​Many construction projects fail due to poor project management. Contractors are continually bemoaning the fact that they can’t get good people anymore. But what are these contractors doing about it? They seem to think they can simply approach a recruitment agency, or advertise, and they’ll have ‘ready-made’ experienced and skilled construction project managers wanting to work for them whenever they’re required. Yes, there are some excellent project managers, but the chances of one of them knocking at your door when you need them are slim. Unfortunately there are also plenty of poor project managers and some of these may knock on your door. Employing the right people in construction

So what can contractors do about the skills shortage – or are they just going to whinge and blame the lack of skills for poor performance, without actually doing anything positive to rectify the situation?

​I was fortunate that as a newly qualified civil engineer I applied for several jobs and most companies offered me a job – so I had choices. I selected what I saw as a growing contractor that executed projects I was interested in. They had recently been awarded a large civil construction project where they needed me, so I thought it would be good experience. Oh, and of course the pay was better than most of the others. But I made a fortunate choice.

There I was almost first on the ground on a big construction project, but completely green with no construction experience, initially working with the surveyor, then looking after the soils and concrete testing laboratory. Getting involved with running the concrete mixing plant and helping schedule and organise large concrete pours. While all around me the project grew. Earthworks, then concrete structures, some building work, eventually the mechanical and electrical contractors moved onto the project (these weren’t in our scope, but I still watched and took note) and finally the roads around the completed facility. What a great experience to witness. I was always asking questions, asking for more work. I was even given boring stuff like checking the cost ledger – boring but essential grounding that helped me understand how important it was to check and understand the project’s costs.

After six months I was given my own section to manage which was several kilometres from the main construction project. There I learned about formwork, scheduling (programming), ordering materials, planning the project and overcoming the normal obstacles that occur every day on construction projects. Yet fortunate enough that experienced project managers were close at hand watching my every move, but seldom interfering unless I was desperate for help.

Twelve months later I was given my own small construction projects to manage. A couple of Supervisors and I managed the project. I planned the project from scratch, sourced the construction equipment, ordered the construction materials and appointed the subcontractors. Every month I measured the completed work and submitted monthly valuation claims. There was additional scope I had to price, so I learned the basics of pricing construction work. In those days we did our pricing long-hand. We broke everything down into labour, materials, equipment and subcontractors. On the blank page on the left-hand side of the bill of quantities we did our calculations. (Pencil, paper and a calculator – sorry showing my age here, but sometimes long-hand is good as it shows you the basics!)

​Unfortunately many young graduate engineers and project managers can’t even get their first job – why – because they don’t have experience! Some contractors view them as unemployable.

When I managed my own construction division I saw it as a tragedy that many young construction graduates couldn’t find work. In fact there were some courses that required students to complete six or twelve months of practical experience with a company before they would be granted their qualification. These poor students couldn’t even complete their qualifications because construction companies wouldn’t employ them. I employed many of them. They were relatively cheap and provided useful help on our construction projects. But more importantly, at the end of the specified period they had received valuable construction experience with a reputable construction company where they learned the basics well, and of course they could finally obtain their degree, or diploma, and continue with their career. But, there was another benefit for us – at the end of the year we were able to select the best and employ them as qualified engineers. We had a year to understand them, and they had a year to decide if they enjoyed working with us. Surely a win-win for both parties with a better chance of success than employing someone we didn’t know. The other benefit was that most of these young newly qualified engineers became incredibly loyal to the company because we had helped them gain their qualifications – we had extended a lifeline to their career. Most became successful and the company benefited hugely from their experience and skills – experience we had provided.

What happens today?

​I’ve seen young engineers unable to get a job, become disillusioned and leave the industry before they started. Others in desperation join construction as a labourer or work themselves up through the trades. When contractors do employ young engineers they are sometimes put in a pigeon hole, only good to do quality inspections for a couple of years, or manage the laboratory or the concrete mixing plant.

Then when the contractor needs a project manager they take one of these engineers, or a Supervisor, or someone in another role, and appoint them as the project manager. Yet these individuals have no experience in managing a project!

Many contractors operate with specialists, who only do planning, or quality control, or safety, or claims and measurement. When someone finally makes it to become a project manager, site manager or site agent, they rely on these specialists. But often, the construction project managers don’t understand the basics of what these people do, so they aren’t capable of interrogating a construction schedule, or checking that the safety officers or quantity surveyor is doing their job properly. They don’t understand how to prepare a construction schedule, can’t measure the completed work, they often don’t understand cost reports, can’t price a construction project, can’t interpret the contract document, don’t understand the basics and unfortunately can’t plan the construction project. (planning your construction project) Then when things go wrong on their project their bosses or managers blame them. The sad thing is that some of those same managers don’t know any better themselves, and are incapable of correcting them or offering advice when things start going wrong because they were never trained properly.

