In light of recent events, we have been fielding numerous calls and emails this week by customers and colleagues involved in commercial construction – and all seem to be seeking similar guidance – How to best prepare to effectively manage delays and risks through this current situation and afterwards
Being that many others are likely seeking similar guidance or reassurance on their plan of attack, I figured I would write about it in hopes that I could help people start wrapping their head around this. I have thought about the current restrictions, quarantine directives, and disruptions to everyday life and, putting myself in the shoes of both the contractor and the owner, I have prepared a “near term” action plan to minimize risk exposure to delays, impacts and overruns that I believe makes sense for everyone.
Before I get started, I am not thinking of this as an industry crippling situation – rather I am looking at it as more of a hiccup, a situation that will impact some projects but, probably not all. I do believe that most large projects will be impacted because of supply chain issues and projects in major cities will be impacted due to shutdowns, restarts, and resource management issues. I also predict that there will be a swell of construction activity once the dust settles which may put short term strains on the industry. But, I think, for the most part the industry will self-correct in a period of 2-3 months and projects will be off and running again. If China is any indication of how quickly a rebound can and will occur, then I think we will realize that the impacts aren’t as severe as some people are predicting. Of course, this is completely dependent on how long this virus drags out, whether or not there is a large population of asymptomatic people walking around and how serious the construction project shutdown and quarantine situations get.
I also think it is important to recognize that many, if not all, construction stakeholders (GC, Owners, Trade Contractors, and Insurance Companies) will likely suffer damages in multiple ways – not just on their construction projects –unique to each company. I definitely foresee some companies will suffer more than others, which right now is a bit of crapshoot, and there will likely be a resultant cash crunch industry-wide for some time. Because of all this, it is a very important time for organizations to begin thinking about strengthening existing project controls, project monitoring, schedule analyses, and dispute avoidance processes - particularly stakeholders with large projects in major cities. The reason being, everything is happening all at once. I firmly believe if there was ever a time to invest in things like schedule-based project controls and risk management, the time is now.
My expertise is in construction process improvement, risk management and dispute avoidance is pretty aligned with the needs of the industry, so I have put together a short term action plan that I think most project controls professionals, operations, project executives or directors of construction should pull together in the next couple weeks. It is as follows:
- Identify your medium to high risk projects that are susceptible to impacts and delays related to the recent crisis - The reality is that a lot of projects will likely be impacted in different ways, while others will not be impacted at all. Identifying which ones are high risk versus low risk is time well spent. We need to be smart with our time and resources and therefore shouldn’t spend much time analyzing low risk projects. Qualified resources to analyze and oversee delays and impacts on projects will be scarce for the foreseeable future and will put a strain on your project controls, scheduling and PM teams. It is therefore advantageous to remove the noise from the equation and in this case, low risk projects will be noise.
- Study the contracts for each project and document relevant delay and impact related contract clauses - Money will be lost in the next couple of months and it will be coming out of the pockets of the contractors initially, likely on multiple projects. This could result in cash management issues that may result in contractor default if not handled appropriately. The best way to avoid this is to start studying the contracts (sooner rather than later) to better understand how to handle the delay and impact costs that result due to the current crisis. Seek out clauses related to Time Extensions, Delays, Disputes, and Early Termination/Default. Also, get a handle on whether or not this sort of thing is covered in the “Force Majeure” clause and what that means to your overall cost risk.
- Assess project statuses as of the end of Feb 2020 for all high and medium risk projects – This is so important because itis vital to get an understanding of the status of the job at the time of the impact because this will serve as the baseline of all delay and disruption analyses going forward. In order to do this right, I suggest forming a task force comprised of your best schedulers / project analysts to status the jobs and analyze them going forward. Items that need to be assessed to ensure that the schedule is set up for success going forward are schedule progress, quality and feasibility.
- Develop an overall delay monitoring and analysis plan for all projects identified – How well delays are documented, analyzed and understood in the incoming months will be highly correlated to the level of success achieved on each respective project from both a cost and schedule standpoint. In addition, these things are highly correlated to the strength of relationships with your construction counterparts involved in these projects. It is time to step it up when it comes to schedule delay and impact management and analysis.
If you would like to download a more comprehensive document that gives more information regarding the action plan outlined above, please complete the information below.
The purpose of the above action plan is to set all parties up for success towards the effective management through the potential delays, impacts and cash flow challenges that will likely happen in the near future. By focusing on the highest risk projects, you are essentially allocating your resources where it will be most valuable.
SmartPM™ is committed to serving and supporting the construction industry by simplifying schedule information and analysis to a level that all parties can understand in an automated fashion. SmartPM™ eliminates confusion regarding the project schedule and performance, resulting in enhanced team collaboration and reduced monetary claims at the end of each project.
For additional support here, please give us a call at SmartPM or reach out to me directly via email at firstname.lastname@example.org. We are here to help keep everyone on the same page and working together through this difficult time.