Process and system innovation in the building and construction industry: developing a model for integrated value chain and life cycle management of built objects

The building and construction industry has a large contribution and impact on society, e.g. economical and environmental, involving a vast spectrum of stakeholders. However, the value delivering performance of the industry has often been criticized. The predictability of the value, price and costs of built objects has proven to be difficult, particularly over the life cycle. The characteristics of construction, such as fragmented value chains, complex projects and long lead times are basic causes, often leading to cost and time overruns, delivery of less value than agreed, and dissatisfied clients and users. In addition, it is difficult to assess all uncertainties and risks beforehand. Besides, fixing the price and demands beforehand makes it difficult to respond to changing demands and circumstances, and to deploy increasing knowledge during the process. In this paper a value-price-cost (VPC) leverage model is presented for the dynamic and integrated control of value, price and costs through the life cycle of built objects, and the value chain, i.e. the cascade of value demanding parties (demand chain), and value supplying parties (supply chain). The model is based on a paradigm shift from a discrete process of fixed prices on fixed contract moments between different phases in the life cycle (static control), towards a continuous process of establishing and monitoring the VPC balance through the life cycle, and acting in case of changing demands or circumstances (dynamic control). The ultimate objective is to optimise the total benefit of the built object through the life cycle. The total benefit is defined as the sum of the profit for value supplying parties (contractors, suppliers, etc.), and the added value for value demanding parties (clients, users, etc.). The model implies the formation of a life cycle alliance around the built object, involving both value demanding and supplying parties keeping the VPC balance and acting when fluctuations in the value or costs of the built object occur during the operation phase. In addition, the alliance is responsible for safeguarding and maintaining the functionality and serviceability of the built object through the life cycle. To conclude, directions for the further development of the model are being discussed.