Why do Construction Projects Fail?

[RyanV]

Residential construction projects consist of innumerable tasks and events that all must be carefully choreographed and managed in order for the project to be considered a success. However, success of a project is not determined simply by the issuance of a certificate of occupancy.

A residential construction project can be completed yet still be classified a failure. A determination of failure can be based upon such elements as:

Exceeding project budget
Not meeting contracted delivery date
Excessive "call backs"
Monetary loss to the company
etc....etc....etc....
In this forum, identify and discuss the causes of failure in a residential construction project and what safeguards a builder can put into place to reduce the risk of failure.

[concretemasonry]

Who are you and why?

[TnAndy]

Is there gonna be a test at the end of this ?

[RyanV]

Nope its just a discussion i have in my class and i was just looking for some input.

[KathyKre8s]

Hi Ryan

This is my second posting to this forum and I do like your question. It's an academic question about a project that IS complex,... home construction with GCs and Subs. I am currently involved in our first foray into this world and I'm afraid it will be a 50/50 chance of success because of the various factors involved that we just have no control over, (and shouldn't have control over).

My only poker chip is that the architect lives 2 blocks away from me and any town can get pretty "small" if someone's reputation is at stake and they drop the ball (or cut corners) so to speak.

Our project will involve a mason, a carpenter, a painter, and demo guy and an electician. For a 10' x 10' uncovered front porch. Wow!

Hope you are checking these postings

Happy for any replies.

Kathy

[David]

In this forum, identify and discuss the causes of failure in a residential construction project and what safeguards a builder can put into place to reduce the risk of failure.

There are only about 2, maybe 3, million reasons why a project would 'fail.' If you want good conversation, you'd have to ask something a little more specific. Here are a few reasons why a project fails:

- Poor quality of subs
- Lack of communication between GC, GC's supervisor (other employees), subs, and client (homeowner)
- Delay in material availability, sub's schedule, delays from other projects the GC is on, and other delays
- Poor craftsmanship
- Poor material choices
- Unrealistic client expectations
- Lack of documentation
- Lack of change orders when client changes his/her mind
- Weather
- Unethical decisions/actions of any party

As I said, there are probably only 2 or 3 million more to add to this list.

[justin]

What i feel is that...The prime reason for a failure is bad management...be it of material or labour...Due to poor management, the costs shoot up and thus the contractor has to bear the additional charges

[concretemasonry]

The real bottom line is that often a contractor does not have a realistic view of the scope of the job, the potential problems, schedule and has an unrealistic price that hopefully can be raised by getting money from the owner to cover the lack of experience, details and perspective. - Too much of the easy "per square foot" and not enough facts to back up an accurate schedule and price.

If the contractor does not have the facts and costs, then he should bear the extra cost unless the scope changes can be documented (management item).

[dantheman9727]

Poor project scheduling is a big reason that many projects are not considered successful. It is critical to spend the appropriate time and map out exactly how long each task will take in order to complete the project by the desired date.

[Richard A Hetzel]

Projects fail because of any or all of bad architects, bad builders, bad subcontractors, bad financing, bad materials, bad workmanship, bad weather, bad communication, bad faith, and bad luck. I think I haven't left anyone or anything out.

[Emirrr]

Contractors today are competing among many others to place bids for work. Where once there was a high margin of profit and overbidding by 15-20% would secure the job today a markup on many projects is as tight as 5% and competition is fierce. Contractors/Project estimators are forced to assume a flawless execution in their estimating calculations to provide a price that resembles the lowest bidder often overlooking problems and setbacks that may occur during construction. This is especially true for young enterpreneurs/contractors who are overly optimistic when it comes to estimating. Bottom line the purpose of a construction/building project is to generate a profit so failure is always linked to money. I have identified many problems that arise and contribute to project failures in my publication on the web found below, particularly section 4 of the paper:

http://liad.gbrownc.on.ca/E-Journal/Thesis%20PDF/Final%20PDF/Marcin_Maslej.pdf

Lack of adequate communication among various parties involved in project execution from start to finish has a lot to do with unsuccessfull building projects.

[Richard A Hetzel]

I know a contractor who builds large projects for the federal giovernment. I know that he goes in with a price that is several hundred thousand dollars lower that what he knows will be his real cost. His reason? He would never win a bid if he didn't.

Then, during construction, he plays this game: "Your architect specified this type of roof, but we can give you this type of roof; it's a better product, and it will only cost you $250,000 extra. The government accepts the offer, and what they never know is that the roof he substituted cost him $500,000 less, for a total swing of $750,000. (These are very large projects.) It doesn't take long before he gets from the loss area to the profit area.

[Emirrr]

Some contractors try to be even more so clever. Very experienced estimators/contractors will purposely underprice a job (on paper as bid generating no profit) just to secure the contract but are aware of certain site conditions that they do not disclose to owner at time of site visit. They try to use these site conditions or scenarios to generate extras resulting from loss of time or extra work required to complete a project. I was dealing with a small civil contractor back in my site project management days. They bid a price for installation of watermain/roadworks for a small park property which came at a bid that was almost 20% lower then anyone elses. One of the items included removing excess clean fill material offsite. After digging began I only then realized why they underpriced the job so much. Apparently 70% of the site was contaminated fill and they contractor knew this and decided to charge a large markup for the disposal of this material to a dump. The small project went over budget by over 30% in the end resulting in extra charges. Not very diligent.