​I’ve seen project manager’s careers destroyed before they even started because they were put in charge of a project and didn’t have the experience or knowledge required and weren't supported when they got into trouble.

So what should contractors do to improve the skills shortage?

​Well firstly let’s employ newly qualified engineers and project managers, even if they don’t have experience. Don’t pigeon-hole them in one position for years – even if they’re doing well in that position. Give them a variety of experience. Ensure they are exposed to:

• Starting a construction project
• Preparing construction schedules
• Quality management systems
• Safety
• Pricing new projects
• Measuring completed work
• Preparing claims
• Doing cost reports
• Meeting with the client and subcontractors
• Understanding legal and contractual compliance

​Allocate a mentor to them. Ensure your team understands how important it is to help and correct them. Send them on training courses where necessary (unfortunately many of our universities and technical colleges don’t provide some of the knowledge we require from our future project managers) – these may include communication, letter writing, scheduling, form-work design and the contractual and financial aspects of construction. Training and mentoring in construction

When they’re finally given their own project to manage ensure they are ready, then support and guide them when required. Don’t let them drown and then blame them for being a poor project manager. If they were bad they shouldn’t have been put in charge of the project in the first place. Their success is your responsibility. The importance of effective delegation for successful projects

What should our young engineers and future project managers do?

​Unfortunately there are some that think it’s easy and there’s a quick path to become a construction project manager. A university degree doesn’t make you a project manager, and nor does years working your way up through the trades. Read my post: ‘What does it take to manage a construction project’.

Try and work for a construction company that will give you the right experience. Importantly work for the right manager who can mentor you, passing their knowledge to you. Continually ask questions. Understand the construction processes. Get involved with different aspects of construction and the various management processes, so you gain as much experience and knowledge as possible. Don’t think it’s easy to manage a construction project. What qualities does a good construction project manager require?

​My mission has always been to train those working with me so they can be better than I was. I made mistakes – they shouldn’t make the same mistakes as me!  That’s why I’ve written several books in the hope of passing on my knowledge and experience to the next generation. 

Let’s stop blaming the skills shortage for the poor performance of some project managers. Ensure we are training the next generation of construction project managers so they’ll be better than us. Take the time to mentor our young engineers and project managers. Correct them when they make mistakes, give them advice, help them and delegate responsibility to them. Yes, there will be failures and some that won’t make the grade, but with proper support and encouragement there will be many more successes.

The future of our construction projects is in your hands.
#constructionmanagement #constructionprojectmanagement #construction​ 

​To read more about the author’s books and find out where you can purchase them visit the pages on this website by clicking the links below:
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© 2016 This article is not to be reproduced for commercial purposes without written permission from the author.

Is your construction company going to become a failure?
Thousands of construction companies fail every year – don’t let your company be one of them.
Is your construction company going to fail? Of course our immediate answer is ‘no’! Yet, many construction companies fail each year. I’m sure we can all name construction companies that have collapsed over the last couple of years! Some have been very successful and then, in a short period of time gone from success to failure. So how can you be sure your company is safe? Are you really safe? Have you taken a good look at your operations lately? Could bankruptcy be waiting for you around the corner?
Often it’s just one project or one bad customer that can sink a company. Sometimes it’s a death by a thousand cuts as the company slowly hemorrhages on every project. Companies become bankrupt or just run out of work.
Is your company safe from failure?
Let’s consider some reasons why construction companies become failures:

