Project Controls is Feasible for Commerical Construction

Effective project controls are both feasible and critical in the commercial construction industry to ensure successful project outcomes. Project controls involve the systematic management of various aspects of a project, such as cost, schedule, resources, risks, and compliance, using specialized software and processes.

This white paper highlights the benefits that contractors in commercial construction can experience from improved project controls. It discusses how implementing effective project controls software and processes can lead to better cost management, schedule performance, decision-making, risk mitigation, resource management, transparency, and compliance. The paper also emphasizes the risks and costs associated with inadequate project controls and the potential financial impacts on the construction industry.

Additionally, the white paper explores examples of contractors who have successfully improved their project controls function. It emphasizes the importance of a proactive and strategic approach to project management, aligning people, processes, information, and technology to optimize project performance and mitigate risks.

The white paper concludes by highlighting the significance of investing in robust project controls software, tools, and training, and fostering a culture of continuous improvement in project controls. It emphasizes the need for contractors in commercial construction to prioritize effective project controls as a key element in achieving successful project delivery, enhancing client satisfaction, and maximizing profitability.

Introduction

Effective project controls are crucial in commercial construction projects to ensure successful project outcomes. Project controls involve the systematic management of various aspects of a project, such as cost, schedule, resources, risks, and compliance, using specialized software and processes. Implementing effective project controls software can provide numerous benefits, including improved cost management, schedule performance, decision-making, risk mitigation, resource management, transparency, and compliance. On the other hand, inadequate project controls can result in cost overruns, schedule delays, poor decision-making, increased risks, inefficient resource management, lack of transparency, and compliance and legal risks, which can have significant financial impacts in construction. It is essential for contractors and owners in the commercial construction industry to invest in robust project controls software and processes to mitigate risks, enhance project performance, and ensure successful project delivery.

Project Controls in Industrial Construction

The practice of hiring staff specifically for project controls in EPC (Engineering, Procurement, and Construction) firms began to take shape in the mid-to-late 20th century, coinciding with the development of modern project management techniques and the advent of computerization in the industry.

It is very common for EPCs to have a project controls team, the presence and size of such a division may vary depending on the size, complexity, and requirements of the projects undertaken by the firm. Larger EPC companies, particularly those working on complex, high-value projects, are more likely to have a dedicated project controls division to ensure effective management and oversight.

Smaller EPC firms may not have a separate project controls division but might still incorporate project controls functions within their project management teams. In these cases, project managers or other team members may take on project controls responsibilities, such as cost control, scheduling, risk management, and reporting.

Regardless of the size or structure of the EPC firm, project controls play a crucial role in the successful management of construction projects. Whether through a dedicated division or integrated into the project management team, the key functions of project controls are essential for achieving project objectives within the constraints of time, budget, and quality.

Project Controls has not been feasible for the commercial construction market

While a project controls function is common in the industrial construction industry, it is not as widespread in commercial construction. There could be several reasons why contractors in commercial construction may not have dedicated project controls functions or may not fully utilize project controls practices:

1. Size and Complexity of Projects: In commercial construction, the size and complexity of projects can vary significantly. Smaller contractors or projects with limited scope may not see the need for dedicated project controls functions and may rely on less formalized methods for project management. However, larger and more complex projects may require more robust project controls practices to effectively manage risks, costs, and schedules.
2. Resource Constraints: Some contractors may face resource constraints, including budget limitations and lack of skilled personnel, which may hinder their ability to establish dedicated project controls functions or invest in project controls software or tools. In such cases, project controls responsibilities may be distributed across various roles within the organization, or contractors may rely on manual or ad-hoc methods for project management.
3. Traditional Project Management Approaches: Commercial construction has traditionally relied on traditional project management approaches, which may not emphasize formalized project controls practices to the same extent as other industries. Some contractors may still follow traditional methods that do not explicitly include project controls functions, but rather rely on experience, intuition, and informal communication for project management.
4. Project-Specific Requirements: Certain commercial construction projects may not have specific contractual or owner-driven requirements for project controls like in the industrial industry. In such cases, contractors may not prioritize the establishment of dedicated project controls functions or utilization of project controls practices.

Modern technology provides a scalable solution.

Commercial construction projects could be more predictable and repeatable with a more rigorous deployment that mitigates risks and enhances project outcomes. However, there have been significant blockers to successful use of project controls software. We believe these constraints are solvable with effective project controls software, making project controls feasible and affordable for contractors of all sizes.

