Sample Issue: FUNDAMENTALS OF PROJECT CONTROLS
By Larry True
Managing Director, DR Construction Services, LLC
Introduction
Deciding on a topic to launch a new series of articles is harder than writing a single article when you know specifically what the topic is and what you want to say. The term "Project Controls" means different things to different people depending on their perspectives. Depending on your role in the project, it could mean Financial Controls (the CFO or Controller), Management Controls (the Project Manager), or Physical Controls (the Superintendent or field foreman, for example).
If you are the Superintendent, you are most interested in controlling the flow of personnel and materials to ensure that people are able to work productively on a day to day basis. You have limited space, so getting the right materials to the job when you need them is critical to your ability to proceed. Managing crew sizes is also vital to success. You must plan several weeks ahead to ensure that you can balance your crews and keep them productive. Likewise, the site must be reasonably clear of excess material and debris or you cannot be successful since your people will be falling over or stepping on the detritus left by either your own operations or that of somebody else.
If you are the Superintendent or a foreman you are also concerned about safety. Nobody likes to see anyone hurt on a construction job, not to mention the impact it has on crew morale and productivity. Quality of work is a concern as well. Nobody will remember that the job was done on time or under budget if the roof leaks or the railing falls off. Hoover Dam was a success but the greatest legend that surrounds it is how many people are buried in the concrete – true or false.
If you are the Project Manager, your focus is on controlling the overall time and cost of construction. You have a budget you must meet and the owner has a completion date that must be met – "time is of the essence." You must plan months ahead, knowing when to order long lead items. The project manager must also balance the needs of one project against the overall needs of the company – the company owns one 150ton crane so which jobs need it and when does it need to be there, for example?
The Paperwork
Project management controls also include the paperwork: CPM Schedule, submittals, change proposals, RFIs, timely notice, permits, and billings. No matter how good the superintendent is if the company does not get paid all that is due for the work performed, the company cannot succeed. If submittals are not done timely, one can rarely argue that the architect or engineer is holding up the job by not reviewing them. If the schedule omits part of the work, and the job appears to be on time but runs over due to poor planning and lack of resources, whose fault is that?
Financial Controls
If you are the Chief Financial Officer, Controller or Cost Engineer, the Financial Controls are the most important to you. While the project manager must manage the budget, if the costs are entered incorrectly or to the wrong job, or if vendors are overpaid or double paid, the job will not make a profit. Or conversely, a job may look too good and show a profit when none was made. If anybody commits fraud and steals money through some means – using the equipment on another job, kickbacks to vendors or paying fictitious vendors, costs are expended without benefiting the company. It is up to the financial controls to prevent it or catch it quickly.
Financial controls also can include managing the overhead and insurance so the company remains competitive. The best team in the world cannot be successful if the insurance costs make the price of the work so high that the company’s labor rates are non-competitive. The CFO cannot possibly control insurance costs, however, if the jobs are not safe and accidents are too frequent.
Buyouts on a job are also critical. Ensuring that vendors and subcontractors are treated fairly and paid on time, and that all aspects of the project are covered by your buyout process, is critical to the overall success of the company. If vendors don’t get paid on time and don’t deliver the goods, the project inefficiencies that result can be catastrophic. Efficient back-office practices ensure good financial controls and reduce costs.
Team Effort
It should also be fairly apparent from this overview of these various perspectives, that project controls are a team effort. No one individual is any more or less important than the others. If costs are not managed, the company is non-competitive. If field logistics are not managed, the jobs do not get done. And if the paperwork is not managed competently, materials won’t be delivered on time, subcontractors won’t show up, and the company will not get paid. No one person can do it all and each person relies on the others to make the whole team successful.
Respect for the other members of the team requires that each understand the needs and roles of the others. The need for respect of other team members should be intuitive but it is not. I frequently find dysfunctional teams in companies where one person does not "trust" the other or decisions are made in one team that impact another without considering the impact that decision might have on the overall operation.
In addition, (or perhaps because of) outside influences can have a big impact on the outcome of a project. For example, extended periods of rain, the owner’s failure to make the site available, delays caused by others, and unforeseen conditions, all can have a major impact on a project. By having good project controls in place, a contractor can immediately assess the potential impact. Controls also can provide for proper notice to be given to the correct parties to protect the contractor’s rights. Further, the right financial controls permit the contractor to accurately measure the impact of the outside influences and recover, if necessary, for the additional cost that is incurred.
In Closing
So here we are, some seven or eight hundred words later, and we have done little more than to define some of the many things that are vital to project controls. I guess there is little doubt that we have enough to write about for the next few years. Future articles will deal with all these topics from various aspects: procedures, personnel, software, techniques, document management, education, training, and the role of outside consultants and other professionals in your business.
We promise that this series will provide insight and will draw on our experience and research – good and bad – to help each reader improve project controls. We will provide information on useful tools that we identify along with some guidelines on getting the most out of those tools. Laser alignment tools have made it easier to put the work in the right place. Good controls help bring the project in on time, within budget and with the quality expected by the owner. Finally, good project controls also improve customer relations by ensuring that you bring quality projects home on time and that your costs remain competitive. We welcome feedback and input from readers as well.
Next month – "Financial Controls - Legacy Systems"
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