Construction Business Best Practices Series Step 7: Pro-Active Project Management Systems

Editor’s Note: This article is the seventh in a series of twelve to lead you toward entrepreneurial excellence by our regular contributor George Hedley, owner of Hedley Construction and Hardhat Presentations. To read part six, click here. To read part eight, click here.

It seems that all of your construction projects must be running smoothly. As you walk from office to office asking your project managers how things are going, their responses include some of the following:

“Everything’s OK.”

“99 percent complete, just a few little things left.”

“I think we’ll finish on time.”

“I’m getting all the signatures tomorrow.”

“The paperwork is almost done.”

“We’re coming in close to budget.”

“Only a few issues left to resolve.”

“No problems I can’t get handled.”

But, are things going as well as you were told? A few days later, you get a call from an angry customer screaming his project is three weeks late. Another is upset he isn’t getting the quality and service for which he contracted. Another client demands you drop everything and fix his problem now. Your accounting manager tells you some project managers are not doing their required paperwork timely and several change orders have not been approved in advance by the owner. An irate subcontractor calls threatening to pull off a job unless they get paid for work completed two months ago. On an important job, the concrete cylinder tests for the footings are not coming up to the design mix requirements. You find out a building inspector has not approved a major installation your foreman changed in the field.

And then, it gets even worse. Your accounts receivable aging report is not good, and payments are being received slower on most projects. Four customers still owe your company final retention payment on projects completed over three months ago. The city will not release your offsite improvement bonds as there are still outstanding items left to complete from over a year ago. There are six outstanding change orders a customer refuses to pay. The month-end job cost reports show the estimated final profit on five projects has slipped again without notice.

No Construction Project Problems?

These problems are symptomatic of companies run by owners who haven’t taken the time to make installing pro-active construction project management systems a priority. These owners struggle and fail as they let project managers continually tell them what they want to hear instead of the truth, avoiding conflict until it’s too late. Typical project management problems are encountered when companies don’t have standardized systems in place that guarantee everyone does business the same way. You want consistent performance and results. You want everyone to do business in a similar manner. You don’t want to rely on your constant reminding, checking and confronting to make sure everything is performed exactly the way you want it done. You want your project managers to be accountable and keep you informed of the real situation on every project.

Even if you have great managers, they will do things differently unless you have written systems in place for all to follow. Six good project managers will do things six different ways, late or not at all. This creates chaos, disorganization, stress and lost profits. Your customers, subcontractors and suppliers can’t deal with a company that doesn’t have consistent business standards and systems in place. Could you imagine doing business with a bank that let each loan officer lend based on their own personal standards? It wouldn’t work. Can you imagine a construction company where each project manager could decide if and when lien releases or signed change orders were required or if the subcontract terms had to be followed? It wouldn’t work either.

Typical re-occurring problems are a result of the company owner not requiring everyone to follow the company project management systems. Most companies have general rules to follow, but don’t have them written down. The owner then tries to keep project managers herded like cats to follow the company rules. But busy owners, over time, let their people slip from following written company procedures, if they even have them. It’s hard to keep people accountable to systems that aren’t written, reviewed, trained, tracked, followed and adhered to.

Construction Project Management Success

Construction companies are project driven. Successful projects lead to profitable growing companies. Owning and managing a successful general contracting company for over twenty-nine years has taught me a simple truth: to build an excellent company, you must get your project management systems installed, pro-active and permanent. Excellent companies consistently hit their overall goals and project management targets in the areas of time, budget, customer satisfaction, quality and safety. They are focused on more than getting the jobs done as efficiently as possible. They focus on being organized and have a systemized pro-active approach to project management, so they can:
 

1.     Consistently measure success
2.     Start and finish projects quickly
3.     Be on time and budget
4.     Meet their commitments
5.     Keep customers happy
6.     Create a great place to work
7.     Build teamwork
8.     Identify problems early
9.     Train and improve people
10.     Maximize and allocate resources
11.     Grow
12.     Make above-average profits

What are Pro-Active Construction Project Management Systems?