When we refer to "effective project controls," we mean the successful implementation and utilization of project controls practices, processes, and tools that are aligned with the contractor's objectives and requirements and are easily scalable according to project size and complexity.

Effective project controls typically involve the following characteristics:

1. Standardized Processes: Project controls processes should be clearly defined and structured. Standardized processes ensure that project activities are carried out consistently and according to established definitions, leading to effective project management.
2. Proactive Monitoring and Control: Project controls involve regular, real-time monitoring and control of project activities to track progress, identify deviations from the plan, and take corrective actions in a proactive manner. This includes monitoring project schedule, cost, quality, risks, resources, and performance against established benchmarks or estimates and taking necessary measures to keep the project on track.
3. Accurate and Timely Reporting: Project controls require accurate and timely reporting of project status, progress, and performance to relevant stakeholders. This includes regular reporting of project metrics, key performance indicators (KPIs), and other project-related information, using appropriate reporting formats and channels. Accurate and timely reporting helps in providing visibility into project performance, facilitating informed decision-making, and maintaining effective communication among project stakeholders.
4. Utilization of Tools and Technology: Project controls often involve the use of specialized tools, software, and technology to support planning, scheduling, tracking, and reporting of project activities. Effective utilization of appropriate tools and technology can streamline project controls processes, improve accuracy and efficiency, and enable better decision-making. We argue that excel spreadsheets are not an effective tool to control a project.
5. Common Data Environment: Effective project controls requires all project data to be easily accessible in real time. A common data environment centralizes all project data in one hub where project estimates can be scoped, estimated, updated and tracked against actuals.

The Cost of Business as Usual is High

The commercial construction industry is well-versed in the results and costs of fragmented project controls. These risks include:

1. Cost Overruns: Without effective project controls, visibility into real-time project costs compared to estimates is low, leading to cost overruns. Actual margins can vary widely from forecasted margins.
2. Schedule Delays: A lack of timely and accurate information, poor coordination among team members, or ineffective resource allocation results in missed deadlines, project delays, and potential penalties for late project completion, which may adversely affect the project timeline and overall project success.
3. Poor Decision-Making: Decision-making is often made based on incomplete or outdated information or intuition. This is a difficult risk to quantify. However, it intuitively results in ineffective resource allocation and potential mistakes in project management decisions, leading to negative impacts on project performance and outcomes.
4. Increased Risks: Inadequate project controls results in inadequate risk identification, assessment, and mitigation, leading to increased risks and potential disruptions to the project. Risks such as safety incidents, quality issues, contractual disputes, or scope changes may arise, and without effective project controls, they may not be addressed proactively, resulting in increased project risks and potential negative impacts.
5. Compliance and Legal Risks: In commercial construction projects, compliance with regulations, contractual obligations, and legal requirements is crucial. Inadequate project controls may result in inadequate documentation, tracking, and reporting of project activities, exposing the project to compliance and legal risks, including penalties, fines, and legal disputes.

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The cost of inadequate project controls in the commercial construction industry can vary significantly depending on the size, complexity, and location of the projects, as well as the specific deficiencies in project controls processes. However, research and industry studies have shown that the cost of poor project controls can be substantial, and the construction industry as a whole can face significant financial losses due to inadequate project controls.

For example, a report by the Project Management Institute (PMI) titled "The High Cost of Low Performance: The Essential Role of Communications" estimated that poor communication and inadequate project controls can result in an average of $135 million in losses per project for a large organization. This includes costs associated with rework, delays, penalties, disputes, and other negative impacts on project performance and outcomes.

Similarly, a study by KPMG titled "Global Construction Project Owner's Survey: Climbing the Curve" found that ineffective project controls were identified as one of the key reasons for cost and schedule overruns in construction projects. The study estimated that construction projects experience cost overruns of up to 50% and schedule delays of up to 40% due to inadequate project controls.

