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Construction Project Failures

The stories are too numerous to count, over budget, schedule delay, labor availability, and more. Many of us have experienced the “Worst Project Ever?” Why do construction projects continue to fail despite all the improvements in productivity, planning, software, and improved communication tools? There are four key elements that influence a project’s outcome; project estimate, project schedule, risk management plans, and change management processes.

Project Estimate

A project estimate should “Start with the End-In-Mind”, a culmination of all elements that make up a completed project. This effort is not simply guessing what the project will cost but is overarching to ensure that the project is well-defined and that it meets the desired outcome. The effort starts with the business case development and alternatives analysis that leads to an alignment of the organization on the right project to attain the desired results. The project team identifies the desired technology, assesses site-specific elements (permits, seismic site class, zoning, highway access, etc.), and develops the preliminary design and equipment list. Once the elements of the project are defined, they can then be priced accordingly. At this time, project contingencies are set using site-specific elements and other project elements as influencing factors.

Project Schedule

Important assumptions regarding how work will be executed should be aligned with the engineering, procurement, and construction activities required to install the defined elements within the project estimate. This planning effort serves as a project basis as defined by the project execution plan, resulting in a time-based plan for the systematic installation and sequencing of assembly. The important planning aspects that must be well defined in the project schedule are:

● Start and completion dates for detailed design and construction, and critical milestone dates as defined by the project objectives

● Procurement of key long-lead equipment

● Strategy for project management

● Strategy for detailed design

● Contracting strategy for construction

● Community and labor trades communication plan

Risk Management Plan

Project risks can be project-related impacts like labor availability or regional impacts such as historical weather patterns in the area. Regardless of the risk, early identification, and development of mitigation plans are vital. Moreover, it is important to make a continual assessment of the project related risks at quarterly intervals at a minimum.

Mitigation strategies can be developed for all reasonable risks, but most of the focus in risk reduction should be placed on the critical few, whether that is the top 20% of risks, the top 5 risks, or other appropriate numbers. A “three-front” mitigation strategy should be developed. The primary strategy should be developed to prevent the risk from occurring; the secondary strategy should focus on mitigating the effects of the risk if it does happen; the third strategy is risk transfer.

The approach to risk identification may vary; one approach is to use the project team to identify potential risks in a brainstorming session. Regardless, a tracking tool (such as a risk register, spreadsheet matrix, or database) should be used to update and manage changes in project risks and updated mitigation strategies.

Change Management

A coworker once said to me “The Enemy of Good…. Is Better”. Meaning, take what was scoped, estimated, scheduled inherently aligned with company business objectives by way of the estimating process, and unless it is unsafe, won’t work or have significant payback including delay in the current schedule and potential rework) DON’T DO IT!

Projects are constantly subjected to requests for change. This may be caused by design learnings, business market adjustments, etc. The effective management of a project requires that the appropriate controls be in place to ensure that the proper level of discipline and rigor are used in assessing change requests. Sound project management practices incorporate formal approval procedures as part of overall project management requirements. The approval process ensures proper review and discussion before project dollars, scope, or schedule are expended, altered, or adjusted, respectively. A change identification document should be used when there is reason to vary from the defined project scope. These conditions are:

● Unplanned scope items required to meet project objectives (Unsafe or Will not Work)

● Changes that alter technology process or product parameters (i.e., capacity, capability, functionality, etc.) – Business change assessment improved payback.

● Replacements that result from initial installation not performing or able to meet requirements (Unsafe or Will not Work)

Price Howard, President

Global Management Partners

http://www.gmpco.com

(864) 334-2860

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