Gerry Keating

Back Home to Brisbane

Having spent so much time working in different parts of the world sometimes you forget where home really is. Moreover, I have met many ex-pats who may have many assets but have no base – no real home. It is taken me a long time to come to the conclusion that not only is my home in Brisbane but so is my heart.

I have lived in Brisbane since 1989 but have spent more than half of that time either working overseas or in various far flung construction sites in every state of Australia. Coal mines, iron ore processing, commercial building, water treatment plants, meat works, high rise etc etc. Now I just want to live here, no more FIFO, no more cheap motels, airport lounges nor hire 4WDs. OK the construction industry here is on the slide, the boom years are over and over the next twelve months there will be even more builders going to the wall or sacking staff.

Recently I have been asked to head back to Perth, I have been approached to return to Qatar to build football stadia for the World Cup. But I declined, they can keep their money I simply want to sleep in my own bed each night.

Who would want to live anywhere else?

by Gerry Keating

http://gkeating.com

Don’t Sack the Gardener

I have not looked at a household bill in years. Electricity, water, telephone, groceries etc are things which do not interest me. i spent my working day staring at damn Excel, arguing with subcontractors about variations, and with bean counters quizzing my costs. So all expenditure on the home front is managed by my darling wife. Ask me how much is a 200mm post tensioned slab per square metre and I will rattle it off. But ask me what we pay for cable tv and I don’t have a clue.

Yesterday evening my whist relaxing on the back deck after work, my wife suggested we sack the elderly gent who has been tending to the garden for the last ten years. She had been listening to the doom and gloom on the tv regarding ever increasing insurances, utility bills and the like. Even with my deft application of minimal encouragements I became drawn into the conversation. Based on the facts that I don’t own a garden shed, let alone a lawn mower, and the only items in the garage are cars, hell will freeze over before I start maintaining gardens, the pool and hedges. So the gardner has a reprieve.

But this made me think about what we decide to cut first in construction budgets. Of course it is the landscaping on the project. The majority of new apartment buildings are pretty boring. Leggo architecture, withe a few embellishments, an entry statement, and give an oxymoronic italian name. The Palazzo, the Paloma, they could be called Lambretta or Vespa, anything to make them sound better than they look. Then at the end of construction the landscape team move in. The budget has been slashed along with the height of the trees and number of plants. The landscape architects vision at the concept stage is now a nightmarish reality.

So it appears the household budget cuts are mirrored in commercial construction. I say leave the landscape design alone and keep lawnmowers away from my garage.

Busy Going Broke

It is symptomatic of our industry that often companies assume being busy equates to making money. All too often it just means acceleration towards bankruptcy. Increased activity does not necessarily mean making greater profit. Nobody hold a gun to our heads to force us into signing a contract, yet we still sign up for projects with unrealistic programmes, inadequate budgets, and risks which we believe can be overcome. It is plain and simple delusion.

The warning signs begin with the tender process. In order to save development costs, clients do not put the required resources into preparing tender documentation. They work under the false illusion that “the market” will determine the best price and the contract will save them from a “switched on” builder. The reality is that “the market” consists of builders who know their game and as long as they understand activity versus profit, the tenders will reflect the completeness of the tender documentation.

Some years ago I delivered a large coal infrastructure project in Kalimantan for an Indonesian client. To keep costs down the client believed he could set the tenders up with minimal documentation, unproven consultants and a catch-all contract. What it would have cost for proper tender documentation was less than 5% of what it cost in contractual claims, delayed production, legal fees and lost profit.

The next twelve months here in Australia will be difficult fr the construction industry, especially for employees who have never experienced really bad times. Yes I am old enough to have gone through Arab oil embargos and three day weeks. It won’t be as bad as that but large contractors will shed staff, salaries will continue their decline and there will be lack of confidence generally. The difference will be contractors will not win work at any price and make cuts in overheads earlier.

Seek.com will be in most people’s favourite bar, LinkedIn will continue its exponential growth, as we all brace ourselves for a bumpy ride.

Vale Lord Severs – a good friend

And Death Shall Have No Dominion

And death shall have no dominion.
Dead man naked they shall be one
With the man in the wind and the west moon;
When their bones are picked clean and the clean bones gone,
They shall have stars at elbow and foot;
Though they go mad they shall be sane,
Though they sink through the sea they shall rise again;
Though lovers be lost love shall not;
And death shall have no dominion.

