Sutter Health

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Sutter Health

• Developing a Contracting Model to Support Lean
  Project Delivery
• LCI Design Forum
• December 10, 2004

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• Insanity
• Doing the same thing over and over again and
  expecting different results.
• Albert Einstein

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• Its what you learn after you know
• it all that counts.
• John Wooden

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Who is Sutter Health
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Who is Sutter Health
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Sutter Health Capital Program

• The Executive Challenge
• Improve the patient experience quality of care
• Sustain operating margins for reinvestment
• Successfully execute 5.5B program
• Minimize risk (financial)
• Traverse the OSHPD approval process
• Provide real-time project reporting to a variety
  of groups

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Facility Planning Developments Goal

• Increase reliability that long lifecycle projects
  (5 years). . .
• on-time or early
• within budget or less
• without claims
• safely (without creating patients), and
• without burn-out of FPD staff

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But How?

• Standardize practices that worked well in the
  past
• Innovate and adopt new practices to support the
  goals

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LCI Project Paradigm
Stodgy
Dynamic
Physics of Work
Design of Systems
Organizations
Contracts
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LCI Project Paradigm
Sutter Health Lean Initiative
Stodgy
Dynamic
Physics of Work
Design of Systems
Organizations
Contracts
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Move to Lean Project Delivery
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Five Big IdeasEmergent Outcomes
Collaborate Really Collaborate
Optimize The Whole
Increase Relatedness
Innovation
Competitive
ContinuousImprovement
Build Trust
Reliability
Projects as Networks of Commitment
Tightly Couple Learning w/ Action
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Actions Taken by Sutter Health

• Sutter Lean Summit
• Internal FPD Training Collaboration
• Implement use of LPS
• Kick-off sessions project coaching
• Develop A/E/C Collaboration Portal
• Sponsor A/E/C Community Events
• Develop Assessment Tools

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Ongoing Opportunities

• Introduction to Lean and LPS seminars
• Target Value Design
• Joint A/E CM/GC Agreement
• Super Charettes for Concept/SD
• Collective Incentive Programs

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Applying Commercial Strategies

• Looking to the 5 Big Ideas to inform the
  commercial strategy
• Seeking alignment between the goals of Lean
  Project Delivery and commercial terms

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Build Teams from Sutter Health Community

• External efforts to build sense of community
  (e.g. Sutter Summit, Vendor Forums)
• Forge Integrated Project Team
• Early Selection of Architect and Cost-Plus CM/GC
• Early Selection of Major Trades by the team
  (Schematic Design/RFP Selection)

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Create Collaborative Design Environment

• CM/GC and trades have seat at design table
• Design-collaboration or design-build
  subcontractors (MEP, Fire, Curtain wall, Skin)
• Sharing of intermediate design documents
• Constructability/buildability inform design
• Value engineering throughout design
• Design-to-budget/Over-the-Shoulder pricing

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Collectively Explore Value

• Joint site investigation plan
• Jointly develop scope review work of
  third-party consultants
• Owner review of subcontracts
• Owner review and approve CM/GC bonuses

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Joint Management of Financial Risk

• Contingency
• Separate contingencies -- design, construction,
  escalation, and project
• Late GMP -- limits hidden contingency (Sutter
  bears the escalation and permitting risks)
• Jointly manage design and construction
  contingency

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Joint Management of Financial Risk

• Limited extras
• Limited change orders (scope, DSC, unforeseen
  regulatory or code interpretation)
• Joint monthly meetings to assess reasons for
  extra work and financial responsibility

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Joint Management of Financial Risk

• A/E Compensation/Risk
• Resource loaded work plan (fees to support
  quality effort)
• Some A/E fees are GMP rather than fixed fee
• Negotiated standard of quality

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Joint Management of Financial Risk

• Re-define basis of financial responsibility
• Sutter takes first dollar risks
• Architect negotiates its level of risk
• Fee informed by level of care and quality
  required

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Joint Management of Financial Risk

• CM/GC Risk
• CM/GC risk mitigated by construction phase
  contingency
• Access based upon recoverable extra cost for
  which change order not available (e.g. buy-out
  gap, missed coordination)
• Beyond contingency, CM/GC bears financial
  responsibility

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Joint Management of Disputes

• Party-controlled dispute resolution
• Monthly change order meetings
• Project manager level negotiations
• Senior Executive level negotiations
• Independent expert appointment
• DRBs
• Mediation

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Developing Incentive Program

• Pool funded by contingency preservation and cost
  of work savings
• Allocation to incentive pool based upon sliding
  scale (smaller of low hanging fruit)
• Team collectively participates in pool (allocate
  based upon fee?)
• Portion of incentive pool actually paid depends
  upon evaluation of non-price performance (5 Big
  Ideas, quality, reliability, safety, innovation,
  etc.) throughout the project (monthly/quarterly
  assessments)

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Challenge to our Vendors

• Learn the skills needed for Lean Project Delivery
• Develop an internal implementation strategy (with
  measurement of progress)
• Demonstrate a commitment to continuous
  improvement
• Exhibit a willingness to share the learning in
  our project community

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FPDs Value Proposition

• Deliver best value to Affiliates to compliment
  their mission of patient care
• Innovate and create a project environment that is
  challenging and engaging
• Push our design and construction partners to
  learn with us
• Never settle for adequate

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• Discussion

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Past Experience
Problem Projects
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Current Program

• 5.5 Billion (2004-2012)
• Acute Care Facilities
• Non-Acute (e.g. Outpatient Surgery)
• Medical Office Buildings
• Parking Facilities
• Remodeling Existing Space