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.
Meeting a deadline is a crucial part of any project. While construction managers might be able to carve out some wiggle room within the overall timeline, there is a lot riding on a timely completion. A steady release of funds could be tied to finishing project milestones, or the owner could be depending on revenue from operations — like in the case of a hotel or restaurant — to pay development fees and other project bills.
Of course, construction companies could face steep per-day or per-week monetary penalties for failing to meet their contractual scheduling goals. The intangibles, such as company reputation, also come into play. Word travels fast in the construction business, and a company that can’t keep pace might soon find itself the second or third choice, losing the competitive edge for repeat business.
So it makes more sense than ever for a construction company — whether it's a subcontractor or a general contractor — to take stock and determine the biggest risks to the schedule, tactics for timely completion and options available if operations start to lag.
Setting the stage for success
Construction projects encounter many potential sources of delays, but the most dangerous could be one that comes from inside the organization itself, according to Howard Ashcraft, partner at Hanson Bridgett in San Francisco and consulting engineering professor at Stanford University.
"The biggest threat is continuing to operate in siloed, non-collaborative structures," he said. "That has more impact than anything else."
Ashcraft said the key to avoiding project delays is thorough planning — all the way back to the preconstruction phase — and suggested methods like integrated project delivery and Lean Construction as ways to stay on track.
"The biggest threat is continuing to operate in siloed, non-collaborative structures."
Partner at Hanson Bridgett and consulting engineering professor at Stanford University
Integrated project delivery is slowly becoming more popular and is considered an approach that can reduce the chances of change order-generating misunderstandings and other schedule delays by making upfront collaboration between all project stakeholders a priority.
Tackling the schedule in the preconstruction phase is something that the project management teams at McKissack & McKissack prioritize as well. That level of forethought is particularly necessary when taking on projects such as the Smithsonian Institution's National Museum of African American History and Culture, which opened in Washington, DC, late last year.
"We usually come on the project early and really set up the schedule for the whole project at the same time the architect comes on board," said Charles Yetter, McKissack & McKissack's senior project manager for the museum and national operations manager. The actual construction schedule, he said, is put together later.
At the earliest phases, Yetter noted, it's important to identify long-lead items so that late material delivery doesn’t hold up the project down the road. At the NMAAHC project, he said, the team identified the major packages — such as steel, site work and mechanical — and then ordered the material they could before having many details.
"We bought the entire steel package well before we knew what the building would look like," Yetter said. The company bought it in on a tonnage basis "in 2011 dollars" even though it didn’t schedule delivery until 2013. "We certainly got our order in and got in line for steel two years ahead of time," he said.
Not only was the steel delivered on time, but ordering so far in advance saved the company millions of dollars of price increases between 2011 and 2013.
When problems emerge mid-project
Staying on schedule once the jobs starts, however, is a challenge of its own. Yetter said that each of McKissack & McKissack's jobs have a senior project manager who is responsible for the schedule, and, each month, the architect, owner and project team sit down and go through the schedule "in agonizing detail."
"We're all together and do a complete review of the drawings, schedule and any other [critical] information," he said. "If you do that, even though you get those hiccups along the way, you're prepared to deal with them."
Ashcraft is a proponent of pull planning, a Lean Construction technique where representatives from subcontractors, suppliers and any other decision makers gather in one room and "reverse engineer" the schedule from a selected milestone back to the current date, coordinating between trades and eliminating wasted time along the way.
"This approach to scheduling is far more efficient and far more flexible," Ashcraft said. "If something goes wrong, you have the right people there to make the decisions, or to 'organically swarm' the problem and come up with solutions."
But what about when things go awry and, for example, a subcontractor or material supplier falls behind?
Zack Secilmis, managing director of the professional services group at the I-Grace Company and adjunct faculty member at the Fordham Real Estate Institute at Lincoln Center, said threats can inspire a subcontractor to pull out all the stops in an effort to catch up, but termination is sometimes counterproductive. "It's not a good idea to switch resources unless the subcontractor [or supplier] has been failing on multiple occasions," he said.
"We're all together and do a complete review of the drawings, schedule and any other [critical] information ... If you do that, even though you get those hiccups along the way, you're prepared to deal with them."
National operations manager for McKissack & McKissack
Secilmis said that if manning the job is a problem, augmenting the subcontractor's workforce isn't the answer either. "I wouldn't force a subcontractor to take manpower they don't want," he said, as there might not be room in the subcontractor's budget for more employees.
Demanding extra shifts is a better choice, according to Secilmis, but either of these options create more costs for a subcontractor that might already be having financial issues. The smart course of action, he said, is to get to the crux if the issue before taking such measures.
Of course, the industry is in the midst of a skilled-labor shortage, so this issue might start coming up more often.
"If you do proper scheduling, you should be able to manage around that," Yetter said. He pointed out, though, that it's not only skilled employees that are in short supply.
When workers left the construction industry during the recession and then slowly returned, there was a swath of junior managers that never came back. "There are these young guys but no one out there with 10 to 12 years' experience," he said.
Technology in the form of scheduling programs, Secilmis added, can also help keep projects on track, but managers need to pick a system that fits with the size and volume of jobs they manage.
Benefits of effective contract clauses
For efficiency's sake, Secilmis said a strong contract penalty clause could head off the lengthy and costly nightmare of court. "Nobody wants it to go to litigation," he said.
A good penalty clause has a methodology for conflict resolution, as well as consequences for failing to meet the schedule and, conversely, rewards for delivering the project in on time. "Instead of paying an attorney, there's a built-in mechanism," Secilmis said.
"I've never been a fan of the big stick," Yetter said. "You have to sit down with [subcontractors and suppliers] and understand why they're behind. If the manufacturer is behind, then maybe you fly out there and ask where his stuff is and ask what's going on ... None of the subs want to be behind."
Getting to the heart of why they're lagging, Yetter said, generates better results for the projects than those generated by legal threats. "Sending a letter doesn’t get you your stuff. All it does is cause anxiety," he said.
Ashcraft warned that there’s no way companies can plan for every single thing that can go wrong for a schedule — like a natural disaster or other emergency affecting delivery of materials and labor — but that’s a lesson itself. "The problem is: The ones that bite you are the ones that you can't predict," he said.
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