The peripatetic nature of my construction career has taken me all over the world. From Cornwall to China and any number of places in between. So many cultures, so many different ways of achieving the same result.
One evening, in Loveland, Colorado, after polishing off a steak as large as my leg and a few surprisingly good beers from a local microbrewery , I retired to my rather bland hotel room and after an age (possibly only 15 minutes in truth) of flicking through re runs of Melrose Place, Jerry Springer and various infomercials showing Chuck Norris advertising something that involved pulling my (then) weighty carcass up and down a board using cables and hand grips, I switched off the television and wrote the following heading on a page of hotel note paper.
Why do so many construction projects lose money?
If you are in the industry, or in some way associated with it professionally, you will no doubt have a sardonic grin on your face now. Those not in the industry will quite possibly be wondering if I am exaggerating.
Sadly no. I wish I was.
I decided that I would not do the usual and list all the faults of the client and the clients representative (resident engineer, architect, PQS etc). My eyes would always glaze over when a contractor I was working for, explaining why things were not going as well as could be expected, would start pointing a finger at the client about various issues, when I knew behind the scenes we were a mess, due in the main to stuff that we could fix quite easily if we just stopped making the same mistakes over and over again. In any case, there will always be ‘good’ clients and ‘bad’ clients, it is an accepted risk of doing business. How you handle yourself though is entirely your decision.
Perhaps influenced by the problem project I was looking at, the first item on my list was…
Accuracy of estimate (lack of)
The poor old estimator gets 6 weeks (if he is lucky) to pull together a multi-million dollar bid, with less than comprehensive technical information, very little historic project performance data to work with, in competition with other turnover starved contractors. A big chunk of the 6 weeks is then taken up shining and polishing the bid teams efforts for internal review. Then after all that, the least accurate estimate wins and the most accurate estimate loses.
Now despite mobilisation being something that happens on every project (obviously!) it seems that ‘not getting ones backside in gear’ rapidly is quite common with contractors. Despite all the workshops, process maps, toolkits, best practise guides, procedures – you name it – something weird happens at the start of projects. A mixture of euphoria, disbelief, forgetfulness and complacency. Combined with the evangelical belief that to have resources in place early is in some way a cost too great to stand (ignoring the knowledge that it will take at least 3 times the resource to make back the time later on).
Projects are quite simply ‘pop up businesses’ made up of a heady mixture of information and people, supported by various resources. Good, fast and consistent communication is essential as you do not have the luxury of a permanent office base or a factory where everyone has worked together doing the same thing for 20 years. The project teams that make money (and the team includes everyone – internal and external) communicate well and ensure that information is expedited and knowledge is shared.
Far too many do not.
Do you what is worse than a bad project? A bad project in denial.
I have witnessed project teams experience existential angst as they try and prove to head office that the project will still make money and finish on time despite overwhelming evidence to the contrary. No one in head office wants to hear bad news, despite the knowledge that the prelims were reduced by 12% to win the project and the job is understaffed, the project manager will ‘bloody sort it’ because he/she is a ‘good guy’.
So, this is how it works.
– The estimate is cut to win the project. Everyone involved in signing off the bid is aware – either publicly or privately – that this was a strategic decision to win that clients work.
– The estimate is handed over to the project team, without the above fact really being made clear to them.
– Project starts to run late due to lack of resources, compounding the impact of the original cut in resources.
– It becomes very hard to buy out packages because to do so will lead to losses having to be revealed. So decisions are delayed and worse still, the most appropriate subcontractors may not be selected for the project.
– The lack of resources and worsening morale creates discord and political infighting on the project. Staff changes lead to a ‘bunker’ mentality where information about the real performance of the project is hard to obtain.
– The client becomes increasingly concerned and looks for ways to slow payments down as a crude means of motivating the contractor.
– All of this has an impact on the relationships with the supply chain. Via suppliers and subcontractors, the market starts to hear rumours about the ‘bad job’ and the perception of the contractor in the market place is negatively effected.
– The cold hard reality of a lack of decent cash coming in (despite the early cost and value reports appearing reasonable) leads to head office parachuting additional resources (and sometimes a completely new team) into the project at a far greater cost than the original resource requirement, to try and finish the project and avoid the costs of delay, including the risk of liquidated damages.
– The lawyers start rubbing their hands…
So I went on writing my list. I think I finished at about 1am. By then I had an A4 note book filled with positives, negatives, stratagems on how to improve based on real life examples found in different construction sectors around the world. Over the next 5 months I added checklists, process maps, flowcharts, forms. All intended to help contractors stop making the same mistakes over and over again.
I turned it into a management system. I approached the board of the business I was working for at the time to adopt it. They liked it, advised it was important and that it should be rolled out. The next board meeting was coming up and that would be an ideal time for me to present.
I waited. The day of the board meeting went by. That evening as they left, I was told that Project XXXX, an especially difficult contract that was losing an awful lot of cash, had to be discussed and as such my management system presentation was bumped. Nothing improves a stodgy board meeting buffet better than a tall glass of irony.
Reflecting on all that, it became to clear to me that even if they had provided me with my moment in the sun, I would still have faced the horrendous task of rolling out a new management system within a large ‘old world’ construction business. Technology was not on my side (or anyones) back then, so it would have involved road shows and long email chains and attempting to build something on the teletext like company intranet (which like so many – even now – is more ‘births, deaths & marriages’ than a real operating system).
Years passed by. I kept improving the management system, adding to it, editing it.
Then a few things happened that changed everything.
- Cloud based computing
- Web enabled devices / smart phones / tablets
- Wireless 3G
Technology caught up with my ambition. I could now see my ‘management system’ not as something that sits in a folder on a project managers book case (or propping up his wobbly desk!) but as real time project performance nervous system, gathering data, visualising it, suggesting actions plans, getting people to work together in different ways but to common goals.
To finally provide contractors with the means to stop losing money on their projects.
So after surprisingly little soul searching, when the opportunity was presented to change the direction of my career, I founded Wootten Consulting Company Ltd, with the immediate objective to create a cloud based business performance improvement system. But always with a view that it could be used not only across an entire organisation/enterprise (and by doing so changing the way management consultancy services are sold) but that it could become the means to resolve the project issues I identified back in that nondescript hotel room in Colorado.
So, take a look, get started with a free trial and let me know what you think.