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The warning signs of a troubled project.

Tightened budgets and a fiercely competitive real estate market have placed additional strain on owners and their representatives to complete new building projects on schedule and within budget. Now more than ever, construction project failures can spell disaster not only for the owner, but for all parties involved.

The key to preventing a troubled project from occurring is recognition of the early warning signs. Vigilant attention to details around the construction site and in communications with contractors and project managers can help owners avoid these pitfalls.

Five obvious conditions can signal that a project is headed for trouble. An experienced project manager will discover these 'hot spots' before they cause irreparable harm. Let's examine each,:

1. Delays are revealed in several ways. Among the more obvious, they may show up during periodic reviews of the work schedule or when contractors request time extensions. Less apparent but just as costly, contractors may reduce the number of workers on site. As a rule of thumb, the total workforce should grow each month during the first two thirds of the project. Any deviation from that pattern should be considered a warning sign.

A disorderly construction site can also signal delays. Improperly cared-for equipment and messy storage of materials are among the symptoms and causes of troubled projects.

2. Change order requests and claims can foreshadow project problems. A substantial backlog in the number and dollar value of change orders in progress is both a sign of trouble and a contributing factor.

Generally, a backlog of unapproved change orders will meet one of three criteria. Undisputed claims may not be approved and issued due to poor administration or lack of funding. Others may be delayed because the cost is disputed though the change itself is warranted. Still more claims may be delayed because of a dispute over whether work is eligible under the contract.

Claims for time extensions and delay damages usually fall under one of several conditions. Scheduling is a common cause of disputed claims for the cost of work added because of delays or acceleration to maintain the schedule. Added labor costs may also be a factor as a result of productivity losses. Finally, the cost of overhead may be extended as project delays mount.

3. As with all business ventures failed communication is both a symptom and a cause of a troubled project. Logically, one would assume that contractors, project engineers and construction managers working on the same site would communicate easily and often, if for no other reason than the convenience of proximity. However, that is often not the case.

Normally, most owner/contractor communication runs between the owner's on-site representative and the contractor's field superintendent. When correspondence runs between the home offices of owner and contractor, trouble is brewing. Other warning signs include increasingly formal, adversarial communication between contractor and architect/engineer or construction manager, as well as letters from or copied to attorneys or bonding companies working on behalf of one of the parties.

4. Declining quality standards are yet another indication of problems to come. Experienced construction managers expect that substitutions of materials and equipment will occur throughout the duration of a project, but when contractors or subcontractors submit an abnormal number of requests for substitutions, the situation should be reviewed. Problems in the project's design will also surface with a growing number of requests for information from contractors, subcontractors and/or suppliers.

Reflecting the attitudes of those working on the project, quality problems may also indicate impending disputes. For example, deteriorating quality of subcontractors' workmanship and materials could reveal problems under their subcontracts with the prime. Similarly, declining quality control on the part of the prime contractors or a radical change in the degree of the owner representative's supervision can either foreshadow or cause future problems.

Finally, close attention to project correspondence and the condition of the work site can provide valuable clues of potential complaints from subcontractors and vendors. Abandonment of the site or delayed shipment of materials or equipment are clear warning signs, as are demands for payment for goods upon delivery from manufacturers or suppliers.

The troubled economy has also caused other problems. For example, when the owner receives liens or notice that liens have been filed against the property, or if payment demands are made directly to the owner, the prime is generally experiencing financial problems. Sensing cash flow problems, subcontractors may opt to leave the job site rather than risk not getting paid.

Experienced project managers can assess potential problem spots by reading key correspondence and job meeting minutes, reviewing financial documents and conducting periodic visits to the site. Clearly, by paying close attention to details, owners can identify and correct developing problems before they create irreparable damage to the project and its bottom line.

Hill International, Inc. in Willingboro, New Jersey, is an international construction consulting, engineering and environmental services firm.
COPYRIGHT 1993 Hagedorn Publication
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:building construction
Author:DiDonato, S. Leonard
Publication:Real Estate Weekly
Date:May 19, 1993
Words:811
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