The following early warning signs or “red flags” are common to construction projects. They are delays and schedule change, design difficulties, payment irregularities, scope changes, unsatisfactory quality of work, slow completion of work, owner actions, performance of project personnel, lack of teamwork, disputes and claims.
Each of the above early warning signs will be addressed, and examples will be provided of the common tools used to indicate potential difficulties. Many forms of available project documentation will be illustrated for their use in helping to recognize the early symptoms of problems. Effective contract provisions will also be highlighted to demonstrate some the most beneficial ways to control and document the underlying issues that cause difficulties on projects.
DELAYS AND SCHEDULE CHANGE
A. Schedule Development
Starting with the initially developed schedule, the contractor’s plan is a direct reflection of the contractor’s understanding of the project scope of work. The schedule must also represent the anticipated means and methods to be used in constructing the project. Schedule reviews should be made for completeness, reasonableness of duration and logic, inclusion of contractual and other constraints, consistency with the contract requirements, and overall compliance with the contract requirements. Depending on the nature of the job, consideration also needs to be given to appropriate level of detail, resource planning, and crew sequencing. Common contracting requirements include the submission of the schedule in electronic format, required level of schedule detail, and utilization of resources such as workforce and cost. Lack of a good initial schedule may raise concerns about the contractor’s plan and general understanding of the project.
Careful review of schedule updates can reveal significant changes. Common types of schedule changes include revisions in logic, duration, resources, addition and deletion of activities and constraint changes. Commercially available software such as Claimdigger or Schedule Analyzer Pro can be used to produce a computer-generated comparison of two different schedules. Many contracts require monthly schedule updates that include a written narrative report and a specific listing of schedule changes. The nature and magnitude of schedule change is an area of potential concern.
B. Progress Monitoring
As work on the project is performed, it is possible to track the overall trending of progress. Typical comparisons are commonly made to compare a schedule update with a baseline in order to identify progress and slippage as well as change in float. Schedule status comparisons commonly reflect contractual dates such as substantial and final completion dates, as well as other critical milestones such as structural completion, building enclosure, key testing or system completions, and any intermediate occupancy requirements.
Tracking of schedule progress over time is often overlooked in the management of projects. Consideration should be given to the accumulation of historical schedule information in order to monitor changes in schedule status and slippage of the project and specific milestones within the project. One such method of graphically trending the project’s schedule progress is represented in figure 1 . Use of this graphic will provide a simple visual trending of the schedule progress and enable quick identification of schedule change or delay. This technique has also been successfully used to compare relative schedule status of multiple projects within a program.
Additionally, efforts need to be made to closely monitor critical project resources such as labor. Data contained in daily field reports can be summarized and graphs can be produced to show actual crew size compared to planned levels. In a similar manner, critical deliveries of equipment and materials need to be closely tracked with data accumulated for comparison to the schedule. Efforts should be made to summarize and graphically portray the data to provide a visual summary of performance. For example, the delivery of large bore pipe may be critical for a major process installation-resulting in a need to closely track the fabrication and delivery status of pipe spools, which can then be compared against the schedule. Status of the piping work can then be updated on a regular basis during a critical phase of work.
A. Performance of the Architect/Engineer
The quality of the initial design as well as design support during construction can play a vital role in the success of a project. With changing forms of contract delivery systems such as design/build and fast track construction, there is likely to be an increased emphasis on the performance of the design professional. There is also a trend to shift some of the design responsibility to the contractor using performance type specification and related design criteria,,thus forcing the contractor to undertake some of the design tasks. The overall quality of the design package can often be determined in the bidding stage of a project-as reflected in bid clarifications and contract addendum.
The project requirements for trade coordination need to be closely monitored. Specifications often call for the general contractor to facilitate a formal coordination process, with different trades overlaying their installations on a composite drawing. Tracking of the coordination activities, by individual system or area, will enable early detection of delays or breakdowns in the coordination process. The lack of adequate coordination is often identified in field conflicts between the trades.
