Avoiding a Troubled Project

26 September 2018 / By John Manning
construction

In a recent two part interview, I discussed my first experience with Troubled Projects, along with How Best to Avoid the Troubled Waters of Construction through the use of a Professional Quality Owner’s Representative, and what attributes to look for in an Owner’s Representative. Today, I would like to touch base on several of the causes for a project running into trouble. These contributing factors can and will impact cost, time and quality.

Some of the key causes of a troubled project include:
1. Inexperienced and inept owners project team
2. Inadequate cost estimating and insufficient budget for the project
3. Permitting issues
4. Incomplete design
5. Design errors
6. Design defects
7. Funding failures
8. Inadequate procurement of a project
9. Contract failures
10. Contractor not paying trades and suppliers
11. Contractor errors and mismanagement
12. Construction defects
13. Contractor illegal activities
14. Labor disputes
15. Acts of God

There are more contributing factors than the 15 listed above; however, these 15 cover a vast majority of the problems I have witnessed in troubled projects.

How a project is organized is key to avoiding a troubled project. Failure to properly organize a project by an Owner leads to many of the causes noted above.

 

Organizing Your Project

How an Owner organizes their project depends on its size and complexity. The owner should have one main leader on every project. Sadly, owners will often attempt to save money by cutting costs on their representation. They rationalize that they are covered by the services of their contracted contractors, such as the architect/engineer, contractor, or designer/builder. What most Owners fail to recognize or give consideration to is that these other contractors will look out for themselves first and the Owner second!

A common thread found in the research of failed projects identified “leadership from owners needs to increase as well as the need for a strong owner representative’s presence.” Whether a single individual is the sole representative for the owner or the leader representing a group of individuals is the representative for the owner, he or she must be competent to lead the project from concept to completion.

The owner’s representative must have the ability, authority and responsibility to execute the owner’s requirements. This starts with a clear vision for what the finished project will be and the ability to explain that vision to all of the project’s stakeholders. This starts with the development of strong contracts for the designers, contractors and any other entity necessary for the successful completion of the project.

The owner’s representative team should have a skill set capable of taking the project from concept to completion, along with the ability to ensure the best interests of the owner are continually being maintained. This team may be totally in-house (employed by the owner), totally outsourced (contracted owner’s representative), or a combination of the two. On larger projects, there could be multiple tiers of representatives, each responsible for a different area of the project or for different scopes. It is critically important that the individual responsible for the overall project defines the job functions of individuals assigned to the project, whether they are in-house or outsourced.

 

A few key roles and functions in construction projects include:

Overall Management of Contracts: A detailed, systematic approach to managing contracts ensures adherence to them. As any good construction attorney will attest, if the owner’s representative allows latitude in the terms and conditions of the contract it could redefine the contract. Strict adherence to contracts is the first rule. This also includes ensuring the development and management of the RFP processes remains aligned with the contract.

Management of Information: On any project, a large amount of information needs to be carefully managed. This requires putting in place a data management system, which in most projects today is cloud-based. Effective owner representatives should have the knowledge and skills to manage project information, along with the knowledge and hands-on experience using cost estimating and scheduling management tools. This process helps to keep everyone working toward the same project goals, ensuring timely project success.

Oversight of Design: Poor design is the Achilles’ heel of a construction project. While the owner’s representative is not expected to handle design management, he or she should be able to clearly track the design process to ensure the owner receives a design that achieves the owner’s vision while it is being built and that the project remains within budget.

Oversight of Construction and Overall Coordination: Frequently, the owner has existing properties that borders the current work. With the contractor focused on managing his or her responsibilities, someone from the owner’s representative team should be providing overall coordination of all activities and responsibilities. This individual should also track the schedule status of the project, putting the contractor on notice if he or she falls behind schedule.

Inspection of Work in Place: The owner’s representative must establish some type of quality oversight to track whether a project is meeting the quality standards set forth in the design. This can be done by an outside agent who has the facilities to perform the tests that confirm the work meets design specification standards and is code compliant; or, it could be someone on the team who performs inspections or coordinates inspections with an outside agent.

The organization necessary to achieve these goals will vary based on the complexity and size of the project. In general, the owner’s representative team should have a strong project manager, supported by assistant managers, contract administrators, construction managers, and inspectors to lead the project to successful, timely completion.

 

A CASE STUDY IN POINT
Several years ago, KMI was asked to review a troubled hotel project. We quickly learned the owner’s representative was way in over his head. He had paid the contractor for more work than what was in place. All the savings he had realized, on a lower-priced owner’s representative, quickly went down the drain with the simple mismanagement of change orders on the project. Now some may ask where the architect in all this was. Well, the owner had hired two architectural firms for the project and they were squabbling over the design! The project was so dysfunctional that one firm would change the design daily to the extent it required the contractor tear out work that had been put in place the day before!

 

A strong owner’s representative would have kept this dysfunction from happening. The owner representative’s main role is to manage the project from the pre-design phase through the design, procurement, and construction phases to project closeout, ensuring that all entities involved in the project perform to expectations and their contracted services.

To learn more about Owner’s Representation Services and Troubled Projects, be sure to look for my upcoming book, Prevent and Turnaround Troubled Construction Projects, where I explore and discuss effective processes for preventing and turning around a troubled project.

About The Author

John Manning

John Manning is the Principal and CEO of KMI International with more than 30 years of global experience in project management of the design and construction processes on resort hotels, parking structures, infrastructure, area development and mixed use. He is a CCM (Certified Construction Manager), PE (Professional Engineer) and a LEED Accredited Professional while serving on the national board of CMAA. He has worked as a project manager for large Owners and Construction Management Firms on projects ranging up to $3 Billion. Mr. Manning also testifies as a forensic expert in state and federal courts.

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