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Building A Better Way With Tom Redl Of Chandos Construction

Over lunch with the owners of Electra Sign, Redl explains how he brought a new way of building to Alberta –and why it’s paying dividends

Feb 5, 2016

by Michael Ganley

Tom Redl, Matt Pennycook and Kam Devine at Mikado in Edmonton
Tom Redl, Matt Pennycook and Kam Devine at Mikado in Edmonton
Photograph Paul Swanson

THE DINERS
Young execs Kam Devine and Matt Pennycook, two of the four owners of Electra Sign Alberta
History Devine’s father started Electra Sign in Winnipeg 35 years ago. Devine took over the Edmonton outlet in 2010 and brought Pennycook and two others in a year ago, when his dad said he wanted to sell
Number of employees Nine

Senior exec Tom Redl, CEO of Chandos Construction
History Redl has been president and CEO of Chandos for 17 years. Three years ago, he started the company down the “Integrated Project Delivery” path
Number of employees 350

Lunch Redl, a regular at Mikado, ordered for the group: Miso soup, seaweed salad, barbecue squid, deluxe sushi combo, Dragon Eyes (deep-fried salmon roll), green tea

Tom Redl, Kam Devine and Matt Pennycook settle into one of the private rooms at Mikado, a terrific sushi place in South Edmonton Common, tucking their legs into the hollowed-out space under the low table. “Hope you’ve been doing your yoga,” quips Redl, the CEO of Chandos Construction. He’s a regular at Mikado – Chandos’s head office is just across the road – and he takes control of ordering, which sits well with everyone else. When he’s done, he poses his first question: “Why me?”

“You take the design team, the key trades, the owner and the architect and you lock them up in a room.” – Tom Redl, CEO, Chandos

Pennycook says he and Devine have been talking with project managers and that they have friends in the city’s building associations. “Kam and I have heard about you and Chandos’s name is everywhere,” he says. “One of the reasons is that we hear you’ve brought in some interesting changes to your organization.”

Before pursuing the nature of those changes, Devine gives a brief history of Electra Sign: His father founded the company 35 years ago in Winnipeg, eventually expanding into Regina and Edmonton. The company designs, builds and installs signs. Devine moved to Edmonton in 2010 to run the shop here. Then, nine months ago, his dad called saying he wanted out of the Edmonton location. Devine was keen to take the reins and in March he brought in three partners – Pennycook and two silent partners – and signed a licensing deal with his dad, with a view to an eventual buyout.

Redl takes his turn to talk a bit about Chandos. In his 17 years as CEO, the company has grown from $23 million in annual revenue to $350 million. The budget for 2016 is $385 million. But it’s never easy. “We, like you, are in a price-taking business,” he says. “It’s very difficult to differentiate, and even when you do – with service or reputation – that allows you to charge a tiny bit more. So then we start working on cost structures. We’ve been able to differentiate and grow our business through efficiencies and doing lean practices and trying to shave costs.” But after a while, he says, all the chaff has been separated from the wheat. What then?

That’s when it’s time to consider Integrated Project Delivery, or IPD, Redl says. Rather than measuring cost savings in fractions of a per cent, with IPD you can shave five, 10, even 20 per cent off a project. The concept is simple, but the execution is difficult.

“IPD is based on high-performance collaboration models where you take different firms and put them together in a joint-venture environment,” he says. “You have to align values and create a different profit model, different contracts. You contract out of suing each other and contract in helping each other.”

There can be hundreds of contracts in a large construction job, he says, and at the intersection of every contract is friction. “If you can get at all that risk and put it in a common pool so people are supporting each other instead of brokering their risk, that’s where the big gains are.”

The second level of IPD comes from the value of proper design. Redl says designers produce a lot of design to cover their butts, but if you have a high-trust environment you can move away from that. The third level comes on-site: The people working there are key. With IPD, “if the electrician is slowing the drywaller down and it costs the drywaller a dollar, everyone shares in that loss,” he says. “If the drywaller can help the electrician speed up so he’s more efficient, everyone shares their efficiency gain.”

Then you get into trust-based scheduling, based on the delivery of promises instead of construction milestones, so it becomes a personal commitment instead of a contractual obligation. “You need a lot of rigour and performance monitoring, but it all starts with value alignment,” Redl says. “I’ll give you an example: one of the best ideas came from a roofer, who came up with a different way of making the connection for the building envelope. It saved all kinds of time and money.”

Devine is eager to jump in. He’s frustrated that Electra Sign often gets short notice for a job. “We’ll get a request from a contractor who says, ‘We need this design installed in under four weeks.’ To be honest, the budget isn’t there, so we redesign and give them something that will fit their budget,” Devine says. “But from a planning perspective, when did that roofer get to see the drawings or where were they involved in planning to get ahead of the game? At what stage of the project can we get engaged, so we can offer design services or at least consult?”

“Being in that reactionary kind of situation is the way I used to work and is why our industry doesn’t function properly and is full of waste,” Redl says. “If the general contractor is late getting you the information and you have to hurry up, that drives your costs up and that’s waste.”

“Are there exercises or courses to take?” Devine asks. “How did you gain the understanding?”

Redl says he first came across the IPD system when he read an article about DPR Construction, a huge U.S. firm headquartered in Silicon Valley, “where all cools things come from,” Redl says. He asked the company to share its knowledge and experience. “It felt weird going to another general contractor and asking them to tell us how they do it,” he says, “but they welcomed us in.” Since then, DPR employees have been guest speakers at Chandos’s staff conferences and the relationship has only grown. Chandos built its first IPD project two years ago: The Mosaic Centre for Conscious Community and Commerce in Edmonton. Not only was the centre the first IPD project in Alberta, it was also the first LEED platinum and net-zero office building in the province. Redl says sustainability, corporate social responsibility and IPD often go together because they are all based on a strong set of values.

“But here’s the thing, IPD is a fairly simple concept but it’s hard to execute,” Redl says. “The resourcing curve is different. It’s heavily front-end loaded. You take the design team, the key trades, the owner and the architect and you lock them up in a room. You have to resource it properly and it starts with value alignment and a deep understanding of what the agenda of the owner is.”

“It’s strange that other companies didn’t think of that approach or why it took so long,” Pennycook says. “Have you felt the industry starting to go this way?”

Perhaps, Redl says, but slowly. “You need to have a long term-view. In the short term, it’s hard and expensive to develop processes. It’s resource intensive up front, but every time you do another one, it gets better as you refine the methodologies.”

Lunch ends with an exchange of business cards and Redl takes Devine and Pennycook for a tour of Chandos’s office. You get the feeling this relationship, begun over sushi, will continue with the delivery of an integrated project.

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