How Projects Go Wrong
How Projects Go Wrong
So, you’ve commenced your project – the strategic direction is well documented, the
operational plan prioritises the plan and critical resources, and the project plan seems
comprehensive. Monthly project reports are being fed to the Board and the project spend
seems continuously aligned to the allocated budget. All the feedback is positive and the
project is all set to be a success. Backslapping all round.
Suddenly the project manager is looking under pressure, the deadline is fast approaching
and you are being told things are ‘off the rails’. You are told the baseline for the planned
progress is now separate from the negatively progressed status line. What?
What went wrong and where were the early
warning signs? What should the Board
have done? What does the Board need to
ask or do now?
Before we address what went wrong, I’ll
start by saying that most projects are
successful. They’ve been planned well,
resourced well, and the project is getting
the right amount of attention from the top. You’re probably reading this hoping to avert a
possible crisis by seeing where ‘other’ projects have gone wrong.
Most schools usually work with an architect who guides them through the tender process
and eventually award the project to a competent construction company with good
references. However even these can still end up in trouble due to a lack of oversight over
progress or unchecked contract variations when the initial scope of works wasn’t vetted
diligently enough to identify exclusions and deficiencies.
Sometimes the problem starts with schools choosing to manage the project themselves and
use internal staff - this might be the business manager or even the property manager who
hasn’t really got the time to perform this role as well as his usual role but takes it on because
it’ll save money. They learn on the job and inevitably pick up enough skills to perform the
role competently…if everything goes okay. However, they often do not know the essential
tools required to avoid learning ‘the hard (and expensive) way’.
2
Whichever method is chosen, the Board needs to ensure project governance is in place via
a comprehensive project management methodology that adheres to good practices of tender
preparation and assessment, contract management, project management, financial
management, risk management, issues management and change management.
A good framework makes many of these tasks easier
and more transparent. The rule simply is – process
guides behaviour and a methodology ensures things are
not missed.
“Process guides behaviour
and a methodology ensures
things are not missed”.
One of the most fundamental issues with projects is that deliverables (outputs) are not clear.
Any ambiguity can cause a mismatch between the Board’s expectations and the project
team’s intentions. This can sometimes arise because most schools only need to engage a
builder every 3-6 years and the knowledge or skills required to oversee a building project
need to be relearned. Often nobody on the Board has the skills that are needed to oversee a
major construction project and ‘prudently’ it is outsourced to an architect. This is why it is
important to carefully select a good architect or project manager to manage the process on
the school’s behalf and to clarify misconceptions prior to project commencement.
It is also critical to ensure the costs of the project are accurate with appropriate tolerances
for contingencies (unknowns such as design changes, striking rock, contaminated soil, or
wet weather) and escalation (cost increases of materials or labour during the term of
construction, problems with materials supply).
Project overruns and failures do happen, they are expensive and can affect not only the
bottom line but the reputations of the school and the Board members. Good planning with
poor execution is just as bad as poor planning. Apart from employing the right people, and
ensuring appropriate governance, another secret is to ensure the correct tools are deployed
to gauge progress, and the results are reported back in a timely manner.
Progress reports should not only be based on the actual costs to the planned budget
(planned value), as this is not a true measure of the project’s performance. The financials
will report everything planned to be purchased was procured and that you are paying for a
lot of labour. But there is no measure of the actual productivity of that labour – in other words
the actual work completed. This is called “earned value” management and is a project
management technique for measuring project performance and progress in an objective
manner. It reports on the actual work performed, which is critical for accurate reporting.
Failure to report on this means the project team is only likely to realise that it has a major
problem when it nears the end of the project and it becomes obvious the project cannot be
delivered within the timeframe allowed or within the budget available.
Earned value is essentially about tracking the percentage completed on each of the tasks
documented on the work breakdown structure. This tool is used to define the activities and
tasks and determine the schedule budget and human resource allocation against the actual
work required, know as process scope. As the days pass, a percentage of completion is
recorded. If a particular date passes and the report does not show tasks as 100% complete,
the issue is obvious. Ideally the trend should be picked up before that date and project
managers should be alerted to where they need to concentrate their efforts. Do not make the
duration of the task so long that it causes guesses. For example, if there is a 12 month task,
the project teams will inevitably report it as being 50% complete after 6 months. It would be
far better to break that task down into two-month increments to assure it can be tracked.
At this point you may be thinking that this is the builder’s or project manager’s problem if the
project is running behind schedule. They’ll have to deploy more resources on your project in
order to finish on time …because you have a fixed price contract. While that may be true it
doesn’t relieve the Board of the responsibility of diligent oversight and regular monitoring
because if the project is running behind schedule, the school ultimately feels the impact as
classrooms aren’t ready, areas of the school have restricted access, and there could be a
domino effect of other negative consequences. Even worse, if your project manager is
approving ‘unfunded’ contract variations without the Project Control Group’s knowledge, the
project could be at risk of stalling due to lack of funds. Worse still, you need to commence
legal action in order to force the builder to fulfil his contract obligations. So the responsibility
is everyone’s but especially the school because they have the most to lose. Delegations and
reporting responsibilities are critical and need to be confirmed prior to project
commencement.
The rule of thumb is that reporting should be no more
than monthly for a major report (ideally weekly or
fortnightly, depending on complexity, spend and risk
level), and there are three critical registers that need to
be maintained, monitored and controlled:
4
1. Risk Register: An essential part of the project manager’s tool box, this takes the initial
risk-management plan and enables a dynamic register that tracks new risks and the
progress of any risk treatments. When a risk is realised with a negative outcome, it
moves to the issues register.
2. Issues Register: During the execution phase, the recording, allocation and
remediation of issues need to be documented and reported to the Board.
3. Change Register: This avoids “scope creep” and doing more unpaid work than the
contract allowed. A ‘change request’ (variation) is the tool for expanding or varying
the scope of a project and must be approved by the project sponsor and project
finance person.
In summary, your project stands a better chance of succeeding if you following the basic
steps of:
1. Ensure the school has a clear view of what the finished project needs to accomplish,
and the total budget available;
2. Engage a competent architect to prepare a design that meets the school’s needs, a
comprehensive scope of works with sufficient detail that allows for accurate costing
and mitigates the chances of cost overruns due to exclusions and deficiencies;
3. With advice from your architect, discuss with Council their requirements for a
successful Development Application and the likely time for this to be approved;
4. With the financial information gleaned in the first 3 points, discuss with your bank
what documents they require prior to applying for finance, if required;
5. Engage a skilled project manager to assist the school and the architect prepare the
project for tender, and select the builder that scores the highest on the tender
assessment;
6. Ensure a competent lawyer assesses the builder’s contract to ensure the school
retains its rights, and the contract is fair and not one-sided;
7. Put together a Project Control Group that comprises members of the Board, the
architect, the project manager, the builder and relevant school staff. Program regular
meetings and set a standing agenda that includes items such as budget vs costs,
progress, safety, variations for approval etc. Determine delegated authorities and
financial caps.
8. Ensure the three registers mentioned above are created and regularly updated.
9. Monitor the project regularly ensuring that the reports received are appropriate and
relevant. Report back to all stakeholders on the progress.
5
Early insight into performance issues avoids ill-based attempts to “turn the Titanic” when it is
too late.
David Buley
Chief Financial Officer
Capital Grants Program Director
dbuley@aisnsw.edu.au
6