How Good Construction Projects Go Bad
Date Posted: January 19, 2021
Posted In: Ideas,
From Construction Business Owner: Most projects don’t start off bad. They begin with the best of intentions, but lack the nurturing, caring and planning necessary to be successful. There are also those projects that take a dark turn, but their trajectory provides a false sense of security to management.
They exhibit signs of being a best-in-class project—one that will become the cover page of the sales brochure. However, below the surface, there are signs and indications of the truth. A client starts to pay just a little bit slower. A key trade partner goes bankrupt. The supply chain sees a small interruption. Before long, the poster project quickly becomes the pariah.
Firms are spending a great deal of energy attempting to understand the short- and long-term ramifications of the post-pandemic world. Throughout the world, there are projects that were irreparably harmed due to stops and restarts, while others barely saw a hiccup of a delay.
For many projects, the work in progress (WIP) report may have seen little disruption, allowing leaders to take a deep sigh of relief. Is this a tad premature? Are some of these projects heading into the bad zone? In what seemed like an eternity ago, we had sports. Take a college football game pitting two rivals—the Southern Reptiles versus the Northern Polar Wolves—against each other. In this game, the Southern Reptiles are favored by two touchdowns, or 14 points.
Put another way, the Reptiles are “spotting” the Polar Wolves 14 at the start of the game or handicapping their odds. In the end, if the Reptiles win, which is expected, but fail to achieve a two-touchdown advantage, then fans and pollsters will see it as a failure. It’s an uncanny example of winning but failing at the same time.
Similarly, consider a contractor that has a project they bring in at 20% gross margin. On the surface, this sounds like a win. However, after you factor in that the project was estimated at 45% and the overhead of the firm is 21%, you realize that this project was an unmitigated disaster.