Damn Site Instructions

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Why on earth do site foreman/managers issue site instructions to subcontractors to carry out works which are contained within the original subcontract scope. It happens all the time and the larger the project the more it occurs. If they understood what is contained within the subcontract the amount of site instructions would decrease and of course the resultant trade cost over runs would be less.

There may be mechanisms for approval of site instructions by the project and commercial manager, but often the site foreman has issued a verbal instruction to the subcontractor and the argument about the validity of the instruction takes place after the works are complete. A case of trying to close the stable door after the horse has bolted.

Sometimes it falls to an inexperienced site based contract administrator to approve site instruction based variations in the subcontractor’s monthly progress claim. If all the boxes are ticked ie the site instruction is signed and issued, the subcontractor has submitted a full cost break up, then the dollars are approved and the subcontractor paid.

If after the payment some hawk eye spots that the paid for works were in fact part of the subcontractor’s original scope, then we begin the process of clawing the money back. We tell the subcontractors that variations are paid “on account” and that payment for a variation does not mean it has been approved. We then go into battle with a subcontractor who we need to finish his trade package. The smart ones may go legal and we get into arguments about Estoppel, deceptive and misleading conduct etc etc.

The worst case is when site instructions are issued after the work has been carried out. There is simply no excuse for this and in my view this is the time for badges and guns to be handed in and the first available window seat is to be organised.

The way to stop money going down the drain is to have a strangle hold in the issuing of site instructions and the only person who can issue them is that rare site based individual – someone who really does know what they are building.

http://gkeating.com

image courtesy of dreamtime.com

Meters for All

fv_howitworks2It appears that the bigger an organisation becomes, the longer the job titles of management develop. Here in Australia we have not succumbed to having vice-presidents as in the USA but we have executive project directors or executive general managers. These titles can morph into wonderful handles such as Executive General Manager – Sustainability and Green Star Initiatives. Seriously someone gave me their business card recently at some junket and that is what it read. pretty soon this person will have to have special business cards made to fit his title.

I am unsure if these expanded titles are bestowed upon employees in lieu of pay rises but to make them feel important, to be one of the chosen elite, to have perceived importance and status.

One future development, I would support, would be to have business cards replaced with electronic lapel labels. They could be called iTags. The iTag could be worn proudly with the person’s name and title and would wirelessly update your phone/iPads contacts.

A further refinement could be that when we have meetings these electronic iTags would change their display to how much per minute the person costs the company and up on the electronic inter active white board there would be a running total of how much the meeting was costing.

This caused me to recall my time at a now long defunct company. Is it too far-fetched to consider every employee just like a running taxi meter?. Perhaps not, because when one of these Executive Senior General Head of Whatever asks the site foreman a question which is so dumb a fresh-faced apprentice could answer, we would all see that  these “promoted to the level of their own inefficiency”   managers are probably contributing nil and costing twenty times more than the person to whom they asked the question.

http://gkeating.com

Lost Profit

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It is often said “we learn from our mistakes”. But why, in the construction industry, do we keep making the same mistakes? When will we have truly learnt our lessons? How many times does a project not deliver the profit that was envisaged when we signed the contract?

There are many reasons for not achieving the target profit but there is a common thread. That is poor commercial management. For some reason builders focus so much on delivery of product without putting as much emphasis on the delivery of profit.

It sounds simple but there are three key issues

  1.  If the project team did what it set out to do
  2.  Got paid for everything it was entitled to
  3.  Only paid out what it was obliged to pay

1         If the project team did what it set out to do

We build to the drawings, specification and scope of works. Therefore, we purchase subcontracts, consultant services, and materials in the same manner. But we do not. We allow consultants to over design and under deliver. Subcontracts have gaps between trades. Materials such as concrete and reinforcing always exceed what was in the cost plan. The reasons for this is inexperienced staff, who simply do not fully know how to build and manage subcontractors and/or consultants.

