Ever wondered why construction projects get delayed, and are usually over budget?

Problem with industry

Two perverse malaises afflict the building and construction industry (in Australia):

1. Not paying.
2. Fixed Pricing.
3. Shoddy workmanship and ineptitude.

They both conspire to increase costs, and extend completion dates.

We’re going to focus on #3: and what we can do to fix it.

(i) Solving Problems Takes Time, Causes Delays

Let’s explain the problem:

1. Builders/developers hire architects/engineers.
2. As soon as drawings are produced, the designers are usually remunerated, but rarely is the job actually complete. Details are often missing, designs often not practicable, coordination’s usually deplorable - this is the key point and the bane of the industry. Once paid, designers not typically incentivised to act with celerity: they drag their feet in answering questions and solving problems caused by their designs. Who can blame them? They’re not getting paid (problem #1). Who solves these problems?
3. Typically, detailers/trades/subcontractors solve them. They may propose solutions, or identify problems which necessitate further design changes (to be approved by architects / engineers / coordinators) - who yet again, drag their feet.

This causes projects to slowly get delayed.

But it’s not usually transparent to upper management, or the owners of a project/building.

Recriminations fall on sub-contractors.

(ii) Solving Problems Costs Money

Solutions don’t spring from thin air: they cost time and money (and expertise) to identify and materialise.

Subcontractors usually solve these problems, and are in effect doing the design and coordination work that engineers / architects should be doing. They ought to charge a fee for it. The problem? nobody wants to pay variations, but everyone wants those changes to be effected.

If a job takes 10 hours, but then extends to 30 due to design changes/problems, who pays for the 20 additional hours? It seems like the industry expects this to be absorbed by sub-contractors’ bottom line. How is that a workable proposition?

Chief designers and coordinators get away with the inefficient designs and capricious changes, because there is no associated cost for doing so. As a result, the contractors in the industry price-in the risk of variations e.g. a job might take only 10 hours, but a further 20 hours might be added to the original quote due to the risk of variations. If they guess accurately, then they make a profit, but if not, then they’ll be running at a loss. Forcing your contractors to run at a loss is rarely a good idea: they will usually take short cuts to minimise it. The end result? Higher (inaccurate) prices which factor in delays, or hidden costs: (due to taking short-cuts etc - i.e. not waterproofing properly. Who’s gonna know?).

See here for an example of how projects get delayed.

(iii) Risk

Every time you make a change: there’s some coordination overhead that needs to be managed: emails, zoom conversations, markups, and perhaps 100s of pdfs which need to be reviewed/updated. There is always a chance that something could go wrong, or be missed, or could result in further problems / design changes and further delays.

Inefficient coordination and design, massively increases the risk of a project going wrong. And if it does go wrong, who pays for the HUUUGE rectification costs? Usually the sub-contractor. He is expected to go through 1000s of pdfs, covering all updates, over many weeks, and is to track everything perfectly, without mistakes - and all this without being paid. And if he does make a “mistake” - he will get little sympathy from an inefficient designer.

“He’s the guilty one your honour. Look, he missed the note I mentioned on the 10,000 th email”

All of this is risk. Who pays for the risk?

Key point: design changes entail risk. Those risks are prohibitively expensive. You gotta charge for that. How?

The Solution is now here:

Price accurately for the job. And if there are design changes: then you gotta charge for it - both for the time and risk.

How you gonna do that?

You need good tools:

In the past, there was no easy way to documentation variations, and to get approvals: you have to manage it through multiple team members, who have project specific knowledge, without the incentive to spend those painstaking hours carefully documenting everything. In the past, you may have had to track 5-10 variations across 10-30 jobs. How you gonna manage that via email? What about sending reminders? It becomes very unwieldy very quickly.

I wrote a documentation management system to handle this very problem - to make tracking variations across many projects and large organisations easy. I call it the Quote App.

Regardless of how you do it, I consider it essential that you: get paid for your valuable time, pass on the risks and costs of badly designed work, back on the inept parties who create those problems..

The New Jerusalem

When builders / developers get your variation charges, they will quickly realise which of their chief designers are good, and which are bad: who causes headaches and who doesn’t.

Those who produce good designs ought to be rewarded, and those who do poor work, which results in costs and delays, ought to be priced out of the market, and cast out into eternal damnation. As they should be. Gone are the days where inefficient managers could defecate costs on a project’s floor and coerce sub-contractors to eat it, with vicious threats of liquidated damages, withholding cash, if their demands are not met.

The messiah is here, inaugurating a new Jerusalem in construction, to redeem you from slavery: fight the system which is rigged against you: strap on the belt of truth, and raise the sword of the Quote app in your defence.

The documentation work will be done for you by your downstream supplier to manage his delays, and his costs. If it’s his cost, then that is also your cost plus some more. Simply add to that and pass it all up, at the click of a button. The beauty of it is that: it’s logged, and tracked, and easy to find, with the person who’s in the weeds - someone in another organisation and on the same project - someone who has project specific knowledge of the difficulties involved - this guy is incentivised to concisely file everything away for you, to make your job easier. When you get his work, all you gotta do now is pull the trigger, add your own costs and pass it up the chain.

This philosophy will revolutionize the industry.

Summary

• Charge for variations. And get paid for it.
• Price inefficient designers out of the market. The result will be cheaper and better construction projects.

And if interested, try the Quote App.