Building a high-quality house has never been easy. But with houses that are required to perform better than ever before combined with ravenous demand and a shifting labor market, it's harder than ever to please customers, go fast, and keep the bottom line black. This dynamic has tested how we manage the quality of our work and changed the way many contractors direct their building process. Unchecked speed for the sake of paring down cycle time has cultivated an environment of inferior workmanship, the effects of which are rippling through the industry.
Many builders and remodelers–especially those "checkbook" builders using an increasing number of subs and suppliers to do the actual building while they prepare more work or find land–are aware that speed is necessary, but risky. A common check and balance is to undergo more inspections. But according to Frank Alexander, the director of quality programs at the NAHB Research Center (NAHB-RC) in Upper Marlboro, Md., inspections alone aren't enough. "Trying to inspect quality into your work won't work," he says, even if a contractor schedules a conscientious series of them layered with supers, subs, and building officials. "All you're doing is throwing a bucket of water on a wildfire." That "wildfire," as Alexander puts it, is one of the industry's–and individual builders' and remodelers'–biggest challenges.
The "Problem." The anecdotal evidence of the "problem" with faster building are issues ranging from low-budget workmanship in high-end houses to entire subdivisions packed with failing buildings. Consumer Reports said in its January 2004 issue that approximately 15 percent–or about 150,000–new homes are built each year with "serious problems" and said that the fast pace of today's building boom is to blame. These consequences of speed are hitting builders from all sides: The resulting building failures have triggered construction defects lawsuits costing the industry untold millions of dollars, general liability insurance costs are increasing (if you can get it at all), and a more savvy buying public is increasingly dissatisfied on many fronts.
Indeed, the results of poor practices like inappropriately sized or installed HVAC units, framing errors, and inappropriate vapor barriers and drainage planes (the list goes on) are in the number of class action lawsuits, like the estimated $24 million settlement between Atlanta-based Beazer Homes and 2,100 of the company's Indianapolis homeowners for mold problems, or a recent lawsuit by 80 homeowners near San Francisco seeking up to $150,000 per house from Los Angeles-based KBHome and Walnut Creek, Calif.-based Davidson Homes for defects dating back 10 years. In Colorado alone, attorneys filed 556 construction defects lawsuits between 1997 and 2003, though that number dropped significantly after Colorado passed a Notice and Opportunity to Repair (NOR) law (see below).
Another backlash: The availability of construction defects liability insurance has shrunk to relatively few carriers, with a growing number of exclusions (including mold) on many policies and significant premium increases.
While the fire burns hot, however, the story isn't new–just more widely known. Builder errors like unreinforced concrete footings, unflashed windows, incorrect drainage, and unvented bath fans are old news. "I'm seeing the same things I saw 20 years ago," says Clarence Cisco, an inspector with Cape Atlantic, in Blue Bell, Pa. "The contractors know better, but they still do it because of time constraints."
And that's the rub–time is money. Cycle time has become more important than craftsmanship for many builders, as finding and developing land outweighs a commitment to quality construction. "Because of the speed of construction today, there's a lower quality of finish [and] mistakes happen [that] a craftsman would not allow," says builder Fernando Pages Ruiz, president of Brighton Construction in Lincoln, Neb., and author of Building an Affordable House. Workers' tradecraft, i.e. their ability to do good work, has become an increasingly important variable builders must consider–carefully, but also on the fly. The availability and cost of a good sub or crew member is a huge challenge for any builder. And, as the makeup of the industry becomes increasingly Hispanic, finding ways to overcome language barriers is vital to builders' quality of work and bottom-line success.
Problem Solvers. There are two sides to every coin though, and good news often gets less attention. Despite the lawsuit against KBHome's North Bay division, the builder's Las Vegas division is doing it both right and fast, according to its customers, which shows that painting a national builder with one brush doesn't always show its true colors. Home buyer satisfaction for KBHome in Las Vegas rose nearly 10 percent in 2003 while warranty claims dropped 24 percent. Simultaneously, KB's starts there climbed 28 percent since 2000 to about 4,000 in 2004 and sales jumped 40 percent during the last two years.
