Every plumbing or mechanical contractor out there has had a project that just seemed like the Job From Hell from Day 1. Probably more than one. Maybe a lot. But did you ever stop to think why that was? Why these projects look so good on paper, but seem to fall apart when you get into them? Or maybe they don't look that great on paper, but you take them anyway.
The answer is simple, yet it isn't: planning. Detailed planning from the bid to the schedule to the contract to the installation. Making sure you've done everything you can before the job even starts can minimize the headaches and problems associated with any construction job.
That's what the Mechanical Contractors Association of America was trying to instill in its members when it presented a case study of a real-life project to tackle at its annual Project Performance Conference (formerly its Mid-Year Education Conference) June 17-19. Staff and instructors took an actual school building project - warts and all - presented it to the conference attendees, and instructed them to come up with solutions on solving or mitigating the multitude of problems that occurred. (The names were changed to protect the innocent.)
For two and a half days, attendees heard from industry experts and members of their own organization about the different aspects of the project, the problems associated with each segment, and possible solutions. Then attendees were given time to discuss (in roundtable fashion) various scenarios and possible resolutions, learning from each other in the process. After each segment, a panel was set up to answer any questions the contractors may have had.
The main objective of this conference was not only to get ideas on how to solve specific problems, but to give attendees ways to prevent these types of problems from cropping up on future jobs.
I attended the conference and found it chock full of ideas. While I was on information overload a few times, as I'm sure a lot of the attendees were, I found quite a bit that I could pass on to PM readers.
Put It In WritingThe first weapon against problem projects is documentation. If something significant is discussed or occurs with the project, write it down. Every phone conversation, every meeting. Save every letter and e-mail. This can be your insurance if something bad happens, your written memory, your evidence to prove it, the best means to avoid or survive a claim, and the proof of your professionalism. So says John Koontz, MCAA's director of project management education.
Timely notice is one issue that should be well documented, he said. And there are two types of timely notice: contractual, and constant and consistent. Contractual notice is self-explanatory: All contracts have notification requirements, usually in the form of formal written letters unless specified otherwise. To know these requirements, you must read the full contract! And read it before you sign it; then if there is something you object to, you have a chance to change it. Many times contractors skim the contract and don't realize everything they're signing on for.
Constant and consistent notice is above and beyond what's in the contract, Koontz notes. This means any change that might affect the schedule or work on the jobsite. But use common sense; don't inundate the construction manager or general contractor with every tiny detail as it happens.
Communication between you and the construction manager can be in the form of requests for information, letters and memos, or jobsite meeting minutes. Jobsite meeting minutes also are important in that they should be read thoroughly to make sure something doesn't "slip in" that wasn't discussed. If you don't respond in a timely fashion - usually 72 hours - to whoever sent the meetings minutes, your acceptance of them is assumed, even if you find a problem later on.
In MCAA's case study, in one of the meeting minutes documents, it stated that the plumbing/piping contractor was responsible for any dewatering needed to begin the underground rough-in for one of the school buildings. However, this item was never discussed at that or any other meeting. Failure to read and acknowledge these minutes could add extra work for your crews, and take money out of your pocket.
But one of the most effective forms of consistent notice is your foreman's daily logs, "contemporaneous written information from the person closest to the work," explains Koontz. "And since the foreman's primary motivation is work completion rather than profitability, the information is more credible."
The critical items that should be included in each daily log are:
- Weather and jobsite working conditions.
- Deliveries received and any damage, shortages or other issues.
- Safety training performed, accidents or any other safety-related issues.
- Number of workers onsite of each trade with brief description of where worked, what was worked on, and how many hours worked.
- Brief summary of any directives received by the general contractor, construction manager, architect, engineer, owner and/or inspector.
These logs can save your bacon in a claims situation.
Owner-Furnished EquipmentOne of the hot-button issues that contractors have is owner-furnished or owner-purchased equipment. This was the situation the piping contractor on the MCAA case study found himself in as the owner had already purchased the boilers, heat pumps, air-handling units and chillers before the project got underway.
"This issue is getting uglier by the day for mechanical contractors because of the endless risk issues and documentation requirements," Koontz says.
Document your assumptions of this type of equipment early on, he notes, especially concerning the project specs vs. the owner's purchase order. You need to make sure that whatever the owner bought will actually work and fit in the parameters of the specs.
Where, when and how will the equipment be delivered? What happens if it arrives late? Is the equipment pre-assembled? If not, do you have enough workers and time to assemble it? These questions should be answered at the beginning of the process as they can affect how well you do the job, if you complete it on time, and if you make any money.
Why do owners pre-purchase equipment? Tom Williams, president of construction at Atlanta-based McKenney's and immediate past president of MCAA, says the pre-purchasing of long-term delivery items can improve construction schedules or beat price increases. In the case of custom or complex items, it may be the superior knowledge of the owner or engineer resulting in the pre-purchase.
