specifications
prepared or which shall
be prepared by
ARCHITECT/ENGINEER: Giffels Associates, Inc.
Architects and Engineers
25200 Telegraph Road
48037
Southfield, MI
Ernest R. McCamman, PE
Arthur 0. Moran, Jr., AIA
or such other or additional Architect/Engineer(s) as the CONSTRUCTION MANAGER may select.
WORK TO BE
COMMENCED:
July
WORK TO BE
COMPLETED:
August 30,
THE CONTRACT
PRICE:
See Article
1,
1986
1987
(3) three.
_
, by and
day of
THIS AGREEMENT made the
between National Industrial Constructors, a
corporation, having its principal offices at 1130 South 22nd
Birmingham, Alabama 35201, hereinafter
(P.O. Box 101),
Street
Ohbayashi Corporation,
and the aforesaid
called
the "CONTRACTOR",
hereinafter
called
the "CONSTRUCTION MANAGER."
WITNESSETH, that the CONTRACTOR and the CONSTRUCTION MANAGER, for
the consideration
hereinafter
named, agree as follows:
241
ARTICLE
1 -
SCOPE OF TIHE WORK
The CONTRACTOR shall
furnish or cause others approved by the
CONSTRUCTION MANAGER to furnish all
of the materials
arid perform
or cause others
approved by the CONSTRUCTION MANAGER to perform
all of the work shown on Drawings prepared by the Archior hereafter
prepared by the Architect/Engineer and
tect/Engineer
furnished to the CONTRACTOR by the CONSTRUCTION MANAGER with
"the Work") at the
building (hereinafter
respect
to the paint
Project.
The Work shall be completed in accordance with the
directions of the CONSTRUCTION MANAGER with such changes, modifications, additions and corrections as the CONSTRUCTION MANAGER
may hereafter impose; provided, however, the CONSTRUCTION MANAGER
presently anticipates the Work will generally be as follows:
Paint Building
(the
"Work")
Approximately
606,000
Sq.
Tons
Ft.
floor
structural
area
steel
Cu. Yds. concrete
and
rock
on both solid
founded
Ship is
The Paint
Dependent upon subsurface
engineered soil-rock fill.
spread
will
be
foundations
building
conditions,
The slab on grade is
footings and/or drilled caissons.
(8)
inch thick unreinforced
to be an eight
anticipated
The building structure is
slab with surface hardening.
a typical structural steel column, beam and truss conply built-up roofing
The roof system is a
struction.
Sidewalls will
installed on insulation and metal deck.
be architectural profile insulated sandwich panels and
masonry.
The facility environment will be controlled by roof
fired
for
be gas
air handlers which will
mounted
circulating
for
coils
cooling
contain
and
heating
handlers and roof
The air
chilled water for cooling.
mounted substations will be enclosed within a continuous roof monitor, the areas between these units will be
utilized to allow for infiltration of natural light.
will
The primary side of the roof mounted substations
be cable fed, the secondary distribution will be by
Internal to the
means of both buss duct and cable.
building will be fire walls as well as a mezzanine
structure
for
support of
future process air supply
house(s).
Lighting will be high pressure sodium vapor
fixtures.
Included within the Paint facility area will be a major
process pit/equipment foundation
x
x depths
242
varyinj from
process related
and
several
smaller
pits.
The
following
process
and
utility
headers
will be
preshigh pressure air,
in
the building:
installed
potable water,
surized industrial
waste,
natural gas,
deionized water, chilled water, steam, storm sewer and
sanitary sewer.
There will be several toilet facilities located within
employee facilities.
the area and other related
The Paint Shop bay spacing is
The facility
will
be fully
sprinkled at a rate
of
The paint storage and mix area will have
GPM/Sq. Ft.
either CO or Halon space flooding in addition to being
sprinkled.
