By Patrick Hogan, handle.com

To keep up with the pace of competition and the overall business landscape in construction, time and cost management are two critical factors that construction business owners and construction project managers must consider. Construction projects involve multiple stakeholders and many moving parts, making it challenging to maintain organization and efficiency. Implementing lean construction techniques directly addresses these challenges and can help construction business owners mitigate risk and improve project outcomes. 

Liens are essential weapons in the lean construction war chest.

What are liens?

A lien, often called a mechanics lien in the construction industry, is a party’s legal claim over the project property to ensure payment for materials supplied or work performed in a construction project. Liens provide contractors, subcontractors, material suppliers, and other professionals and workers who participate in construction projects with security for due payment. Liens act as a guarantee, allowing construction participants to continue work without the fear of getting stiffed. 

Liens are an undeniably essential tool for securing payment, and their proper utilization is critical to the success of lean construction projects.

What is lean construction?

Lean construction is a methodology applied to construction projects that reduces costs by identifying and eliminating inefficiencies throughout the construction process. The goal is to increase productivity without compromising project quality. The lean construction approach aims to lower materials, labor, and overhead expenses costs while shortening project progress and duration.

Here are some examples of cost-cutting measures in lean construction:

1. Streamlining communication – Effective communication between project team members reduces misunderstandings and delays, reducing project duration and cost.
2. Optimizing resource utilization – Optimizing resources such as materials, equipment, and labor involves identifying opportunities to reuse or recycle materials, streamlining schedules, and using equipment more efficiently. With lean construction in mind, examples of inefficiencies identified and eliminated include excess inventory, overproduction, and unnecessary transportation.
3. Implement just-in-time (JIT) delivery –  JIT delivery involves receiving materials and supplies only when needed.
4. Lean supply chain management – Optimizing the supply chain reduces lead times and costs associated with transportation, storage, and handling of materials.
5. Identifying possible points of failure specifically to avoid rework – Reducing rework leans out project duration and costs. This is done by identifying and addressing quality issues early in the construction process.
6. Project assessment geared towards improving processes for subsequent projects – Continuously identifying and addressing improvement areas help optimize project outcomes over time.
   

The power of contracts and liens in lean construction success

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In a lean construction project, liens are vital to the project’s success. The lean construction approach emphasizes collaboration, communication, and continuous improvement to minimize waste, reduce costs, and maximize value for the owner. One way to achieve this is through the use of lean construction contracts that include provisions for liens.

Mitigates risk for all parties

By including lien provisions in the contract, the owner can better understand the risks involved when payments are not made promptly, allowing work to continue without delay. This is because contractors and subcontractors can file liens against the property if they are not paid on time, which provides them with the legal right to receive payment from the property’s sale if necessary. As a result, the owner is motivated to pay on time, knowing they could face legal action due to non-payment or excessive delays.

Streamlines the payment process

Liens help streamline the payment process. When all parties understand the lien provisions and the consequences of not paying on time, they are more likely to prioritize timely payment. This benefits not only the contractors and subcontractors but also the owner. There will be fewer disputes and delays if payments are made on time, resulting in a smoother project timeline and a better outcome for all parties involved.

Creates transparency 

Liens also provide transparency in the payment process, which is crucial in lean construction. In a lean project, all parties are encouraged to work collaboratively to minimize waste and reduce costs. When parties exercise their lien rights by delivering the preliminary notices required to keep everyone on the same page, transparency is ensured in the payment process. This transparency promotes trust and encourages all parties to work together toward the project’s success.

Additionally, the lien process allows for the tracking of payments and helps identify any potential issues or delays in the payment process. Tracking will enable parties to address problems promptly and make necessary adjustments, ultimately increasing efficiency.

Final thoughts

Liens are an essential tool in the success of lean construction projects. By including lien provisions in the contract, the owner can ensure timely payment and motivate all parties to work optimally. As the construction industry evolves and with the current payment issues that plague the industry in mind, the use of liens in lean construction projects has become increasingly crucial in ensuring successful project outcomes.

About the Author:

Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors and material suppliers with lien management and payment compliance. The biggest names in construction use Handle on a daily basis to save time and money while improving efficiency.