July 21, 2006
Several recent studies, including one by the surety industry, have shown an interesting statistic:
On average, three out of ten projects have significant, potentially- damaging problems. One of the three is handled internally between the parties. Two involve such potential impacts to the bottom line that claims consultants and attorneys can be seen circling the project. One of the ten is so potentially damaging that the losses from that project can totally wipe out a company. These last two contribute to the fact that construction has the second highest failure rates among U.S. companies.
Other than an interesting bit of cocktail party conversation, is there anything of value in this statistic. ABSOLUTELY, but first a few other relevant statistics:
- Sixty percent of all problems on projects are encountered during the first 25 percent of the project’s period of performance. A project experiences the majority of its real world “body blows” during the early phases of a project, often when we are the busiest attending to administrative, managerial and other factors.
- Every project has its own nature or style that becomes fixed at about 15 to 20 percent into the project. That is, the particular nature of the project, i.e., the actual practices of scheduling, coordination, change orders, etc., become a reality and the controlling forces, such as the personality of the General Contractor’s Superintendent, become firm. After this point, most efforts to change the project’s momentum and style become increasingly futile as it continues.
- By the time the project reaches approximately 40 percent complete, most of the impacts to the project have been witnessed and the nature of the project is so fixed that many consultants believe the project is at the “POINT OF ‘NO’ RETURN.” After this 40 percent threshold, costs and difficulties of making substantive changes to a project are so high that its destiny, good or bad, is likely fixed.
If we cannot identify the bad projects early and take meaningful steps to correct the problem(s), then there is a point at which we cannot significantly effect change and the disaster becomes unavoidable. Even the magnitude of the disaster can be predicted before the project reaches the halfway point and there are little or no options to reduce that magnitude. Actually, most efforts at this stage of the project result in only worsening a bad situation.
If the Owner, Designer, Contractor, etc., has only a short window of opportunity to alter the course of a bad project, the trick to effective management is to: (1) Institute a reliable monitoring system to detect early signs of project failure, (2) Identify cause(s) of any of the failure(s), and (3) Effect changes. These steps must be quick, decisive and focused.
At least one approach to this process is:
- Assign a single, experienced person to be charged with the responsibility for early detection of troubled projects. This person must use special monitoring procedures to detect early signs of problems because the normal reporting mechanisms of schedules and pay applications are too late. Some effective monitoring factors can be:
- Planned v. Actual productivity.
- Planned v. Actual labor resources.
- Impacts from Subsurface or unforeseen conditions.
- Effective coordination of trades.
- Use of the project schedule.
- Superintendent’s knowledge of such key factors as the required labor force, critical path and changes in the flow of planned work.
- Loss of key sub-contractors and suppliers.
- Status of RFIs, Change Order Requests, etc.
- Assign the authority to determine the cause(s) of the problems and to effect change to a single, experienced person who is often the same person assigned to identify problem projects. Change for change sake is foolish but delay in making a needed change can be just as foolish.
- Make these required change(s) as quickly as possible. Delay is no one’s friend.
- Monitor the project to determine if the changes bring about the desired results. If not, review and taking further action may be necessary.
It is my experience that the involvement of multiple parties or committees in this process introduces so much delay and indecision that the short window of opportunity can be closed before any action is taken. A single source, a responsible party with the experience and talents necessary for this difficult position, is probably the only tool available to dodge those devastating impacts from BAD PROJECTS.
Tim Fitzgerald has served the construction industry for over 26 years as a master project scheduler, claims consultant, expert witness and project manager. He is also a national speaker on managing troubled construction projects. His expertise includes commercial, industrial and residential projects for private, state, federal and quasi-public (airports) projects He can be reached toll-free at 866 349-7765 or via e-mail at [email protected].