Lean Six Sigma

Water Main Replacement Cost ReductionGreg Meszaros, Director of Public Works and City Utilities

Define Phase

Problem Statement:

Objective:

Water main replacement costs are higher than last rate plan estimate

Decrease water main replacement construction bid costs from $60/ft to $50/ft

Project DescriptionProject Description

Time Line

Define Feb 2002 Measure Mar 2002 Analyze Apr 2002 Improve May 2002 Control May - Dec 2002

Champion: Ted Rhinehart

Black Belt: Greg Meszaros

Team Members: Matthew Wirtz

Mark Gensic

Paul Powers

Dan Smith

Ken Stempien

Bob Hinga

Outside Members: Contractors, Engineering Firm

Project Team

)x,...,x,x,f(x=Y k321

Y= Water main replacement construction bid cost per foot

Big “Y”

Every $1/ft reduction = $32K per year in savings

• External (Customer) Focused– Decrease in Service Interruptions– Improved Water Quality– Improved Fire Protection– Improved Control of Utility Rates– Provided customers with a reliable, sufficient

water distribution system– Replaced 6 miles of water main per year

(150/year replacement cycle)

Benefits

Measurement Phase

Inputs Process Outputs

Design Firm Constructable water main replacement design solutionPDS Internal Staff Time No conflict design solutionType of Pipe Material for New Main (DI, HDPE, etc) Effective water main replacement design solutionConstruction Method (Open Cut, Boring, Bursting, etc) Lowest cost water main replacement design solutionTrees (type, number, location) Reasonable construction scheduleSoil Conditions Accurate engineer's estimate of probable costSite Conditions Well defined bid quantities for measurement & paymentProject Location (residential, commerical, big street, etc) Completed work requestWater main(s) to be replaced Complete project fileProfessional Service Agreement (PSA) Acceptable bidsPermits Clear, Accurate Bid DocumentsDesign Criteria/Standards Manual Clear, Accurate Plans & SpecificationsTime of the Bid (what season)City Bidding RequirementsRestoration RequirementsNumber and condition of existing servicesDepth of constructionCapital FundingBoard Improvement ResolutionLocation of Other UtilitiesRoute of new water lineSpecial ConditionsBackfill RequirementsLevel of design detailBid alternates and award decisionBid preparation time (between advertisement and opening)Construction ContractorsHydrant & Value (Locations, Types, Numbers)Traffic Control RequirementsRoutings for other utility reviewsPre-bid meetingCoordination with other improvement projects (street work)Wage Rates

Start: Scope

Design a WaterMain

Replacement

Stop: Open Bids

Inputs and Outputs50,000 ft. Water Main Design Process Map Inputs and Outputs

Inputs Process Step Outputs

RFQ list of engineering firms Designer Selected (internal or firm)PDS staff time Determination of type of replacement (programmed, TES project)Mains that need to be replaced (size of project) Location(s) of mains to replaceConflict map Professional service agreement (PSA) & fee negotiatedCapital improvement plan (CU & TES) Project #'s established (work order, board order, etc)Budget Schedule established

Extent of replacement (number of mains, size, etc)

Designer (internal or external firm) Flow test resultsSurvey firm (on call or engineering firm) Confirmed property and right of way linesOp Techs (flow testing) Site topo establishedDIPRA (corrosion testing) Confirmation of location of existing utilitiesTES Techs (coordination with street work) Confirmed location (survey) of physical features at siteCubis (tap location information) Knowledge of corrosive conditions (need for poly-wrapped pipe)Holey Moley (underground locates) Extent of pavement replacement requirements (core results)

Knowledge of soil conditions (type, strength)Location/number/type of existing water services