B. Design Support During Construction
The architect/engineer normally has critical involvement during the construction phase of a project. It is important to maintain detailed logs to track the activity status of work, which requires approval, review comments and other forms of input. Commercially available software such as Expedition or Prolog Manager can be utilized to accumulate data related to the following types of design interface activities:
- Shop drawing submittals;
- Coordination drawing submittals;
- Requests for information; and
- Change requests.
Information contained in the above logs or databases can be summarized in tabular report forms and sorted in various ways (by days outstanding, by priority, by trade, etc.). Similarly, graphic summaries can be produced like the illustration shown in figure 2, which is a summary of a project’s requests for information highlighting the periods and trending of response backlog and the architect/engineer’s response time. This form of graphic can be very helpful in the evaluation of trending the design performance on a project or within an individual discipline of work.
A. Contractor and Designer Pay Requests
Initial submittals should be prepared with adequate detail to separate individual components of work, isolate major material and equipment deliveries, and include breakdowns by work area to facilitate the payment application process. Review of a detailed, itemized pay request will enable a review for accuracy, checking for potential “front-end loading” and providing insurance of adequate reserves for deliverables such as as-built drawing, operating manuals, and testing activities. Having adequate detail will also simplify the payment review and approval process.
The monitoring of ongoing progress payments may detect irregularities in the contractor’s or designer’s pay applications. Examples of detected problems may include requests grossly exceeding status, lack of supporting subcontractor documentation, and insufficient waiver documentation.
Review of the overall rate of payments or cash flow can be an effective too] of tracking overall progress. Figure 3 depicts a cash flow chart with cumulative payment requests. Using a cost-loaded schedule, this actual payment data can simply be compared against a planned rate. Similar “progress curves” have been utilized to compare planned and actual percent completion based on an established method of computing the completion percentages, commonly tied to labor activities.
B. Other Payment and Cash Flow Concerns
During the execution of the project, other activities can be monitored to identify other signs of potential financial difficulties. The owner and others monitoring a project do not always readily detect untimely payment to subcontractors, suppliers, and labor unions. Suppliers and labor union representatives may make inquiries to the owner. Contractors and subcontractors needing increased crew sizes may make continued refusals to add personnel-thus raising concern regarding cash flow and profitability. Finally, the filing of mechanic’s liens, even on other projects being handled by a contractor, will raise additional financial concern.
A. Processing Scope Changes
The overall tracking of the initiation, pricing, approval, and release of change work can be monitored using a change log or database. In many cases, contractors initiate a system of tracking potential changes by separate documentation and cost segregation of the work related to an issue. Logs of the status of potential changes can be monitored by tracing communication with the owner, pricing submittal, approval, schedule impact, and change order status. Methods to be utilized for pricing of change work are often dictated by the contract. The owner can normally specify the required level of details that is needed to support a change request -with an anticipated breakdown of labor, material, equipment, and subcontractor costs. Contractor resistance or refusal to provide a reasonable level of detail and support documentation can raise concerns regarding the change pricing.
The overall process of pricing and implementing changes into the scope of work needs to be closely monitored. Timely incorporation of changes will require close subcontractor coordination, distribution of revised working drawings, and scheduling of the work. Failure to disseminate required change information to field and subcontractor personnel in a timely manner can result in significant delays, inefficiencies, and potential rework. Also of importance is the need to incorporate changes into the project schedule to accurately reflect the timing of such work and communicate the plans of the change work to all affected trades.
B. Other Change Considerations
Awareness of the general handling of changes also needs to focus on the tone and nature of correspondence and other communication related to the changes. A pricing submittal needs to be closely reviewed for completeness, include the schedule impact or time extension request, as well as exclusions or exculpatory language-particularly related to indirect or consequential costs. The “tone” of communications related to possible change impacts, notices of potential change or claims, and a contractor’s general attitude regarding change pricing will often give a clear indication of potential downstream disputes or claims.
