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1(c) 2008 Garrison Associates

Construction Cost Management & Construction Cost Management &

The Impact of the Project Schedule on Cost The Impact of the Project Schedule on Cost Part 2: How to Define the Project to Contr ol Part 2: How to Define the Project to Contr ol

Costs Costs

By Ted Garrison

Garrison Associates

www.TedGarrison.com

www.StrategicPlanningforContractors.com

www.NewConstructionStrategies.com

http://www.tedgarrison.com/

http://www.strategicplanningforcontractors.com/

http://www.newconstructionstrategies.com/

http://www.newconstructionstrategies.com/

http://www.strategicplanningforcontractors.com/

http://www.tedgarrison.com/




Module 1: Introduction toModule 1: Introduction to

Phase 1Phase 1-- Defining the ProjectDefining the Project

“You create the finish line you will later

cross. Make the finish line clear to allstakeholders.”

Ron Black, author

I diot’ s Guide to Project Management & M icrosoft Project 2003




What is the number one reason

why projects fail?

Lack of clear goal or definition!




5 Phases of PM5 Phases of PM

D e f i n e

P l a n

E x e c u t e

M o n i t o r A d j u s t

C o m p l e t e

E v a l u a t e

T h e

L o o p




Strategic Goal ©

“A project result that is mutually agreed

upon that creates a win-win

environment for all stakeholders.”

Ted Garrison




Benefits of Strategic GoalBenefits of Strategic Goal ©©

• Projects need a primary purpose.

• Get stakeholders focused on helping each

other.

• A common goal ensures day-to-daydecisions match the desired outcome.

• Without a common goal – decisions canhave a negative impact.






Why Is This So Important?

• Delighting the customer produces greater profits.

• When companies are perceived to provide quality

in the top 20%, they make more than double theprofits of the bottom 40%.

• Higher profits correlate better with customer-perceived quality than with market share or any

other variable.

• Therefore, you are the key.




What’s the Purpose of a

Business?

To get and keep customers by

satisfying their needs!




What’s the Definition of What’s the Definition of

Client”?Client”?

“Someone under the protection of”

In essence, defining a project is about the client!




How to Develop a Clear

Construction Project Definition:

• Identify all project stakeholders.

• Develop initial constraints.• Link constraints to resources.

• Identify key management issues.

• Set priorities for the project.

• Develop a project goal statement.

• Communicate w/stakeholders and refine.




Who Are the Stakeholders?

• Originator.

• End Users.

• Subcontractors.• Vendors.

• Other contractors.

• Other stakeholders.• Community.

• Project Team Members.




Determine the Key Participants

and/or Stakeholders and TheirRoles

• Might not satisfy key requirements.

• May suffer lost opportunities.

• Might lose project support if you ignore

key individuals.

• Will allow you to determine who your alliesmight be.




4 Questions to Ask to Add

Value

1. What services could be eliminated?

2. What services could be reduced?

3. What services could be increased?

4. What services could be added?




Improved Communications

with Clients

• Communication begins with dialogue –

not discussions.

§ Discussions are about persuasion

§ Dialogue is about “thinking together”

• Clients have identified effectivecommunication as one of the most

important aspects of successful projects.




Triple ConstraintsTriple Constraints(“Make it fast. Make it good. Make it cheap.”)(“Make it fast. Make it good. Make it cheap.”)

• Cost

• Cheap not as important as you may think.

• More important is increasing value.

• Schedule

• Performance (Deliverables)

• Basically – pick any two!




How to Lose Clients?

• 70% of clients are lost due to poor

service.

• 25% of clients are lost just due to

indifference.

• Recognize you are experiencing a clientrevolution.




How Many Contractors Want

Satisfied Clients?• Why? 86% of satisfied clients will go to your

competitor on the next job.

• Loyalty = Profits• Excellent quality doesn’t create loyalty.

• Low prices do not create loyalty.

• Excellent service doesn’t create loyalty.• Even client satisfaction doesn’t create loyalty –

“unless you add the emotion of love!” Prof.Robert Peterson – Univ. of Texas




So What Creates Loyalty?

• Client intimacy is what creates

loyalty!• Taking care of the client’s special

needs is what creates intimacy.

