Construction Cost Management & The Impact of the Project Schedule on Cost

Part 2: How to Define the Project to Control Costs By Ted Garrison Garrison Associates www.TedGarrison.com www.StrategicPlanningforContractors.com www.NewConstructionStrategies.com
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Module 1: Introduction to Phase 1- Defining the Project

You create the finish line you will later cross. Make the finish line clear to all stakeholders.
Ron Black, author Idiot s Guide to Project Management & Microsoft Project 2003

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What is the number one reason why projects fail?

Lack of clear goal or definition!

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5 Phases of PM
D e f in e P la n

E x e c u te T h e L o o p A d ju s t M o n it o r

C o m p le t e

E v a lu a t e

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Strategic Goal

A project result that is mutually agreed upon that creates a win-win environment for all stakeholders. Ted Garrison

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Benefits of Strategic Goal

Projects need a primary purpose. Get stakeholders focused on helping each other. A common goal ensures day-to-day decisions match the desired outcome. Without a common goal decisions can have a negative impact.
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What Should Be the Contractor s Primary Goal on Every Project?

Get the next project or a referral! How do you get repeat business?
WOWING the customer by exceeding their expectations. Solving the client s intimate problems does this.
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Why Is This So Important?

Delighting the customer produces greater profits. When companies are perceived to provide quality in the top 20%, they make more than double the profits of the bottom 40%. Higher profits correlate better with customerperceived quality than with market share or any other variable. Therefore, you are the key.
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What s the Purpose of a Business?

To get and keep customers by satisfying their needs!

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What s the Definition of Client ?

Someone under the protection of

In essence, defining a project is about the client!

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How to Develop a Clear Construction Project Definition:

Identify all project stakeholders. Develop initial constraints. Link constraints to resources. Identify key management issues. Set priorities for the project. Develop a project goal statement. Communicate w/stakeholders and refine.
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Who Are the Stakeholders?

Originator. End Users. Subcontractors. Vendors. Other contractors. Other stakeholders. Community. Project Team Members.
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Determine the Key Participants and/or Stakeholders and Their Roles

Might not satisfy key requirements. May suffer lost opportunities. Might lose project support if you ignore key individuals. Will allow you to determine who your allies might be.
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4 Questions to Ask to Add Value

1. What services could be eliminated? 2. What services could be reduced? 3. What services could be increased? 4. What services could be added?
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Improved Communications with Clients

Communication begins with dialogue not discussions.
Discussions are about persuasion Dialogue is about thinking together

Clients have identified effective communication as one of the most important aspects of successful projects.
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Triple Constraints
( Make it fast. Make it good. Make it cheap. )

Cost
Cheap not as important as you may think. More important is increasing value.

Schedule Performance (Deliverables) Basically pick any two!

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How to Lose Clients?

70% of clients are lost due to poor service. 25% of clients are lost just due to indifference. Recognize you are experiencing a client revolution.
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How Many Contractors Want Satisfied Clients?

Why? 86% of satisfied clients will go to your competitor on the next job. Loyalty = Profits Excellent quality doesn t create loyalty. Low prices do not create loyalty. Excellent service doesn t create loyalty. Even client satisfaction doesn t create loyalty unless you add the emotion of love! Prof. Robert Peterson Univ. of Texas
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So What Creates Loyalty?

Client intimacy is what creates loyalty! Taking care of the client s special needs is what creates intimacy. In other words WOW the client!
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How Do We Wow Customers?

You must develop customer intimacy. You create customer intimacy by taking care of the customer s special needs. This is the heart of adding value . Add value through increased quality. Think of a client as someone under the protection of .
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Understanding the Client

The driving force is what the client wants from you. Client = anyone whose satisfaction depends on your results Client trade your service for the price they are willing to pay. Clients judge quality of the relationship with your company & whether business process gives them satisfaction.
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Understanding the Client

Not all clients have the same desires & expectations. If clients are asked the right questions they are more likely to tell you exactly what they want. Make sure that your client s real requirements are being met. Prioritize requirements they will impact your future planning efforts.
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Performance Criteria
(Need to Measure)
Ability to manage the project cost (minimize change orders) (Cost) Ability to maintain project schedule (complete on-time or early) (Schedule) Quality of workmanship (Performance) Professionalism and ability to manage (includes responses and prompt payment to suppliers and subcontractors)
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Performance Criteria
(Need to Measure)
Close out process (no punch list upon turnover, warranties, as-builts, operating manuals, tax clearance, etc. submitted promptly. Communication, explanation of risk, and documentation (construction interface completed on time) Ability to follow the users rules, regulations, and requirements (housekeeping, safety, etc.) Overall client satisfaction and hiring again based on performance (comfort level in hiring contractor again)(c) 2008 Garrison Associates 24

It s All About Trust!