UNSATISFACTORY QUALITY OF WORK
A. Monitoring Quality of Installations
Inspection of completed installations commonly results in the reporting of unacceptable work through the use of a noncompliance report. The tracking of information contained in these reports is normally recorded in a database or spreadsheet format-with data related to date issued, date resolved, trade involved, and other pertinent information. Accumulation of this data can be summarized to show the cumulative backlog of unresolved noncompliances as well as the average aging of issues (from identification to resolution). Figure 4 illustrates the graphic summary of the status of a project’s noncompliance backlog. Periods of slow progress in resolving noncompliance or the general lack of attention to such matters can be demonstrated using this type of graph.
Disagreements over the interpretation of noncompliance issues often result in contractor protests. In addition to the tracking of such protests, efforts can be made to identify and quantify the amount of rework that could result from such directed efforts. Contractors often prepare daily time and material sheets for this type of rework, and submit documentation to the owner for verification of time.
B. Difficulties Resolving Deficiencies
Failure of the contractor to address noncompliance issues in a timely manner may be a direct indication of a pending dispute. Rather than respond with a notice of dispute regarding a non– compliance, contractors often remain silent, and tend to ignore such problems, or attempt to pass on the problem to other subcontractors and suppliers. noncompliance needs a timely response, management attention, and timely resolution to avoid being a distraction to ongoing work. A contractor’s refusal to perform corrective work will normally draw immediate attention from the project team. Such actions may be reflective of the contractor’s uncooperative attitude, disregard for contract requirements, and lack of control of its labor force and subcontractors. In some cases, a stop work order may be issued ordering the contractor to stop installations due to work being performed contrary to the contract requirements.
The lack of attention to resolving quality of work concerns such as noncompliance issues may result in withholdings taken from a contractor’s pay request. In extreme situations, the contract conditions often allow for the issuance of a cure notice-giving a contractor a specified period of time to remedy a problem and then allow the owner to subsequently correct if not adequately addressed by the contractor. Many of these types of quality issues result in disputed claim items.
SLOW COMPLETION OF WORK
A. Closeout Process
Construction completion and the acceptance of the job need to be consistent with a contractor’s planned work completion, testing and commissioning, and punch list activities. All too often, there are difficulties experienced resulting in delays and disputes arising from the slow resolution of such work. For each area or system included in a project, it is beneficial to have a tracking system to monitor turnovers and the resolution of outstanding work. Such tracking logs include individual components of inspection such as above-ceiling inspections, test completions, initial punchlist, submittal of required documentation (operating manuals, test results, warranties, as-built drawings), and final turnovers.
Implementation of an orderly commissioning process normally includes a method of close monitoring of outstanding work items and identification of items needing review from a technical or design standpoint. Effective punchlist documents are formatted in a manner to allow a contractor to identify responsible subcontractor tasks and provide a means of communicating identified work to construction forces.
Specific attention should be given to the processing of warranty documentation as required by the contract specifications, for items such as roofing and building equipment. Communication of expected submittal requirements is normally established well before closeout begins to allow for advance preparation of documentation. Many projects experience difficulties during the final stages due to untimely submittal of testing results and lagging disputes over the interpretation of punch list work. The closeout process needs to be closely monitored to ensure that an orderly turnover is accomplished.
B. Documentation of Work Status
As completion tasks are finished, field records can be used to document and track the status of completed and open work tasks. Standardized forms are commonly used for the documentation of inspections, noncompliance, punch lists, testing, and turnovers. Use of consistent forms will simplify the documentation process and allow for easier status tracking.
It is also important to establish clearly defined contract requirements. Review and approval of schedules should address the detailed closeout requirements. Completion activities contained in schedules need to be consistent with the contractual definitions of substantial and final completion, with a clear understanding of what exceptions will be allowed for a project.
