HOW TO REHABILITATE A SICK PROJECT

THROUGH PROPER MANAGEMENT

By: Engr. Eustaquio T. Coronel, Jr.

I am here as one of the assigned resource speaker of the PICE Project

Management Specialty Division for this mornings seminar. This is in keeping
with PICEs organizational commitment to the professionalization of civil
engineering practice in our country and to the upgrading of civil
engineers technical knowledge and skills to world-class standards. PICE
has taken a pro-active role in leveling the playing field for the benefit of
our local professionals whose foreign counterparts have the competitive
edge in the open market.
For the brief introduction of myself, I am a licensed civil engineer who is
through and through an Operations Man, one who started from the lowest
level of construction and engineering work and went through the nittygritty of said work until I finally became a Project Manager. Thus, today I
can legitimately lay claim to my 60 years of hands-on knowledge and
experience as a building contractor and as a project manager of all types
and sizes of projects.

Professionally and operationally, I met some very challenging experiences

when I managed the construction of real estate projects for Ayala Land,
Inc., Interhouse Corporation, Gotesco Realty, Inc., Isetann, Inc., Robinsons
Land Corporation, La Perla Industries, Inc., KKP Resources and
Development Corporation and Adamson & Adamson, Inc. However, the
most challenging projects I encountered were the ones in very critical
condition when entrusted to me. And I successfully turned them around to
the surprise of the deeply grateful owners or contractors.
One example of this serious problem in project management concerns a
company which owns 100 ongoing projects spread all over the country.
Apparently, its top executives were dissatisfied with the overall progress of
their building program. So, they hired me as consultant and tasked me to
assess the construction performance of their contractors including their
own in-house construction group which was the implementor of their
nationwide building program.
After evaluating all the pertinent information and data based on available
documents, my men finally came up with a Technical Audit Report. Its
almost revealing finding is the fact that 70 out of the 100 ongoing projects
were plagued by problems, the cause of which was pinpointed on the use
of the wrong system of the project management or the lack of familiarity
with the right project management.

This reference to the right project management is the focus of this

afternoons seminar topic: The Rehabilitation of a Sick Project. For the
purpose of this seminar, I shall define or clarify the word rehabilitation and
the term sick project within the context of my actual experience with
actual cases of projects in bad shape but which I was able to put in good
shape.
It is to be noted that when complete work stoppage happens in a project
and it remains in such condition for many months or years, the completed
items of work will gradually show signs of deterioration or even damage
due to their exposure to the elements or to the wear tear of time. The
extent and gravity of the deterioration and damage will depend upon
whether or not the proper protective and preventive measures have been
applied during the duration of the work stoppage.
In this regard, the word rehabilitation is used to mean the improvement
made in the existing condition of a project or its restoration to a good
condition so that it can be re-used or used for a new purpose. Regarding
the term sick project, it can be likened to a person who is afflicted with a
disease. If a sick person is cured of his disease by medication, a sick project
is brought back to good health by rehabilitation.

As far as sick projects are concerned, they are found mostly in urban
centers but their greatest concentration is in Metro Manila. In my long and
rich experience in the rehabilitation of sick projects, I can classify them into
three types:
1. Projects that economic and financial crises had overtaken since
the latter part of the 1990s which saw their complete closure and which
stagnated for 2 years or more before they were re-opened for
rehabilitation. This is the sickest type in terms of deterioration because they
were left entirely to the mercy of the elements without any effort expended
in preserving the quality of the completed works or in preventing them from
further deterioration by proper maintenance.
2. Projects that were operationally stopped upon the issuance of
the courts temporary restraining orders and the subsequent court litigation
between the owner and the contractor for contract violations by both and
for non-compliance with plans and specifications by the contractor and
non-payment of alleged accomplishments by the owner. The project was
the sure loser where the court battle was a long-drawn affair.

