One of the most basic premises of Data Integrity is to ensure the data in your project cost management system is Current, Accurate and Complete. We talk a lot about getting your project data in real time and how that leads to better decision making and the ability to take early, corrective action on issues as they arise. We also go to great lengths to discuss how the project cost management software can be configured to ensure the highest levels of accuracy upon data input by preconfiguring constraints, tolerances and ranges of acceptable values.
It’s one of those boring details that is frequently overlooked – but ignoring it can cause havoc in project reporting. I’m talking about the importance of aligning project financial reporting to a specific point in time in order to have any chance at meaningful metrics on the state of the project. Major projects are steeped in complexity, with a high pace of activity going on every day. It’s tricky to measure and report on frenetic, in-flight projects like that because putting a halt to things simply isn’t an option, “Hey everyone, just stop what you’re doing so we can get a reading on what’s going on.” That’s just not going to happen. So, you have to set regular, theoretical, lines-in-the-sand at incremental points, and measure the project at those increments so that you can produce reports, even though things will keep moving on. It’s a bit like trying to measure the flow of a fast mountain river tumbling over rocks and cliffs – you have to just jump in and go for it while the river keeps pounding on past you.
You have to expect that, from the very beginning, nothing ever plays out exactly to plan on major construction projects. Things change. Scope changes. Drawings change. People change. There are hundreds of factors that can surface at a moment’s notice – including mistakes, anomalies and unforeseen predicaments – that can cause setbacks and overages.
Being able to react quickly and nimbly to the jams and messes that project managers face on a daily basis, is the glue that keeps projects humming relatively close to expectations and plan. Major projects are big and complicated. There’s a mountain of activity going on every day that requires careful oversight to ensure things don’t go completely off the rails. With the amount of money and risk on the line, organizations clearly have to keep a tight ship or risk significant financial consequences; along with potential erosion of trust and reputation of your organization.
There is a growing movement in the construction industry to adopt LEAN principles to streamline jobsite labor productivity. As one of the primary costs of construction, labor alone constitutes as much as 30% of overall project cost, and represents the cost that is most subject to uncertainty and risk. This risk is predominantly due to compromised site productivity on projects where there’s a high degree of wasteful, non productive labor time.
In fact, it’s common to view labor productivity as the sole determining factor of overall project performance and profitability – i.e. project success or failure is directly dependant on labor productivity. Other primary project costs – such as procurement, equipment, materials and engineering – can have associated risk and uncertainty but are marginal in comparison to risk associated to labor productivity.
"Excel just wasn’t designed to do some of the heavy lifting that companies need to do in finance.” So says Paul Hammerman, a business applications analyst at Forrester Research Inc. Despite that generally accepted fact, spreadsheets continue to be widely used as the default tool of choice for managing the finances of construction projects large and small. Most individuals that find themselves in this situation however, would enthusiastically agree that the use of spreadsheets for this level of complexity requires a ridiculous amount of meaningless effort for very little return. Far too much effort is put into getting the data into the spreadsheet – and all the formulas straightened out – that little time is actually spent analyzing that data.
Several decades ago, organizations used to manage all their finances using big paper-based ledgers, where they’d spend much of their day “doing the books”. These large ledger books worked for hundreds of years, however it would be a challenge to find any modern company today that runs their business on paper-based accounting methods.
As the saying goes, “You don’t get what you deserve, you get what you negotiate.”
Every contract is negotiable, and by negotiating, you can achieve more than you would if you simply accepted what was offered; or refused.
How do you figure out percent complete on a project? How is it you go about objectively assigning a reasonable and accurate measurement of how far along you are on an item of work? How many times have you asked, “Hey, where did that number come from?”
Most any manager, VP or director who has to oversee the work of his or her team of project managers has a big worry about this very thing. They know the temptation that exists for a project manager to leverage a little creative license with the numbers to make the project look a little rosier than it is in reality. Customers on the receiving side of a progress draw are equally aware of the tendency to big-up the progress numbers in order to fatten the invoice.