First, a disclaimer: I am not an economist or a fortune-teller. I am just a Project Manager with over 35 years of
experience planning and managing capital projects. In that time I’ve witnessed a lot of ups and downs in the construction industry, but I have never seen the convergence of circumstances that are making this one of the most challenging markets in living memory for project owners. Capital is starting to flow, demand for goods and services is way up while at the same time the supply of goods and services is way down. This is naturally creating project crises in the form of cost escalation and time delays. So what is a project owner to do when they need to bring a mission-critical project online as quickly as possible?
Blame it on COVID?
The pandemic, (which, as of this writing, is still raging in parts of the world), has certainly created supply chain disruptions from which it may take years to recover. So yes, in terms of materials, the law of supply and demand will continue to wreak havoc on project budgets and schedules for the foreseeable future. But long before the current pandemic there were supply issues in the US related to the availability of labor. An aging labor workforce and fewer young people entering the trades has been a trend for decades and it only seems to be getting worse. But you know what? For project owners none of this really matters. Why? Because the average project owner has no control over the market factors of availability of material and labor.
Focus on the Elements You CAN control
As the economy opens up and recovery money begins to flow, demand for goods and services is soaring. Our project management workload, for example, more than doubled since the beginning of the new year. Some of our clients are reviving projects that were conceived three years ago and cost-estimated two years ago, hoping that two year-old budgets and schedules will hold up. (Spoiler alert: they won’t.) It may be interesting and intellectually stimulating to speculate about the causes of this current crisis, but ruminating over factors that are out of your control won’t get your project built. Instead, we are advising our clients to focus on the factors that they CAN control. Here are just a few:
Assemble your complete project team as early in the process as possible
Missing pieces of your team can result in errant assumptions and costly delays. A complete team of competent professionals creates a synergy that can solve challenges that no one individual would be capable of.
Have your funding squared-away
It is not unusual for projects to have several sources of funding. And we all know that each funder operates with their own set of rules. Sometimes those rules are at odds with emerging market conditions. Get all your funders in the same room at the same time with your project principals and shine a bright light on the realities of your project challenges. Engage your funders in becoming part of the solution to these challenges and stake out common ground and realistic expectations. (Yes, easier said than done.)
Be prepared to adjust your earlier budget upward.
Contractors are faced with the highest demand for their services that they have seen in years. They will understandably be drawn to the projects with secure funding in place. Make sure your project is among them.
Streamline your procurement processes
Carefully review your purchasing and procurement policies. They are in place to protect your organization so you need to be diligent about this. But be on the lookout for opportunities to streamline. Are there layers or levels of approval that can be eliminated or adjusted? Can dollar value limits be adjusted to reflect market conditions and still protect your interests? Are there prohibitions on certain project delivery methods that can be reexamined and modified for the benefit of budget and schedule?
Be disciplined about your decision-making process
Many project delays are caused by the Owner failing to meet critical decision deadlines. Work with your project team to establish clear, realistic, and documented decision milestones and stick to them.
None of us will ever be able to control market conditions, but by focusing on the details that you can control you will surely increase your chances of a successful project. May the odds be ever in your favor.
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Copyright (c) Tom Peterson / PCI