Only 2.5% of construction companies finish projects on time and on budget, according to a recent FMI study, “Why Project Management Still Fails.”
All projects deal with changes in scope, vendor and schedule issues, incorrect information, and environmental roadblocks. And all companies have dedicated, proactive project managers who sacrifice sleep and sanity (you know who you are) to make impossible requirements happen.
So what do the contractors who repeatedly hit their goals do differently?
They handle chaos in a systematic way.
Sometimes even the most hard-working, sleep-deprived project managers aren’t able to pull off a miracle. And successful firms don’t count on them to do it. Instead, they create disciplined, repeatable processes that anticipate and deal with the inevitable problems in a systematic way.
Here are five things top performing contractors do differently that any team can do.
1. Involve project leaders before the project starts.
Contractors who involve project managers during the estimating phase hit their profit margin targets 78% of the time, versus 55% when PMs are excluded or looped in later, according to FMI’s recent study.
From the same study: Companies that require field leaders to sign off before the construction project is mobilized finish on or ahead of schedule 76% of the time, compared to 58% for companies to mobilize without it.
“Contractors who involve PMs during estimating hit their profit margin targets 78% of the time, versus 55% when PMs are looped in later.”
Why is PM leadership involvement so critical early on?
High performers connect estimating and preconstruction, project management, and field execution early on. It’s not enough to just throw an estimate over the fence and hope that the work lines up with the assumptions, because there’s a good chance it won’t.
When project data is consistent and connected between teams and processes, it’s easy to tell when estimates or information are wrong. It’s also easier to take accountability and raise the alarm.
2. Establish a “company process” and actually use it
Almost 90% of contractors in the FMI study said they have a defined project management playbook … but only 24% apply it consistently.
A well-defined process is only as good as the people using it.
Before the project starts, establish and document the following:
- Shared definitions and approach to cost management
Teams need consistent ways to categorize and track budgets and actuals, commitments, changes, and forecasts between teams and construction phases. Without a consistent, shared approach, PMs end up with information that is defined differently, gathered using different timeframes, etc.
- Clear approval rules and accountability
Before the project starts, identify who reviews, approves, and escalates different types of decisions. Define what information is required for approval before each phase gate. Your playbook should make it clear what the next step, and who’s responsible, instead of relying on assumptions or tribal knowledge.
- Consistent reporting
Decide what project leaders are expected to report, how often they report it, and how results are defined. You don’t need exactly the same report for every project, but you do need to be able to understand performance across jobs without deciphering how each individual PM works.
- Regular training and reinforcement
Check regularly to make sure that your actual processes follow the playbook. Without regular checks and follow-up, official processes that aren’t enforced will probably not be followed.
The FMI report recommends measuring compliance against stated expectations. Did “required” reviews actually happen every time? Did changes follow the defined workflow? Were forecasts updated on schedule? There’s only one way to know.
Finally, allow enough flexibility for project differences.
“Standardize” doesn’t mean “identical.” Contract types; suppliers, vendors, and subs; and delivery methods can change your approach. However, that defined approach should be able to flex without making every PM create their own process from scratch every time.
3. Treat change orders like proper mini projects
Contractors that manage change orders consistently meet or exceed schedules 80% of the time, according to Part 2 of the same FMI report. Disciplined specialty contractors meet or exceed project profit margin targets 87% of the time.
How?
Highly successful firms treat changes as mini projects. They capture, analyze, and communicate the impact of the CO instead of letting them disappear in an email chain or scrap of paper in a PM’s truck.
Why?
At best, change orders can add profit to your contract value with additional labor and supplies. At worst, they can erode profit margin by leaving you to absorb the extra costs of the change because it wasn’t properly documented or approved.
4. Focus on monthly forecasts instead of reporting
Of course, monthly reporting is important, too; but FMI found that contractors with the most rigorous forecasting practices hit profit expectations 92% of the time. That’s because successful firms review quantity-based, cost-to-complete forecasts every month, for every job.
Month-end reporting is also necessary, but it only tells you what happened. Forecasts tell you whether you can still do something about it.
“Before, this process would take me half a day of calling people and wrangling numbers.
“Now, I get an automatic report every month instead of clicking through every project and calling people to get numbers. It takes me about 30 minutes, and it’s all in one spot.” ”
Take Walters, Inc., a structural steel fabrication and construction company based in Ontario, Canada. Before they onboarded Kahua, they tracked RFIs, change orders, progress and costs through spreadsheets and project folders.
“Finance would come to me at the end of the month and say, ‘These numbers don’t make any sense,” said Ed Lacroix, Vice President of Projects.
“They were chasing information constantly. We’d have to work through it together with our project managers just to get something realistic into the system.”
After centralizing that data in the Kahua platform, their month-end data gathering became eight times faster. They replaced 20+ files to review per project with one single location, and gained earlier visibility into cost, risk, and change issues.
“Before this process would take me half a day of calling people and wrangling numbers,” Lacroix said. “Now, I get an automatic report every month instead of clicking through every project and calling people to get numbers. It takes me about 30 minutes, and it’s all in one spot.”
Walters’ experience isn’t unique. FMI found that 61% of contractors conduct rigorous post-job reviews rarely, if ever. The ability to easily forecast and review monthly reports puts contractors in the sweet spot of spotting the issues and being able to act on them.
High performers don’t let hard-earned project knowledge disappear when the job closes.
It’s not sexy, but planning, review, and discipline outperform one-off heroics almost every time.
Of course, technology on its own can’t create operational discipline.
But the right construction project management system can make discipline so much easier. Instead of asking project managers to do manual reconciliation and one-off processes—establish consistent workflows and project data.