To earn trust you must demonstrate or prove you are trustworthy To earn trust you must give it! Three characteristics that build trust:
Competence Candor Concern
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Actions That Can Help

Develop focus groups to explain problems/gain information. Directly observe end-user s problems where possible to gain information. Ask questions Ask about everything. If you have a problem add it to the next contract s list of questions.
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Management of Expectations
Don t set expectations too low set as high as you can deliver will decrease competition. Don t promise what you can t deliver in fact, experienced pm s deliver slightly more than they promise on every project. Poor management of expectations is one of the major problems on many projects, especially public works projects.
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Management of Expectations
Your success depends on your ability to meet or exceed the expectations of the project s originator, its stakeholders, and end users. Make sure you can deliver measured success on everything you promise. Schedule & budget are often easier than soft issues.
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Why Is It Difficult to Define a Construction Project?

Qualifications of who defines the project. Tough decisions. Visions.
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A Vision of the Desired Result

A project without a clear vision or goal lacks direction. A vision without a plan is only a wish but a plan brings it alive. A vision needs the direction and clarity of a plan to make it relevant to the day-today operations.
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What Have We Learned About Taking Care of the Client?

Understand the client s needs and then satisfy those needs. Must wow the client That s accomplished by exceeding their expectations.
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Module 3: Strategies for Contractors to Add Value

Continuous Learning
Only by changing how we think and interact can we change the outcomes of our projects.

Innovation
Tomorrow s victories will go to the masters of innovation! Period! Tom Peters

Increase collaboration
In developing your strategic alliances you are only limited by the quality of your alliance relationships and your imagination. Ed Rigsbee author of Developing Strategic Alliances

Turn PM process into competitive advantage.

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Obstacles to Learning
Our beliefs determine how we think and how we act, but these may be in conflict with good ideas. The more successful people are the more resistant they are to change. Too often intelligent individuals attempt to solve problems themselves. In essence, we are allowing biases to interfere with our perceptions of the information.
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Why Continuous Learning?

Our organizations work the way they work, ultimately, because of how we think and how we interact.
Peter Senge

Continuous learning is one of the only two sustainable competitive advantage.

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Two Critical Types of Learning

Adaptive learning adapting to new environments. Generative learning results from developing new practices not considered before by uncovering their client s latent needs.

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Adaptive Learning
Experience has taught us rules to operate by. In a changing environment the rules must change. Learning organizations learn from failures, question practices to see if they are still valid, and value experiment.

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Generative Learning
Generative learning is about expanding ones abilities. Adaptive learning is important in the short-term, but generative learning is essential for long-term survival. To add value and create a competitive advantage we must pursue the latent needs of the client.
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What Must We Learn More About?

Our clients and their business. Our employees and their desires. Our industry and its potentials. Leadership. Marketing and sales. In other words, a lot of stuff.
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Keys to Learning
Must think in systems because of interrelationship and systems hold things together. People learn not companies. A shared vision is needed to give direction and provide a framework for decisions. But first you must learn the client s perspective. Dialogue leads to successful joint learning.
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Why All the Fuss Over Innovation?

It s one of the two sustainable competitive advantages. Innovation builds client loyalty, which produces greater profits. Innovation boosts earnings, speeds growth, and attracts employees. Innovation is how we manage change those that don t manage change don t survive.
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Need Greater Creativity

What is creativity? A process that challenges the excepted ideas and ways of doing things to find new solutions or approaches to challenges. Creativity is about changing assumptions and beliefs response to a changing world. Useful creativity is about developing new ideas that add value for your customers. New services , Better business practices, better marketing, better management practices.
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4 Ways to Stimulate Your Company s Creativity

1. Don t let industry assumptions determine your strategy. 2. Don t let competitors set the parameters of your strategic thinking. 3. Focus on the common features that customers value. 4. Stop working within the boundaries established by the industry or the competition.
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Why Collaboration for Contractors?

In developing your strategic alliances, you are only limited by the quality of your alliance relationship and your imagination! Ed Rigsbee
Author of Developing Strategic Alliances

Collaboration is about creating trust by working together for the common good or the Strategic Goal . Collaboration is not about partnering or sharing of risk
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Benefits of Collaboration
Increases profitability. Improves productivity. Improves working relationships. Increases fun. Improved communications. (System) Improved quality. Reduced paperwork. Will help your business grow.
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Who To Collaborate With?

Start with similar core values Find people you trust Seek those who believe in win-win situations Seek those who will listen but you need to listen too Seek those that are flexible Seek those who share a chemistry You can only collaborate with someone who wants to work together
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Collaboration with Clients

It creates an environment of open dialogue through trust and mutual respect. Allows you to learn more about your clients the more you know about them the more valuable you are to them. It allows you time to learn and develop innovations that add value.
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A Few Secrets of Planning

The driving force of any plan must be what the client wants. A plan must accept clients judge the quality of the contractor by how the entire process gives them satisfaction not just schedulebudget-bricks and mortar quality. A plan must recognize that not all client have the same desires & expectations.
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A Few Secrets of Planning

To develop a good plan you must ask the client the right questions so they tell you what they want. A plan must make sure the client s real requirements are met. A good plan prioritizes project requirements because they will impact future planning efforts (updates).
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Make Your PM Process Value Driven

What s the number one reason for project failure? Answer: Lack of clear definition! Stop defining projects by only plans and specs must include all clients needs Better yet, start defining your projects in terms of what you must do to get the next project .
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Action Steps

Please turn to the inside of the front cover of the resource guide. Write down 1 to 3 action steps that you want to immediately implement from Part 2 of this program.