Electrical contractors learn how to identify the warning signs of project distress before it’s too late
Project schedule acceleration or compression is commonplace in today's unsteady economic environment. Although electrical contractors spend a lot of time and effort to avoid jobs that are prone to acceleration — many even perform a pre-risk assessment of a project — that doesn't necessarily eliminate the risk of schedule acceleration or compression. To protect themselves from economic losses, electrical contractors must be able to detect early warning signs of project distress and have a clear understanding of what to document.
Early warning signs
Senior managers are not always aware of problems that could cause distress on a project. Many contractors rely on front-line supervisors, such as foremen or general foremen, to run the day-to-day activities of the project. However, if these supervisors are not given the proper training and knowledge as to what to look for, it's practically impossible for them to predict problems. Training supervisors will help senior managers make business decisions that will mitigate economic losses of schedule acceleration.
There are several early warning signs front-line supervisors notice that may not be readily apparent to senior managers — signs that can be identified by assessing the resources necessary for the project to proceed smoothly. Not only must supervisors determine the resources they need, but they also must observe the problems other contractors are having in procuring resources. For this article, we'll define these four key resources as labor, tools and equipment, materials, and information.
Labor — In tight labor markets, qualified manpower isn't always available. If your company is having trouble finding qualified man power, then there's a strong possibility other subcontractors on the project are experiencing the same difficulties.
Tools and equipment — It's not always known what tools other subcontractors will need to stay on schedule. However, supervisors can determine if large tools are not present on the project or if they are ineffective. Projects requiring cranes or elevators that aren't present or not working properly are obvious to everyone on the job. This is a huge red flag for project distress.
Equipment delays are becoming more common in the construction industry these days. One large problem is owner-furnished equipment. In an effort to keep costs down, many owners are providing larger equipment. However, few have the expertise with equipment procurement or the capability of storing equipment for any length of time.
Materials — Materials that don't show up on time can cause delays for all parties. These materials can be for your company or other participants on the project. The supervisor, using his communication skills with the other participants on the job, will easily be able to determine if necessary materials are available.
Information — Today, there seems to be no such thing as a complete set of prints, as questions seem to arise in all sectors and phases of the project. Although just needing information isn't necessarily a sign of distress, lack of information is. It's also important that you receive the correct information — incorrect or inaccurate information may cause more problems than no information at all.
Resources — or a lack thereof — are not the only things to watch out for. Many other problems may inhibit your ability to stay on schedule. Examples of disruptions or inhibitors that can occur include design changes, working in an operational environment, improper sequencing of work, congestion, the stacking of trades, and weather. However, the main reason for schedule acceleration or compression is poor contractor management. General contractors that manage construction projects poorly cause added expense for the subcontractors as well as the owner. Problems caused by poor contractor management early in the construction process will not go away — they usually multiply as the project moves forward.
It's your job to document and communicate the resources and disruptors with senior managers so they can determine a plan of action. Most of the information can be extracted from the daily job logs, meeting minutes of the project progress meeting, change-order log, request for information log, or the constant communication with other project participants. This doesn't have to be a formal document. Usually, it's an informal log called the project distress log.
Using the labor factor model (click here to see Figure), developed by H. Randolph Thomas, author of “Forecasting Labor Productivity Using Factor Model” and a professor at Pennsylvania State University, allows supervisors to communicate important information on project distress to senior managers. Employing an informal diary or log developed for each project can save your firm thousands of dollars, should the project actually move into a distressed state.
What to document
Once it's apparent that the project is in distress, you must document everything that happens on the job. Supervisors should be aware of how important their daily job log will be when it comes time to recover lost monies due to inefficiencies. The burden of proof will be on you. Your documentation will build a chronology that will tell the story of what happened and when. Trying to reconstruct what happened after the project is complete will be virtually impossible. A project file should be organized to support a claim for a loss of labor efficiencies that include 10 essential items.
- Estimating and bidding files
These files should include the original estimate with all related backup sheets. Because most, if not all, bids are done on a computer, a backup disk should be made and stored with the job file. Include any quotes from subcontractors and vendors. These prices may be different than the actual dollar amount spent due to excessive changes or having to expedite material fabrication and delivery.
- Contract documents
Maintain copies of all contract documents, including addenda, change-orders, and correspondences that were associated with the contract negotiations.
Start with the original project schedule and include all updates and revisions. The schedule should show a date of implementation. If it doesn't, make sure the date is handwritten on a hard copy.
- Cost records
Keep a weekly cost record of all expenditures on the project. Be sure to include deliveries, payments, and requisitions.
- Correspondence and similar communications
Include all correspondences, internal and external memos, letters, e-mails, notes of phone conversations, meeting minutes, and any other documentation that shows proof of key events that took place.
- As-built information
Include daily reports, inspection reports, time sheets, job logs, professional inspections, and diaries. These records will show the conditions of how the work progressed. The daily job logs are probably the most import documentation that will go into this file.
- Standard form correspondences
Include any and all correspondences with all project participants, such as notes of phone conversations, requests for information (RFIs), field clarifications, transmittals, submittals, and changes.
A picture is worth a thousand words — and perhaps dollars — in this case. When filing a claim, you need to show the conditions in which the work was installed. Make sure pictures are dated and time-stamped. The value of the picture will be determined by how well it is documented.
- Other subcontractors' files
Manpower and location of the work others are performing are also important factors to document. Out-of-sequence work and slow progress may not affect you immediately, but they could cause problems down the road.
- Completion documents
Documents, such as punch lists, certificates of substantial completion, certificates of occupancy, or certificates of final acceptance, should go into this file.
Looking at the big picture, the three most important things to remember are documentation, documentation, and documentation. When in doubt, document. Remember, it's your responsibility to show entitlement when filing a claim. The better your documentation is, the easier it will be for you to recover your claim. It's not unusual for 25% of the total labor hours on a project to be inefficient, a reality that has put some electrical contractors out of business. Don't let it be you.
Mitchell is president of Integrated Management Group in St. Louis. He can be reached at firstname.lastname@example.org.