Survey Results P&S: Pipe material for replacement main (DI, HDPE)Corrosion Control Recommendation P&S: Pipe sizeFlow Test Results P&S: Construction method (open cut, bore, bursting)Pavement Core Results P&S: Tree conflict requirementsRouting List (who to route plans for review) P&S: Driveway restoration requirementsState (IDEM) permitting requirements P&S: Street restoration requirementsCity standards P&S: Backfill requirementsPDS staff time P&S: Confirmed routingDesigner (individual or firm) P&S: Fire hydrant and valve type & locations establishedKnowledge of Soil Conditions P&S: Service replacement requirementsConfirmation of location of existing utilities P&S: Traffic control requirementsLocation/number/type of existing water services P&S: Easement requirements

Construction schedule establishedEngineers cost estimate establishedBid alternates and method of award establishedPermits (right-of-way, IDNR, etc)

5,000 ft. Level 1 Water Main Design Process Map Inputs and Outputs

DataCollection

ProjectScoping

Design

Inputs and Outputs

P&S: Pipe material (DI, HDPE) Final bid packet (plans & specs, city boilerplate)P&S: Pipe size Board improvement resolutionP&S: Construction method (open cut, bore) Bid advertisement & bid opening dates P&S: Tree conflict requirements Prevailing (union) if $150K+ (heavy highway rate, utility rate)P&S: Driveway restoration requirements Non-prevailing wage rate if project less than $150KP&S: Street restoration requirementsP&S: Backfill requirementsP&S: Confirmed routingP&S: Fire hydrant and valve type & locationsP&S: Service replacement requirementsP&S: Traffic control requirementsP&S: Easement requirementsConstruction schedule establishedEngineers cost estimate establishedBid alternates and method of award establishedPermits (right-of-way, IDNR, etc)City boilerplate contract languageContract complianceBoard of WorksPDS staff TimeQuantity takeoffs

Final bid packet (plans & specs, city boilerplate) Prebid conferenceBoard improvement resolution Clarifying addendums to bid packetBid advertisement & opening dates (time of year) Contractor bidsPrevailing (union) if $150K+ (heavy highway, utility) Bid tabulationNon-prevailing wage rate if project less than $150K Completed project fileContractors Completed work requestBoard of Works Cost share agreement (with transportation projects)PDS staff timeESS staff time

Bidding

Bid Preparation

Inputs Process Step Outputs

Inputs and Outputs

Cause & Effect Matrix

Rating of Importance to Customer 8 10 6 4 4

1 2 3 4 5

Effe

ctive

So

lution

Lo

wes

t C

ost S

olu

tion

Co

ns

tru

cta

ble

So

lution

Rea

so

na

ble

Sche

du

le

Accep

tab

le B

ids

TotalProcess Step Process Inputs

1 Project Scoping RFQ list of engineering firms 9 9 9 9 9 2882 Project Scoping PDS staff time 3 3 3 3 3 963 Project Scoping Prior itized list of mains that need to be replaced 1 9 0 3 0 1104 Project Scoping Conflict map 1 3 3 3 0 685 Project Scoping Capital improvement plans (Utility & Transportation) 9 9 3 3 0 1926 Project Scoping Budget 3 3 3 3 9 1207 Data Collec tion Designer ( internal or external firm) 9 9 9 9 9 2888 Data Collec tion Survey f irm (on call or through engineering firm) 9 9 9 9 0 2529 Data Collec tion Op Techs (flow testing) 3 0 0 0 0 24

10 Data Collec tion DIPRA (corrosion testing) 9 1 0 0 0 8211 Data Collec tion TES Techs (coordination with street work) 9 9 3 9 0 21612 Data Collec tion Cubis (tap location information) 9 9 9 0 0 21613 Data Collec tion Holey Moley (underground locates) 3 9 9 3 0 180

ProcessDesign a W ater Main Replacement

Cause and Effect Matrix

• Time of Year Project is Bid

• Construction Method Specified

• Size of Project (Footage of main replaced)

