At the heart of all construction contract claims, disputes, and associated litigation and arbitration are issues that arose from the lack of effective construction management. While no two construction projects are the same, there are certain management responsibilities common to all projects that must be performed with diligence and consistency to achieve successful project completion.
Over the course of assisting clients in more than 1,000 troubled projects, Interface has noted the following key construction management responsibilities that, if handled poorly, can have a disproportionate amount of impact to the level of success achieved by a project:
- Administer the contract
- Manage the work
- Manage changes in the scope of work
The competition for a construction or project manager’s time on a project can be fierce, and today’s construction projects are facing increasingly complex execution strategies and shorter schedule requirements than ever before. This routinely forces management to handle multiple issues at once, which can dilute the project management’s effectiveness. It is important to recognize that each of the key construction management areas are equally important and none can be performed in a vacuum.
Administer the Contract
Construction contracts form the basis of the relationship between the parties. Contracts can be standard, all-purpose forms of agreement, or customized documents carefully drafted by professionals. In all cases, it is imperative for construction managers to diligently scrutinize the terms and conditions of the contract once it is executed and preferably before it is executed. Seemingly innocuous contract provisions that are agreed to without careful consideration of potential impacts that may occur during construction execution can lead to major contract disputes years later.
The time constraints around bidding periods and contract awards can put pressure on contract negotiations to conclude so that the work can begin. Key risks to the execution of a project are often overlooked when contract terms and conditions are being negotiated. After it is too late to renegotiate, the parties may realize that they have committed to an undesirable contract provision. For this reason, structured risk analysis should be performed prior to contract execution. This analysis should identify as many risks as possible, assess the potential impacts, and develop a control plan to preempt such impacts. Contractual mechanisms should be negotiated to eliminate risk in the event a control plan cannot be implemented.
It is imperative to have a methodical review and analysis of proposed contract terms by those experienced and familiar with the intended project execution plan. In many companies, owner and contractor alike, entirely different organizations are responsible for the bidding, award, negotiation, and execution phases of construction projects. The almost inherent silo effect associated with this organizational tendency can set up projects for failure from the start when agreed-upon contract terms and conditions are incompatible with key aspects of the construction execution plan.
Manage the Work
The activities undertaken during the execution phase of a construction project can vary widely from project to project, and are controlled by a range of variables, including the following:
- Project delivery methods
- Contract requirements
- Contract changes
During the execution of a project, there are several essential management responsibilities to consider for the implementation of a successful construction management program.
Construction Processes and Procedures
Successful construction management requires an organized, thoughtful, and consistent plan for how the scope of work will be performed by an organization. However, even the best laid plans can fail if they are not adequately communicated to the project team responsible for performing the work on a day-to-day basis. Written construction processes and procedures can be the best way for a construction management team to communicate its plan for how the work is to be accomplished. The best organizations in the construction industry have a wide-ranging library of standard processes and procedures they can reference from project to project and, as appropriate, tailor to address specific project requirements. The failure to implement or follow established processes and procedures is a key risk to the successful completion of any construction project. The following key areas should be included in construction management processes and procedures:
A properly planned and realistic construction schedule can facilitate timely, coordinated, and efficient project execution and provide a means to identify potential issues impacting project completion and profitability. Successful organizations manage the development of these schedules, as well as the consistent updates to these schedules, by adhering to sound procedures that can generally be applied across the varying sectors of the construction industry. Common features of these procedures include the following:
- Senior-level management engagement and development of a baseline schedule in accordance with contract requirements
- Definitions or directions on how to determine the appropriate level of detail in a schedule
- Direction regarding how to develop and include various interdisciplinary deliverables to the schedule relationships
- Checks to ensure the schedule produced and used on the project meets the contract requirements and can be effectively used as a management tool by the execution team in the field
- Checks to ensure the schedule is updated regularly and in accordance with the contract requirements
- Directions outlining when, or defining the circumstances of when, a project may need to re-baseline a schedule
Field Progress Measurement
On large, complex projects, progress measurement is a major undertaking involving coordinated efforts from all construction disciplines. For each task, it is critical to measure what you have done to date and forecast what needs to be done tomorrow in order to meet the schedule. Contract reporting requirements must also be considered when developing a project-specific progress measurement plan.
Projects that are not set up with the appropriate means to track progress, and/or experience problems performing progress measurement, routinely end up in trouble. One of the main causes of troubled projects is ill-informed management decisions based on inaccurate or absent reporting from the onsite execution team. However, in many cases, the root cause of poor progress reporting is not inaccurate data provided from the field, but rather the failure to develop or follow project procedures describing what is to be reported and the method in which it is reported.
There are numerous components common to sound progress measurement development plans and procedures, including the following:
- Instituting management checks to ensure contract reporting requirements are met
- Establishing minimum reporting requirements and processes for identifying measurables that must be tracked
- Ensuring adequate staffing is provided within reporting organizations
- Developing standard report and metrics templates that can be customized for project-specific use
- Providing descriptions for the division of responsibilities that indicate what is to be measured, who is responsible for reviewing and analyzing the data, and how the data is to be incorporated into the project schedule
The timely implementation of a progress measurement plan on a construction project helps reduce cost and schedule risk. Early in a construction program, it can be difficult to set up a system that will meet the future reporting needs of a project. However, attempting to implement an effective progress measurement system late in the execution of large project can prove to be a nearly impossible task.