A. Changes in Work Scope
The timing and magnitude of owner-initiated changes in work scope can have a major impact on the project cost and schedule. As distinguished from changes resulting from design errors and omissions, an owner may introduce changes that need to follow a prescribed change order process. Close monitoring of the change process will facilitate the timely submittal and approval of change requests. Tracking logs and meeting minutes can be established to monitor the change order status and reviewed on a frequent basis. Such reviews will identify priority action items and the party responsible for the assigned tasks.
Depending on the specific contract requirements, owners often have certain duties and responsibilities. Owner actions related to obtaining permits, providing of owner-furnished equipment, changing of turnover priorities, providing site access, inspections and approvals of work can directly influence the overall schedule and work efficiency. Close tracking of the status of owner responsibilities can be monitored to ensure that critical issues are addressed in a timely fashion.
B. Owner Approvals
A key component of owner involvement in the construction process involves approvals. Contract provisions normally define authorization responsibilities. The timing of owner approvals is vital to ensure the timely processing of payment requests, approval of change requests, and acceptance of work. It is suggested that the approval processes be carefully reviewed at the start of a project to provide a clear understanding of project requirements as well as the duties and expectations of the parties involved.
Certain project controls can be used in the tracking of owner approval activities, such as change order logs and payment requests. With proper documentation and standard approval forms, the approval process can be streamlined to minimize potential processing delays.
PERFORMANCE OF PROJECT PERSONNEL
A. Work Performance
Monitoring of individual and crew work performance can assist in the identification of areas of work encountering difficulties and potential labor inefficiencies. Construction accounting systems are commonly capable of producing labor productivity reports, assuming quantity data are recorded. Graphic trending of productivity rates over time within different types of work activities, work areas, and time periods can provide an extremely helpful tool to monitor work performance.
There are a series of less tangible issues that also need to be monitored related to personnel matters. The longevity of the work force and management should be reviewed periodically to identify unusual levels of turnover. The handling of personnel can also be evaluated related to hiring and termination practices as well as recognition and incentives for high levels of performance and safety. Much can be learned about a project reflected in the general morale, personal attitude, and pride in workmanship taken by the labor force.
B. Management Involvement
The quality and level of management involvement in a project can have a direct impact on a project. Many contracts now allow the owner to have approval responsibility for proposed changes in key personnel positions. Management staffing plans should be clearly understood and communicated to the owner prior to the start of a project. Handling of proposed personnel changes needs to be carefully reviewed by both contractor and owner management.
Partnering has been successfully used on many construction projects. Direct management involvement and commitment to participate in a partnering process has been demonstrated as a vital component of a program’s success. Similarly, continued management involvement is also vital to ensure that a project is being properly executed. Lack of management attention to a project will normally raise serious concerns to an owner.
LACK OF TEAMWORK
A. Duties and Responsibilities of Team Members
Individuals assigned to a given construction project normally have specific defined responsibilities. Cooperation between team members will assist in the effective management of schedule, cost, and quality on a project. Depending on the team organization, a blending of field staff, project management, and office personnel is commonly needed to develop a strong and successful team. The lack of good cooperation and clear communication between team members can result in difficulties executing the project and fulfilling individual job responsibilities.
Clarity in the designation of leadership roles is vital to the success of a team operation. Successful execution of a construction project requires advance planning, establishing goals and responsibilities, and monitoring the team’s performance. Effective teamwork will need both leadership and strong team interaction, commonly handled through regular project meetings and accountability for specific work tasks and resolution of problems.
Effective communication will normally improve through proper leadership, training of personnel, and use of project management tools. Beyond the regular project meetings, the team should strive to share project data with the clear identification of priorities and problems-using some form of exception reporting that summarizes critical items needing attention. Project websites are now being used to allow team members access to many of the schedule, cost and quality records, and tracking devices used on a project. Progress reports, meeting minutes, and priority work lists are effective documents used to communicate between team members, assuming such documents are issued at an appropriate frequency and distributed in a timely manner.