3. Projects that the contractor had to abandon due to financial

losses resulting from abnormal slippages and sub-standard materials and
workmanship which often leads to a take-over of the project by the owner
or it is awarded to another contractor deductible from the original
contractors contract. The usual cause of this project abandonment is the
underbid price of the winning contractor coupled with managerial and
technical incompetence.
With this clarificatory explanation of terms and types of sick projects, let me
go back into the main topic of this seminar by asking this question: How can
a sick project be rehabilitated? Offhand, the ready answer I can give is the
application of the right project management. It should be understood that
the use of the wrong project management can even get a healthy project
into the sick list.
However, I am reserving for the later discussion the project/construction
management that I know from experience is the right one to prevent a
healthy project from getting sick and to cure a sick project by making it get
well. Meantime, let me give you some of the sick and almost dead projects
we were able to rehabilitate successfully. The focus of our concern in these
projects was to determine the most urgent problems and provide the most
practical solutions to them.

1991 Rehabilitation Program for Earthquake-Damaged Secondary

Schoolbuildings in Metro Manila Araullo High School, Roxas High School
and Ramon Magsaysay High School
When we were hired to rehabilitate these heavily damaged buildings, the
DPWH had already conducted its investigation and recommended for
demolition what it listed down as condemned buildings. As we personally
made an ocular inspection of these condemned buildings, we decided to
have a second opinion on the cracks on the beams, columns and walls
which, to our judgment, did not adversely affect their structural stability.
True enough, the good structural engineer we hired concurred with our
judgment and recommended the proper remedial measures. After these
remedies were done, the rest of the rehabilitation work followed routinely.
These rehabilitation work put the condemned buildings back to use and
occupancy which meant a savings to the government instead of losses if
demolished.

Ongoing Rehabilitation of Critically III Mega Projects Shopping Complex at

Imus, Cavite and Baclaran, Paraaque, Metro Manila and 42-Storey HighRise Building at Ermita, Manila
Several weeks before our contract with the general contract took effect,
we secured all the necessary documents and the data from which we reestimated each project item for item, computed for the total
accomplishment against the budget as well as the cost to compete the
remaining works. After we had determined the total days of delay, we
required all project participants to submit their respective revised schedules,
on the basis of which we consolidated them to draw up the overall Bar
Chart, S-Curve, Manpower Requirements, etc. in conformity with the
projected completion date.
We also prepared the final costing for change orders and additional works
based on the newly revised plans and specifications and budget for the
balance of uncompleted works. We identified the funding problem and
operational constraints which had to be resolved to put the project back
on track.

Armed with the needed comprehensive Status Report on where the project
stood including the technical and accounting aspects of project
rehabilitation, we met with the owners, architect, designers and marketing
officers to present the difficult problems to overcome and the pragmatic
solutions to turn around the project in the right direction. We made it clear
to them that the ideal solution was to start with a clean slate. Meaning to
say that if we could right away replace all the existing project personnel,
subcontractors, etc. who were deadwoods with our own men, we could
definitely say what to commit and how much we could deliver at a given
time.
Because our hands were tied by securing of tenure and due process
requirements of the law, we had to retain most of the deadwoods and
gave them the chance to prove themselves but under the new rules of the
game we set and expected them to follow if they did not want to foul out
before the gave was over.
In line with our policy of fair play, we upgraded their present wages to the
latest rate to the latest rate of the minimum daily wage and other benefits
they were entitled to under existing laws but were denied to them.
Experience has taught us that the two great deterrents to high productivity
level are non-payment due benefits under the laws and late payment of
their weekly wages.

In our initial meetings with the project supervisors and technical staff, we
repeatedly stressed the necessity of working together as a team. That
cooperative and coordinative effort is a must for one and all because the
project is the individual and collective responsibility of all project
participants. No one should think of his work to be his only responsibility but
must always look at doing it in relation to its effect on the work of others.
Accordingly, we imposed sanctions against non-compliance with these
obligations they have to one another.
A few months after we had installed the right management organizational
structure affecting the functional realignment of responsibilities, especially
the daily monitoring of the daily activities, many of the deadwoods
voluntarily got out while the due process of weeding out the rest of the
undesirables went on without let-up. When the entire project manpower
had been substantially replaced by men of our choice, the control and
direction of the whole project had gradually shifted to us and overall
productivity visibly went up in terms of completed works and workers
morale.
Today these once very sick projects have been turned around after the
cancerous growths in their bodies had been surgically removed and their
failing health restored by remedial treatment.

