How contractual scheduling and production planning work in tandem

In construction, nearly everyone is familiar with the contractual schedule. That is, the formal, legally binding agreement between the builder (contractor) and client (owner). This schedule serves a key purpose — it outlines the key milestones, dates and deliverables agreed upon by all parties involved in the contract and what happens if deadlines are not met. Making changes to this schedule is difficult, as it requires amendments to be written or renegotiations to happen between all parties.

Challenges can emerge though when construction teams take a contractual schedule and immediately start building out a comprehensive production plan from it, operating on the assumption that more detail means more predictability and improved project outcomes.

Orienting the entire construction process around what’s written in the contractual schedule can work well when projects are small and routine in nature or where there’s an abundance of information up front, allowing design and preconstruction teams to build robust plans that factor in multiple contingencies.

However, this does not reflect the reality of many construction projects today.

Where does contractual scheduling break?  

The bidding process used on most construction projects doesn’t reward thorough up-front planning. Low-cost bidding structures reward speed over quality from design and engineering. Often, the minimum work required to win the bid is what gets done. Cost overruns and change orders are common, as there is no financial incentive for architecture and engineering firms to build in contingencies or think beyond the initial scope. These changes can even become a key revenue stream for some organizations, who bid low to start and earn profit back later when change orders are inevitably needed.

Shifting economic and political circumstances can also throw an unforeseen wrench into even the most bulletproof plan. Tariffs, supply chain disruptions and regulatory changes can all send a project spiraling. The longer the project is in duration, the greater the risk factor that external disruption plays.

How is production planning different from contractual scheduling? 

A production plan (or system) is a detailed, sequential timeline covering exactly what tasks need to be performed, when they are to be completed and who’s going to be doing them. It factors in variables like labor, equipment and materials that can be tough to predict at the outset of a project. The concept of production planning is not new — it has roots in manufacturing tracing back to the industrial revolution and scientific management movement in the late 19th century. It was taken further in the late 20th century by just-in-time (JIT) inventory management and the Toyota Production System (TPS), which drastically improved reliability and reduced material costs in the automotive sector, spearheading the Lean movement which has expanded to other industries, including construction.

Production planning is different from conventional planning because it is short term in nature — it doesn’t try to lock in every variable at the start. Its focus is on guiding processes at the ground level and identifying crucial dependencies to keep work flowing, while working backward from the outcome desired. A lot of emphasis is placed on removing any barrier that could break or disrupt the pattern of ongoing work. These inefficiencies (or wastes) can take many forms — such as unnecessary movement around the jobsite, too much inventory being held, defects that require rework and bottlenecks where you’re paying one group to wait for another group to finish.

For production planning to be effective in construction, it requires a direct relationship and active involvement with the people closest to the work taking place (such as superintendents and trades). Variables like machine time, labor capacity and material availability are crucial to on-time delivery and are difficult (if not impossible) to accurately forecast at the outset of a project. You need a systematic way to make and capture decisions closer to where the work is unfolding to allow for flexibility and responsiveness. A popular and proven approach for handling this in construction is the Last Planner System®. 

Which approach is right for my project?  

 In many cases, the answer isn’t choosing between contractual scheduling and production planning — it’s a matter of both working in conjunction with each other. You need a contractual schedule to lock in commitments with your client and set expectations for budget, scope and duration. But if you go too detailed on this high-level, long-term plan, your project will suffer from inefficiency and you’ll be unable to react appropriately to changing circumstances. Meanwhile, a production plan covers the intricacies of how you run your shop (or, in the case of construction, your day-over-day site management). It’s highly detailed but short term and flexible in nature, because the inputs are continually in a state of flux.  

Can these two approaches communicate with each other?  

Yes, despite serving different purposes, your contractual schedule and your production plan should feed information back and forth with each other at various points in the project. Your contractual schedule should be the basis for setting the high-level milestones from which your production plan works backward — this is critical for delivering value to the customer that’s paying for your services.

Similarly, once the production plan has been executed, it’s important that the information gets fed back up the chain to anyone involved with building the initial contractual schedule. These teams need to know how the final flow of work was completed compared to what was initially planned so they can get better at bidding and estimating future projects. This information also provides valuable baseline data so the project’s performance can be measured and studied against others in the portfolio.

Analysis of the production plan should also be routinely done by the site team responsible for execution as a reflection point. They should learn what went well and where future improvements can be made. A common metric for measuring this is Percent Plan Complete (PPC), which shows how many activities were completed versus how many activities were planned. This is a great barometer to gauge the overall health of the project, especially when it is overlaid with information on reasons for variance (why an activity wasn’t completed as planned).

Tip: Technology can aid tremendously in passively capturing PPC and reasons for variance data. Learn more about reporting in Nialli™ Visual Planner.

In summary

Rigid contractual schedules are great for setting milestones but they lack flexibility, often leading to inefficiencies when conditions change on projects. But when they are paired with adaptive, short-term production planning methods — like the Last Planner System — projects can properly stay on track.

See why contractors like Willmott Dixon and PCL have chosen Nialli Visual Planner to help with production planning.