When Good Projects go Bad

Steve Revay

January 18, 2012

Calgary AACE International Dinner Meeting

Agenda

Warning Signs

Lesson Learnt

Fast Track

Top Causes

Change Management

Communication / Email

Credible Claim Presentation

SAFETY MOMENT

CONTROLLING STRESS

STRESS

Next step is to deal or cope with stressors in

positive way

•Acceptance

Some things we have no control over so accept

them

e.g. “Someday I’ll laugh about this!”

•Attitude

Try to focus on positive

e.g. “What can I learn from this?”

•Perspective

Ask yourself “How important is this situation?”

Or “Will I even remember this in 5 years?”

What happens when the marketplace is in a downturn

Typically

Contractors tend to be more aggressive in pursing claims – cash flow becomes more important than relationships; and

Owners tend to be more aggressive as they become more concerned with the bottom line – less concerned with keeping contractors happy

What does all this mean

More disputes / claims

AACE International can help

RPs / Technical Products / Certifications /

Education / Annual Seminar.

Warning Signs Owners who:

have unrealistic expectations

fail to properly develop project

cut corners on investigations

and design

inappropriately shift risks to contractor

Consequently. Contractors will frequently,

Warning Signs

Engineers who:

pass on design responsibilities to Contractors

agrees to unrealistic expectations

have vested interest in disputes

produce ambiguous or conflicting documents

Blame for Petro-Canada RCP overrun some $900 million

“The root cause of these problems is poor quality engineering and

sub par site management”

Calgary Herald July 25, 2008 – quoting CEO Ron Brenneman

link

Realistic Schedule

Project Completion Engineering

Overlap

Construction

DELAY

Increased overlap

Failure to move start and end dates notwithstanding initial delays causes unrealistic schedule

Industrial Megaprojects Edward Merrow

It is far more important to be carefully monitoring engineering than construction! When problems start to show up in engineering, it actually may be possible to do something about them. If the problems are not seen until construction, it is usually too late

The Post Mortem You Never Want – How To Determine Findings From a Troubled Project –

Bob Prieto - PM World November 2008

Failing to adequately plan (use of tool)

Plan not sufficiently developed

Critical Path not understood

Schedule does not reflect realities of Project (political / deliverable not tool)

Project execution lacks rigor

Performance metrics not effectively used

"Plans are nothing.

Planning is everything."

Dwight D Eishenhower

Warning Signs Contractors can make the situation worse if

they:

don’t satisfy notice provisions

cut corners to offset bid deficiencies

abuse subcontractors

don’t read the contract or assume it will not

be enforced

fail to keep adequate project records

don’t document claims properly

fail to develop and update schedules

Lessons

Learnt

Repeated

Owner Issues

Best practices are known but not

practiced

Lip Service

SCOPE DEFINITION

STAGE GATING

RISK MANAGEMENT

CONSTRUCTABILITY/VALUE ENGINEERING

Contractor Issues

Contract Familiarity

ARTICLES TO READ NOTICE PROVISION

CHANGES/EXTRAS

DISPUTES

AUTHORITY

SOIL SITE CONDITIONS

DELAY

PAYMENT

R T F C

Words of Wisdom

“ Education is what you get when you read the fine print …

...experience is what you get when you don’t. ”

Fast Track

Fast Track

&

Hard money Excellent source of business for claims

consultants

Scope Creep

Inadequate Change Management

Poor Estimates /PM /Project Teams

Lack of communication

Ineffective Project Controls

Most Common Causes of Overrun ( Linkin discussion)

Unrealistic Expectations

Extensive changes / scope creep

Acceleration – more hours / people

Lack of communication

Ineffective Project Controls

Most Common Causes of Overrun ( SOR experience)

