TechPractices: Shea Homes, San Diego, CA

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Summary

Over the past seven years, a California builder/developer partnered with trade contractors to implement quality practices that have led to an 80 percent reduction in defects, a cycle time reduction of 36 percent, and increased worker safety. Shea Homes, a subsidiary of the J.F. Shea Company, contains five divisions. This case study focuses on the San Diego, CA division and its 125 employees and trade contractors. This division builds between 300 and 400 homes per year that range in price from the low $100,000's to over $400,000. A quality oriented company, Shea has won several quality awards including the California Eureka Award, the Total Excellence In Management Award and NAHB Research Center's National Housing Quality (NHQ) Award. The company has improved quality by developing a partnership between its suppliers and trade contractors in an effort to move towards meeting the International Standards Organization (ISO) 9000 quality standards. ISO 9000 is a set of international standards for both quality management and assurance, which has been adopted by over 90 countries. The ISO 9000 standards rigorously assure that building codes and specifications are followed when the products are installed on the jobsite.

Details

In 1991, when Shea Homes began to implement Total Quality Management practices, they also involved their trade contractors in the training. This recast them in the role of "Trade Partners™", rather than subordinate subcontractors. Trade Partners™ enter into a quality agreement that lays out a mutually developed scope of work and quality specifications. Trade Partners™ and their personnel, who will actually be performing the work, are required to attend an on site pre-job meeting to discuss the production schedule, quality specifications and work to be performed. Shea and their trade partners cooperated to develop a "Checklist System" used by the builder's superintendents and the Trade Partners™ to ensure compliance with quality requirements. Upon completion of the work, the checklist is sent via modem to Shea's main office where payment is immediately released. Shea also issues a monthly "Trade Performance Evaluation" which evaluates contractor performance with respect to construction and customer service. Contractors that maintain a score of 10 out of a possible 12 have their contracts automatically renewed, eliminating the bidding process. Trade Partners™ also evaluate Shea on the support they receive for the performance of quality work.

United States versions of the ISO 9000 standards are available from the American National Standards Institute (ANSI) as ANSI Q91.

Shea Homes is in the implementation phase for ISO 9000 certification. Achieving compliance with ISO 9000 standards requires the cooperation of trade contractors and product manufacturers to assure that specifications are followed during the entire construction process. It also requires the development of installation instructions and workmanship requirements that are specific, measurable and audible. Approved material lists for all materials used in the installation process are required. It also provides for standard contract information to clearly define responsibilities. Craftsmanship qualification tests are required for correct product installation. Jobsite inspection forms will be used to verify conformance to installation requirements. Audit inspection forms will provide detailed reviews of the effectiveness of the quality procedures.

Installation/Construction

N/A

Benefits/Costs

Implementation of ambitious quality practices has produced many benefits for Shea Homes. Supplier and trade contractor partnering has substantially decreased the amount of callbacks and increased customer satisfaction. It has also allowed Shea homes to reduce the number of trade contractors from 186 to 61 over seven years. This allows more in-depth contractor training and the opportunity to strengthen the bond between the builder and contractors. Another direct result of the commitment of Trade Partner's™ is a significant drop in the number of defects per walkthrough. Since 1991, the average number of defects per walkthrough has declined from 12 to 2.3. During the same period, Shea has reduced cycle time by 36 percent to 75 days. Worker safety has also been improved. Shea's accident rates have decreased from 4 percent to an amount that is barely detectable and rounds to 0 percent.

The NAHB Research Center surveyed several NHQ builders and compared their net incomes and gross margins to data continued in the NAHB Business Management Committee's 1997 Cost of Doing Business Study. The study placed typical builder net incomes before taxes at 5.1 percent and gross margin at 18.5 percent. NHQ builders had average net incomes of 11.2 percent and gross margins of 25.5 percent. Shea Homes has indicated that their financial performance is consistent with these figures.

Shea Homes believes that the ISO 9000 standards will allow for more consistency and continuity in the production process resulting in improved production efficiency and more durable homes.

Code/Regulatory

ISO 9000 is a system that assures compliance with the building codes as well as other construction specifications. The model building codes do not address ISO 9000 standards or set rquirements for trade contractor/builder partnering.

Feedback

Shea homes conducts an annual Trade Partner Satisfaction Survey to gauge the satisfaction of their Trade Partners™ compared to Shea's competition and to identify new opportunities for increasing the effectiveness of partnering. Over 90 percent of the respondents viewed Shea's overall performance as the same or superior to their competitors. Over 70 percent viewed their performance as superior. When asked about Shea's partnering program, one framing partner said, "The partnering program, without a doubt, has improved the efficiency of our business." The framing partner also stated that the partnering program has increased cooperation among the other partners. This has helped the partners to more effectively build a quality product.

Contact(s)

Do you have a specific question? Try the contacts listed below:

Shea Homes
10721 Treena Street, Ste. 200
San Diego, CA 92131
619-549-3156
http://www.sheahomes.com/

American National Standards Institute (ANSI)
11 West 42nd Street
New York, NY 10036
212-642-4900
http://www.ansi.org