Pro-active project management systems are repeatable and standardized written organizational methods, procedures and guidelines that achieve project goals and optimize resources of time, energy, money, people, equipment and materials within a specific deadline. Project management is composed of several different types of activities such as planning, assessing risk, estimating resources, organizing work, assigning tasks, directing activities, monitoring, tracking, reporting progress and finally analyzing results. Pro-active project management systems control all project activities and deliver the desired and targeted results on time and on budget, per the contracted scope of work, while minimizing risk.

Four Stages of “Pro-Active” Construction Project Management Systems

1. Project goals and objectives

Consistent performance and success is more than getting organized and training project managers to do business the same way. Most projects are started without a plan and with hope that something good will happen. Successful projects start with clear objectives and measurable results to achieve. Just trying to do your best or trying to bring it in on budget and schedule will not guarantee the bottom-line results you want at the completion of every job. Without clear targets, you can’t make project managers accountable or responsible for their results. Before every project, sit down with the project team and lay out the goals and objectives, including:

A. Overall project objectives

B. Budget and financial
 

1.     Job cost
2.     Productivity
3.     Profit

C. Time and schedule
 

1.     Start
2.     Milestones
3.     Completion
4.     Punch-list

D. Quality

E. Service

F. Safety

G. Customer satisfaction

H. Training

2. Construction Project planning

Successful projects have written plans to insure they stay on track and hit their goals. You wouldn’t start a construction project without a detailed set of working drawings or building plans. Project management is no different. There are certain steps every project must follow that guarantee on-time and on-budget completion and success. These steps must be identified and perfected as part of your project management system. These systems can include pre-project start-up meetings, procurement procedures, change order systems and shop drawing standards.

The objective should be more than keeping the job moving. The intent is to hit the goals and project milestones. Systems will make this happen. Project managers must breakdown the project into small incremental steps that will insure accomplishing the end results. By creating and following a project plan, the manager can assign tasks and hold people accountable. In order to draft a successful project plan, include the following:

A. Project specifications

B. Project requirements

C. Materials

D. Resources

E. Equipment

F. Labor

G. Cash-flow

H. Tasks

I. Schedule

J. Accountability

K. Responsibility

3. Project Production and Implementation

The next step is to build the project. Ongoing organizational systems will keep your project headed and tracking toward the desired end result. Each project team member must know what is expected and what systems must be followed before starting work. By establishing clear measurements and procedures for project implementation, team members can get started on track and monitored on an ongoing basis as to their progress. Consider which project management systems will guarantee that every project will meet its goals:

A. Project control systems

B. Procurement systems

C. Installation systems

D. Tracking systems

E. Cost control systems

F. Quality control systems

G. Productivity systems

H. Training systems

I. Safety systems

J. Customer systems

4.  Monitoring and Evaluating Construction Projects

As you build each project, constant monitoring becomes easy for the owner or upper management when systems are in place and being followed. When project management systems are installed and used effectively, monthly evaluation meetings become a simple check of what has been done properly and what needs attention. When systems are used, problems become quick to identify, hard to overlook or hide and can be addressed before it’s too late.

Project Management Systems are “Pro-Active”

A key success factor to owning and managing an organized and systemized company is to select the systems that will insure the success of your operation. To create pro-active project management systems, start by selecting the top ten systems and procedures you feel, if implemented and followed, will guarantee successful projects 90 percent of the time. Then you must be “pro-active” and stay focused on these systems as “musts” for your managers to implement, maintain, track and perform. It will be your job to monitor these priority systems and force your project management team to adhere to these without exception. For example, when ordering something with a credit card, they always insist on getting your expiration date, no exceptions.