• Wage Rates

• Mixture of Work

• Quality of Underground Facility Data

• Engineering Firm

Cause and Effect Expert Opinion

Process Step/InputFailure Modes - What can go

wrong? Effects Causes Current Controls

Wage Raterequested prevailing wage rate for

bids less than 150khigher cost Eng Estimate over 150k None

did not request prevailing wage rate all bids come in over 150k

rebid Eng Estimate under 150k None

Time of Year Project is BidBid projects when contractors are too busy to submit cost effective

bids

Higher costs & late schedules

Bidding projects too late in the construction season

None

Construction Method SpecifiedBid structure does not give

contracts ability to bid most cost effective solution

Higher Cost1) Not enough flexibility for construction methods

2) Bid award method does not encourage best pricing

None

Construction methods allow replacement technologies that don't

workReplacement main fails

1) Unproven methods2) Bid specs now well written

Utility only allows DIP or HDPE methods

Size of Project (Footage of replaced pipe)

Project footage is so small that few contractors are interested in

biddingHigher costs

1) Not grouping together enough related main replacement work

None

Project footage is so large that few contractors are interested in

biddingHigher costs

1) Grouping together of too much main replacement work in one job.

Current practice is to not bid pipeline work that exceeds $1M per

job

Water Main Replacement FMEA Worksheet

Failure Mode Effect Analysis (FMEA)

FMEA & Process Hardening

• Wage Rates– Require review of all engineer’s estimates

between $150K and $200K before requesting prevailing wage rates

– Applies to all construction bidding, not just main replacement work

• Construction Method– Allow ductile iron (open trench construction) or

HDPE (bored construction) option on all main replacement work

FMEA and Process Hardening

• Colony Drive - Estimate: $192,685*Requested prevailing (higher) wage rates because initial

estimate > $150K

• Actual Bids– $109,785

– $118,622

– $149,200

– $159,388

– $175,272

– $183,029

FMEA-Wage Rate Example

*Three bids under $150KPrevailing wage rate structure is

not required for this work.

MSA Study-Verification

Construction bid tabulations were verified with original bid documents from Board of Works records.

Analyze & Improve Phases

Normal Distribution, Mean=$61.01/ft; StDev=11.05

8070605040

95% Confidence Interval for Mu

69645954

95% Confidence Interval for Median

Variable: Total_Projec

52.6396

8.1636

55.1260

Maximum3rd QuartileMedian1st QuartileMinimum

NKurtosisSkewnessVarianceStDevMean

P-Value:A-Squared:

67.5843

17.1039

66.9036

83.895867.958660.773751.226341.0162

16-5.5E-020.240046122.13011.051261.0148

0.9750.132

95% Confidence Interval for Median

95% Confidence Interval for Sigma

95% Confidence Interval for Mu

Anderson-Darling Normality Test

Descriptive Statistics

Distribution

15105Subgroup 0

90

80

70

60

50

40

30

Indi

vidu

al V

alue

Mean=61.01

UCL=85.89

LCL=36.14

30

20

10

0

Mov

ing

Ran

ge

1

R=9.352

UCL=30.56

LCL=0

I and MR Chart for Total_Projec

Control Chart-In Control

Cpk = 0.49 with LSL=$1.00/ft and USL=$75/ft

100806040200

USLLSL

Process Capability Analysis for Total_Projec

PPM Total

PPM > USL

PPM < LSL

PPM Total

PPM > USL

PPM < LSL

PPM Total

PPM > USL

PPM < LSL

Ppk

PPL

PPU

Pp

Cpm

Cpk

CPL

CPU

Cp

StDev (Overall)

StDev (Within)

Sample N

Mean

LSL

Target

USL

106642.73

106642.68

0.05

70017.77

70017.77

0.00

62500.00

62500.00

0.00

0.41

1.78

0.41

1.10

*

0.49

2.11

0.49

1.30

11.2368

9.4772

16

61.0148

1.0000

*

75.0000

Exp. "Overall" PerformanceExp. "Within" PerformanceObserved PerformanceOverall Capability

Potential (Within) Capability

Process Data

Within

Overall

Initial Capability Study

Time of Year (Season)