And death shall have no dominion.
Under the windings of the sea
They lying long shall not die windily;
Twisting on racks when sinews give way,
Strapped to a wheel, yet they shall not break;
Faith in their hands shall snap in two,
And the unicorn evils run them through;
Split all ends up they shan’t crack;
And death shall have no dominion.

And death shall have no dominion.
No more may gulls cry at their ears
Or waves break loud on the seashores;
Where blew a flower may a flower no more
Lift its head to the blows of the rain;
Though they be mad and dead as nails,
Heads of the characters hammer through daisies;
Break in the sun till the sun breaks down,
And death shall have no dominion.

Dylan Thomas

Value Management – the great con trick

How many times in the design development phase, do we fool ourselves that dollars will fall out of the project budget due to astute value management. Some call it value engineering, so it is known as VM or VE. As builders we review architect‘s scribblings and start off withe the preconception that we know better. We can find a way, with our vast construction expertise, to rein in the architect’s vision for the project, save money, yet deliver to the client an unadulterated project.

Well we are kidding ourselves. The dreaded VM spreadsheet starts off with savings as big as telephone numbers and then the fun begins. We cannot change what the local authority approved plans, there may be an end-user contract condition to satisfy, it may even be the sales documentation that some evangelical styled real estate novelist has dreamt up. Slowly the VM spreadsheet total savings reduce. yet we still believe there are dollars to be squeezed out. meanwhile the design is developing, more doors are closing behind us, now the client has developed expectations.

At this point we have signed a contract and of course we are jointly bound with the client to actively seek savings through VM. With the proviso not to compromise anything in the project brief. We fooled ourselves there was money to be saved and find that we won the job on the basis the VM would stack up.

The simple rule is you make money before you start on site, and if any VM is achievable it has to be seized as early as possible in the design stage. Controlling drunken sailors, sorry the design team, is like herding cats, and we have to do it before the scribblings begin in earnest. The cartoon was sent to me by an architect commenting on the way I run design team meetings, thanks Milo.

Cartoon courtesy of: http://allthingslearning.wordpress.com/tag/classroom-management/

Apollo or Dionysus

Sounds a bit heavy for a Monday morning but it is my afterthoughts from a chance meeting with an old friend on the weekend. for some long convoluted reason we hot talking about the kind of people we work with. I am in construction and the friend is in marketing, so we are pretty much diametrically opposed. The opposition being generated by each other on our perceptions of the others’ industry. My friend sees us builders as people who are rough around the edges, drink copious amounts of beer and are one step below the average philistine. Whereas most builders perceive marketers as Audi TT driving, “t shirt with suit”, designer spectacles and endless lunches.

So the builders have the Apollonian traits and the marketers align with the Dionysian. It may be uncomfortable truth but there is some logic to this. However, whenever I have been looking for new recruits I seek a combination of the two.

Oh No, they have brought in a Quantity Surveyor

Builders hire external quantity surveyors only as a last resort. Usually after months of trying to convince themselves that the project bottom line will improve, they realize that they are in for a contractual fight with the client and any straw needs to be grasped.

Month after month of cost reports with ever diminishing margin, force them to consider the battle ahead. That means finding every conceivable error, ambiguity, inference in the contract documents or any slip by the client’s representative. Project managers think they are experts in construction law, directors look for blame, and the site based project team convince themselves they have a cas against the client. Delusion has set in.

Wonderful expressions are uttered, “global claims”, “unfair enrichment”, deceptive and misleading conduct” All are bandied about with as much abandon in the site office as in the boardroom. Sight is completely lost of the simplicity of contractual claims:

What did the client do or not do?
Did this cause us costs?
Is it recoverable under the contract?
What are those costs?

The client’s quantity surveyor has either dismissed or taken a blow torch to variation claims and because builders are not in the quantity surveying club, they are forced to seek the services of an external professional – the QS.

by Gerry Keating

So we go through the very expensive exercise of our people talking to their people and if we are lucky end up with a compromise on the steps of the court.

The alternative is to start the process from the day the first variation is carved up by the client’s QS, not wait until the dire cost report forces the issue. Get in early, don’t get time barred, and do not put up with any nonsense from a QS who probably created the errors or ambiguities in the first place.