ARTICLE 2 -
TIME OF COMPLETION:
be commenced
Agreement shall
The Work to be performed under this
be completed on or before August 30,
1986, and shall
July
1,
1987, and during the period of construction the CONTRACTOR agrees
to complete portions
of the Work as follows:
Completion Dates:
of the Work:
Portion
Start Foundations
7/01/86
Start Equipment Pits & Foundations
7/01/86
Start
Steel
Erection
9/01/86
11/01/86
Start Roof Closure
Mechanical
& Electrical Installation
12/01/86
Building Closure Completed
1/01/87
Paint Shop Ready for Selected Process
Installation
4/1/87
11/01/87
Equipment Trial Runs
ARTICLE 3 -
THE CONTRACT PRICE:
The Contract Price shall be the sum of the following:
(a)
A lump sum fee of
to cover the CONTRACTOR'S overhead and profit, which amount shall be (i) increased by
of the amount by which the costs included in the Contract
Price pursuant to subparagraph (d) of this Article 3 exceeds
243
the costs
paragraph
of the amount
reduced by
or (ii)
included in the Contract Price pursuant
(d) of this
Article
3 are less than
by which
to sub-
(b)
Reimbursement for the CONTRACTOR'S "actual costs", as
hereinafter
defined, of such management and supervisory
personnel in the employ of the CONTRACTOR as may be necessary to supervise the CONTRACTOR'S contractors and subcontractors
if
and only if such personnel have been approved in
writing by the CONSTRUCTION MANAGER, which approval by the
CONSTRUCTION MANAGER shall
riot be unreasonably withheld as
long as the total
of such "actual costs" pursuant to this
subparagraph (b) does not exceed
(c)
Reimbursement of such general overhead items as detined in
Schedule C to the bid submitted by the CONTRACTOR as the
CONSTRUCTION MANAGER approves in writing, which approval
shall not be unreasonably withheld as long as the total cost
pursuant to this subparagraph (c) does not exceed
(d)
defined, to the CONTRACThe "actual
costs",
as hereinafter
TOR of completing the Work, with the exception of elements
of "actual
costs"
included in subparagraphs (a),
(b) and (c)
of this
Article
3.
Such "actual costs" of completing the
include the "actual costs", as hereinafter
Work shall
defined, of all
labor and materials necessary to complete
the Work other than with respect to labor or materials for
which the CONTRACTOR is to be compensated pursuant to
subparagraph (a),
(b) or (c) of this
Article
3.
Notwithstanding anything contained in this or any other agreement
to the contrary,
(i) such "actual
costs" of completing the
Work shall be included in the Contract Price only to the
extent
all
elements of such "actual costs"
of completing the
Work, including, but not limited to, all contracts, subcontracts,
and cost
of materials and labor, have been approved
in writing by the CONSTRUCTION MANAGER and (ii) no amounts
paid or payable to the CONTRACTOR, officers, directors or
owned or
employees of the CONTRACTOR or persons or entities
controlled by or which own or control the CONTRACTOR shall
be included in the Contract Price pursuant to this subparagraph (d) except to the extent such payment is specifically
approved in a writing signed by the CONSTRUCTION MANAGER,
which writing also acknowledges such relationship.
Article
3 shall
mean the
The term "actual
costs"
as used in this
aggregate amount of all expenditures actually paid with respect
to labor, materials
and supplies employed in the completion of
the Work with the CONSTRUCTION MANAGER to receive the benefits of
all
discounts,
credits,
rebates, similar
arrangements and other
benefits,
except as otherwise limited in this
Agreement.
The
term "actual
costs"
shall,
however, not include the following:
(i)
Compensation of the CONTRACTOR'S
tive
or administrative officers.
244
execu-
(ii)
(iii)
Overhead
or
general
expenses, of
any
kind,
excupt
any
such
expenses
speci fically
mentioned in
subparagraphs
3.
Article
and (c) of this
(b)
Services and expenses of the CONTRACTOR'S
executive,
administrative,
estimating, purchasing, cost, and accounting departments.
(iv)
Any and all costs of capital employed or
money borrowed.
(v)
fees or
costs of
taxes,
Any and all
the
CONTRACTOR
on
imposed
charges
relating to receipts, income, either net
or gross, licenses or similar items.
(vi)
Any and all costs of insurance acquired
except as otherwise
by the CONTRACTOR,
General
the
in
specifically provided
Conditions.