Pulte Homes, with more than 32,600 closings in 2003, topped 11 of 25 metro areas canvassed for new-homeowner satisfaction by J.D. Power and Associates (JDPA) and is in the top three in another nine markets. Indeed, by having all 24 of its operating divisions outperform their respective market averages tallied by JDPA, Pulte received JDPA's first-ever "Platinum Award" for home builders.
And yet both KBHome and Pulte are poster children for modern production home building, relying on subs and suppliers to perform the bulk of production while the front office is under stockholder pressure to keep starts on the rise. While developing an error-free national system for companies of this magnitude is a massive–and necessary–goal, breaking the companies down by division shows what works and what doesn't. So, instead of sacrificing quality for speed, KB, Pulte, and other builders that top JDPA, like Los Angeles-based Pardee Homes, Dallas-based Centex Homes, and Greystone Homes (a division of Miami-based Lennar Corp.), rankings consider customer satisfaction–and the level of comprehensive quality required to achieve it–essential to their survival and growth. "The housing industry has a low benchmark [for quality and customer satisfaction] today, which gives us a huge [competitive] opportunity," says Richard J. Dugas Jr., president and CEO of Pulte Homes, based in Bloomfield Hills, Mich. "We believe that outstanding customer delivery will set us up for the long term, so it's not something we compromise. Ever."
Builders who "do it right" think more about their "process" than individual fixes for specific trouble spots. Ruiz conducts a diligent routine of designing, refining, and reworking plans, specifications, and even homes under construction to ensure quality. "To achieve affordability, I have to refine the construction process so I know I'm spending only what I need to," he says.
That goal requires focusing on quality control to avoid errors, but isn't necessarily complicated. "It can be as simple as identifying a common pull point on the plans for everyone to measure from," says Ruiz.
Alexander suggests that contractors start by expecting their homes to comply with contracts and regulatory requirements, construction documents, and workmanship standards. Next, ensure those commitments are met through a combination of comprehensive specifications, workforce training, and checkpoints during construction. But this isn't just another "inspection." According to Alexander, "Any one of them alone won't work. They must be blended to achieve an improvement in quality."
At Stronghold Remodeling in Boise, Idaho, President Joan Stephens issues comprehensive checklists to crews and subs for nearly every major work phase on every job to define and communicate her expectations. The checklists were derived partly from NAHB's Production Checklist for Builders and Superintendents, which Stronghold also uses to arbitrate disputes. "We build above that [standard], but it serves as a good baseline," she says.
Stephens not only distributes the checklist to each sub prior to starting work, but requires her lead carpenters (or superintendents) to review the checklist with each sub at the conclusion of that phase, and repair, replace, or address mistakes and missing items. "It's easier to fix things in process than at the end of the job," she says.
Partnering. Increasingly, builders large and small recognize the value of partnering with national or local programs promoting energy efficient, healthy, and/or green building as a way to improve construction quality. "We have an independent quality control process built into our program," says Angie Lien, national director of the American Lung Association's Health House program. "Registered builders not only distinguish themselves in the market as building healthier homes, but also experience fewer callbacks, happier clients, more referrals, and reduced legal risk."
The "systems" approach to design and building required by Health House and similar programs such as Energy Star and Building America include the use of more durable materials, building science, and efficient construction methods. "Everything you do impacts energy use and overall performance," says Chuck Miller, a Boise-based custom builder and multiple winner of the annual Energy Housing Value Award from the NAHB-RC, including Builder of the Year in 2004. "It requires you to build to a higher level of quality."
Another quality benchmark is the JDPA customer satisfaction survey, which considers customer service, home readiness, and workmanship/materials ahead of price, design, and location as factors driving homeowner satisfaction. JDPA contends that the more mistakesand trips out to fix themthe lower a buyer's satisfaction. "Builders who deliver a house with fewer problems have higher satisfaction ratings," says Paula Sonkin, senior director of JDPA's Homebuilder/Real Estate practice. "It's a direct relationship."
