The Dotted Line: How to juggle resources across projects and stay on schedule
This feature is a part of "The Dotted Line" series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.
The quality of a contractor's work and the timeliness of delivery have always been key to a project's success. So, when agreed-upon deadlines or milestones are not met, the repercussions — like monetary penalties for every day a contractor falls behind schedule — can be harsh.
Most contracts allow for delays under a few scenarios that don't mean immediate added liability for the contractor, like bad weather or a significant owner- or architect-requested design change, but that can stall the project and throw everyone off the projected timeline.
Otherwise, by signing most common contract agreements, contractors and subcontractors are agreeing to the schedule and acknowledging that it gives them enough time to finish the work. Aside from the aforementioned design changes and bad weather, other acceptable reasons to extend the schedule include mistakes by the owner, architect or other contractor; owner-authorized mediation or binding dispute resolution; fire; labor disputes; or some other serious, unexpected event.
An example of delays that are not given a pass, however, are those caused by contractors trying to juggle limited resources across multiple projects. However, in an environment of booming demand, these situations are typically unavoidable.
So how can construction companies effectively navigate these tricky situations?
Where problems can arise
Subcontractors are the most likely to get overextended, as they provide the lion's share of labor, materials and equipment in a typical general contractor-run job site scenario. Therefore, whether it is a lack of planning, a shortage of available workers or the need to take on additional work after entering into a contract, they can find themselves facing an unexpected strain on resources.
"Resource management is really hard [for contractors and subcontractors]," said Tim Kay, managing director and market leader for JLL. He said the real estate investment firm tries to develop strong relationships early on so that they are kept in the loop on every project, enabling them to see any potential delays coming well in advance.
Today's biggest potential schedule challenges for contractors are a result of labor shortages, delivery time for long lead-time materials like glass, and availability of high-demand equipment such as cranes, according to Chuck Taylor, director of operations for Illinois-based Englewood Construction.
"Glass is probably the worst I've seen in my career," Taylor said, "and with high demand comes a longer wait." Taylor said the industry is still feeling effects from the Great Recession, as some HVAC equipment suppliers, for example, used to offer both stock units and special order items. "They were stuck with a lot inventory during the downturn, and now everything is spec," he said.
With construction activity at such a frenetic pace, competition for available heavy equipment — like excavators and cranes — is also high, he said. If the job isn't ready when the equipment is delivered, "the equipment is moving on without you," Taylor said.
Labor isn’t as much of an issue for Englewood, Taylor noted, as his company uses a union workforce, which can fill the gaps on a project fairly quickly. However, he said that as part of the competitive bid process — when the lowest numbers win the day — the company has ended up supplementing labor for some ambitious subcontractors who submitted low bids and then had trouble manning the job for that amount.
Why communication and planning is key
Taylor and Kay pointed to two key strategies in heading off schedule delays: communication and developing relationships with subcontractors that are a known entity.
"We try to use medium to large subcontractors … and when we get out of town, we go back to the same subcontractor," Taylor said. The higher the level of sophistication — such as separate teams assigned to different departments like estimating and field operations — the less risky the subcontractor tends to be.
However, because challenges like labor can affect contractors of any size, even the larger subcontractors can become saddled with the burdens of maintaining an adequate workforce, according to Taylor.
"Once they agree to the schedule, if they fall behind expectations, they're either going to work extra hours or weekends [to be able] to meet the schedule," he said. "If that's the situation, that's at their cost."
"The worst thing in construction is to get to a point where you haven't planned in advance and have a need to fill but don't have any means of meeting that need."
Company principal at Gaston Electrical
Kay said that preplanning is key on JLL projects and that the priority is "nailing down capacity" before the project begins. "We make sure [the general contractor] and their subcontractors can commit to the timeline," he said.
Malcolm MacInnes, founder and president of MGM General Contracting in Fort Lauderdale, FL, said all of their jobs — no matter how small — get a detailed schedule weeks ahead of time, and MGM managers constantly talk to the subs about how well they're handling the pace.
"If they're not in a position to [achieve] it," he said, "then it's not unreasonable to have a conversation about how can we help." This, MacInnes said, is very different than approaching the subject at the last minute when the subcontractor is already in trouble.
In either case, he said, the normal course of action is to supplement the subcontractor's labor or get assurances that they'll work overtime to catch up.
Preplanning for projects and detailed communication is also a guiding principle at Massachusetts-based subcontracting firm Gaston Electrical, according to company principal Bill Weber. "Successful manpower allocation means having a really talented general superintendent who has an open line of dialogue with project managers so that we know what the labor need will be," he said.
Weber said Gaston project teams meet weekly to review the workforce needs on every job, a process that lets them prepare enough in advance so that they can avoid shortages. "The worst thing in construction," he said, "is to get to a point where you haven't planned in advance and have a need to fill but don't have any means of meeting that need."
Gaston hires workers in advance, even if they're not needed right way on a job, as "an investment" in future projects.
Another not-so-secret weapon Gaston has used to stay ahead of schedule for the last few years is prefabrication. Weber said if they can prefabricate and spread out the manpower needs, they can reduce their onsite labor requirements by about 50%, although that varies with each job.
Significant timesaving can happen when multiple trades — like mechanical, electrical and plumbing — prefabricate pieces of their work together into, for example, 20-foot- to 30-foot panels of ductwork, raceways and pipes that let individual trades hook into them without the chaos that comes with multiple people trying to work in small spaces.
Some companies, Weber noted, are resistant to change, but he said schedules these days are tighter, requiring the efficiency that prefab brings. "To ignore [progress] is really committing professional suicide in the construction industry," he said.
How contractors can 'control your own destiny'
New York–based UA Builders Group has managed to circumvent most potential manpower and responsiveness issues by staffing its projects with company-owned subcontractors, according to Richard Markel, the company's vice president of design and construction.
"We have a tremendous amount of work in our pipeline," Markel said. "Owning your own trades allows you … to control your own destiny."
"You're only as successful as your weakest link. If you can identify that weakest link and supplement it with resources to make sure the link doesn’t break, then we're all successful."
Vice president of design and construction at UA Builders Group
Markel said UA puts work out for bid as well, and, if a third-party subcontractor has a lower bid, then UA will go with that company. Choosing an outside firm, he said, happens about 50% of the time and achieves two objectives — keeping their own subcontractors competitive and developing a stable of qualified subcontractors.
Having a ready supply of workers, he said, also allows UA to supplement third-party subcontractors who fall behind. However, Markel said the company doesn’t want subs to feel like they're being punished when this happens.
"There's a professional responsibility for us to work with a sub," he said. "You're only as successful as your weakest link. If you can identify that weakest link and supplement it with resources to make sure the link doesn’t break, then we're all successful."
MacInnes added that he has workers on staff who are skilled in a variety of trades ready to supplement his subcontractors so that MGM can better control the schedule. "If something has to get done," he said, "we have the ability to do it."
This ability to supplement subcontractors is an advantage not lost on Kay, who said JLL will sometimes award a contract to a general contractor that has that ability, even if their price is a little higher.
So, what is the best strategy subcontractors and general contractors can adopt in order to avoid being stretched beyond their limits?
"Make sure you're in the conversation during the early preplanning process," Kay said.
Markel added that companies at all levels should be sure to accept help. "We don't look at the sub as failing," he said. "It could mean we're the ones who failed and didn't support the sub appropriately. It's not the blame game. We have an issue and a problem, so let's roll up our sleeves and get it solved."
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