COAA BENCHMARKING STUDY FEBRUARY 2009

RANK COST SCHEDULE PRODUCTIVITY

1 AMOUNT OF UNPLANNED

OVERTIME

% ENGINEERING

COMPLETION PRIOR TO

CONSTRUCTION START

% ENGINEERING

COMPLETION PRIOR TO

CONSTRUCTION START

2 % ENGINEERING

COMPLETION PRIOR TO

CONSTRUCTION START

BUSINESS MARKET

CONDITIONS

AMOUNT OF UNPLANNED

OVERTIME

3 BUSINESS MARKET

CONDITIONS

CRAFT LABOUR SKILL BUSINESS MARKET

CONDITIONS

4 CRAFT LABOUR SKILL QUALITY OF FIELD LEVEL

SUPERVISION

QUALITY OF FIELD LEVEL

SUPERVISION

5 COORDINATION WITH

PLANT SHUTDOWN

WEATHER CONDITIONS CRAFT LABOUR SKILL

FACT OR FICTION

Contractors like changes

Contractors make $$$ (gouge) on changes

Productivity impact (?) can be quantified on each change

Contractors make money on the markup in change orders

CHANGE QUOTATION

The price quoted is only for the direct cost of the change. We

reserve the right to seek compensation for the impact on

contract work and / or the cumulative effect of changes

when these costs (if any) can be quantified.

The Great Debate

Owners

Absolutely refuse to

accept

qualification

Contractors

Need to qualify so as to

preserve their right to discuss

productivity

EXTRA WORK

BREAK-EVEN POINT

0

100

200

300

400

500

0 500 1000 1500 2000

O VERHEAD AND FEE

DIRECT COST VALUE OF CHANGE

?

What is being said - What is happening

Owners say

We want to know early

on when there are problems

Contractors say

Owners become defensive and

more rigid with no give and take

-

becomes war zone

HAVING AN HONEST DISPUTE IS NOT

SHAMEFUL;

UNWILLINGNESS TO RESOLVE IT

IS

Success

“Success of a project is directly linked to meeting stakeholder expectations, and failure is linked to communication breakdowns”

Dr. Francis T. Hartman “Don’t Park your Brain Outside”

A Project Management Approach

Monitoring

At each and every coordination job site meeting each and every contractor or subcontractor is asked if they are aware of any current or potential situation that is affecting or might affect their time and or cost to complete their work.

Monitoring

The response to this question must be minuted for each and every contractor / subcontractor.

Email: Getting in Control

When do we use E-mail?

– 79% checked email in the bathroom

– 77% while driving

– 11% while engaged in intimate behaviour

– 41% while their commercial plane was in the air

– 94% during work nights or weekends

– 96% while on vacation

* Taken from “Mobile Messaging Marketing Trends,”

CLAIM

QUANTIFICATION

Opinion from

19 41.30%0 0%

14 30.43%13 28.26%

Totals 46 100%

1.) Make up of Group Do you work for a: Responses

Owner organization – buyer of serviceEngineering organization – design of serviceContractor organization – builderFirm that consults to one or more of the abov...

Inflation

6 13.64%18 40.91%12 27.27%

8 18.18%0 0%

Totals 44 100%

2.) Inflation in Claim What is the general level of

inflation in claims? Responses

10% higher than actual value30% higher than actual value60% higher than actual value100% higher than actual value200% or more than actual value

Inflation Extras

7 15.56%23 51.11%

9 20%6 13.33%0 0%

Totals 45 100%

3.) Inflation in Extras What is the general level of

inflation in extras? Responses

10% higher than actual value30% higher than actual value60% higher than actual value100% higher than actual value200% or more than actual value

Claim Prep

3 6.67%11 24.44%22 48.89%

9 20%Totals 45 100%

4.) Quality of Claim Submission Claim Submissions are

well prepared Responses

AgreeSomewhat AgreeSomewhat DisagreeDisagree

Approach

Provide cause – entitlement-effect;

Maintain credibility;

Amounts should be supportable & auditable; and

No charged language

SOURCES

REVAY WEB PAGE: www.revay.com

AACEI : www.aacei.org

COAA: www.coaa.ab.ca

CII: www.construction-institute.org