Do All Building Infrastructure Contracts Overrun?
One of the biggest cliches in construction is that building projects aren’t delivered on time or on budget. It doesn’t matter what level of construction you look at, whether it’s a small domestic extension or a huge national infrastructure project, there’s an overwhelming likelihood that contracts overrun and costs can spiral.
Common causes of contract delays and overspend are environmental, technological failings, poor project management, staffing issues, opposing views and differing expectations between stakeholders.
Research by McKinsey and Co shows that 98% of projects overrun and costs blow out of control – average overspend on large global construction projects in the research data set was 80%. This was data collected from many developed-world nations, so it’s not a third-world issue where technology and supply chains may be to blame.
This information casts the construction industry in an awful light and opens up a lot of questions…
● Why does this keep happening?
● Is contract management not effective enough?
● Are material costs under-quoted?
● Is construction slower than we think it is?
● What variable costs are we not considering in project forecasting?
● Is a large enough labour force recruited in time?
This isn’t an exhaustive list, but it shows a small sample of the considerations you need to have before engaging in an infrastructure project.
Beware of ambition
There’s an assumption that many projects are delivered late and over budget because of ambitious bidding. In an attempt to win work, many construction companies will promise quicker time frames and reduced job costs. Whilst this may look impressive on a tender bid, the question has to be asked how they can promise the work on time and on budget?
Understanding the fundamental workings of a job can prevent future frustrations and difficult conversations with stakeholders.
If bidding parties are cutting costs by reducing labour force and promising low material costs, these are often out of the control of a contractor, so a plan needs to be in place for unexpected cost rises or delays.
Being upfront about timescales and enforcing financial penalties for underperformance and delays will often reduce ‘project creep’ where the focus is lost and timescales are allowed to slide.
Solving infrastructure project delays
Whilst there is seldom one single reason for project delays and spiralling costs, one of the fundamental issues is with the organisation of contract management and delivery. In an industry where delivery is on a project-to-project basis, open communication and tight project management is fundamental.
An issue in construction for too long has been poor contract management. A lack of clear communication between relevant parties, deliverables not being met and an absence of consequence for late or over-budget work can allow collective standards to slip.
To help avoid these issues, Management Process Systems created the contract management software CCM. This allows project managers to effectively communicate with stakeholders and construction companies to ensure smooth delivery of an infrastructure project.
CCM makes communication much smoother, helping to avoid a major hurdle to smooth construction project delivery.