1. Negative cash flow. This is probably the biggest cause of companies failing. Even profitable projects can sink a company if the project’s cash flow is negative. If you don’t have cash to pay your employees, suppliers or subcontractors you will almost certainly go bankrupt unless you’re lucky enough to get a loan from the bank. But failure to repay the loan on time will end in the same result. Most customers pay for work invoiced monthly or when a milestone is reached. Payments are frequently 30 days after the contractor submits their invoice which could be a month or more after some work was actually completed. Furthermore customers usually hold retention monies until the project is completed, and often until the end of the warranty period which could be another year after project completion. In the meantime contractors have to pay their employees, suppliers and subcontractors. This often results in contractors funding a project until it’s completed. The bigger the project, or the more projects the contractor works on, the bigger the potential cash flow problem becomes. Contractors need to understand their cash flows, read their contracts carefully to ensure the payment terms and conditions are acceptable and consider what will happen should a customer delay payment or if large unresolved change order claims occur. Cash flow is further impacted when valuations are submitted late, or all completed work isn’t claimed. It’s essential to check your customers are paying milestones and invoices on time in accordance with the contract. Do you understand your project and company’s cash flow? Does your team understand how vital it is to receive payment as soon as possible? Don’t take on projects that will push your cash flow into the red unless you have sufficient funds to get the company through this period.
2. Poor reputation. A contractor’s reputation can be ruined in a short space of time. Poor quality work, safety breaches and late completion of projects all adversely impact our company’s reputation. Companies with a poor reputation find it difficult to win projects. Companies with a good reputation form lasting relationships with clients and are often able to secure work with a higher profit margin. Do your employees understand how vital it is to build and protect your company’s reputation?
3. Making errors when you price a project. Contractors sometimes make errors when they bid for construction projects. This may result in them winning projects with a price that’s below what the project will cost them. These mistakes may be simple arithmetic errors, or could be due to misunderstanding the RFP’s scope or specifications. Companies have been destroyed because a single project was under-priced. Of course submitting prices which are too high can also be detrimental and result in the company not securing projects.
4. Theft and fraud. Theft and fraud often happens when there aren’t sufficient controls in place. Sometimes contractors aren’t aware it’s happening. The theft can be theft of materials and equipment from your project sites. It can be time theft in the form of time sheets rounded up to inflate payroll. It could also be suppliers and subcontractors defrauding the company by invoicing for items they haven’t delivered or over-invoicing for items they have delivered. But fraud may involve your employees and could be as simple as doing work on their private projects with the company’s resources. Often it involves theft or misuse of petty cash and even arranging fake bank accounts for customers to pay money to in place of the company’s bank account. Theft reduces profits, disrupts cash flow, impacts productivity, delays progress and can be demoralizing for employees. Ensure you have systems in place to deter theft and fraud.
5. Over capitalizing the company. The construction industry goes through boom cycles when construction work is abundant to times when work is scarce. In times of lots of work contractors often think it will never end and are quick to purchase new equipment and employ additional people to take on more and bigger projects. As the cycle turns it becomes difficult to keep these resources busy. Either the company must win projects to keep their people and equipment busy by under-pricing work when it’s scarce or they’ll have machines and people standing. Often this new equipment is purchased with loans from the banks which still have to be repaid in the lean times. If a bank has any doubt that their loan may be in jeopardy they could take action to foreclose the loan. It’s important to purchase new equipment and grow the company, but always take a cautious approach knowing that the good times will almost certainly end.
6. Employing unsuitable and unqualified people. Construction companies depend on their employees. Poorly skilled people or the wrong person for the job can quickly turn to a disaster – poor quality work which has to be redone, accidents and injuries, poor production and even unhappy customers. Inept people will adversely impact reputation and cost the company money. Continually review your employees, train where necessary, correct their faults and occasionally clean out dead wood and those who are creating problems in the company. Ensure employees know what’s expected from them. But just as important is to look after your good people. A construction company is only as good as their employees.
7. Taking on risky projects. More than one company has sunk (literally) when a storm or flood has disrupted their project. There are many project risks such as industrial unrest, political instability, supplier disruption, scarcity of resources, construction methodologies which aren’t successful, etc. Some risks, should they come to pass, can cause huge losses and disruption to a project – and if they are large enough impact the whole company. Understand the risks when you price your projects. Take mitigating actions to reduce the impact from the risk or to lessen the probable occurrence of the event. Don’t take on projects where the risks are so large that they could destroy the whole company. Ensure your managers and estimators don’t destroy the company by submitting prices for risky projects.
8. Working for the wrong client. Many contractors go bankrupt because their customer hasn’t paid them for completed work. Some customers have a reputation for paying contractors late, or even not paying them at all. Customers can also be disorganized, or have a weak design and management team leading to project delays and disruptions. Budgets may be too small leading to insufficient funds to pay contractors. Occasionally we encounter customers who engage in legal disputes with their contractors and some that are demanding and just plain hard work. Make sure when pricing your projects that you’ve done your homework and understand your client knowing they have sufficient funds to pay for work completed.
9. Buying businesses without doing proper investigations.  .....CONTINUE READING........... 