Benefits of Effective Project Controls for General Contractors

Research and industry studies have shown that implementing project controls function or software can lead to improved project delivery performance. Here are some examples:

1. Improved Schedule Performance: According to a study by the Project Management Institute (PMI) in their report "Pulse of the Profession 2020," organizations that use formal project management practices, including project controls, are more likely to complete projects on time. The study found that high-performing organizations, which effectively apply project management practices, completed 79% of their projects on time, compared to only 43% for low-performing organizations.
2. Enhanced Cost Management: Project controls software can help organizations better manage project costs. A survey conducted by KPMG in their "Global Construction Project Owner's Survey 2019" found that 75% of construction project owners reported that using project controls software had a positive impact on their ability to manage costs effectively.
3. Increased Risk Mitigation: Project controls function or software can aid in identifying and mitigating project risks, leading to improved project outcomes. A study by the found that effective implementation of project controls, including risk management, led to a 25% reduction in project risks and a 20% improvement in project cost and schedule performance.
4. Enhanced Documentation Control: Project controls software can improve document management, version control, and accessibility, leading to better coordination and communication among project stakeholders. A survey by PlanGrid and FMI Corporation in their "Construction Disconnected" report found that 37% of construction professionals reported that using project controls software helped them avoid rework and errors related to documentation issues.
5. Better Decision-Making: Project controls provide accurate and timely data for decision-making, enabling project managers to make informed decisions and take corrective actions as needed. A study by Deloitte in their "Construction Predictions 2020" report found that organizations that effectively use project controls are more likely to achieve their project goals and deliver projects successfully.

Effective project controls can lead to improved project performance by helping contractors better plan, track, and control project activities. This results in better adherence to project schedules, budgets, and quality standards, reducing the risk of delays, cost overruns, and rework.

Accurate and timely project information, metrics, and performance data provided by effective project controls support data-driven decision-making. The ability to make data-informed decisions enable a contractor to proactively identify and address potential risks, reducing the impact of risks on project outcomes and minimizing costly disruptions or disputes. They can also optimize the allocation and management of resources such as labor, materials, and equipment.

Contractors with effective project controls practices can gain a competitive advantage by demonstrating their ability to manage projects effectively and to a high degree of success. This enhances their reputation in the industry and positions them as reliable and trustworthy partners for commercial construction projects.

Benefits of Effective Project Controls for Owners

Owners of commercial construction projects can benefit in several ways from effective project controls as well. Some potential benefits of effective project controls for owners in commercial construction projects may include:

1. Improved Project Performance: Effective project controls can help ensure that their projects are completed on time, within budget, and with quality results. This allows owners to achieve their project objectives, meet project deadlines, and minimize delays or cost overruns, resulting in improved overall project performance.
2. Enhanced Decision-Making: Project controls provide owners with timely and accurate data and information about a project's status, progress, and performance. This enables informed decision-making across their entire portfolio to strategically weigh scope changes, resource allocation, and risk mitigation.
3. Greater Transparency: Effective project controls enable owners to have better visibility into project costs, expenses, and schedule performance. This can help owners track project costs, monitor budget variances, and ensure that financial resources are managed efficiently, resulting in improved transparency and accountability.
4. Mitigated Risks: Project controls involve proactive identification, assessment, and mitigation of risks. This helps owners identify potential risks or issues early on and take appropriate measures to mitigate or manage them. This can result in reduced risks, minimized disruptions, and improved project stability and resilience.
5. Improved Communication and Collaboration: Project controls practices often involve regular communication and collaboration among project stakeholders. This can enhance communication channels, facilitate coordination, and promote effective collaboration among team members, contractors, suppliers, and other relevant parties. Improved communication and collaboration can lead to smoother project execution, reduced misunderstandings, and better project outcomes.
6. Enhanced Project Documentation: Effective project controls involves robust document control practices, ensuring that project documentation, including contracts, specifications, and drawings, is organized, up-to-date, and easily accessible. Owners then have access to accurate and complete project documentation, which can be valuable for project auditing, compliance, and future reference.
7. Increased Portfolio Visibility: Project controls provide owners with better visibility into the overall health and progress of their entire portfolio. This can help owners monitor project performance, track milestones, and anticipate potential issues or delays, optimizing their portfolio performance.

Conclusion

The day-to-day impact of effective project controls in commercial construction can be seen in improved planning and scheduling, budgeting and cost control, risk management, performance monitoring and reporting, communication and collaboration, document control, and decision-making. These improvements lead to smoother project execution, better project outcomes, and more efficient project management practices.

Effective project controls is feasible for owners and contractors of all sizes, industries and project profiles with modern project controls software.