• Keynotes
• Management Programs
• Project Management Programs
• Consulting

• NCS Radio: Construction 3.0 Audio Files
• Garrison Report: Monthly Newsletter Signup
• Ted’s Blog: Discussing critical industry issues

Last month's report addressed creating the right strategic plan for a business, but it's equally important for every project to have the right strategic plan or project Strategic Goal, which I define as a project outcome that is mutually agreed upon and creates a win-win environment for all stakeholders. This is important because with construction volume down, it's critical that contractors maximize the project return on investment for all stakeholders on every project.

The number one reason projects fail to achieve peak performance is because of a lack of a clear definition. In essence, creating a Strategic Goal is about defining the project from the client's perspective. Developing a project's Strategic Goal is like placing project preplanning on steroids. However, despite the fact that preplanning is the most important step in assuring a successful project, too often it's ignored because of the pressure to get started. I'm sure you have heard the expression "haste makes waste," and this attitude is a perfect example.

The problem is that unless everyone agrees on the project's desired outcome, it's virtually assured that not everyone will be pleased with the final product. The benefits of taking a little time to understand the project's ultimate goal is more than justified. In an NCS Radio interview, Doug Woods, founder of DPR Construction, explained that he instituted a process that gets all project stakeholders to meet to develop the project goal. This meeting includes the architects, the owner, the subcontractors and DPR personnel. When he initiated this procedure, there was resistance because many people thought it was a waste of time, but the improved project results quickly created converts to the concept.

One of my criticisms of the construction industry for the past few decades has been the gradual reduction of the management people assigned to a project. When I started in this business, projects had a team of managers, including a project manager, superintendent, project engineers and office engineers. While titles have changed over the years, the reduction in the number of people has been ill advised. This was often done to reduce project overhead because of the mistaken belief that all overhead is evil or wasteful and should be minimized. But not all overhead is wasteful. It's wasteful only if it doesn't produce more value than it costs.

Recently the CEO of an electrical firm told me that while volume is down, profits are actually up. When I asked how he achieved this result, he offered the following explanation. Since they had less work, they assigned additional management people to each project. The result was direct costs came down faster than overhead costs went up, proving that proactive planning actually improves project performance.

However, for this to work, leadership is required. Leadership is the ability to perceive existing conditions and allocate the available resources to their best applications. Perception includes the ability to anticipate potential problems and risks to the projects then take the appropriate actions to minimize them. However, understanding the project's initial conditions requires not only perception but experience.

The preplanning process is critical because the best way to manage a problem is to prevent it, and the earlier one addresses the problem, the easier it is to manage because there are more options. In contrast, people who are not very perceptive or lack experience are constantly surprised by events and find their projects disrupted. This results in additional costs and time delays.

When the idea of preplanning is discussed, it would seem logical that the preplanning process would begin before the project does. After all, isn't that what preplanning means? Unfortunately too often the contractor isn't brought on to the project team until after the design is complete. Some would argue that the owner and design team preplanned the project. The mistake is that in most cases neither of these two entities has enough experience to be perceptive about all possible construction problems or risks. Of course, they may identify some, but why eliminate the input of the general contractor and key subcontractors from the preplanning process? The reality is that many design decisions have a huge impact on the construction process, so why not get the input of the construction expert?

The need for preplanning makes the best case for integrated project delivery methods. How to select the contractor in this format is a discussion for another day, but the basic concept is to pick the general contractor and key subcontractors based on who is the most perceptive about the given project. The reason is simple: this team will deliver the greatest value to the owner.

Since contractors don't control the delivery method, they should begin their preplanning process as soon as they become involved on a project. While there are significant advantages to starting this process before design begins, contractors that become involved in a project after it has been designed can still achieve significant improvement in the construction process if they properly preplan it before they dig the first shovel into the ground.

Whether owners are hiring a prime contractor or a prime contractor is hiring a subcontractor, they should seek contractors that aggressively preplan their projects. The performance will be better. True, these contractors might be higher priced at bid day, but the reason is they have anticipated the problems and risks and addressed them. In contrast, too many low bidders who haven't preplanned the project are surprised by events. This usually results in higher costs and delays that could have been avoided by hiring the right contractor in the beginning.

The reality is the world is shifting to a more value-driven approach. Therefore, contractors that preplan and deliver higher performance will be rewarded in the future. While there will always be competition in the construction industry, it's much better to compete based on the value one delivers rather than merely on price.

The future is clear: the most successful and profitable contractors of the future will emphasize preplanning their projects.