Owner Side Schedule Oversight
Delay is the most feared word in all of construction. It’s true. Ask anyone. When the word “delay” enters the discussion, people on the owner’s side cringe and people on the construction side shut down like the Atlanta Falcons in the third quarter of the Superbowl. Why is this? It’s because delays is a major problem for owners and it affects their business in far more ways than it affects a contractors business.
The reason owners place a completion date in their contract is because they want the project complete on a certain date in order to get what they want out of that asset. For the most part, in commercial construction, completion date ties to revenue, which ties to ROI. That being said, in addition to delays impacting revenue, it also reaches much further into the owner’s profits. Delayed projects usually result in added construction costs, increased interest costs on construction, impacted relationships with vendors/leaseholders, and added stress. All of those things can impact the profit margins for the company. In addition, it can result in legal fees and/or consultant fees as well – because quite often disputes arise in these scenarios (for the costs listed above). So, yeah, Owners cringe when they hear the term “delay” because it’s a major disruptor to their business.
This is also the reason why contractors clam up! Contractors don’t like someone being pissed off at them they are out there busting their butts, doing what they perceive to be the impossible. As a matter of fact, delay doesn’t really impact a contractor – and in some cases they make more money (I’ve actually heard the word “Profitize” in the same sentence as “Delay” by some folks on the construction side). Herein lies what I believe to be the root of the construction industry’s biggest problem. Delay costs an owner money and it severely impacts their business. Whereas, in most cases, it often results in additional money for the contractor. Not always of course, but often enough to raise an eyebrow. The only real negative impact that delay has on any CM/GC is the resulting relationship issues it causes with one of the hands that feed them
The solutions to this disconnect is easy – it in a mutual understanding of the project schedule. It is not in change orders, it is not in OAC meetings, it is not in payment applications, it is not in RFI’s, but it is the data behind the schedule that solves this problem. Data removes all biases – including hindsight bias and overconfidence bias, which essentially translates to transparency and objectivity. So, this requires some proactiveness on the Owner side to correct.
Now, I know most people on the owner side at this point in the article will say “of course, we always analyze the schedule” – but run of the mill schedule oversight is not what I am talking about. I am talking about studying the schedule until you are sick to your stomach. Analyzing it line to line, from one period to the next, studying the changes, looking at criticality, compression, delay…things that the average owner and owner’s rep don’t have the time and the stomach for. Things like:
- Structural Integrity – the quality of the schedule is a very important thing, and it all boils down to making sure the schedule is of sound quality to manage a job. Keep a focus on Relationships – and other risk items like long durations, high floats, etc. There is a method called the DCMA methodology that works, and essentially is designed to make sure that structural integrity is present in the schedule logic and durations aren’t too out of whack, and that the schedule doesn’t have high levels of criticality or compression.
- Delay Diagnostic – Delay needs to be studied early and often, from one update to the next. Project management teams don’t study critical path delay because they don’t have time. If the schedule slips, they don’t run around telling everyone. Instead, they overcome it through changes in the schedule. This is where “overconfidence bias” becomes a problem. Once delays accumulate to the point that it is impossible to ignore, contractors discuss it and usually have many excuses why it happened (well after the fact). This is where “hindsight bias” becomes an issue and arguments start to happen. Understanding delay issues in real time is imperative towards achievement of success, because as GI Joe says, “Knowing is half the battle”.
- Schedule Modification Analysis – At each update, any modifications made to the schedule need to be understood by the owner. This is because most of them were made to overcome delays and other challenges. There needs to be some sort of GUARANTEED checks and balances system in place to minimize owner risk. An understanding of these changes is necessary to ensure that the projected end date isn’t becoming unrealistic. What contractors need to know is that owners aren’t that mad at “delay” rather the uncertainty that it brings to the outcome. The term “If I only knew” is something I hear often from owners.
- Activity Duration Feasibility Analysis – One common question people always have when looking at the schedule is “are the durations accurate?”. Duration accuracy hinges on a couple things, but it always boils down to how much labor is available and can fit into the space, given the design and other issues (like overlapping trades, material in the way etc.). The reality is that duration feasibility isn’t really known (or can be analyzed) until the project gets rolling because that is when the rubber hits the road. Real issues fall out, which are usually patternistic, and thus should be studied over time. Once you can see how quickly, on average, concrete is being poured, Ductwork is being installed, and drywall is placed on an area by area basis, you can then test the feasibility of the durations in the schedule. This effort is important because it keeps everyone honest and the end date accurate.
The reality is that in order for an owner to get intimately familiar with the data in the schedule, it usually requires spending a lot of time analyzing the schedules and updates, which takes a lot of time (which is scarce) or costs a lot of money to hire an outside consultant, which again costs more money. So, proactive is a tough sell sometimes….but worth it!
The analyses above are proven to work well in managing the fallout of delay if implemented by owners. I know it because I have done it on projects many times over and can honestly say that it results in optimal outcomes! Less delays, less overruns, better relationships – no legal disputes. And having a realistic projection on end date well ahead of time ensures that owners can do everything in their power to minimize cost exposure for all the reasons outlined above.
The alternative to hiring a consultant or spending hours analyzing data is to use a technology that does it all for you, instantly and automatically. I developed SmartPM to do exactly that. Take a look here: www.smartpmtech.com