In a perfect world, every job runs smoothly; there are never delays, everything is done in sequence, and contractors make the profit (or better) identified on bid day. Unfortunately, construction projects are rarely perfect. Material shipments are late, incomplete or just wrong. Other trades fall behind in their work and that causes delays for the crew. Even the weather can affect the project. Contractors might be asked to jump around and work out of sequence and as a result, overtime may be forced on the crew.
When the economy was better, an important strategy was to pick the territory wisely, hand pick the clients, choose the kind of work that was in the sweet spot and negotiate a project rather than hard bid it. In a stronger economy, contractors think in terms of relationships. In a down economy, like now, contractors find themselves hard-bidding jobs against 30 competitors, bidding on jobs out of town, working for clients that are difficult and for whom they would not typically work. Contractors find themselves fighting tooth and nail for every dollar and focusing on every change order. Projects naturally start from a place of stress. Managing the project each and every day is the foundation to maintaining profits and winning claims.
The need to file claims puts a lot of stress on the project and the team. Instead of avoiding the claims process altogether, it is best to use up-front strategic project management to be prepared for claims. If a contractor implements these steps it won’t eliminate or prevent the need for a claim to be filed. It will, however, put the contractor in a far stronger position to defend himself and subsequently win the claim outright.
WORRY ABOUT THE CLAIMS PROCESS?
Over the years I have heard a lot of reasons why contractors don’t worry about the claims process.
Claims happen to the “other guy”
Projects are always fully documented
Projects always go according to plan
Communication never breaks down
The numbers aren’t always trustworthy
Project managers are responsible for tracking a great deal of information. Equally important is performing analytics on this data. PMs must track original estimated quantities of materials and labor hours. They must measure the installed materials and the corresponding completed labor hours; this includes the percent complete to the calculated earned value. The inclusion of actual payroll data brings a higher level of accuracy to the project that helps determine its success or failure.
There are five essentials to strategic project management: “Scope,” “Resource,” “Time,” “Money” and “Documentation.” If the job shifts from perfect to imperfect, these five fundamentals will determine whether the contractor makes money on the job or if there is enough information to win a claim.
“Scope” is the first essential and is really the quantitative takeoff. It is the basis for good documentation. The takeoff is the visualization of what has been defined as the project’s scope of work. It is the job’s benchmark and each project manager should perform their own takeoff after winning the bid and before starting the build.
“Resource” is really the labor and material budget. It is important to be thorough and break everything down by area and by code. This breakdown should reflect how the job will be manned and sequenced. Confirmation of this workflow should be made with the foreman. The stocking list should also reflect the area and code breakdown. This information is evidence of what was planned to be done by the contractor before any circumstances on the job changed. This is the basis for planned versus actual materials tracking.
Dealing with claims is a very time consuming and stressful activity. It detracts from the core business. Therefore it is best to do everything possible throughout the project lifecycle to be prepared for claims.
Part two of the series will dive into time, money and documentation. W&C