Cold Weather Warm Weather

40

45

50

55

60

65

70

75

80

85

Season

Tota

l_P

roje

ct_C

PF

SmallBig

85

80

75

70

65

60

55

50

45

40

Size

Tota

l_P

roje

ct_C

PF

Project Size

CUCombined

85

80

75

70

65

60

55

50

45

40

CU_Street2

Tota

l_P

roje

ct_C

PF

Mixture of Work

Interesting Box Plots

ANOVA Work

Time of Year (Season)

Big

Small

Fall-Winter Spring-Summer

52

57

62

67

Season2

Size

Mean

Interaction Plot - Data Means for Total_Projec

Interesting Interaction

Size & Season

Big

Small

Combined CU

50

55

60

65

CU_Street2

Size

Mean

Interaction Plot - Data Means for Total_Projec

Interesting Interactions

Size & Mixture of Work

Improvement Conclusion

Large (footage>3000 feet), stand alone main replacement work bid in the cold weather

• Do not request prevailing wage rates until cost estimates exceed $200K

• Bid all projects with construction method choice (open cut or bored) and award on lowest cost solution

• Bid larger (total footage) main replacement projects by replacing all under performing water main in an entire neighborhood (as opposed to individual streets) Bid the larger neighborhood replacement projects in the cold weather months (December - March)

• Bid the larger neighborhood replacement projects with a minimal amount of additional construction work not directly associated with the water main replacement work (don’t add lots of surface paving work into the replacement project)

Process Change Summary

Control Phase

Process Process Step Output Input Process Specification (LSL, USL, Target)

Main Replacement

DesignBid

Preparation Wage RateEngineer's

Cost EstimatePrevailing wage rate should not be requested unless engineer's estimate greater than $200K

Main Replacement

DesignBid

PreparationFinal Bid Packet

Construction Method & Method of

Award

Two construction methods (open cut and bored) should be specified for each main replacement project with selection (award) of method based on lowest cost bid. Contractors need to only bid one method based on their lowest cost.

Main Replacement

DesignProject Scoping

Extent of Replacement

Mains that need to be replaced

Maximize replacement of under performing water mains in a neighborhood to increase total amount of footage of replacement work

Main Replacement

DesignBid

PreparationBid Opening

DateConstruction

Schedule

Bid largest water main replacement projects (5,000 feet or greater) in the cold weather months (November through February). Make allowances for flexibility of notice to proceeds for winter weather conditions.

Main Replacement

DesignProject Scoping

Type of Replacement

(TES or Programmed)

Capital Improvement Plan (TES)

Review Transportation Engineering Services (TES) capital improvement plan (CIP) to determine if any surface projects are planned for large main replacement project areas. If so, coordinate with TES to bid and complete main work separately.

Control Plan

Measurement Technique Sample SizeSample

FrequencyControl Method Reaction Plan

Update wage rate column in bid tab database with type of wage rate requested. Use "None" for projects that did not use prevailing wage rate structure.

Low bid for each main

replacement project

After each main

replacement project bid opening

Review wage rate column in bid tab database to determine if any bids received were less than $150K with a wage rate designation other than "None"

Perform review audit of low bid and original engineer's estimate to determine why prevailing wage rate was requested.

Review bid tabluations from Board of Works bid openings to determine how project was bid. Update bid tab database with a Y (Yes) in "HDPE Alt" field to indicate the project was bid with a bored construction alternative. Update bid tab database with a Y in "HDPE Alt H to H" field to indicate that the construction method selection was based on lowest cost solution between bored and open cut methods. A N (No) in either of these fields should trigger a review

All bids taken for main

replacement project

After each main

replacement project bid opening

Review bid tabulation sheet to verify that open cut and bored (HDPE) construction method alternatives were specified for each main replacement project. Also verify that final selection was based on lowest cost solution. Failure in either of these categories should trigger a review

Review any replacement project bid without construction method choice to determine why single source selection was made.