Hard Dollar Hero

Hard dollar, lump sum, fixed price they are all the same. Submit your tender, win the job and away we go, in theory the only additional dollars come from client approved variations. Some say this is the old-fashioned way, it is confrontational, leads to major contractual arguments and neither the builder nor the client wins.

The alternatives such as construction management, PPPs, negotiated D&C, etc have come to the fore, espousing so-called “win win” deals.

Interestingly, hard dollar gains popularity with clients as money becomes tight. they want certainty over budgets, especially as the IRR on projects reduces. Some builders tend to specialize in hard dollar projects, they are usually run with minimum overheads, tight margins and preliminaries cut to the bone. The project management style companies who are in the construction management mode struggle with hard dollar. Their management structure, staff experience means their overheads are high and they find the hard dollar market difficult to be competitive in and often get burnt thinking that they can adapt easily. At site level foreman on construction management projects issue site instructions with little regard to financial impact.

Subcontractor selection on construction management projects can be less rigorous than hard dollar. Their selection can be influenced by how easy they are to deal with rather than the best price.

Personally, I prefer hard dollar. i have spent most of my career delivering fixed price projects, with like-minded project teams and focussed subcontractors. project management teams who have concentrated on construction management, fee based on trade packages, need experience in the hard-nosed world of lump sum. They sink or swim.

Accountants or Builders

Budget-Earned-Accrued

Over time I have interviewed many people for roles in the construction industry, some junior and many senior positions. Interestingly, the younger applicants looking for a job at a junior level, invariably want to work for major builders on mega projects and want to be project managers as soon as possible. They equate large construction companies with status and expect those companies to be the best, to have the best systems, people, projects and rewards. Whereas the older applicants who have worked for “the big boys” are more circumspect and have experienced the multi nationals and often the smaller companies. All too often both types of applicants become disenchanted not with the project delivery but in the way the companies manage their processes. The young guys assume the large organisations have done it all before, learnt lessons and use best practice in how they manage projects from initial enquiry through to project hand over.

Unfortunately they are often disappointed, especially with the tools their companies use in project financial management. The most disappointing aspect of this is the reliance by large companies on spreadsheets for financial control. It never ceases to amaze me that smaller contractors invest in proprietary software such as Jobpac or Cheops whilst the “big boys” continue with antiquated linked spreadsheets and unreliable macros designed by long forgotten Excel devotees and fiddled with by every man and his dog.

Anyone who has spent hours preparing cost forecasts using “the company standard excel template” to find something is wrong. A formula in a cell has been over typed, a redundant hyperlink, or simply not being in the most current version of the workbook.

But why do large organisations continue with antiquated financial management systems and yet smaller companys can see the benefits and use software that is fit for purpose. Perhaps it is simply that large companies are run by accountable far removed from project costing and smaller companies are run by people who have worked on site, hired subbys and had to fight for every dollar

Home or Away

Not the nonsensical tv show from down under here in Oz, but the choice between working FIFO or being based in my adopted home town of Brisbane.
There are the pros and cons to consider: money versus sleeping in your own bed; big project budgets versus winning jobs by the skin of your teeth; engineers versus architects. On the face of it the decision is easy, but the main question is do we end up doing the job we enjoy or does the ebbs and flows of the construction industry force us into dongas we really don’t want to be in.

2013 is looking pretty bleak for the commercial construction industry in south-east Queensland. Too few projects, too many contractors, no government spending, and a looming second GFA. paradoxically the price of Iron ore is increasing. The major players in resources are looking at gearing up for new projects. So whilst the tower cranes of Brisbane languish in plant yards, the resources head hunters are smiling (again). In September 2012 Iron Ore was $90/tonne, today it is $145/tonne. I won’t bore you withe the maths but take one major port with 25 trains per day, hauling 125 cars with 50 tonne of ore in each, the price increase equates to $8.5M per day.

The emails from employment consultants to “catch up” have started. “Join me on LinkedIn” etc etc. Now the phone calls looking for PMs with resource experience for “immediate starts” are going to voicemail.

I think I need a break, oh we just had one.

Share this:

Like this:

Share this:

Like this:

Share this:

Like this:

And Death Shall Have No Dominion

Share this:

Like this:

Share this:

Like this:

Share this:

Like this:

Share this:

Like this:

Share this:

Like this:

Share this:

Like this:

Share this:

Like this: