Category: Projects

Back Home to Brisbane

Brisbane
Home is 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

Busy Going Broke

redundancy250It 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.

Value Management – the great con trick

thinkers_cartoonHow 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/

Oh No, they have brought in a Quantity Surveyor

Budget Meeting

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.11a%20Fixing%20fibre%20glass

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

Consultants and their “Visions”

Sometimes trying to control consultants on a design and construct project is similar to catching a runaway horse. That is if you come to the project after the design process has begun. What is this “vision” that architects wax eloquently on about. Forget the vision for a moment; just consider how many dollars we have to deliver what is in the client brief. Why, all of a sudden, do embellishments appear on the drawings before they are at “for construction issue”?

We refer to this as “design creep”. Utter nonsense. It is lack of design control and has to be nipped in the bud. What happens is that the drawings through the design phase are issued to the project team and then they are pored over, red pen at the ready, to check that the consultants have not added anything which is either incorrect or not required. The more “prestigious” the consultant the more likely for this to occur. It could be argued that the cost of design creep is proportional to the size of the consultant’s (usually the architect’s) ego. If I hear the words vision, statement or landmark one more time at a design meeting, I may start taking a Taser to the meeting instead of the red pen.

Of course they consider me a philistine or a dumb builder, but we have deliver projects that satisfy various parameters including the client’s brief, various approvals and my budget. Some consultants, people who we hire to provide a service, just don’t get it.

So how do we deal with this problem? It is easy if you are there from the initial discussions. It is called control. However, the onsite construction team do not get involved until the design train is hurtling down the track heading for derailment. Then you give our consultant friends a reality check and guess what they don’t like it. No more latte style nebulous meetings, we are now down to brass tacks. If we are trying to design down to a budget and the consultant team have been previously chasing visions, it is going to end in tears before bedtime. You become the hardnosed school teacher with a class full of recalcitrant children. I usually revert to the simplest method of reining in the runaway horse. Dollars. When it is pointed out that these embellishments, visions etc. are going to hurt the budget, simply deduct monies from the consultancy agreement for wasted time. That is the time the project team spends with the red pen and the abortive time the consultants have spent producing spurious design.

If the bricklayer uses the wrong bricks do we pay him because he thought they would look better? We do not but yet we are prepared to pay for consultants to fix up what they should not have done in the first place.

Consultants need clear direction, strong management and as soon as they veer away from the brief jump on them from a great height. They won’t like it – but it is not their budget.

La vida es sueño

Don’t worry I am not going soft but possible a touch of reversion to my youth and memories of being beaten in the name of Catholicism. As school children we were forced with regular beatings, by so-called christian brothers, to read the classics and to my surprise I still re-read some of those ancient scribblers. The title of this post comes from Pedro Calderón de la Barca (1600 to 1681) who was one of them, a scribbler not one of those catholic sadists.

The play’s most famous lines are:

“Qué es la vida?
Un frensí. 
Una ilusión,
una sombra,
una ficción,
y el mayor bien es pequeño: que toda la vida es sueño, y los sueños, sueños son.”
 
“What is life? 
An illusion,
one shadow,
a fiction,
and the greatest good is small: that all life is a dream, and dreams are dreams”
 

As mentioned, I often read these old classics and what prompted me to pick up this dog-eared book was a chance meeting with on old adversary. He was the client’s representative and I the builder’s project manager. Whenever I would call him and I would ask how he was doing, the reply was always the same – “living the dream, just living the dream Gerry”

I was in the city last week and we bumped into each other and of course we went through the normal pleasantries trying not to refer to the “project from hell” Of course I asked if he was still living the dream and where was he working. His response was that he had given up on construction, mining and resources and had opened a coffee shop. He was sick and tired of battling with clients and contractors and just wanted a quieter life. This surprised me as he used to be my arch-enemy and had a very good reputation around the town. He was actually a good client rep (not many of those around town). So I was surprised and could not understand why he would swap working on projects for a fate worst then death ie dealing with the great unwashed public. So after listening to him ramble on for half an hour and when I was about to go he let me in to how he accessed “the dream”.

He makes $1.00 net profit on each coffee sold. He averages 7,500 coffees per week and does not have to read crappy emails from the likes of me. I let him pay and decided I best start planning to execute my dream.

 
 

The jungle is dense and the river is deep

This little gem of advice was given to me some years back up in the farthest reaches of Kalimantan (Borneo as we used to call it). I was PM on my first resources project, building new infrastructure on a brand new open cut coal mine.

The team consisted of me,  my resident engineer, a contracts manager and 750 locals. The project included all buildings, plant maintenance facilities, barge loading, purchase of all mine plant, and a 45 Klm haul road. Total value about $US100m. All carried out through virgin rain forest with the only access by sea or helicopter. That was the construction side, but the other part of the project was to set up a cost structure for getting the coal out of the ground, taking it to the river, loading barges and delivering it to coal ships moored in deep water. A cost structure that would accurately manage costs and report/forecast on the profitability of the business.

The mine was Indonesian owned and the owners had a very simple philosophy. They knew how much they could sell a tonne of coal for, so they simply wanted to know the cost of getting it out of the ground and delivered to their clients’ ships.

