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Best strategy for getting projects completed on time and within budget.

4 March 2015

A commonly asked question is, 15 or so years ago, how many contracts finished late? How many of those contracts had delay damages applied?

The answer was very few and none.

If the question were asked of the contracts currently under way, the answer would be diametrically opposite, namely most of them are late and all of these have penalties levied.

By definition therefore, whether you look at things from an employer or a contractor situation, most contracts are late and by definition will be over budget (or looking at things from the contractor’s view point), he will lose money.

This is therefore a pretty depressing outlook and clearly a topic of general interest.

Lets first and foremost try and get to grips with what has gone wrong. Is this a contractor’s problem alone? Is this perhaps exacerbated by problems within the professional team for example, the requirement that professionals tender for their work and have too little money to do their job properly? Are low skilled, inexperienced and perhaps politicized employers make things more difficult by not making the correct decisions at the right time? How about the work force? Have unionized workers who are under motivated to achieve acceptable levels of production contributed to the overall situation?

The answer is that all the parties to the contracts are contributing the poor performance of modern contracts.

So what is to be done about this?

Well firstly we have to realize how destructive our standard form contracts are. These are commonly referred to as adversarial contracts and as the name implies a great deal of time is spent in conflict on these contracts. If you want an example of the sorts of things we are talking about look no further than the Eskom contracts adopted for the Kusile and Medupi power stations. These use the Fidic form of contract which, notwithstanding statements by Fidic themselves to the contrary, is not a particularly contractor friendly contract. This contract has been “spiced up” to make life interesting (and no doubt more difficult) for any contractor unfortunate enough to be awarded a contract on either of these sites. An enormous amount of time (and money) is being expended in promoting and defending claims. This is time and effort that would be better expended getting the job done.

Developments overseas in recent years have favored more collaborative contract execution strategies like target cost contracts. The intention is to play to the parties’ strengths, align the aspirations and objectives of the parties to get the job done as quickly and as inexpensively as possible. These form of contract also require fewer levels of hierarchy and in a skills scarce environment this should also be a strong motivator to adopting less conflict prone means of running a contract.

Collaboration also requires a team approach from the professional team. “Them and us” attitudes are inappropriate and unacceptable. A slick service from the professional team is a necessity and to do this he must be properly remunerated. He must be able to afford to deploy sufficient top class people to perform his function in such a way that the scope of the work, the employers requirements, the geotechnical information and as many of the unknowns that inevitably bedevil the proper execution of a contract are attended to and are known as near to or preferably before commencement of the work.

Employers must get their acts together too. Making decisions at the right time and for the right reasons is paramount. One of the benefits of collaborative forms of contracts is that the Employer can take a greater role in the actual execution of the contract and where employers have expertise in contract execution this can be of major benefit.

Ultimately, the objective is to create a trust relationship between the parties to the contract and this brings us conveniently to the question of the work force. Contractor work force relationships are, generally strained and it would not be inaccurate to say that the relationship is polarized. Bold industry wide initiatives must be adopted. Fair and equitable remuneration packages must be available to workers who perform from a production, safety and quality perspective. Career paths must be established for each member of the work force. Training must be provided (literacy and numeracy included) to enable individual workers to achieve their particular aspirations and to move up the ladder to better levels of remuneration and employment benefits and to escape the poverty trap.

All of the issues that we have addressed in this article are risks that are inherent in the construction environment albeit, much bigger issues than might normally be addressed. Like the day to day risks that are dealt with in the normal course of events they must be managed in an effective way so that they do not present insurmountable impediments to the satisfactory and successful completion of the contract.

Author: Ian Massey – Director