Capital Projects ... Five Steps to Success ... What Every Owner Needs to Know About Their Project
Date Posted: February 12, 2013
by Jack Woelber, President, Interstates Control Systems (top picture) and Scott Peterson, Chief Financial Officer, Interstates Companies
Success is something planned; it rarely happens on its own.
As you strategize a capital project, you will do many things to set yourself up for success.
Early on you will partner with a design-builder or general contractor with the understanding that you will save time and mitigate risk.
While your design team manages the details of your building project, you can continue to focus on your business.
This initial partnering happens very early; and it is recommended that you also partner with specialty contractors as early as the RFQ stage of the project.
In preparing for your project, consider that there are many ways specialty contractors can contribute additional value, especially with opportunity to provide early input into a project’s design.
As experts in their area, specialty contractors suggest ways to improve processes, save on front end construction cost, and save on life cycle costs.
Once you place your project in the hands of the design-build team or a general contractor, how do you know that you are getting the best project management, quality specialty contractors, and attention to detail that you would give yourself? The truth of the matter is that you don’t know.
There are steps you can take to ensure your project proceeds as desired.
From a specialty contractor’s perspective, here are five things that owners can do early in their capital project to prepare it for success:
1 – Set clear direction and expectations
2 – Communicate
3 – Agree in advance about how the team will resolve conflict
4 – Ensure that the entire team understands your risk
5 – Beware of the ‘low price lie’
Set clear direction and expectations
When you set clear direction and expectations early in a project, everyone involved understands what is expected of the team both collectively and individually.
It is also the team’s prime opportunity to question and clarify those expectations.
As the name implies, specialty contractors have extensive knowledge in their specialty area. Ask your design-builder or general contractor to bring specialty contractors to the table early in the RFQ stage and identify them among key personnel on your project.
When the team culture allows for specialties to share their design expertise, owners reap the benefits of higher value solutions.
The earlier in the project those specialty contractors are able to provide design input, the greater value owners will experience.
Every project requires good communication.
But, it’s often debatable what is considered to be good communication.
Take steps early in the process to define and agree upon how communication should look. For example, what kind of schedule or budget reports do you want to see and how often? Decide the type of information to share and with whom it will be shared.
Good communication is concrete. Encourage team members to be definitive in their statements using ‘I will’ statements, not ‘I hope’.
When allowed to make ‘I hope’ statements, there is not actually a commitment being made. Or worse, commitment is implied that may or may not be possible to meet.
Give team members room to share bad news and present solutions. A little pressure is good for keeping everyone at the top of their game.
You don’t want to be involved in all the day-to-day ups and downs.
But don’t let yourself be so far removed that you don’t have a clear idea of what is reality for the project team.
Agree in advance about how the team will resolve conflict
Agree in advance about how the team will resolve conflict.
Provide a non-threatening environment where team members are allowed, even encouraged, to disagree.
Doing so allows for some creative tension, giving specialty contractors room to challenge the status quo and offer value-added improvements that will ultimately improve the project status.
Have a plan by which your team can systematically address performance issues or personality conflict. Your plan should start with the design team and flow all the way through the organization chart to your specialty contractors.
You want to be comfortable that your team is working well together. Teams that do not function well require extra time. Start from the beginning with good conflict resolution plans and your team will be stronger because of it.
Ensure that the entire project team understands your risk
As owner, it’s your money/reputation on the line.
Ensure that the entire project team understands your risk.
You want all team members to understand exactly what is at risk and why that risk is important to you.
If they are not sensitive to the impact they have on your risk, consider if they are truly a fit for your team.
Well-led projects have someone looking ahead, addressing potential issues to mitigate risk, and ensuring that all the pieces are in place according to plan.
Consider if your project manager is a fire fighter (reactive) or a fire marshal (proactive)?
Projects that are well-led require a little of each, but mostly you want a project to be run proactively.
Beware of the ‘low price lie’
Beware of the ‘low price lie’ when it comes to project bids.
The idea of the lowest price bid is attractive, but there is risk in going down that path.
Think about who you would rather have on your project: someone comfortable that they are being treated fairly for their specialty work or, someone bidding below cost in order to secure the work and will then cut corners or change-order-you-to-death during the process?
Like other things in life, what sounds too good to be true probably is.
As you strategize a capital project and visualize what success will look like, keep these five things in mind: set clear direction and expectations, communicate, agree in advance about how the team will resolve conflict, ensure the team understands your risk, and beware of the ‘low price lie’.
With these things considered, your project is sure to run smoothly.
Scott Peterson, MBA, C.P.A., C.I.A., CCIFP is the Chief Financial Officer of Interstates Companies. Interstates Companies provide electrical engineering, construction, automation and instrumentation services for industrial and processing facilities in industries such as food & beverage and value-added agriculture. For more information, visit www.interstates.com or click here to email Scott.
Jack Woelber is the President of Interstates Control Systems. As part of Interstates Companies, Interstates Control Systems provides control systems design, automation, and manufacturing intelligence services for industrial and processing facilities in industries such as food & beverage and value-added agriculture. For more information, visit www.interstates.com or click here to e-mail Jack. For more information, call 712-722-1662.