(vii)
No expenses or costs shall be included
as
"actual costs" to the extent paid
more than once, thus, by way of illusa
makes
the
CONTRACTOR
if
tration,
Subcontractor,
a
to
payment
for
or
supplier
Sub-subcontractor
lien is
services or materials and a
by
a
filed
subsequently
Sub-subcontractor for an item included
in such payment, the CONTRACTOR will be
required to pay such Sub-subcontractor
the amount due in order to release the
and the expenses of such payment
lien
not be included as an item of
shall
"actual costs. "
(viii)
of
expenses
and
costs
all
and
Any
in connection with
attorneys and others
any claims or litigation, reviewing of
agreements, or similar matters relating
to the Work except as otherwise provided
in
the General
this Agreement or
in
Conditions.
(ix)
Any and all liability, cost or expense
the Contractor might incur in connection
with breach of or failure to perform or
claimed breach of or failure
to perform
in accordance with this Agreement, the
General
Conditions
or
the
Contract
Documents
described
in
the
General
245
Conditions,
whether
warranty,
breach
other matter.
relat 1 fig
contract
to
or
a
any
(x)
Any costs
and expenses
incurred
after
the earlier
of (A)
the termination of
the Agreement pursuant to Article 18 of
the General
Conditions,
or
(B)
final
payment as provided in Article 14 of the
General Conditions.
(xi)
Any and all matters, costs and expenses
which the General Conditions provide are
to be borne by or at the expense of the
CONTRACTOR,
including,
but not limited
to those relating to uncovering, replacwork pursuant
to
ing
and
correcting
Article 18 of the General Conditions.
(xii)
ARTICLE
of
4 -
Except to the extent the CONSTRUCTION
MANAGER has otherwise agreed in writing,
any and all payments, expenses and costs
of or relating to any item, compensation
or other matter in excess of the lowest
amount specified for such item, compensation or other matter in either (A) the
CONTRACTOR'S bid, including Schedules B
written representa(B)
and C thereto;
between
the
tions
and
correspondence
CONTRACTOR and CONSTRUCTION MANAGER; or
(C) Exhibits "A" and "B" attached hereto
and incorporated herein.
PROGRESS PAYMENTS
AND
FINAL PAYMENT:
The CONSTRUCTION MANAGER shall make payments on account of the
Contract as provided in the General Conditions.
ARTICLE
5
-
THE CONTRACT DOCUMENTS:
The Contract Documents consist
of this
Agreement,
the General
Conditions attached hereto as Exhibit "C", reflecting
a last
revision
date of June 12, 1986, and incorporated herein by reference, any supplementary or other Conditions added pursuant to the
General Conditions or by agreement of the parties, such written
construction procedures and guidelines as the CONSTRUCTION
reasonably adopt, the Drawings, the SpeciMANAGER may hereafter
fications, and all Addenda issued prior to and all Modifications
issued after execution of this Agreement, and all are as fully a
Agreement as if hereto attached or herein repeated.
part
of
this
246
ART ICLE
6
-
CONDITIONS
FOR
UNION
CONTRACTORS:
Thu CONTRACTOR represents
and warrants it
has attached to this
Agreement true and correct
copies of any and all
written
agreemiients and a detailed
summary of any and all
non-written agreements or other obligations
entered into between the CONTRACTOR
and any union contractor
the CONTRACTOR intends to involve in the
Work and all unions which the CONTRACTOR or any such other
contractor
recognizes as bargaining agents for its
employees on
this project.
In the event of a violation
of any of the provisions of the attached agreement by a signatory union, the
CONTRACTOR agrees to promptly and aggressively pursue all available legal remedies against the union.
The CONTRACTOR agrees not
to subcontract or allow any Subcontractor or Sub-subcontractor to
subcontract any portion
of its
work on this
project
to any other
contractor who recognizes any union as the collective bargaining
agent of its employees on this project who has not, prior to
being assigned such work, entered into collective bargaining
bargaining
to the form of a collective
agreements (a)
identical
agreement attached hereto as Exhibit "D" with all such recognized
unions or (b) otherwise approved in writing by the CONSTRUCTION
MANAGER.
In the event the CONTRACTOR breaches the provisions of this
paragraph, such breach shall be considered a substantial vioAgreement and of the Conditions
of the provisions of this
lation
of the Contract and CONSTRUCTION MANAGER shall have the rights
and remedies provided for in paragraph 19.2.1 of the General
Conditions.
