Why Construction Projects Fail
Construction projects fail because of three core reasons: people, time, and money.
To prevent failure, companies must do their due diligence with every aspect of the construction project before work starts. Make sure you’ve got the right people with the right skills and experience, that the schedule is realistic and manageable, and that the budget can handle changes or delays.
Construction projects are not small endeavors. These are community-changing projects that impact so many people, therefore it’s critical that construction stakeholders make their people, schedule, and budget a priority.
Construction project cost overruns, schedule delays, and other project infrastructure issues are so frequent that KPMG regularly interviews and analyzes the underlying issues in the construction industry.
A 2015 KPMG Global Construction Survey revealed some interesting findings and statistics that should have encouraged change, but all it takes is a quick scan of the news headlines to see that construction projects are frequently behind schedule, over budget, and mismanaged.
Consider these key findings from the 2015 KPMG Global Construction Survey:
- 60% of organizations that spent more than $10 million on capital construction projects reported that at least one project failed or underperformed. These failures were primarily due to personnel issues.
- In the United States, 56% of project owners said they have trouble recruiting qualified craft labor and 45% reported a lack of planners and project managers.
- Project owners said only 31% of their projects came within 10% of budget and just 25% within 10% of original deadlines in the past three years.
“As engineering and construction projects get bigger, the complexity grows exponentially. The improvements by owners in planning and risk management have been significant, yet there is further work to be done to reduce the number of project failures and bring more projects in on time and on budget.” Geno Armstrong, KPMG’s global chair of engineering and construction.
Subsequent KPMG surveys in 2017 and 2018 underscored the need for construction companies and leaders to act. This meant addressing the underlying issues that cause construction project failure and looking for new ways to improve how people, budgets, and time are managed, supported, and encouraged.
Our goal at PCS is to help change the message surrounding the construction industry. Cost overruns, schedule delays, mismanagement, and the trickle-down impacts of these core problems do not need to be part of construction regardless of size, scope, or goals.
Project Management Process for Construction Projects
Whether you’re managing a construction project, leading a team of sub-contractors, or managing the people on the ground, there are core project management lessons that can help prevent failure.
Think about how these seven project performance factors and how they can be applied to your construction project:
- Focus on business value, not technical detail: a clear link must be established between the project detail and how it will add value to the community.
- Establish clear accountability for measured results: a stable baseline of requirements must be established before work can proceed, to help mitigate scope creep and change orders.
- Have consistent processes for managing unambiguous checkpoints: use an established and successful project management process to keep the project on schedule, budget, and scope. For many construction projects, independent oversight by a team of construction cost advisers is the ideal way to manage numerous project interdependencies.
- Have a consistent methodology for planning and executing projects: a construction plan and schedule is mandatory. Inadequate planning is the major reason why so many construction projects fail.
- Include the customer at the beginning of the project and continually involve the customer as things change so that the required adjustments can be made together: the more the stakeholders and construction team work together, communicate regularly, and provide constructive input – the more likely the project is to succeed. This can help prevent scope creep, change orders, last-minute design changes, and other issues that result in schedule delays and cost overruns.
- Manage and motivate people so that project efforts will experience a zone of optimal performance throughout its life: you need skilled, experienced, motivated, and committed people working on every aspect of your construction project. Project success comes down to having the right people on the team – take the time to find the right people and do not cut corners or settle during the hiring process.
- Provide the team members the tools and techniques they need to produce consistently successful projects: every person on the project must know why they are part of the construction project. Make sure roles are clearly defined and that people are empowered to communicate openly.
Ultimately, to be successful, a construction project must stay focused on the basics – people, time, and budget.
To get this right, you need to do the work before the project starts and remain committed to consistent communication, oversight, and review during the project. These project management processes can help prevent failure and identify any barriers to success.
Independent Oversight for Construction Success
It all comes down to people, time, and budgets. When you get these right, it is much easier to prevent scope creep, to limit change orders, and to be part of a successful construction project.
However, it can be challenging to take a critical and unbiased view of your construction project.
Trust PCS to provide independent and honest analysis, feedback, and support through all phases of your construction project:
- Assist with feasibility studies and review designer sketches and measurements to determine project scope.
- Study architect and engineer plans determine the costs involved and set an overall estimated budget.
- Benchmarks your project with others like it.
- Plan costs to help the design team stay within the project or program budget using an iterative process.
- Prepare a final Opinion of Probable Cost report.
- Assess cost effects when project changes occur.
- Resolve scope creep with contractors.
- Manage and resolve disputes between suppliers, contractors, and designers.
- Provide a thorough review of the project showing the actual costs.
At PCS, Construction Is Personal™. We want you to know that we care about your construction project. We will listen to you and work for you to ensure that your construction project is successful.
Contact us to learn how we put you first at PCS.
About the author
Lee Thomas, MBA is the chairman and CEO of Project Cost Solutions. Lee has over 20 years of hands-on operational process experience under his belt. He is deeply committed to seeing your construction project succeed.