At least 20,000 of water main replacement work bid in units of work 5,000 feet or higher on an annual basis

Main replacement work planned for the year Quarterly

Review main replacement projects to determine neighborhood groupings and amount of bids planned for 5000 feet or larger

Review project scoping step to determine why larger main replacement projects are not being generated

At least 20,000 of annual main replacement work bid in the November through February time frame

Main replacement work planned for the year Quarterly

Quarterly review of main replacement bid scheduling to determine amount of main replacement work planned to be bid in the optimum time window

Acclerate main replacement design work if quarterly reviews determine that optimum bid windows will not be met

No large (3000 feet or greater) main replacement projects bid with TES add in work

Main replacement work planned for the year Quarterly

Quarterly review of main replacement projects to determine amount of TES add in planned for each project.

If significant amounts of TES add in for large replacement projects. Review project timing to separate main replacement work from TES surface work.

Control Plan

• Process Step: Bid Preparation

– Input: Construction Method– Output: Final Bid Packet

• Process Spec: Allow for two construction methods (open cut or bored) on all main replacement projects and select based on lowest cost

• Control Method: Review bid tabulation sheet to verify that base (open cut) and alternate (bored) methods are specified for each bid

Control Plan- Close Up Example

Process Improvement Results

Normal Distribution, Mean=$49.92/ft; StDev=4.95

555351494745

95% Confidence Interval for Mu

555045

95% Confidence Interval for Median

Variable: Total_Projec

44.7762

2.9685

43.7723

Maximum3rd QuartileMedian1st QuartileMinimum

NKurtosisSkewnessVarianceStDevMean

P-Value:A-Squared:

55.0912

14.2376

56.0764

55.091254.731250.452844.853244.7762

5-2.96320-1.2E-0124.5489 4.954749.9243

0.2360.386

95% Confidence Interval for Median

95% Confidence Interval for Sigma

95% Confidence Interval for Mu

Anderson-Darling Normality Test

Descriptive Statistics

Project Bid After Improvements

Control Chart - Before & After Improvements

2010Subgroup 0

90

80

70

60

50

40

30

Indi

vidu

al V

alue

1

2

Mean=58.37

UCL=82.01

LCL=34.74

30

20

10

0

Mov

ing

Ran

ge

1

R=8.886

UCL=29.03

LCL=0

I and MR Chart for CPF

Sweet Spot!13,000' @ $44.93

Control Chart

Cpk = 1.28 with LSL=$1.00/ft and USL=$75/ft

80706050403020100

USLLSL

Process Capability Analysis for Total_Projec

PPM Total

PPM > USL

PPM < LSL

PPM Total

PPM > USL

PPM < LSL

PPM Total

PPM > USL

PPM < LSL

Ppk

PPL

PPU

Pp

Cpm

Cpk

CPL

CPU

Cp

StDev (Overall)

StDev (Within)

Sample N

Mean

LSL

Target

USL

0.98

0.98

0.00

57.92

57.92

0.00

0.00

0.00

0.00

1.59

3.09

1.59

2.34

*

1.28

2.51

1.28

1.90

5.27102

6.50512

5

49.9243

1.0000

*

75.0000

Exp. "Overall" PerformanceExp. "Within" PerformanceObserved PerformanceOverall Capability

Potential (Within) Capability

Process Data

Within

Overall

Final Capability-Bids After Improvements

Financial Results

• Direct Savings– Before: $2,824,861/46,498 feet = $60.75/ft– After: $1,325,283/27,041 feet = $49.01/ft– Marginal Difference: $60.75-$49.01 = $11.74/ft– Savings: $11.74*27,041 = $317,461

• Indirect Savings– Savings do not include “spill over benefit” of

process hardening activities such as wage rate optimization on other types of project bidding

Costs Savings

MeasureMeasure

AnalyzeAnalyze

ImproveImprove

ControlControl

ProjectDescription

ProcessMap

C & EMatrix

PreliminaryFMEA

MSA

InitialCapability Study

Multi-Vari

DOE (or other improvement)

ControlPlan

Hand OffTraining

Final Capability

Study

OwnerSign-Off

Final ProjectReport

Project Tracking