ARTICLE 7 -
PERFORMANCE BOND AND LABOR AND MATERIAL PAYMENT BOND:
request from the CONSTRUCTION
The CONTRACTOR, upon written
shall
furnish and pay for bonds, in favor of the CONMANAGER,
STRUCTION MANAGER, covering the faithful performance of all or
such part of the Work as may be requested by the CONSTRUCTION
MANAGER and the CONTRACTOR'S and Subcontractors' and
Sub-subcontractors' obligations under this Agreement and the
Contract Documents and all obligations arising thereunder or
otherwise relating thereto, for such amount as the CONSTRUCTION
MANAGER in good faith estimates it will cost the CONSTRUCTION
MANAGER to complete and pay for the portion of the Work with
respect to which such bond or bonds are to be provided, and with
such sureties as may be agreeable to the CONSTRUCTION MANAGER.
The CONTRACTOR shall, upon request from the CONSTRUCTION MANAGER,
promptly submit satisfactory evidence to the CONSTRUCTION MANAGER
that such bonds have been issued.
Subject to the limitations
contained in Article 3 of this Agreement, the reasonable actual
cost of such bonds required by the CONSTRUCTION MANAGER shall be
included as part of the Contract Price.
247
ARITICiL
8
-
MIISCELLANEOUS
PROVISIONS
(a)
In the event of any conflict
between the provisions of this
Agreement and the provisions of any other Contract
Document(s),
the terms and provisions of this
Agreement
shall control and be fully applicable.
(b)
Except to the extent inconsistent
with this
Agreement,
the
definitions contained in the General Conditions shall be
applicable in interpreting this Agreement.
(c)
This Agreement shall be governed by the law of the Commonwealth of Kentucky.
(d)
The titles and headings contained in this Agreement are for
convenience only and should not be used in construction of
this Agreement.
(e)
The CONTRACTOR shall not be entitled to assign, transfer or
convey any of its rights or obligations pursuant to this
Agreement without the prior written consent of the CONSTRUCTION MANAGER.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement this the day and year first above written.
CONTRACTOR:
NATIONAL
INDUSTRIAL CONSTRUCTORS
BY:
ITS:
CONSTRUCTION MANAGER:
OHBAYASHI CORPORATION
BY:
ITS:
000:020
24A
APPENDIX 2
:-PERAT;ON CHART OF THE TO#OTA Vi PROJECT
LESEND
DO
AS: ASSIST/INFORM
Ci: CHECK/REVIEW
ik: BE INFORMED
AF: APPROVE
') CONCEPTL-AL PLANNING STAGE
OWNER
TMC
PRELIMIMARY FEASIBILITY STUDY
* MARKETINS/POLITICAL ANALYSIS
* DEFINE NEEDS
S PRELIMIARY FINANCIAL ANALYSIS
t EXAMININ6 JOINT VENTURE
S EXAMINS C3NTSACT METHOD,
S DEFINE &FERATING REQUIREMENTS
t PROViDE BASIC INFORMATION
OF SITE
OHB
CONSULTAN STATE
GOV'T
A.
PREDESI/EtPLANNINS STAGE
DO
Do
DO
DO
DO
DO
IN
OWNER
TMC
A. SELECTION OF CONSTRUCTION MANAGER
B. SELEZTI1N OF A/E
I PERSONNEL SELECTION OF CM
t PERSONNEL SELECTION OF A/E
SITE SELECTION
t INVESTIE4TION OF ZONING
REGULAT ON.ETC.
t INVESTIEATION OF CLIMATE,
GEOTECHO:CAL CONDITION,
INFRASTFjCTURE, ETC.
