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JR COMPANY’S TOP TEN THINGS
THAT CAN GO WRONG
ON A CONSTRUCTION PROJECT
By Michael DiMercurio
NUMBER 9: FAILURE TO CONTROL THE FIELD - PART 2
Here are the main ways to fail to control the field:
Fail to manage subcontractors:
Just let the subcontractors put in whatever change requests and claims they feel like, and be friendly and respectful and pay them all.
Wrong. Subcontractors are famous for claiming extras for things that were in the as-purchased scope. But if the PM or his team doesn’t know the contract scope, he won’t be able to fight off the changes.
Changes should all be negotiated to the point of unreasonable bitterness, because the tougher the paying party is to get to agree, the more the claiming party will choose its battles. Particularly the first change order – contractors will always try on the construction manager with the first change order. Be a bear on change request number one, and all the others will be easier.
As to claims, when a contractor or subcontractor drops a claim on the PM’s desk, the project team should be ready to drop its backcharge file on top. For every claim there’s a counterclaim. Every time the contractor thinks he was damaged, there is probably a time when he committed actions that damaged the overall project. That does NOT mean that in isolated cases a claim lacks validity. But the skillful project manager knows how to negotiate his damages down to the bare minimum. If a claim must be settled, the first string PM demands to see evidence of actual costs, meaning certified payroll records, payment of union benefit amounts, invoices and payments to lower tier subs and vendors, and receipts for travel. Consultants exist who can easily blast through ten bankers boxes of such data between breakfast and lunch and establish that half the claim is trumped up nonsense or double-counts. Without even going to entitlement, the quantum can be cut in half. Then the good PM knows his contract – he actually READS the thing, takes notes, and knows what his rights are. And then he ENFORCES his contract, hopefully in real time, but if not, when the claim comes he “scrubs” the contract to see if everything the claiming party was bought out to do, he did. If and when there was an unfulfilled obligation, the PM assigns an amount to it and adds it to the counterclaim.
And then there are backcharges. The electrical contractor breaks a drain pipe put in by the plumbing contractor. Conduit got in the way of a valve. The skillful PM has a file set up for every contractor. If relationships are good and the job is built well with a minimum of extras, then the backcharge file is tossed out at contract closeout. But if things go as things tend to – all fouled up in the field – then the PM and his team use that backcharge file against the offending contractor before settling up retention payments. The skillful PM is NEVER shy about deducting damages amounts, even if his contract is equivocal about it. The other contractors are watching to see how the first contract closes out.
Failure to manage upward (prime contractor, construction manager, owner, home office);
failure to prosecute changes (RFCOs or requests for change orders):
In the old days of construction, project managers would get migraine headaches when litigators would demand “documentation” of damages. Today it’s absurdly easy. Pull out your digital camera and take a picture of the trench cut across the road that blocks access to your work area from the underground contractor who got ahead of himself and failed to coordinate. In many cases, the PM doesn’t even need anything more than his cell phone. Snap a picture, text message it to the construction manager’s project manager with a terse message – “this has delayed my project today, you will be presented with costs later this week.”
Failure to manage the material (material control):
Project managers who economize on material control are foolish. The “crane path” approach to construction management doesn’t address the fact that a critical path schedule can fall apart from the lack of one lunchbox-sized part that could have been controlled, but that part isn’t present, the vendor has to be called (good luck, it’s 4th of July weekend and no one cares about working except your fast-track project team), and the part will take a month to get here.
Failure to understand costs (in real time or close to it):
Entire construction projects have been run, sometimes for years, with the project management team ignorant of costs. “That’s accounting’s job,” one project manager said, when asked about his 50% overrun. No, that’s the PM’s job. Anyone can complete a project eventually with a shot budget. It’s the skillful project manager who can bring it in on budget and on time. And the status of the project costs relative to the budget allows the PM to make his own decisions. If the project is forecasted to be under budget, the PM can implement overtime programs to recover schedule. While it isn’t like the money is his to spend, senior management won’t argue for overtime moneys if the project will underrun. A late part can be the subject of a delivery bonus. Money can buy schedule if applied properly. It can also reward a war-weary project team and breathe new life into team performance. But if the PM has no idea what his costs are in real time, he can’t be creative and innovative with his underrunning funds. Similarly, if the project is going to overrun, the PM needs to know immediately so he can alert senior management. His notification must be in writing and formalized. Project reports on a periodic basis, or documented emails. When it comes to bad news, senior management has fuzzy memories of exactly when it was brought into the loop. Failure to “buy management into” the overrun on a timely basis can cost the project manager the job that he so cherishes.
Failure to understand what is happening to schedule (while there is time to act):
Schedules must be tracked to see ways to work around delays. An article on critical path is coming up, but it must be understood that many if not most schedule problems can be worked around without overall project delays, provided those delays are known to the project manager. The work-arounds can be costly, so the project manager MUST know the “cost of time.” How much money on overtime can be spent to save one critical path day? Liquidated damages focus the mind, but are also a dent in a company’s pride, so LD values alone do not make the decision of how much to spend to catch up a schedule. Schedule opportunities, ways to get ahead that were not anticipated when the schedule network was assembled, can be found if the schedule is updated in real time. If the project manager takes his responsibility on this seriously, he can save critical path time and money. If he’s one of those PMs who say, “that’s the project control manager’s job,” the project had better hope the project control engineer is one hell of a guy, willing to do the PM’s job for him.
Failure to manage on-time delivery of equipment and material:
On another project, it was determined that the company’s subsidiary “forgot” to include in their purchase order to have the structural steel fabricator finish paint the steel for mammoth twin multi-megawatt boilers, each as big as a skyscraper, and the prefabricator wanted several million dollars and a couple months of schedule to paint the steel. The alternative, painting the steel after erection, was not pretty. Because of the height of the structure, field painting would take double the prefabricator’s estimate. With time a-wasting, and the clock ticking on possible huge liquidated damages, the project manager – a cigar chomping tough guy – ordered that a subcontract be bid out the local painters, for tents to be set up on the jobsite so that steel could be offloaded from the trucks, plopped down in the tent areas, painted at grade, then fed to the crane to erect. The loss of schedule was only a week per truckload, not the 8 weeks quoted by the fabricator. The cost of the painting – even after a lawsuit and a claim – was less than half of the original estimate. Moral of the story: manage the delivery of the material to the jobsite, even if it is someone else’s responsibility.
Controlling the field means controlling everyone and everything that comes onto the jobsite. And no one interferes with your jobsite without YOUR permission. That goes for clients and customers. Be polite, but enforce that it’s your site. One project manager noticed that all the visitors kept making off with the white visitor hardhats, and hardhat losses were adding up to several thousand dollars. Perhaps a small thing, but it was a sign of the job being out of control. So the PM mandated that the next batch of hardhats purchased were PINK. Whenever pesky customers or vendor reps or fire department inspectors came to the jobsite, they could be seen out the trailer windows uneasily wearing their pink hardhats. As could be expected, none of the pink hardhats left the jobsite. Obviously, those hats were not to be used for senior management!
Controlling the field is such a powerful project management tool that it can make up for making almost all the other typical project mistakes. The trouble is that it is such a powerful tool that sometimes project managers try to use it as a “silver bullet” rather than solving all the other issues. As amazing as field control can be, it won’t make up for gross deficiencies in design or inadequate budgets or poor senior management.
But let’s be thankful that there is one torpedo in our tube that’s nuclear-tipped. We might not win a war with it, but certainly the skillful use of it can win the battle.
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