Business Tips

Project failure causes you really want to avoid

Many project failures have similar causes. Prepare yourself by either avoiding them, or having a sound plan to recover from them.

Inadequate risk management

Construction risks get a lot of attention, yet many owners and contractors hope for the best instead of planning for the worst. It’s too easy to assume everything will be smooth sailing—and besides, who wants to do extra work for something that might not even happen? But if you can imagine it, it can happen.

Risk management starts long before breaking ground—that’s the real secret to reducing construction risks. Experience tells you the types of factors you should consider. Safety is a big one, along with contract conditions that flow too much risk your way. Design and follow through with a stringent safety program. When it comes to contractual terms, push back when you are being asked to assume risks you have little control over.

Other risky areas include poorly scoped projects, hidden existing conditions, and being forced to accept risky partners. In short, you are the key to reducing your risks and you must be willing to objectively assess them and decide how to eliminate, mitigate, or insure against them.

Untimely decision making

A construction project requires many decisions to be made by many people, sometimes simultaneously and almost always with time constraints. If you lack a good information-sharing process that’s backed up and operating in real time, you face a threat to timely and accurate decision making.

Get a good project management tool and use it. If the tool allows you to share the system with your partners, then do it. Getting everyone to use the same document management system really improves decision making.

Inadequate planning

This category applies to everyone on a project. The owner that has vague project objectives, has poor vision for expected outcomes, and allows places for scope creep is playing a dangerous game where uncertainty will prevail.

Contractors of all stripes can be guilty of ill-conceived estimates, poorly designed schedules, and poorly chosen participants. Any one of these is enough to sink a project, but when multiple parties on a project have failed in their judgments, the effects are amplified.

Contractors of all stripes can be guilty of ill-conceived estimates, poorly designed schedules, and poorly chosen participants.

As a general contractor, you can cushion yourself from these scenarios by carefully selecting your projects and your subs. You want the reliability and consistency that come with partners who use good planning and careful forethought. The same goes for subcontractors when choosing projects and GCs.

Communication gaps

In the best of all worlds, everyone on a project has excellent communication skills and flawless communication practices. But that’s not often the reality, so the next best thing is finding out where the communication deficits are and eliminating or mitigating them.

Set up a solid communication plan in the contract so everyone uses the same processes for information requests, submittals, and notifications. Use digital tools and devices to speed up the delivery of data, information, changes, and plan details. Find ways to minimize meetings and keep them short.

Financial mismanagement

By carefully selecting projects that have well-defined scopes and realistic budgets you can reduce the chances you’ll get stung. Subs should also vet their GCs by checking on their track records and how they handle payments.

You also need to vet owners, because there are many who want something for nothing. And there are those who accept completed work only to drag out payment, or find ways to get out of paying. Have your contracts reviewed by expert counsel to help eliminate loopholes that owners can use to avoid payment. Preserve your lien rights by following the requirements your state imposes on filing liens.

Underestimating contingencies

With all the variables affecting construction projects, it’s not unusual for budgets to be stretched taut by lots of changes. You have your plan for problems that come out of nowhere. You could use a blanket percentage for contingencies on every project, but that means you’ll be short on some projects and over on others. Given the time, it’s better to develop a plan for contingencies for each project.

That process requires factoring in all the items above and then some. Your contingency plan should reflect the level of risk across the entire project. Since there are risks common to all projects, you can simplify your risk assessments by keeping a list of these and adding to it as you discover new ones. That frees up time for you to identify each project’s unique risks. This should help you design a realistic contingency plan. And, because you’ve done a thorough job, you’ll be able to justify any extra expenses if they get called into question.