* INVESTI&TION OF ACQUISISION TERMS
D. NEGOTIA~ION ABOUT INCENTIVES
FOR SIT: SELECTION
E. FRELIMI%.ARY ARCHITECTURAL PLAN
t ARCH:TE:'-URAL DESIEN
i STR:UTUGL DESIGN
I BUILDINB EQUIPMENTS
t PRODUsT::N ENGINEERiNG
COST AN&'?SIS
S. DEVELOFIENT PROCESS AND SCHEDULING
(AS)
AS
(AS)
(AS)
IN
IN
DO
OHB
CONSULTAN STATE
GOV'T
A/E
GIF
DO
AP
CH
CH
DO
IN
AS
DO
AS
AS
AS
IN
DO
AS
£0
IN
DO
DO
AS
DC
E0
AS
AS
DO
DO
DO
DO
DO
AP
AP
DO
CH
CH
DO
DO
AS
DO
AS
AS
A
AS
DO
249
oPERATiON CHART OF THE TOYOTA K PROJECT
3) ENSINEEIRNG &DESIGN STAGE
A. MAKIN k ARRANIGIN6 DESIGN
DZCLMETS
t DRAWINES AND SPECS FOR PERMISSION
I DRAWINaS AND SPECS FOR ESTIMATION
I SPECS F3P CONSTRUCTION
B. APPLICtaiON FOR PERMISSIONS
t BUILDIKE PERMITS
t FOUNDATION PERMITS
I 3THER FERMITS
COSTH.CC TROL/VALUE ENGINEEFING
I REVIEW FINAL PLANS AND SPECS
WITH COST ESTIMATES
4) FROCUREENT STAGE:
OWNER
TMC
AP
IN
AP
AP
IN
IN
IN
IN
CH
AP
OWNER
TMC
A. BIDDINE & CONTRACT NEGOTIATION
t NOTICE 7D BIDDERS
* QUALIF*:sN & SELECTION OF SUBS
* SID EV..-EATION
Z.tTIONS
z. LABC
t FFOJEC AREEMFNT
£ NEG:TIAluN ABOUT LABOR
FELA T l
STATE
GOV'T
AP
AP
IN
t P.
AP
AP
AlE
GIF
OHB
CH
DO
CH
CH
IN
DO
0
DO
DO
9o
DO
Do
Dc;
DO
AS
CH
AS
AP
AP
AP
IN
IN
A/E
GIF
KYILOCAL OHE
GOV'T
(CH)
AS
DO
Do
AS
4
CH
(cH)
DD1
CH
DO
DO
IN
IN
250
S.C.5
SUBS
UNION
DO
IN
DO
AS
DO
IN
IN
IN
IN
)
IN
CH
CH
CH
CH
DO
DO
,,PERATION CHART OF THE
GiOTA K FROJECT
LESEND
iL: DO
AS: ASSIT/INFORM
CH: CHECK/REVIEW
IN: BE INFORMED
AF: APPROVE
5) CONSTRICTION STABE:
OWNER
LOCAL
TMC
GO'I I
A. CCNSTRUCTION
I SCHIEDLIN
1
I QUALITY CONTROL
* COST CONTROL
S SAFETI CONTROL
I DCCUMENT CONTROL
S REVIEW -LANS & SPECS
I PERSONNEL SELECTION
I CONSTRUCTION METHODS
* INSPEC: ON
Z CNS-,
PEFaiTIC*
Do
DO
Dc.
DC
DO
AS
CH
CH
CH
CH
CON
CH iN
DO
uNNER
'Mr.
CH
IN
DO
DO
DO
DO
DO
Do
AS
AS
IN
MAINTENECE AFTER THE SUARANTEED
DO
IN
Dr
IN
DO
AS
SUBS
AS
DO
B. INSPECTDN'AFTER ONE YEAR
L.
AS
AS
G.C.s
AS
TEST LAB
AS
AS
GF
VGUARANTEED
AP
AS
AS
UNION
AS3
AS
H*AE
AS
AS
AS
SUBs
IN
C4, D0
APD
S.C.s
IN
CH
AND MAINTENANCE STABE
A. MAINTEha-'*EE DURINS
FER .
kA
H
B. C0R.DINATION CONSTRUCTION WITH
PUBLIC A4ENCIES
C. FURCHASINS IMATERIALS)
D. FINAL IkiPECTIGN
6
A/E
IF
AS
INDO
PERIECD
251
AS
Appendix 3
manager-s
Roles of sam
in
(1B's
site office in
the Toyota KY
(Ojhba):
Project Director
field
and design
1)
Responsible for all
2)
Companies on and off
3)
Organizing Ohbayashi's Toyota KY on
site
Responsible for all
2)
Companies on site
representative of the project.
and off
site
office.
(Mi zoguchi):
Deputy Project Manager1)
activities.
activities.
job site
representative with owner,
labor,
vendors,
and public.
3)
In
the absence of the Project Director,
of the Project Director.
responsibilities
Project Manager
assumes the
(Jordan):
1) Promotes and maintains good relations with the client, A/E,
and local community.
2)
Provides the focal
point for
the coordination of
the
and achieves the required schedule,
construction staff
cost,
and
quality.