At this point, let me draw your attention to the fact that all the aforenamed
projects we rehabilitated are examples of the curative function of project
implementation. At the jobsite, problems delays, cost overruns and poor
workmanship recur with regularity so much so that they are assumed to be
inherent in construction. But if these jobsite problems are searching
analyzed, their main root can be traced to the following:
Incomplete Plans and Specifications and Their Manifold Revisions
More often than not, the construction of a project is started with very
incomplete plans and specifications, usually without the necessary details.
Moreover, these said plans are issued to the field on a piecemeal basis in
the course of construction.
The owner hires an architect to design the building and who at the same
time acts as his representative/consultant on the project. He also hires the
designers for specialty works: structural, mechanical, electrical, sanitary,
architectural, etc. who commence their preliminary designs based on the
initial floor plans/elevations of the architect.

Sometimes, even before the contractor can start the project, changes or
revisions for the owner and architect take place, and many more revisions
come as construction goes on especially after the specialty designers have
submitted their respective designs, and discrepancies or conflicts are
discovered within the individual designs. Altogether, these continuing
changes or revisions along with the shop drawings requiring the approval of
the designer concerned necessarily extend the original time schedule and
increase the original budget.
It is to be noted that the seemingly endless revisions of the plans and
specifications are disadvantageous to contractors who are poor in
documenting their legitimate money claims, not to speak to their
reluctance to bill little amounts of valid claims for change orders out of their
timidity or fear of falling out of the owners good graces. In fact, even when
their delays can qualify for time extensions, they may not have the courage
to claim it in the absence of documents to support it. So, they may instead
end up paying liquidated damages that is deductive from their billings.

Unreasonable Project Cost Award

Bidder and owner are not on an equal footing when it comes to the
bidding of projects. The owner is at a vantage point to extort from bidders
the lowest limit of the desired winning bid price. As a general rule, after
three lowest bidders known, the owner offers to his preferred bidder (if he is
not the lowest bidder) to at least match the lowest bid to nail the contract
award. Once this preferred bidder agrees to the owners offer of matching
the lowest bid, the latter usually will not let go until he gets a substantial
discount from the former. Bear in mind, that some contractors may bid even
below the bare cost of the project because they have core group of
technical men to maintain in the hope of at least breaking even.
It is to be expected that where the contractor has to make do with a
contract price that the owner has squeezed dry, the former is eventually
compelled to cut corners when he can by scrimping on materials,
underpaying his workers and sacrificing quality to survive. As contractors run
short of funding, delays and slippages are incurred and do recur that surely
slow down the pace of work until it finally comes to a halt. This is what
makes a project sickly and critically ill.

Practice of Undercutting on Professional Fee

With the recognition and acceptance of the importance of the services of
Project/Construction Managers by project owners as their best assurance of
getting their moneys worth, many firms and professional groups have
mushroomed in the playing field, dominated by a few smart operators.
Unfortunately, they resort to unethical ways to corner the crowded market
for premium projects.
Undercutting one another has been the prevailing practice of some
professional who are willing to offer or accept a service fee that is as low as
0.70%. I understand that the supervisory fee charged by the DPWH is 3.0%.
Again, the hard-nosed tactic of the owner in price negotiation applies to
professional fee. My experience has taught me the embarrassment of
offering 1.0% to 1.5% fee which is way below NEDA approved standard
rates and to be told that it is way above the prevailing market rate.

The puzzling question is: how can a Project/Construction Manager fulfill his
contract at a fee of 0.70%? Like the contractor who accepted the contract
at almost no mark-up, the Project/Construction Manager will not be able to
provide the right number of technical administrative and accounting
personnel in the implementation of the project. The Project/Construction
Manager will seek the favor of the contractor by shifting some routine
activities to the latter and by obtaining required information and data to
make his regular reports to the owner. As this is a case of you scratch my
back and Ill scratch yours, the Project/Construction Manager will return
the favor by playing blind to the contractors violations of his contract. So
the project becomes afflicted with delays, sub-standard materials,
defective works and poor quality.
The end-result is a sick project caused by both the owner and the Project
Manager. The very low price of the contract which the owner considers as
savings is actually a loss. The real loser, however, is the contractor who
cannot depend upon the Project Manager to protect him as the project is
his contractual responsibility and he is directly accountable for his
performance.

