9470 N. Little Cottonwood Rd. Sandy, Utah 84092
Dr. Leo Shelton
Fall Session 2, 2010
Conrad Construction Industries is a residential and commercial contracting firm based in Salt Lake City, Utah consisting of 100 employees, in addition to governing a board of directors and multiple subcontractors. The organization has maintained a competive advantage in the construction industry for several years. However, in 2006 the board of directors recognized an industry trend towards sustainable building driven by the increasing demand for LEED certified general contractors, and initiated the shift from a cost-based strategy to a value-based focus. Thus, CCI began to transform itself from a traditional construction company to a green building firm, investing heavily in high-tech machinery, equipment and latest innovative building materials to support the processes of sustainable design.
“Sustainable design is the practice of creating healthier and more resource efficient models of construction, renovation, operation, maintenance, and demolition (Hassan, 2006). LEED, or Leadership in Energy Efficient Design, is the accreditation awarded by the United States Green Building Council (USGBC) to projects meeting the extensive criteria based on the building’s efficient performance, low waste production. Today, there are over 138,170 LEED professionals working in the United States, and approximately 891 LEED professionals in Utah (GBCI, 2010). LEED is currently the highest level validation for quality standards in the green building market. Analysts also confirm that this market is on the rise, speculating that the industry will triple in growth over the next five years (Rock Products, 2010).
Despite their long-standing success in the traditional construction, CCI has struggled to increase their market share since making the shift to green building, despite a high volume of new business projects, and their solid reputation in the community. The procurement team, who was accustomed to the practice of offsetting labor costs with inferior product selection and economizing projects to maximize value, recognized the need for evaluation. Their investigation revealed two critical areas that were impacting market performance, cost control and level of quality. 1. Cost Control- In order to satisfy LEED standards, CCI must tack on an additional 20 percent to a traditional price quote to cover the additional labor costs plus a high performance materials expense. Their competition is able to provide the premium quality an attractive price, effectively lowering the market price point. CCI is aware of excessive labor waste and material waste occurring from production delays, materials miscalculations, and lag time on the jobsite. They are paying foreman overtime to correct and rework errors, but this is costing more than it is saving. They have no scale of reference to gauge what the new building methods should cost or how long they should take, and no system for waste inventory. The overall lack of cost control is placing them out of competition for contracts. 2. Level of Quality- CCI struggles to maintain a consistent level of quality from project to project despite large investments in LEED training and equipment upgrades. Projects often require rework, as backtracking to correct mistakes is a frequent occurrence. The firm has received numerous complaints about quality, making concessions to settle contract disputes on a regular basis. They have attempted to solve each quality issue as it arises, but cannot seem to maintain quality for a period of time. An oversight in one area sparks a widespread meltdown of quality throughout the project. Employee engagement...