3)
Is
an integral
part of the development
of the overall project
p1an.
4)
Integrates the engineering,
procurement, administration, and
construction groups to a common goal.
5)
Monitors the projects safety, security,
and medical
aid
programs.
project schedule and budget performance.
6)
Monitors the overall
7)
Promotes labor harmony.
Engineer-ing Manager
(Japanese):
252
Engineering Manager
1)
Is
(Japanese):
responsible for procirement,
flo :w with enineering
manager
(OHB) ,
A/E
expertise
(GIF
aid coordinates information
among
and OHFB'
TIMC),
cliert
deslign
team),
constructi
on
and area general
contractors.
2)
Provides bid package and recommendation
bid pacikaqe,
bid itself,
3)
method of
bid classifiction,
(analy inq conterts o listing
of
bidders,
etc.)
Provides
for the orderly flow of
the construction effort,
along with
construction documents to the desion
design documents to support
the timely flow of
firm for reviews and
approval s.
4)
Coordinates the economic
equipment,
utilization
of
and conistruction principals
similar
materials,
with the design effort
to
obt ain op ti mum resultLs.
5)
Provides
r3rofessiolnal
6)
Provides.,
master
7)
foir techr-ical
societies,
crrespondence with the A/E., vendors.,
etc.
monitors. and recommends changes to the project
schedule plan.
Provides the management
level
cost,
capitalization
and budget
reporting.
S) Controls the quality of soil,
9)
Edits
construction
Area Manager
1)
reports
steel,
(in
and
concrete quality.
Japanese).
(American):
Manaqes and administers the contract with the Construction
Manger/General
Contractor with his assigned
253
area.
_)
with
r egard
Con xst r uct ti
3)
to
on
Document
and
Engi neers to
are met
and
Promotes
Contractor's
5)
safety
project
Advises
regards
insure
and
working
among
for
the
both
and
goals
are maintained.
Marager's/General
a
S.upervision
on
the
security.
and receives advise from
planning
Project
programs by insuring
construction
and
Managers
Area
the overall
relationcShips
and security
awareness
accordance with
in
the other
enforces the Construction
safety
mai ntained
overall
cooperates with
good
and
schedul e
y., and
t i ves
cec
obj
P o r oject
s.
promote
that
or ex. ceds t h
meet.
qual it
cost,
C'ordinates
Area
4)
or
Ens;uLr cs con tr uci
Engineering
the project
and
his
Manager
as
individual
area
requ i rements.
6)
and
Monitors
planning efforts
directs
to
Area Engineer/Area
1)
Is
resoonsible
2)
Needs direct
Contractor
General.
achieve
proj
ect
for
deal
engineeringc
requireffierts.
in
TMC,
his
Needs close cooperation
4)
Evaluates bids and recommends
5)
Reviews and
6)
Monitors
negotiates
approves
(Japanese):
assigned
and
A/E,
with the following
3)
and
subcontractors'
Contract Coordinator
contact with
to
Cntractor's
area.
the Area
General
works.
with Engineering
award
estimates for
area budoets,
Manager.
contractors.
change
and
orders.
adjustmerts. to
these
budgets.
~7)
With
the General
and provides for
Contractor
monitoring
estabi
and
i shes
short
recommeindations
254
rang e
for
schedules
corrective
act
i on,
8)
Frovi. des conIStr-Uct i on pl anni ng
9)
Monitors
qned
compliance
for
on work
the constructi
a.si
his
area.
to
Project
Standards..
QuaIity
1C)
in
Th r ough
1abor,
f
1. i
d tcours
pr-ov ides
equi pment.,
materials,
11)
Coordinates ccnstrLc:ti
and
supplies
12)
Provides construction
of
production
on
f-or
and
eff
with
machineries
report
written
255
uti Ii zati on of
ces.
servi
pr-ocess
3.ci ent
the General
the
for
in
Contractor
for
setting
Japanese
to
TMC.
them.