The way it had been set up was haphazard with all subcontractors charging on a cost plus basis. One of my tasks was simply to stop this and get everyone working on fixed price lump sum term contracts. Maybe easy to do in sunny Brisbane but a bit more challenging in deepest Kalimantan. So I set about the task by working out what it was costing, the average selling price of coal project over the next three years, discounted cash flows, capital investment, the normal run of the mill spreadsheet heaven.

I called a meeting of about 100 subcontractors, all locals. They turned up in pretty much the same uniform of shorts, ripped off tee shirts, and many with ubiquitous parangs (you call that a knife, a parang is a big bloody knife). So with my interpreter I commence my spiel, being ultra careful not to point, raise my feet to expose the soles etc etc. After about twenty minutes of extolling the virtues of the certainties of fixed price arrangements, the win win relationship plus all sorts of similar management speak, a small figure at the back stood up. Not only did the audience go quite, my Indonesian interpreter went visibly pail. The interlocutor spoke firmly for ten seconds and the room if it were possible went even quieter. My interpreter was reluctant to speak but after physically prodding him for the translation, he whispered to me, a feat in itself as I was two foot taller than him, that the firm spoken speaker had said, “The rivers are deep and the jungle is dense”.

I was baffled and asked him what does he mean. My diminutive friend responded in his best interpretation of my scouse accent, “Er keep this up mate and you won’t be going home in a box ‘cos they won’t find yer body pal”

I ditched fixed price negotiations immediately and from that point on we were all friends. The infrastructure was completed, the price of coal to China went up, the subbies made money, the client smiled (or was it wind) and I flew home a year later business class.

Rostered Day Off spent with James Joyce

As I am on a rostered day off in the morning, my thoughts turn away from construction to one of my other passions – Irish literature. The following is also on one of my other blogs which I do not publicise here as we all need some privacy.

When I was six years old I was on holiday in Ireland with my mother. An Irish lady born in beautiful Carlingford county Louth. Although she left school at fourteen she had a passion for literature especially Irish novelists. She was an out an out Feanian and her priorities were country, Catholicism and family in that order. It was she who introduced me to the magical world of irish writers. That magic started on a beautiful summer’s day with a visit to the grave of William Butler Yates at Drumcliff County Sligo. Much to my surprise my mother knelt down and then yanked me down too, and said a silent prayer not just for the great man but for Ireland and its people. (so I learned much later).

As I got older I would borrow my mother’s books and devour them: Yeats, Swift, Pearse, O Riordan, Wilde, Sterne, Goldsmith. But there was one missing – the towering presence of James Aloysius Joyce. And why? Because some of his work had been banned by the catholic church. Of course as teenager anything banned meant I had to have it. It was the late sixties and everything that the establishment did not want us to have, we made sure we had it. No matter if it were books, drinks, acid, music etc. Thus my life-long love affair with Joyce began. As we approach Bloomsday and remember the characters of Ulysses going about their day on 16th June 1904, those early memories of my mother, Ireland, long summers and happy days return. A long way from the Pilbara in Western Australia where I now earn my keep.

So for those who follow this blog a little bit of the magic of Yeats followed my the magnificence of Joyce

The last three lines of one of Yeats’ poems are written on his grave stone

Under bare Ben Bulben’s head
In Drumcliff churchyard Yeats is laid.
An ancestor was rector there
Long years ago, a church stands near,
By the road an ancient cross.

No marble, no conventional phrase;
On limestone quarried near the spot
By his command these words are cut:

Cast a cold eye
On life, on death.
Horseman, pass by!

 And my choice from Joyce’s Ulysses has to be the following two passages from the episode Cyclops:

 After the citizen spots this person at the bar, the person is described:

The figure seated on a large boulder at the foot of a round tower was that of a broadshouldered deepchested stronglimbed frankeyed redhaired freelyfreckled shaggybearded widemouthed largenosed longheaded deepvoiced barekneed brawnyhanded hairylegged ruddyfaced sinewyarmed hero. From shoulder to shoulder he measured several ells and his rocklike mountainous knees were covered, as was likewise the rest of his body wherever visible, with a strong growth of tawny prickly hair in hue and toughness similar to the mountain gorse (Ulex Europeus). The widewinged nostrils, from which bristles of the same tawny hue projected, were of such capaciousness that within their cavernous obscurity the fieldlark might easily have lodged her nest. The eyes in which a tear and a smile strove ever for the mastery were of the dimensions of a goodsized cauliflower. A powerful current of warm breath issued at regular intervals from the profound cavity of his mouth while in rhythmic resonance the loud strong hale reverberations of his formidable heart thundered rumblingly causing the ground, the summit of the lofty tower and the still loftier walls of the cave to vibrate and tremble.

And later the best description of Guinness ever:

Terence O’Ryan heard him and straightway brought him a crystal cup full of the foamy ebon ale which the noble twin brothers Bungiveagh and Bungardilaun brew ever in their divine alevats, cunning as the sons of deathless Leda. For they garner the succulent berries of the hop and mass and sift and bruise and brew them and they mix therewith sour juices and bring the must to the sacred fire and cease not night or day from their toil, those cunning brothers, lords of the vat.