2         Got paid for everything it was entitled to

We sign a contract so why don’t we understand it, use it, and extract every cent out of it. Often the member of the project team responsible for the day-to-day management of the finances is a relatively junior, young and less experienced individual. The big guns from head office only get involved when the project is starting to haemorrhage substantial dollars. The inexperienced site based contract administrator often does not want to “take on” the client or has not been given the authority to do so. They are reluctant to highlight potential/actual losses and can be overruled or intimidated by an over bearing wily project manager.

3         Only paid out what it was obliged to pay

If we start with the premise that the project team does not grasp these three key issues we need to have in place some method of monitoring them and being able to take corrective action before it is too late. That means setting projects up with robust reporting protocols. That does not mean head office go through the monthly report and try to act like the Spanish Inquisition with the project team. It means identifying before we start on site the areas where we know there will be issues. We need to ask the simple question: is this project team really up for this job to maximise our profit or is it a simple case of this team will deliver a good project but yes they are commercially weak.

I have lost count of the amount of times I have had to explain to people responsible for project profit what the terms committed cost, certified cost, margin on revenue, margin on cost, work in progress, accruals, discounted cash flow, aged trial balance. I have even had to explain the difference between a certificate and an invoice; revenue and profit; forecast cost to complete and forecast final cost.

So we need to train these young “Harry Potters” who peer at their computer screens all day, send off curt circulatory emails to all and sundry, but they hardly walk the job, engage with subcontractors and generally live their lives in a bubble. If you want to manage costs you have to be able to manage people.

by Gerry Keating

http://gkeating.com

How to Burn the Budget

Let’s assume at the start of the project we know the budget is going to be exceeded. We know the design is incomplete, the cost planner was not in touch with reality, the program was prepared by a Primavera zealot and the project team are as motivated as a retiring politician. So the premise is that the budget will be blown, heads will roll and the project manager will develop a persecution complex.

How do we prevent it? By going back to basics and following a few simple rules:

  1. Don’t manage the design team – control them, make them earn every cent and get them to deliver what they are paid to deliver and by the date it is due
  2. Let 80% of the trade packages within 20% of the contract period.
  3. Assign the best people to the project team and pay them what they are worth.
  4. Have minimal internal reviews. Every time there is a new review or set of eyes someone feels they have to add to the debate.
  5. Make sure the program is prepared by someone who actually knows what to build, pin it up on the site office wall and status it daily.
  6. Ban spreadsheets for cost reporting
  7. Treat subcontractors as equals not servants
  8. Listen to experienced, practical site managers/foremen
  9. Keep hard copies of every email, site instruction, time sheet, order, site instruction and delivery docket if they back up a variation or EOT
  10. Open every meeting with a “safety share” and encourage all to contribute

Ok it is not rocket science, but we are not building space stations. Before we get carried away with BIM, CPA, benchmarking, discounted cash flows, IRRs, pivot tables, delivery strategies etc etc, consider delivering what we set out to, by the time allowed, to the required quality and with no harm to anyone.

 

by http://gkeating.com

So Long, and Thanks for All the Fish

TC 1 and 2Once again I will be bidding farewell to a colleague this week. Not to the great high rise in the sky, but he is off to pastures new. So as always  I will write on the farewell gift card a quote from good old  Douglas Adams the above memorable line.

I have worked with some truly remarkable people over many years, in many countries, on a myriad of projects. But there are only three of them who I have learnt something unique, and the guy who is leaving tomorrow is one of those three. So what makes these three so special? Out of hundreds of people I have worked with, why should they stand out from all the rest.

They are all very different but share some key characteristics: charismatic leaders; very bright and inspirational; but above all their frightening honesty. The honesty manifests itself in how they manage to get individuals to perform better as a project team than they could ever achieve as individuals. They manage this be looking people in the eye and telling them straight what is expected, when they have succeeded and when they have stuffed up.

These days honesty is in short supply. We are bombarded with spin and pseudo reality, employment longevity is often determined not by how good you are at what you do , but by how you fit in. The honest leader is not perceived as the best leader, when in truth he is the leader people want to have supporting them.

So I wish my colleague well in his new endeavour, and the enterprise he will embark upon will be successful and a place where many would want to be.

We need to work with difficult people

I shot the video above when we were delivering the Pearl in Qatar. Then the GFC and the rest is history.

There is something about tower cranes that gets the construction survivor’s pulse raising. I cannot get enough of them. Old diesel Favcos, cranes on rail tracks, self climbers etc. They are all derived from the ancient Greek balance cranes i.e. levers,  fulcrums and a power source to lift. But what really interests me are the people who drive them.

I have known many crane drivers over many years and they are an interesting part of the project team, and that is a big understatement. I worked with one driver who had been at it for nearly thirty tears. He was the highest paid person on site, cantankerous, completely uncompromising, difficult to manage but I would not have replaced him for anyone else. Why? Because he was safe, good at his job, and simply made things happen.

He is an example of a difficult person to work with, but someone you simply need on your project. We have all worked for difficult bosses, had recalcitrant site managers, nit-picking head office accountants. Sometimes we see a list of hurdles in the way of getting the job done. I don’t see it that way at all. I have worked with some absolutely dreadful personalities. I had one senior executive who joked he was sacked from the Gestapo for cruelty. He thought this self observation would endear him to us – it did not.

But what usually lies beneath this hard exterior is a world-weary, battle-scarred individual who may have the personality of a dung beetle but still has something to offer. I was explaining this to an ex colleague who had moved to pastures new and was having “differences” with his boss. I told him to find a t least one redeeming factor about his nemesis. A few weeks later he called me and found one. When in a heated meeting with a very difficult client was scheduled he invited his boss along. before the meeting he explained the situation. At the meeting he saw his boss from another perspective. He saw a fighter, a defender of the business, a hard negotiator, an ally.

You don’t have to like someone to work with them, just recognise their strengths and call upon them at the appropriate moment. People are different, but people deliver projects. However difficult crane drivers live in their cabs for ten hours a day and have no email, bosses drop in unexpectedly and email at all times of the day or night. But they both need a little ego massage now and again.

My mate and his boss get on better now. The crane driver has swapped his cab for a Winebbago and become a grey nomad. After thirty years on his own talking to himself inside his cab I bought him a retirement present for his road trip. A pair of ear defenders for his wife.

by Gerry Keating

http://gkeating.com

Try Google Plus

Quite a few people have been asking me about Google Plus. Forget the nerds who drone on about what is best, Facebook, Twitter, etc, Google Plus stands head a shoulders above them. it is not as popular here in Australia than it is in the USA and Eurpoe.

The best way to get started is firstly create a Gmail account, watch Matt’s video and just try it. Learn about circles, handouts and sharing. You can post on it and share your Google Plus posts on Facebook, if you want.

Thanks Martin Shervinton http://www.martinshervington.com

Posted by Gerry Keating

http://gkeating.com

No Subcontractors Thank You

CranesI recently struck up a conversation with a stalwart of the construction industry here in Brisbane. He had worked for the same company for over forty years. He started out as an apprentice, became a leading hand, foreman, site manager, and now a senior member of the construction management team. So we did what most of us construction survivors do, we exchanged war stories.

A common theme soon developed – most construction companies have forgotten how to be builders. Forty years ago we had a stream of apprentices who were the company’s future. Senior managers rose from the ranks based on ability and experience.

But the key point was that builders used to employ their own tradespeople to carry out the work with a very few specialist subcontractors. Nowadays a project manager is measure on how he can organise a rabble of subcontractors. If he is inefficient and disorganised, it costs the subcontractor. Using your own labour means if you are not organised it costs a fortune. To be organised you need to know how to build.

It could be argued that most construction companies set up a project with the minimum of their own staff, subcontracts out every trade, hire the cranes, hoists, scaffold, and they don’t even own a wheel barrow.

Of course the reason is simple. The client pushes the risk on the construction company, and in turn they push it on to the subcontractor. You cannot back charge your own labour force but it is easy to do it to the subcontractor. This style of project management is run on the same format as a shepherd herding sheep. As long as they are all moving in the right direction, just leave them to it. So the project manager herds the subcontractors and they build it.

This may be the norm in commercial and residential construction but is not the same story in the resources sector. Companies on mine sites tend to employ more of their own labour to carry out what would be subcontract trades. This is mainly due to the control exercised on the construction companies by the mine owners. However, due to the magnitude of these resources projects, there may be several joint venture construction companies who find themselves being treated by the mine companies in the same way a construction company would treat their subcontractors. They don’t like it, because being a subcontractor these days is the end of the food chain, having the biggest risk of not being paid but with all the responsibility that goes into a two hundred page subcontract.

So back to the construction stalwart. He is disillusioned with the industry he has given forty years to, he despises the short slightness of people who won’t employ apprentices, he shakes his head at Google Glass wearing, iPad toting project managers, wants to punch the light out of the Harry Potter lookalike who pays the subcontractors. But he still is cheerful as he can always look at his mark on the landscape that is he can take his grandchildren to see and touch not the jobs he managed but the buildings that he built.

by Gerry Keating

https://gkeating.com/

Stop pushing the rock up the mountain

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Poor old Sisyphus  He was the bloke who upset the Greek Gods and as punishment was forced to push a rock up a hill but it always ended up rolling back down again. So to be free he had to get the rock up to the mountain top, because he could not he was condemned to eternal hard labour.

Luckily for us in construction, we do eventually get the rock to the summit, we call it practical completion. I reckon that is the easy part. Getting the rock to move in the first place needs a client to sign a contract, the next challenge is to find the resources at the right price to start pushing the rock. Once the team build up momentum the summit is reached and more often in the nick of time to avoid penalties or as our friendly contract bots refer to as “liquidated damages”

But sometimes the rock gets stuck, a delay in contract signing, a client runs out of money, the builder goes broke, act of God. At any of these events there is fallout and decisions are made: we go legal against the client; we are all looking for another job; or we scratch our heads and say in unison “where do we go from here?”. Then there is the blame game, whose head is on the block? head office gets the jitters and the project team start worrying about their mortgage payments.

However, the canny survivor often sees the writing on the wall and gets out before they are pushed. All too often the wrong people get sacked first. Not the numb skull who got the job into the diabolical mess but the person doing their best to deliver the project.

Sometimes Sisyphus it is better to let the rock roll and find another mountain.

by Gerry Keating

PS  One of my heroes, yes I can be a bit strange, is Albert Camus, the French existentialist writer. Check out his take on this subject

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Hand in your badge and gun

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A project manager mate of mine arrived at his site office last Friday. He was greeted with the normal scene: union delegates arguing about subcontractors having the audacity to employ people who are not 100% unionised; subcontractors with not enough resources; and emails from the client’s representative refusing perfectly valid variations. He had made a decision which would upset head office and may make him a pariah as far as future promotion was concerned. He was taking Saturday off to have a full weekend with his wife.

Although his annual salary far exceeds the “average Australian” if it is divided by the number of hours he works, his hourly rate is less than a site labourer. But he has a passion for construction. That passion cost him his first marriage, drove him to the occasional drink, and evolved him into a dad his children did not know or particularly like. But his passion was a major factor in driving him to deliver project after project for his employer.

As Friday wore on, and the normal dramas of the day were crossed off the to do list, he decided it was time for his daily “walk about. However, as he reached for his hard hat, he received a text from his operations manager. Not a personal visit or a phone call, just a text which read verbatim: “Company ceased trading, get everyone off site, lock the gates, take only personal belongings report to head office immediately”. Yes the company had gone broke.

This has happened to many of us in the construction industry, we end up with broken relationships, heart attacks through stress, and the stigma that goes with having been the PM on “that job, for “that mob” who screwed their subcontractors. Sometimes the bloke delivering the project gets screwed as well.

Now he has to wait and see if he will get his entitlements, find a job, and still keep his passion for his next employer. His comment to me “Well at least I have finished paying child support, I think it is time for a spot of fishing”

So if you are reading this mate, go easy on the Johnny Walker, enjoy the fishing and it may be a good idea to take your wife with you or you might get made redundant there as well, then you will be looking for wife number 3.

by Gerry Keating

https://gkeating.com/