Accurate and Appropriate Project Controls
A serious risk to any construction project is when construction managers rely on reporting that shows the work is being performed in a manner that meets budget and schedule demands when, in reality, it does not. For this reason, consistent reporting of the right data can provide insight into key project indicators and help identify variances to a project’s baseline plans early in the project. Basic project controls reporting includes measurables such as contract profitability, installed quantities, labor hours, productivity, and schedule performance. While basic reporting of historical data may suffice in some industries, large, complex construction projects benefit from the provision of forward-looking reporting in addition to historical data.
Early in a project, construction managers should take an active role in deciding what data to report. It is important to be familiar with contract requirements and the execution methodology when determining report requirements. For example, if a general contractor engages with a subcontractor that will perform work on a time-and-materials basis, it may be appropriate to require the subcontractor to report labor productivity data that is then verified by the general contractor’s field personnel. Implementing such a practice could potentially provide advance notice of cost increases related to labor hour overruns. Similarly, a contractor involved in work on a unit-rate type contract may wish to track the same data internally to ensure actual labor costs are not exceeding those built into the contract unit pricing.
Ultimately, the data reported on a construction project is subject to the knowledge and experience of the construction managers analyzing it. Identification of baseline variances by means of the reporting metrics used on a project does not necessarily provide insight into the actions that should be instituted to counter negative impacts to a project. However, a construction manager’s failure to establish appropriate reporting means and methods early in a job increases the risks to a project’s success. Attempting to implement sound reporting methods after a project has strayed from the plan is an incredibly difficult and time-consuming task that can distract from the day-to-day project management activities.
Manage Changes in the Scope of Work
Almost all construction projects experience some degree of change, typically in the work scope. A successful organization’s ability to effectively identify, analyze, document, and mitigate changes during a project is what differentiates it from less successful organizations. There are several key features of an effective change management program that allows construction managers to answer two questions:
- What is the status of the project now?
- What can we forecast our status to be in the future?
Establishing a project baseline for change management involves identifying what the project’s current status will be measured against over time. It can vary from project to project and may be determined by considering documentation including contract documents, staffing plans, equipment usage plans, installed quantities, expectations for cash flow, etc. Early identification of a project baseline allows construction managers to identify variances to the baseline from the start of the project when changes occur, capture the impacts of changes, and implement mitigation efforts to address new risks that may arise during execution.
Identifying and Assessing Variances
Identifying variances to the baseline can be one of the most difficult construction management tasks during a project. Often, it is not readily apparent that a variance has occurred until after the impacts manifest themselves in the form of cost overruns and/or schedule delays. At this point, it is too late to mitigate the negative impacts to the project. Selecting the right project data to report against the baseline, as well as determining how to report this data, can be critical in the timely identification of variances. Typically, the most basic reporting mechanisms are built around variations to the baseline schedule, project costs, and productivity. However, for large complex construction projects, reporting can become a comprehensive task involving detailed reporting mechanisms for key performance indicators.
In addition to identifying variances to the baseline, a construction manager must also oversee the recording and assessment of the variance’s impacts. If a change is identified early enough, it may be possible to implement tracking mechanisms that discretely record any cost and schedule impacts before they occur. However, as previously discussed, baseline plan variations are often not identified until after the impact is experienced. In these instances, an effective change management program can reference the contemporaneous project records to assess when the change occurred and measure the impacts.
Planning and Tracking Changes
Changes on a construction project do not occur in a vacuum. Often, multiple variations on a project can amass and have a cumulative effect beyond what their individual impacts may have been. Therefore, the quality of the information gathered during the identification and assessment of individual variations is critical to successfully identifying their root causes and managing change on a project.
After identifying and assessing variations, construction managers can implement methods to account and plan for the impacts of these events. These methods can include inserting new activities into a schedule, creating new cost codes for work-related changes, etc. In many instances, the extent of a change’s impacts is not realized until the work is complete and the data verified. However, construction managers should track progress performance whenever possible to have data to forecast potential impacts, and use this as a basis for the recovery of time and costs where appropriate.
As previously noted, the cumulative impact of multiple changes on a construction project can often outweigh the impact measured by a construction manager. In these instances, risks to a contractor’s or owner’s ability to be compensated for an unaccounted-for impact is increased by the lack of contemporaneous project data that could have been used to assess the impacts in real time.
Interface’s Construction Management Expertise & Services
Interface Consulting is staffed with professionals experienced in managing complex construction projects across many industries around the globe. This allows Interface to offer beneficial insight to clients involved in all forms of the construction process, including dispute resolution; assisting clients with troubled projects; and addressing key challenges before they escalate to contract disputes or litigation.
For more than 32 years, Interface has used proven techniques and expertise to assist clients with construction management-related issues. The firm’s experts work with our clients to resolve complex problems arising from the complex project execution strategies demanded by the challenging construction industry.
Clients with troubled projects retain Interface Consulting’s construction management experts to provide expertise in various key aspects of construction project management and execution, including:
- Claim Management
- Work Scope Change Management
- Project Scheduling and Delay Analysis
- Project Management Processes and Procedures
- Quality Assurance and Quality Control
- Labor Productivity Analysis
- Contract and Subcontract Management
- Cost Analysis
- Proposal Preparation and Review
- Constructability Analysis
- Change Order Preparation and Analysis
- Project Administration