DISPUTES AND CLAIMS
A. Early Recognition of Disputes
Correspondence and other forms of communication need to be monitored for detection of changes in the “tone” of the dialogue between team members. Forceful letters misrepresenting project facts, use of exculpatory language in agreements, and unreasonably and overly aggressive change requests can be a reflection of a contractor’s unreasonable conduct. In many cases, such conduct is an early indication of pending claims.
Another direct indication of potential disputes or pending default consideration would be the filing of subcontractor and supplier claim notices and liens. Contractor financial difficulties are often first detected through the lack of subcontractor and supplier payments and lower tier disputes.
B. Resolving Disputes and Claims
Actions taken by the contractor and other parties involved with a project to resolve disputes will provide an early indication of potential downstream claims. Conduct of the team members can be readily recognized as reasonable and professional versus unreasonable and antagonistic. During the prequalification and bidding phase of projects, many owners screen potential contractors and design professionals – requiring the identification of prior litigation as part of its qualification submittal. Industry reputations are reflective of a company’s prior conduct and approaches taken to resolve disputes without formal litigation.
The formal filing of a claim will unfortunately be the last and most direct indication of a troubled project. Many contracts now permit the use of mediation and other forms of alternate dispute resolution as a means of resolving conflicts. Early communication of pending disputes, sharing of associated justification and documentation, and the team’s willingness to work together in addressing issues can foster early resolution of disputes.
Based on the survey results, design received the highest overall ranking as a key indicator and received a ranking of 100. There has been a strong consensus that the performance of design functions, particularly during the construction phase of a project, has a great influence in the avoidance of problems.
Change, delay, and owner actions were the next three high— ranking indicators, with relative rankings between 63 and 71. The effect of change and owner actions is often directly tied to major delays on a project. All three indicators can be readily monitored, and surveys indicate that all three factors weigh heavily in the early detection of problems on construction projects.
Quality, work completion, personnel, and teamwork all ranked significantly lower in priority, but were closely ranked with scores between 34 and 43. All of these factors were viewed as having some benefit as early indicators, but much less significant than the four factors described above.
Last, disputes and claims were the lowest ranked factor, due primarily to the nature of the timing of dispute notices and claim filings. Once a project has encountered significant claims, it is most likely too late to mitigate those problems. As such, this factor received a much lower overall ranking.
Key Indicators of Troubled Projects
There are a broad range of early warning signs that can be utilized to assist in the identification of projects that are having difficulty and those projects that are likely to have disputes and claims. The results of recent surveys, discussed above, have confirmed that the process of managing change is often a key factor in the success of a project. There are four specific indicators that commonly appear in troubled projects-related to the control of design changes, owner actions, schedule change and delays, and management of design functions. All of these factors are important to the success of a project.
Monitoring the progress and status of a project requires balanced attention to cost, schedule, and quality issues. One of the goals of effective project management should be to provide a means of early recognition of significant deviations from plan. For example, are there labor categories with serious variances in labor productivity rates or have the projected schedule milestones slipped significantly from the baseline schedule? Careful monitoring of the project schedule is also vital in providing early indications of potential delays and disruption. A review of key cost, schedule, and quality issues to identify variances is needed to measure the performance and success of a project.
Strategies to Overcome Problems
Early detection of potential project difficulties is vital to identify sources of problems that could lead to cost overruns, delays, and quality concerns. Once identified, problems can be addressed in detail to analyze the underlying cause of the problem. Strategies can then be developed to improve the project performance to overcome difficulties and minimize the impact that issues may have on the project. For example, if a project team encounters slow design response time with extreme difficulties with design details related to field conditions, it may be important to improve the response time to design questions by having a design representative on the jobsite to provide adequate and timely responses.
Conducting periodic reviews of project performance can improve the overall effectiveness of a project— assuming that problems are clearly identified and strategies developed to overcome those difficulties. Trending will help identify problems, but management needs to take initiatives to address and improve underlying difficulties Once problems are successfully addressed, there should be a reduced occurrence of disputes and claims.