The Next Step. For the best builders, however, JDPA and other quality-related surveys and guidelines aren't enough. John Wieland Homes, a historically high-ranking builder in Atlanta, and Raleigh and Charlotte, N.C., developed an internal certification process to ensure home readiness, including a 400-point checklist and inspection routine along with financial bonuses tied to certified home completions. "It continues to raise the bar regarding the level of completion and quality," says CEO Terry Russell.
Ruiz, on the other hand, doesn't subscribe to any program. He completes the quality circle by maintaining a service call file. Reviewed regularly, he traces problemsand coststo their origin and addresses them. "I can track trades and products that are giving me problems," he says. "The amount gets lower every year."
If achieving and maintaining high-level construction quality combined with the profits and benefits that result from building quickly is the goal, then the road to get there is paved by your ability to manage what housing gurus call "capacity." Capacity is a contractor's ability to meet an expected standard. Understanding your capacityand applying it to your building processis the critical element to successfully balancing construction speed and quality.
For contractors, capacity is measured mainly by deadlines, workmanship, and budget as they struggle to build fast enough to meet demand, but well enough to avoid callbacks or lawsuits. "You have to understand your capacity and operate just under that [threshold]," to successfully navigate today's building market, says Kelly Daniel, division president of St. Joe Towns & Resorts in Jacksonville, Fla.
"Your capacity is that of your weakest link," says Mahesh Bhupalam, CEO of Totally Productive Group in Cape Coral, Fla., a housing industry management consultant. "To have reliable and consistent production, you have to find your bottlenecks and work on them." Most often, bottlenecks are low-performing subs or suppliers and recurring mistakes. "A lack of capacity masks a lack of quality," says Bhupalam. "If you don't build to a high level of consistent and reliable quality, you can't increase capacity."
As more builders and remodelers rely on subcontractors and suppliers to actually build and install, bottlenecks can be amplified. Preventing this requires a dedicated quality assurance and control system, including a quality manager at the top of the production food chain overseeing and managing the processwith power to find the right mix of subs and suppliers and train them to meet expected standards.
Bhupalam and other experts, including some of the largest home builders in the country, believe that finding and refining your capacity links construction speed and quality instead of driving them apart. "If you're truly building faster, it means that you're truly building better," he says.
Experts. To ensure quality control, Ruiz employs structural and mechanical engineers, lumber dealers, truss suppliers, all of his subs, and an energy efficiency expert to value-engineer his plans and specs, relying on them to make suggestions in building products and methods to streamline his process. "The people I work with are educated to how I work," says Ruiz. "My vendors are my Q.C. staff."
Ruiz and other quality-driven builders not only enlist other experts, but develop a mutual loyalty and respect that encourages success. "An effective quality assurance system breeds harmony among your trades," says Alexander, which results in cooperation and compliance with quality standards.
Certified Subs. KBHome's success in Las Vegas is largely due to the builder mandating that its trade partners successfully complete the NAHB-RC's trade certification programor at least be enrolledby Jan. 1, 2004. "It not only shows a commitment [to quality and to KBHome], but allows us to speak the same language of quality," says Doug Eddie, KBHome's Quality Manager for its Nevada operations.
NAHB-RC's quality programs have certified about 1,400 subs nationwide and cites results like a 50 percent callback reduction among participants. And certification doesn't stop with a plaque on the wall. "We audit the operation for certification 90 days after it finishes the training," says Alexander, though most shops require five to nine months to implement the program, followed by quarterly reports and annual audits and recertification.
Other Las Vegas builders (a pilot market for the program) also rely on NAHB-RC's certified subs list, which are posted on the local building association's Web site. It's perhaps one reason the Las Vegas market ranks highest in JDPA's overall customer satisfaction survey. "If we need a new sub, I go there first," says Lance Jones, vice president of purchasing for Christopher Homes, one of the city's most respected custom and luxury spec home builders. "It's the first question I ask a sub if they call me, and we don't go any further if they say no."
