June 2023CONSTRUCTIONBUSINESSREVIEW.COM8By Ramon Parchment, Mission Critical Project Manager, AECOM Tishman PARETO PRINCIPLE AND OPERATIONAL EFFICIENCY IN CONSTRUCTION IN MYOPINIONPareto Distribution is a phenomenon that was first discovered by Italian Economist/Civil Engineer Vilfredo Pareto In the late 19th century. Pareto discovered while observing wealth and income inequality that a small percentage of the population owned a large percentage of the wealth. In contrast, the majority of the population owned only a small percentage.Pareto's observations of wealth distribution led him to propose what is now known as the Pareto principle, or the "80/20 rule." This principle states that roughly 80% of the effects come from 20% of the causes. For example, in a business context, 80% of the profits might come from 20% of the products, or 80% of the complaints is likely to come from 20% of the customers.In the context of operational efficiency in construction, the Pareto principle can be used to identify critical factors that contribute to delays or inefficiencies in a construction project. For example, if we observe that 20% of the project activities are causing 80% of the delays, we can focus on addressing those critical activities to improve overall project efficiency.To apply the Pareto principle in construction, we must first identify the key performance indicators (KPIs) most relevant to the project's success. These KPIs could include factors such as the length of time for the submittal review process, long lead time items, cost overruns, safety incidents, or quality issues. Once we have identified the KPIs, we can use data analysis techniques such as Pareto charts to visualize the data distribution and identify the most significant contributors to inefficiency.For example, if we focus on delays, 20% of the subcontractors are responsible for 80%. Using the Pareto principle, we can address those subcontractors sooner than later and ensure they meet their contractual obligations. Similarly, suppose a particular type of equipment is responsible for a disproportionate number of safety incidents. We can improve safety protocols using Pareto distribution. Ramon Parchment
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