APPENDIX 4
MINDEN'S "PROCUREMENT METHOD DESIGN MATRIX" And Its Explanations
Figure
A General Procurement Method Decision Algorithm
IDENTIFY
CONTIGENCY FACTORS
CHARACTERIZE AND WEIGH
CONTIGENCY FACTORS
BASED ON UUDGEMENT
OF OWNER
CORRELATE AND
EVALUATE PROCUREMENT
METHOD ATTRIBUTES
WITH CONTIGENCY FACTORS
TENTATIYELY IDENTIFY
PREFERED PROCUREMENT
METHOD ATTRIBUTES
ARE
PROCUREMENT
METHOD ATTRIBUTES
MUTUALLY
COMPATIBLE
NO
IDENTIFY INCOMPATIBLE
ATTRIBUTES AND REPLACE
WITH NEXT PREFERABLE
ALTERNATE ATTRIBUTE
WHICH IS NOT INCOMPATIBLE
YES
DEFINE AND IMPLEMENT
PROCUREMENT METHOD
SOURCE:
MINDEN'S THESIS AT MIT, 1986
256
Instructions
1 Select contingency factors which apply
5 Tentatively select attribute in each
category with highest score.
2 Weigh contingency factors in terms
of relative importance,
6 Compare attributes on right matrix
for incompatibility, denoted " X"
If incompatibility detected, select
alternate attribute(s) to eliminate
incompatibilities while optimizing
total score of all attributes.
to project.
3
Compare each contingency factor with
procurement method attributes as
indicated on the left matrix.
4
Score each attribute according to
correlation with weighted contingency
factors. Example: Score design-build
given:
0
0
Early Delivery
5
0
5
Complex Project
2
x
-2
Tight Budget
Sophisticated,
limited mgmt
Type i Owner
3
0
3
2
0
2
4
o
Total Score
to
12
SOURCE:
257
MINDEN'S THESIS AT MIT, 1986
12,
Weight
N)
(11
OD
Procurement Method Contigence Factors
Early Accelerated Deliver y Required
Normal Sequencing Adequate, Delivery Time Not Critical
Project Large &/or Complex &/or High Risk &/or Poor Definition
Project Moderate in Size &/or Complexity
size/complexity/risk
Project Simple, Straightforward, Governed by Generic Standards
Based on Scope/Quality/Time, Budget Appears Tight
cost
Owner has Sophisticated,Capable & Extensive Management Resources
Owner has Sophisticated but Limited Management Resources
delivery time
0T
c
(0
CX
anement
2.
Owner lacks Management Resources & Know-how
Type I Owner, Weak Negotiating Position, or Required to Bid
Type 1IOwner, Strong Negotiating Position, No Bidding Restraints
Requires Fixed Price Before Commiting to Bid
Able to Bear Most Cost Risk
Weak Competition, Limited Qualified Contractors
Good Competition, Bidding Viable
Qualified Contractors Unable -toOffer Fixed Price w/o High Premium
Qualified Contractors Can Offer Fixed Price v/o Excessive Premium
bibbing/negotiating
constraints
0
risk aversion
bidding climate
contractor risk
aversion
Competition May Be Improved or Risk Managed by Disaggregating Project
No Significant Benefit by Disaggregating Project
advantages of
disaggregation
Building Systems Meeting Project Requirements Available
Building Systems Not Available but Potential Market
Aggregations Mayq Justify
building systems
availability or
market potential
27
a'~
x
0
0EEEEEEEEE
o
__
xEE0E
o
1onEEEEEEE.0EE
x~
0
-X
x~~~
00
o
I
-0-
-
1
0
om xEE00
o
1
x
10
0
SOURCE:
259
-i
-0
1-
EEE0EEE0
IX0
00
1 10'
o
~10
0
0
_0BEEEEEEEE
010L
xl
I
x
X1
0o
0
-
IoIx
[xEMEEEEE
0
XO 01
1
0 olXI0O
X010_
MINDEN'S THESIS AT MIT, 1986
1
Procurement Method Attributes
I
Normal Sejuential Design/ Bid/ Build Schedule
Accelerated Design &/or Construction
Fast-Track
Pre-Engineering
Single Responsibility Contract
Early Work Packages w/ Transfer
Multiple Work Packages
Use Existing System
Develop New Building System
Use Open Systems or Conventional Technology
Traditional Method
Design-CM
Construction-CM (CM w/GMP)
Design-Build
Systems
Bid Competitively*
Negotiate*
Fixed or Unit Price*
Shared Savings*
Cost Plus*
* Fsw o
v// pr"i. rz' namseri
.sepers~tew-k pataps-
260