To create and draft project management systems, please refer to Step 3 in my Entrepreneurial Excellence series entitled: Replace Yourself with Systems or visit my website to obtain a copy of my “Construction Field & Project Management Systems That Work” program. Review the following list of project management systems, and select the top ten you feel are a “must” in your organization:

__ On-going safety program

__ On-going training program

__ Change order management

__ Procurement procedures

__ General contract checklist

__ Subcontract checklists

__ Purchase order checklist

__ Required approval list

__ Insurance requirements

__ Submittal and shop drawing steps

__ Project scheduling and monitoring

__ Request for information systems

__ Scope of work standards

__ Specification review

__ Customer service standards

__ Customer satisfaction review

__ Job cost reporting and review

__ Progress payment procedures

__ Project paperwork standards

__ Contract documentation

__ Contract administration

__ Contract management

__ Project communication

__ Project management meetings

Construction Project Success System

At Hedley Construction, we selected, installed and currently monitor fifteen project management systems on an ongoing basis. The overall system that holds it all together is our monthly project management meeting. In this mandatory and valuable meeting held monthly, we review the progress of each project under construction with the project team. Each project team includes the project manager, project engineer, superintendent, foreman, contract administrator and project bookkeeper. Each project management meeting takes about one hour to fully review. We review and check that each system is being followed and if the project is on track and meeting its goals, objectives and milestone targets. At each project management meeting we review and monitor the following for every project under construction:
 

1.     Project goals targets
2.     Jobsite photos
3.     Updated schedule
4.     Proposed change order log
5.     Executed change order log
6.     Subcontract tracking log
7.     Accounts receivables
8.     Accounts payables
9.     Shop drawing and submittal log
10.     Job cost update
11.     Budget variance report

Construction Company Success System

In addition to the monthly project management meetings, we hold an overall company success meeting to review the progress of the overall company and projects in progress. At this review we focus on hitting milestone targets for every project. Our review includes the following agenda items for the overall company success factors:
 

1.     Current project milestone tracking
2.     Sales and proposals
3.     Estimates and bids
4.     Pre-construction
5.     Procurement
6.     Project start-up
7.     Construction
8.     Completion
9.     Payment
10.     Overall strategy

Systems That Work

The following are a few of the top priority project management systems I recommend to keep your projects on track:

Project Start-Up System

1.     Review bid/estimate/proposal
2.     Read complete contract
3.     Review complete plans
4.     Review complete specifications
5.     Visit jobsite
6.     Project goals and objectives
7.     Set-up project master budget
8.     Complete project checklist:
9.         Insurance requirements
10.         Bonding requirements
11.         Billing and payment requirements
12.         Cash-flow needs
13.         Discounts available
14.         Shop drawings and submittals
15.         Schedule and deadlines
16.         Long lead items
17.         Special tools and equipment
18.         Meetings
19.         Signature of authority designated
20.         City and permit requirements
21.         Site accessibility
22.         Loading and unloading needs
23.         Project close-out requirements

9.        Execute contract
 

Procurement System

1.     Always award to the lowest responsible bidder

Before awarding contracts, review:

1.     Bid scope of work
2.     References
3.     Financial capacity
4.     Ability to meet schedule
5.     Adequate manpower
6.     Similar project experience
7.     Quality workmanship
8.     Professional
9.     Training program
10.     Safety program

 1.   Review contract terms:

1.         Final scope of work
2.         Schedule
3.         Delay clauses
4.         Mandatory meetings
5.         Clean-up and punch-list
6.         Supervision
7.         Change order procedures
8.         Notice requirements
9.         Payment procedures

 2.   Execute all subcontracts prior to starting job

 

Shop Drawing and Submittal System

1.     Create list of required submittals
2.     Put submittal requirements in subcontract
3.     Put close-out requirements in subcontract
4.     Submit for approval within thirty to forty-five days
5.     Get alternates and substitutions in writing

Change Order System

1.     Never give it away
2.     Be firm but fair
3.     Charge the right price
4.     Never do “extra” work without understanding:
5.         Is the work extra?
6.         How is it to be charged?
7.         Who pays and when?
8.         Is there money available to pay?
9.         Who is authorized to approve?

 5.      Always request additional time required
 6.      Give proper prior notice per contract
 7.      If it’s not in writing, it didn’t happen!

You can get your construction business to work without your constant attention and monitoring by creating, installing and using project management systems. The choice is yours to build an excellent company that is organized or not. The results you get are a direct result of your priorities and how you run and manage your entrepreneurial company. To make more money and have more fun with less stress, get organized! Install systems to produce consistent results and get everyone in your company doing business the same way.

Construction Business Owner, July 2006