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Pricing a project without researching it properly could be costly.Some years ago we were staying at a Bed and Breakfast in the highlands of South Africa. It was winter and the day’s temperature was about 16 degree Celsius (60F) and the nights dipped to -2 Celsius (30F). It wasn’t freezing but the air had a bite to it. It was late evening and we were having drinks in front of a cozy log fire when two tourists arrived (bird watchers) with their guide. They immediately gravitated to the fire to warm up. The bird watchers were thinly clad in shorts and T-shirts and one had a sleeveless light jacket. They looked frozen. The local guide had a pullover and a thick jacket. We asked them why they were dressed for summer and where their sweatshirts were. Apparently they arrived in South Africa the day before from New York (where it was summer) and were collected at the airport by their birding guide to start a 10 day bird trip through South Africa. They hadn’t packed anything warm as they were coming to Africa – apparently they thought Africa was always warm!
Now Africa actually consists of about 50 countries and South Africa spans from about 20˚⁰South to 35⁰South and much of the interior has an altitude over 4,000 feet so in winter it can get fairly cold – although snow isn’t common. Since these guys were on a bird watching trip they weren’t staying in towns where warmer clothes could be purchased. We thought of them the next morning when we heard them leave at 5.30am. When we had breakfast at 7am the frost was still thick on the ground. Bird watching means you are outside much of the time walking the fields – it wouldn’t have been fun in summer clothes that morning.
So here’s an example of individuals who hadn’t done their basic research before leaving on vacation – and suffered for it. Of course we hear many vacation disaster stories of tourists unable to travel because their passports had expired, they failed to get the required visas, overstayed their visas, or missed their flights because they hadn’t looked at their flight times properly. All of this costs them money and time. They have to rearrange travel plans. Indeed, I have sometimes been amazed at the lack of travel knowledge and preparation of some tourists on my journeys. On a cruise to the Antarctic a fellow passenger remarked she didn’t realize that all she would be seeing was ice!
In the same way I’m often amazed at construction companies that fail to carry out basic research before submitting a price for a project. They seem to assume the project is the same as their last projects.
In February Samsung C&T revealed they had lost over $700 million on a $4 billion project in Australia. I think a large portion was due to poor pricing and not understanding the local conditions.
What homework should construction companies do when pricing a new project?

• Understand the contract information supplied:
  • Read and understand the contract. Are these conditions acceptable to your company?
  • Ensure you understand the scope of work – what you have to construct and its location. Price the scope as you are asked to.
  • Know what you have to supply and what the customer will supply.
  • Ensure you are pricing in accordance with the supplied specifications.
• Know your customer:
  • Do they have the required funds?
  • Are they known for treating their contractors well or do they pay late and become involved in contract and payment disputes?
  • Can you deliver what they expect?
• Visit the project site:
  • Is there access?
  • What does the terrain look like – is it flat or steeply sloping?
  • Are there other contractors already working on the site or adjacent to the site which could impede your work?
  • What are the ground conditions like? Rock could slow excavations down making the installation of utilities slow and expensive. Of course ground conditions can vary even over short distances meaning that similar projects in close proximity could have very different foundation designs impacting both the project duration and the cost. When in doubt, don’t price the project without a soils report.
  • What is the security situation? Some neighborhoods have more theft than others.
• Understand the local conditions:
  • Cities, counties and states have different laws which might govern permit conditions and even building codes. You may need different licenses and registrations to operate in that region. In some cases your company may not be able to obtain these, but even if you do get them there may be delays and additional costs.
  • Understand the local tax which can vary between states and countries.
  • Working in another country brings with it a host of potential problems which include; the lack of materials and skills, problems with importing and re-exporting your equipment, not understanding the tax system, lengthy red-tape, corruption, and even exporting your money out of the country. I’ve known contractors who haven’t been able to take their equipment out of the country even though they originally brought it in to construct the project. I’ve known others who couldn’t take their project profits out of the country. Many contractors have suffered huge financial losses when the currency they were being paid in devalued part way through the project. The horror stories of contractors working in foreign countries who didn’t do their homework properly and understand the local conditions is endless.
  • Research the local weather conditions which could be significantly different to those you are used to.
  • Understand the availability of resources. Materials, equipment and people.
  • Be aware of the local labor codes and wage rates.
  • Understand the productivity of the local workers – these can vary significantly between different countries and I’ve known it to vary by a factor of five. Imagine pricing a project on an assumed productivity and the actual productivity achieved is only 20% of what you allowed!
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Two months ago I asked an electrical contractor to price some work. A few weeks later I emailed them on another issue and asked where the quote was. They acted surprised I hadn’t got the price and promised to resend it. Nothing arrived. When I met the electrician at another job I again asked what had happened to their price. It appeared they had sent the quote to the wrong email – despite me regularly communicating by email! I was promised the quote would be resent. I was surprised to hear the electrician actually had little work in the last month and was desperate for new projects. Obviously not desperate enough to follow up on the quote sent to me. A few days later and I still haven’t received their price.
It’s the same story with a number of other requests for quotes. In early January the shade sails at a rental property needed urgent replacement. We sent out 3 urgent requests for quotes. One company replied the same day and got the job. The other two companies contacted us nearly two months later. I’m still waiting for a quote to replace the roof on an apartment complex nearly four months after the company visited the apartments. I received a quote from another company within a week.
Some companies always seem to have work, even when the economy is depressed, while others seem to struggle to find work. Why is this?
How you can secure more business