[concretemasonry]

One good test of the profitability of a job is whether is is conpleted on time or ahead of schedule. For some reason (or many) very few are "failures". - This really true if the job might be subjected to weather variations, like grading and civil.

We just had a $200,000,000 bridge (design & build) that started construction late in January with a December 25 completions date. The contractor will probably turn it over in the middle or end of September (almost 3 months early). I don't think the contractor will have any extras because he will get a $20,000,000 early completion bonus.

The contractor was not the low bidder, but offered a bridge design that was faster to build, met all specifications, less maintenance and had a very complete presentation and background.

[Rich]

I just had a conversation with a friend of mine who still works for HP. They are currently working on 1.5% margin. When I was there we were in the neighborhood of 3.0%-3.5%. On a typical 200 million dollar job that's quite a cut.

[concretemasonry]

The contractor also spent a considerable amount on overtime (24x7) to take advantage of the weather when it was good. They also built enclosures on site so they could pour the 20 ton+ precast segments adjacent to one end of the bridge during zero to -20F early in the job. Concrete came from a ready mix supplier that could easily handle the volumes in the winter and spring.

The $20,000,000, or so, bonus was based on 50% of the savings to the community when the bridge was done.

[Richard A Hetzel]

I like stories like the bridge story. Great things happen when American ingenuity is challenged.

[pmhut]

Hi,

I have published a lot of articles on the subject of "why projects fail" (usually the #1 culprit is the "Lack of Executive Support") and hence my interest in this post.

I was reading David's reply about the reasons why Constructions Projects Fail and I was expecting something completely different. However, almost all the list has its equivalent in the Project Management Reasons for Failure. Note that I am comparing to this article: why projects fail (http://www.pmhut.com/why-projects-fail-2), among others.

- Lack of communication between GC, GC's supervisor (other employees), subs, and client (homeowner) - Lack of Communication
- Delay in material availability, sub's schedule, delays from other projects the GC is on, and other delays - Poor Planning
- Poor craftsmanship - Improper Staffic
- Unrealistic client expectations - Poor Stakeholder Management
- Lack of documentation - Poor Planning
- Lack of change orders when client changes his/her mind - Scope Creep

[west35]

The last post mentioned a lack of the executive touch as a cause for failure and I couldn't agree more.

I would identify 'executive' as being represented by the owner in a professional manner commensurate with the surrounding environment. I also think that this type of ‘touch’ implies the operation of the business as an entity as well.

I’ve worked with large and small general contracting firms and while both strive to secure the talented and skilled work force to represent the project management team, the crux of the process really lies on the executives ability to manage his/her business.

Of course, hiring experienced people is a key element, but I’ve found that standardizing the process is also vital to achieving success thereby steering away from the potential failure. This standardization comes by way of the use of technology, whether it be the typewriter or computer or specific forms used over and over.

Let me say that again, the use of forms or documents over and over again. This enables your entire team to become familiar with the documentation process of your firm and also provides one very essential tool for successful business practice – keep it the same.

The difference between the successful companies I’ve had exposure to is just that – a standard set of operating procedures through the use of documents that rarely change (once established). Think of the AIA standards. All the contracts are the same. If you mention an AIA G702, most well established firms, architects, engineers, and clients will understand exactly what you are talking about.

By standardizing this process of the company, you are strengthening the engine inside that supports the field outside. Estimating is performed quicker, costing less on the bid side. Contracts are written faster – less administrative costs. Change Orders, billings, RFPs and RFIs…you get the idea.

I am fortunate to have the exposure to several computer applications where I am comfortable developing and adopting these applications to fit the needs of my company. One resource I’ve found that has impressed me is http://www.constructionofficeonline.com. I’ve downloaded several templates specifically designed for construction and adapted them to fit my firm. All of this has cut about 3% of my overhead expenses by saving time – not to mention how my staff communicates with our clients.

The rest is experience and involvement. Forget about ego and focus on the truth of the project and communicate constantly with the client and the rest will inevitably come as a success.

[Richard A Hetzel]

Documents schmocuments. Give me a good experienced super on the job, and I'll give you a good job. One of those can make up for a lot of failures by architects, engineers, owners, project managers, and executives, and the unfortunate truth is that most of them have had to.

[west35]

Documents schmocuments. Give me a good experienced super on the job, and I'll give you a good job. One of those can make up for a lot of failures by architects, engineers, owners, project managers, and executives, and the unfortunate truth is that most of them have had to.

Yes - Quality people are very critical in the success of a project. I've never seen a perfect set of plans, structural details, city review/approval, or contractor.

To maximize the potential for success...the entire team must be on board. I have walked away from a few jobs where an Architect is not going to play well with others, and this holds true with other key people (engineers, owners, reps, subs, generals...). It only takes one bad apple to make the rest look bad.

The forgotten side of business though is the way that all these key people operate on the inside. How is their function managed? If I have to create new documents for every project I run, my staff would have my head, my clients would still be waiting for information, and my superintendents, project managers, and design team would quit working with me.

LA Unified School District is a great example of standardized document control which, once you've overcome the learning curve, significantly reduces risk because the documents are standard across the board, but also increases productivity - because we all know what we are looking at when we get it.

My superintendent knows what form to use for what, my project manager knows what he's looking at, and my clients understand what they see because its all the same.