The Challenge to Construction Companies in today’s construction environment

The prediction above translates to a healthy outlook for construction companies into the future however, the challenges they will face to achieve success are bound to increase.

The challenges of sustaining a construction company are not new to the industry, however, the expected growth rates will lure new competition. Clients will have a wider selection of contractors’ requirements and demands will become even more stringent than they already are.

It will become more difficult for everyone to secure their piece of the pie and bidders will need to take extreme measures to be competitive.

Already today contractors are cutting tenders to the bone which may lead to success in the short term, but if this aspect is not managed carefully and you encounter further losses, this will not be the solution to running a long-term sustainable business.

Construction companies today are already facing extreme challenges such as

  • Aggressive bidding and low-profit margins.
  • Disruption resulting from unclear scopes and excessive changes.
  • Schedule slippage resulting from delays outside of their control.
  • Labour and economic instability.
  • Acquiring and maintaining a skilled workforce.
  • Unrealistic client demands.

These are only some of the challenges contractors are faced with. The bad news is that these are not going to go away and are bound to get even worse.

So how is this dealt with?

Unfortunately, there is no quick and easy solution; however, one cannot change the conditions; you can only change how you respond to them.

What does this mean to contractors? A new player in the mix with a focus on realizing a profit on their investment means even tighter budgets.

The unfortunate truth about being a contractor is that you often enter the project towards the tail end when much of the overall project float has already been depleted and the project investor is desperate to curb any further costs/delays. The construction contractor is often exposed to unrealistic timelines and targets which are near impossible to achieve.

The contractor can either walk away or accept the risk. With the existing competition and the need to maintain a flow of contracts, contractors are often left with little choice but to accept the risk.

The unfortunate fact is that in the project environment today, this scenario plays off all too often and contractors that are not able to deal with this will soon find themselves out of business.

The net result is that contractors, unable to protect themselves through contingency due to tight competition are often forced into excessive risk margins.

The most common error made here is to attempt to cut down on costs by delaying the onboarding of resources and also forfeiting on quality of resources.

A regular strategy seems to be to sit back and rely on delays by the owner’s team leading to recovery through claims. In today’s project environment, changes and claims are common however they do carry risk.

  • Contractors do not want to be branded as claim chasers.
  • You do not want to unnecessarily sour relations with clients as you will need to work with them again in the future.
  • When you do present claims, you need to ensure your ability to successfully prove and demonstrate your position.
  • When claims go to arbitration, clients are often in a stronger position to defend these, and it could result in further costs to the contractor.

A further problem I have noticed with many contractors is that by not establishing a well-defined baseline program and systems leads to legitimate claims passing by unnoticed, resulting in opportunities that are missed.

Further to the above is the inclusion of program elements such as, key contractual dates, provisions for float, time risk allowances and other requirements, access dates, delivery of client-provided items, approvals from others, and other items the client may require to be in the schedule. So, how do contractors protect and defend themselves in these scenarios?

For contractors, their most costly expense is generally the cost of time. Their best defence is to protect time. The project baseline schedule is the most important tool and mechanism for managing and protecting time. If set up correctly to the correct level of detail with a clear critical path, this is also the best mechanism for identifying, managing, controlling, and defending delays and claims if sufficiently detailed.

Too often I see contractors with sub-standard programs/schedules resulting in their time control being taken over by their clients and thus also effectively taking away their ability to manage their own destiny and protection against potential unwanted delays.

Gilbel Project Solutions understands this predicament contractors are facing. We also understand the budgetary constraints. Our aim is to help you take ownership of your schedule by improving the input quality from the outset, and to ensure maintained quality throughout the project, at a cost that fits within your budgetary constraints.

What benefits will you get when partnering with us?

We will assist with training and mentoring your project planning and scheduling team to:

  • Ensure your schedule is sufficiently robust to protect your time.
  • To identify and understand your schedule risk.
  • Ensure your schedule identifies areas leading to a risk of delay.
  • Ensure your schedule identifies the impact of scope changes that may arise.
  • Ensure your schedule allows for demonstration of changes and delays and improves your success rate of claims.
  • Ensure that in the event of arbitration cases your schedule quality is of an acceptable quality standard for your appointed arbitrator for use for your case, thus limiting additional costs of reworking your schedules to support your case.

Contact me and let us discuss how my services can benefit you.

Published by: Jackie Gilliland

Gilbel Project Solutions.