1. Follow-up on quotes. A few days after submitting your quote call the customer. Check they’ve received your quote. Ask if they have any questions and if everything is clear. Let them know you’re interested in the work. If they intend to place the order with another contractor ask why. Feedback is important for future quotes. You may need to make some adjustments in your next quote to win the project, or, if you can’t meet your competitors’ prices you may have to revisit how you do work or even consider looking at other markets where you could be more competitive. Send your customers their quote as soon as possible – many customers are impatient and want immediate answers. As they say; ‘the early bird catches the worm’! Often we will proceed with the quotes we have and not wait for stragglers.
2. Ensure your quote is clear and includes everything that was asked. Tell the customer why they should be using your company. Unfortunately many quotes end up in the trash. Customers can’t find what they are looking for or the quote has so many exclusions and legalese that customers can’t be bothered. Obviously ensure your price is submitted to the correct address.
3. Reputation. Without a good reputation you will be lost. Your company’s reputation is built on delivering a quality project, safely, on time and with minimal fuss. Ensure your employees understand this. It only takes one employee to destroy your company’s reputation. Word of mouth is often your best advertisement and repeat customers should be looked after.
4. Always be professional. This means returning phone messages, answering emails and arriving to meetings on time. Customers can sometimes be irritating or ask stupid questions. They will stretch your patience. Unfortunately you usually just have to deal with it. However, some customers can be very tiresome and distract your time from other projects and customers. It might be time to avoid pricing projects for these difficult customers – but don’t be rude to them.
5. Advertising methods vary by market and what works for one company won’t work for another. We all focus on different customers and types of work. However I’ll touch on a few items.
   1. Ensure your website is up to date and reflects the projects the company delivers. Obviously check that the contact details are current.
   2. Company equipment and vehicles with the company’s name and contact details are almost free advertising. Equipment should always be clean and in good condition as poor equipment is a poor advertisement.
   3. Always carry business cards and company brochures with you – you never know when you could meet a potential client.
   4. Ensure that you are targeting your advertising correctly. What works for one company won’t necessarily work for another company that’s a different size or targeting different customers.
   5. Sign boards with your contact details placed outside the projects where you are working are essential. However ensure they have your customer’s approval and meet the local authorities’ requirements. Sometimes even safety signage with your company’s name on it can be sufficient advertising.
6. Keep in touch with your past clients. Don’t assume that past customers will remember you. Develop long standing business relationships. But don’t rely only on these relationships. Remember customers are often evolving, moving people to different roles, opening new departments, changing the way they give out projects. Be aware of these changes otherwise you may not notice that the person you were relying on no longer holds influence on the awarding of new projects.
7. Chat with current customers, subcontractors, project managers, designers and suppliers. Ask about new leads. If they know you are looking for new projects they may refer your company to someone they know. Ensure your employees are on the lookout for new work opportunities which can be passed back to managers to follow-up. Looking for work shouldn’t only be the responsibility of business development managers, the estimating department or senior managers. Securing new projects is a team effort and your employees need to understand this.
8. Always look for new opportunities. You may consider new areas, new markets or new products. Always be on the lookout for new project opportunities as you travel around – even on your day off. Keep current with the local news stories. Keep a list of possible upcoming projects and contact those associated with the bidding process.
9. Think ‘out-the-box’. Is the traditional way of finding new work not delivering results?  Look for other avenues. What are your competitors doing differently? Who gives out the type of projects you do? Who are potential customers? Can we make minor changes to the product you offer that could possibly attract a new customer base?
10. Be aware of the latest technology developments. There’s new technology to help us manage our projects and businesses better so we spend less time with paperwork and mundane tasks. There are options to better market our company. Our customers are demanding that we include the latest technology into their products. There are new building materials and methods that can reduce project costs, shorten project durations and improve quality. Consider how virtual reality can provide customers a 3D image of the finished product. Of course don’t just jump in with the latest technology without investigating it properly and understanding whether it will be right for your company and your customers.

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