By Don Wallis.
Field operations cannot succeed without competent office support.
According to Elizabeth Sanborn, chief operating officer at Independent Project Analysis, Inc., “about two-thirds of [construction] projects over $1 billion fail compared to smaller projects’ 40% failure rate.’’
These astonishing statistics are included in an article in Engineering News-Record co-authored by Debra K. Rubin, Alisa Zevin, Janice L. Tuchman, and Scott Blair.
Projects managed by the largest, most sophisticated construction, architecture, and engineering companies in the world fail 66% of the time. The failure rate for the construction industry as a whole approaches 30 to 40 %.
The main reason for these failures, according to the ENR report, is not shoddy workmanship. It’s inaccurate estimating, imprecise risk analysis, and poor coordination between the design professionals, the owner, the general contractor, and subcontractors and suppliers.
Everyone in construction knows that attention to the details of project management is essential. All construction managers know that profitability is best ensured by sharp pencils in the negotiating process prior breaking ground.
Modern estimating and project programs make it possible to control and coordinate every facet of the construction process. Real-time communication between companies in any part of the word is now available.
Why then do companies in our industry continue to lose money on their projects? There are several reasons.
Many projects are still awarded to the lowest bidder. This is often the company that overlooked a cost item in their bid.
Pricing information provided by owners to bidders is sometimes incomplete. This is especially true for projects where state-of-the-art technology is being tested for the first time.
And there are the classic cost overruns due to weather or unexpected increases in the cost of material.
Contingency funding is often insufficient.
“Stephan Cabano, president of Pathfinder LLC, stressed the importance for the owner to understand clearly a project’s scope and lock it down before the project is fully funded.” Contractors should do the same before signing contracts.
Economies Are ‘Fragile,’ but Firms Push Robust Strategies, Debra K. Rubin, Alisa Zevin, Janice L. Tuchman, Scott Blair, Engineering News-Record, Nov. 6/13, 2017.
Don Wallis has more than 40 years experience in residential and commercial construction, and land development. He also has a law degree and currently teaches Environmental Law at Santa Fe Community College.