Measuring Performance. Measuring your ability to deliver your product with fewer defects is the only way to continually improve performance and keep customers happyno matter how you do it. "They're demanding we do this correctly," says Eddie. Ruiz points out, "If you take responsibility, then quality becomes self-correcting. I'd rather have a satisfied customer than weasel out of a complaint or mistake."
An effective way to measure and breed success is to share best practices. Pulte Homes established a process for sharing best practices among its divisions in 1994, standardizing what works at a division level then mandating them company-wide. A decade later, divisions now seek each other out to share successful tactics.
The same process works for smaller builders, remodelers, and trades. Ruiz occasionally roundtables his team to discuss their roles and concerns. "We don't try to find band-aid fixes or make false expectations," he says. "The goal is to get it right."
That's always been the goal. And the challenge. The recurring mistakes Sisco and others observe, however, are now happening on a larger scale, amplified by volume, demand, and labor issuesall under the watchful eye of more educated buyers. "Customers are demanding that we do this correctly," says Eddie. "We consider quality to be the main driver for maintaining and improving our industry and making us viable players in the market."
–Rich Binsacca is a contributing editor for Builder and ProSales magazines, sister publications of Tools of the Trade.
At of the end of 2004, 24 states had enacted or were on the verge of enacting Notice and Opportunity to Repair (NOR) laws, which are designed to provide builders and homeowners with a mechanism for settling defects and workmanship claims without lawyers or lawsuits. Though statutes differ, they all enable builders to respond to, evaluate, and fix problems identified by homeowners within a certain timeframe (usually a few months) to avoid litigation or settlements.
Combined with the American Legislative Exchange Council (ALEC), a nonpartisan organization of more than 2,400 state legislators from all 50 states (and nearly 100 former members now serving in the U.S. Congress), the NAHB's State & Local Government Affairs office crafted "model" NOR legislative language for builders, trade associations, and lawmakers for drafting statutes. "Each state law is different, but the model legislation gives them a place to start," says Sam Leyvas, director of NAHB's State & Local Government Affairs. The model legislation is available online to NAHB members at www.nahb.com, and to ALEC members at www.alec.org. R.B.
States with NOR laws include : *adopted in 2004 +pending Governor's signature # vetoed by Governor Alaska, Arizona, California, Colorado, Florida, Georgia*, Hawaii*, Idaho, Indiana, Kansas, Kentucky, Louisiana, Michigan, Mississippi*, Missouri *#, Montana, Nevada, Ohio+, Oregon, South Carolina, Tennessee*, Texas, Virginia, and Washington. Source: NAHB State & Local Government Affairs.
Construction quality is a hot topic, especially in light of defects litigation and competitive market conditions. Consider the following resources to help guide a quality assurance program:
NAHB Research Center
(800-638-8556; www.nahbrc.org) Offers several programs and resources, including trade contractor certification, the National Housing Quality Awards program, and Quality Matters, a new online publication.
J.D. Power and Associates
(805-418-8000; www.jdpower.com) In addition to posting its annual home builder rankings online, the national research firm produced Excellence in Home Builder Satisfaction: Common Characteristics of High-Ranking Builders, a thorough analysis of its customer satisfaction data that reveals the common attributes and practices that characterize builders that consistently rank highest in the survey ($500).
(800-368-5242; www.nahb.com) Among a variety of resources and programs, NAHB's Construction Quality Survey, conducted in 2003 in conjunction with the American Society of Home Inspectors, offers insight into common construction defects from more than 220 respondents nationwide. Both the full report and a synopsis of findings are available.
Production Checklist for Builders and Superintendents and Building Quality:
An Operations Manual for home builders
(800-223-2665; www.builderbooks.com) Among several available books on quality and construction management, these resources provide step-by-step instructions and offer helpful checklists to attain and communicate better quality standards and control.
Building an Affordable House: Trade Secrets for High-Value, Low-Cost Construction, by Fernando Pages Ruiz.
Available at most online and retail booksellers, this book provides insight on how to build low-cost homes at a high level of construction quality.