And sometimes it comes down to cost savings. Manufacturers or vendors may tell the owner he or she is getting a "national buying agreement" or the "best deal," Williams notes. Even the general contractors and construction managers are selling the concept to the owners.
But there are all sorts of problems that can arise for the specialty contractor, such as scope of the purchase order, delivery of the purchased items, warranty issues, submittal approval and specifications compliance, ownership of the equipment, and who carries the risk for the equipment.
Schedule, Schedule, ScheduleThe baseline for all project documentation is the manpower-loaded schedule, Koontz says. "For maximum credibility and value, professional mechanical contractors must submit a manpower-loaded schedule to the customer prior to the project start or at project start," he explains, "or all other documentation loses its value."
If you fail to submit such a schedule, you won't have any kind of leverage when the project encounters numerous delays, intermittent work, work stoppages and out of sequence work. And what if the construction manager doesn't give you a construction schedule, as happened in the MCAA case study? If you haven't submitted your schedule, how can you get on the CM's or GC's case for not providing one to you?
When putting your initial schedule together, make sure you have read the full contract, says Michael Hafling, P.E., vice president of Topeka, Kan.-based CAS Construction. You will have contractual responsibilities that should be included in your schedule. Also try to get a copy of the CM's contract to see what his contractual responsibilities are regarding scheduling and notice requirements.
Use the milestone schedule to get started. You need to factor in specific tasks (not just construction activities), proper sequence, duration of activities, resource loading, and cost loading. Resource loading, making sure you have enough manpower to complete all activities throughout the schedule, should be done only after an accurate schedule has been completed. But make sure you level the manpower numbers, Hafling says, otherwise you'll have three guys in one day, 10 guys in the next few days, etc., - not a real efficient use of your "resources."
The last step is to verify the schedule and test it for accuracy by asking these questions:
- 1. Does the critical path make sense and does it meet the contractual requirements?
2. Are activities shown in the proper sequence? Is it the way you intend to build? Are there constraints for work beyond your control?
3. Do activities have too much float?
4. Are there any unnecessarily long gaps?
And then there's out of sequence work, where your workers may be asked to start on something a few weeks ahead of schedule to accommodate the construction manager or another specialty contractor. Again, this situation occurred in the case study.
"It almost always starts out pretty harmless; you're trying to be a team player," Koontz states. "Then, the next thing you know, you find yourself sucked right in and in a weak position."
Out of sequence work causes labor disruptions; loss of productivity; acceleration of work at a later date to meet the schedule; and the stacking of trades, where several trades are working in the same area to complete their work, Hafling says. This increases the cost to you and decreases morale in your work crews.
Documenting this in the foreman daily logs will go a long way to avoiding or surviving a claim down the road.
Other Things To Think AboutInternet Reverse Auctions: Large companies such as Johnson & Johnson, Intel and Target are using reverse auctions, which means they'll probably be around for a while. "They are trying to drive the cost out of the bidding process because they believe it saves time and money," Williams notes. "Potential benefits to contractors are selected bid lists, clear scopes of work, reduce impact of bid errors and rewards for low-cost producer. Many auctions are direct with the owner, so you're closer to the money."
Change Orders: Know your contract, paying special attention to notification, authorization and accounting requirements, Koontz says. Changes can be excusable and compensable (owner, prime contractor, CM caused), excusable and noncompensable (adverse weather, strikes, riots, etc.), nonexcusable (caused by actions or inactions of contractor), and concurrent. (The piping contractor and the MCAA case study had 245 change orders by the eighth month.)
When you receive a change order, create a separate schedule just for the scope of the change. "You need to analyze the work for the individual change, then insert the change into the current and updated schedule, and note the change to the end result," Hafling explains.
Insurance: If the contract is covered by an owner-controlled insurance program (OCIP), contractors should consider coverages by the OCIP and their own insurance policies, says Tony James, AU, CIC, national program director at CNA Insurance. Is the OCIP primary? Does your policy have completed operations coverage?
Be aware of the coverage implications of "site" vs. "project." If only the site is covered and one of your workers injures himself doing prefab work at your facility, you may not be covered by workers comp.
Bankruptcy of Subcontractor: If you have a subcontractor that goes belly up during the project, you'll have the cost of the replacement contractor, added cost of performance, delay damages assessed to you (if present in contract), payment for unpaid materials, and payment for unpaid fringe benefits, says Mike Gossman, CEO of Midwest Mechanical Group and current MCAA president.
How can you avoid this situation? Try to obtain proper material and labor billing breakdowns from the sub, ensure that you have material bills to back-up stored materials, and obtain lien waivers (from sub, sub's union, sub's material vendors)
You can also use surety bond underwriting techniques to pre-qualify subs, James says, by using the three Cs: character (sub's reputation), capital (sufficient financial resources) and capacity (ability to complete job successfully).