As earlier said, rehabilitating a project is curative. The point in tracing the

root of project sickness of these three prevailing practices in the playing
field (incomplete plans and specifications, unreasonable project cost &
undercutting in professional fee) is to give the preventive aspect of project
implementation the importance it deserves in terms of time, cost and
quality.
In a capsule, what I am trying to say is that if the plans and specifications
including details are complete and the owner gives the reasonable pricing
for the construction contract and service contract, the construction and
completion of the project will be assured of an honest-to-goodness
compliance with the approved plans and specifications, time schedule,
budget cost and quality standards. Meaning to say that the progress of
construction work from its inception to its completion will not be attended
by repetitive defects and deficiencies which are presently considered
normal.

Projects are conceptualized, crystallized and distilled at the pre-planning

level of the pre-construction Planning Group. All the owner-commissioned
designers (structural, mechanical, electrical, sanitary, architectural, etc.) led
by architect should sit down together with the owner for an exhaustive
discussion and comprehensive agreement on the various requirements that
will enter into their respective designs. After all the different design concepts
have been defined and further refined in subsequent meetings, a final
meeting must be held for further fine-tune the designs against the full
requirements of the owner so that each to the other and all are well
coordinated in every detail to remove any discrepancy or conflict therein.
It is pertinent to point out that the only mega project I know which comes
nearest to achieving the construction of a project with complete plans and
specifications is the new Citibank Building at Paseo de Roxas Avenue,
Makati City. I was fortunate to be involved in its pre-planning period of
almost two years as one of the Project Consultants. The owner wanted the
project to be completed within the target date once its construction went
underway and it was done accordingly.

Needless that I go to a detailed account of the pre-planning activities

except to say that its Planning and Design Staff produced the complete
plans and specifications for the Citibank Project. Only minor revisions were
made which did not disturb the smooth implementation of said plans.
Change orders and additional works were very minimal. Overall, the
completion of the project did not have the typical symptoms of a sick
project.
Equally important is the right price for the construction contract and the
right
fee
for
professional
services.
When
a
contractor
or
Project/Construction Manager is paid at a price so low that he cannot
comply with his contractual commitments, the owner will in the end get the
short end of the bargain. This is because the contractor or
project/construction manager will do everything possible to stay viable so
that to compensate for his funding shortage he will be forced to
shortchange the owner in terms of slippages, inferior materials and substandard quality.

Owners must be aware of the negative after effect of denying contractors

or project/construction managers the fair and equitable mark-up in their
contract awards. And the same advice applies to contractors or
project/construction managers who unethically offer and accept prices
that reflect cutthroat competition. Unless the contractors or
project/construction managers get the right price for the owner, the owner
cannot really get the right Project/Construction Managers for the project.
What I have just explained is the preventive means of ensuring the healthy
condition of any project which is really the principal key to the successful
rehabilitation of a sick project. More than half of the present jobsite
problems such as delays, cost overruns, poor workmanship, etc., will be
substantially reduced in their number, recurrence and frequency, if plans
and specifications are complete, contract price and service fee are fair
and just. The sick conditions that normally afflict projects will be prevented
and the health of the project can be sustained up to its completion.
Nevertheless, whether a project is in good health or in bad shape, what is
first and foremost to keep the former healthy all the way and rehabilitate
the latter to its full recovery is not only to manage them right but also to
know the right project/construction management to implement.

Due to time constraint, I am only going to present the general features of

the right Project/Construction Management System. In speaking of the right
project/construction management, I am referring to the kind of
management that is responsible for maximizing the use of six (6) resources to
ensure the completion of the project on time, within cost estimate ad to the
desired quality.

THANK YOU!!!