• In other words – WOW the client!




How Do We Wow Customers?

• You must develop customer intimacy.

• You create customer intimacy by taking care of

the customer’s special needs.

• This is the heart of “adding value”.

• Add value through increased quality.

• Think of a client as “someone under theprotection of”.




Understanding the ClientUnderstanding the Client

• The driving force is what the client wants fromyou.

• Client = anyone whose satisfaction depends onyour results

• Client trade your service for the price they arewilling to pay.

• Clients judge quality of the relationship withyour company & whether business process givesthem satisfaction.




Understanding the ClientUnderstanding the Client

• Not all clients have the same desires &

expectations.

• If clients are asked the right questions – they aremore likely to tell you exactly what they want.

• Make sure that your client’s real requirements

are being met.

• Prioritize requirements – they will impact your

future planning efforts.




Performance CriteriaPerformance Criteria(Need to Measure)(Need to Measure)

• Ability to manage the project cost(minimize change orders) (Cost)

• Ability to maintain project schedule(complete on-time or early) (Schedule)

• Quality of workmanship (Performance)

• Professionalism and ability to manage(includes responses and prompt payment tosuppliers and subcontractors)




Performance CriteriaPerformance Criteria

(Need to Measure)(Need to Measure)

• Close out process (no punch list upon turnover,warranties, as-builts, operating manuals, taxclearance, etc. submitted promptly.

• Communication, explanation of risk, anddocumentation (construction interface completedon time)

• Ability to follow the users rules, regulations, andrequirements (housekeeping, safety, etc.)

• Overall client satisfaction and hiring again basedon performance (comfort level in hiringcontractor again)




It’s All About Trust!

• To earn trust you must demonstrate or prove you

are trustworthy

• To earn trust you must give it!

• Three characteristics that build trust:

• Competence

• Candor

• Concern




Actions That Can Help

• Develop focus groups to explain problems/gaininformation.

• Directly observe end-user’s problems – wherepossible to gain information.

• Ask questions -

• Ask about everything.

• If you have a problem – add it to the next contract’s list of questions.




Management of Expectations

• Don’t set expectations too low – set as high as you

can deliver – will decrease competition.

• Don’t promise what you can’t deliver – in fact,experienced pm’s deliver slightly more than they

promise on every project.

• Poor management of expectations is one of the

major problems on many projects, especially

public works projects.




Management of Expectations

• Your success depends on your ability tomeet or exceed the expectations of the

project’s originator, its stakeholders, andend users.

• Make sure you can deliver measuredsuccess on everything you promise.

• Schedule & budget are often easier thansoft issues.




Why Is It Difficult to Define a

Construction Project?

• Qualifications of who defines theproject.

• Tough decisions.

• Visions.




A Vision of the Desired ResultA Vision of the Desired Result

• A project without a clear vision or goallacks direction.

• A vision without a plan is only a wish -but a plan brings it alive.

• A vision needs the direction and clarity of a plan to make it relevant to the day-to-day operations.




What Have We Learned About

Taking Care of the Client?

• Understand the client’s needs and then

satisfy those needs.

• Must wow the client

• That’s accomplished by exceeding theirexpectations.




Module 3: Strategies for

Contractors to Add Value• Continuous Learning

§ Only by changing how we think and interact can we change theoutcomes of our projects.

• Innovation§ “Tomorrow’s victories will go to the masters of innovation!

Period!” Tom Peters

• Increase collaboration§ “In developing your strategic alliances you are only limited by the

quality of your alliance relationships and your imagination.” EdRigsbee – author of Developing Strategic Al l iances

• Turn PM process into competitiveadvantage.




Obstacles to Learning

• Our beliefs determine how we think and howwe act, but these may be in conflict with goodideas.

• The more successful people are – the moreresistant they are to change.

• Too often intelligent individuals attempt tosolve problems themselves.

• In essence, we are allowing biases to interferewith our perceptions of the information.




Why Continuous Learning?

• “Our organizations work the way they

work, ultimately, because of how we think

and how we interact.”Peter Senge

• Continuous learning is one of the only two

sustainable competitive advantage.




Two Critical Types of

Learning• Adaptive learning – adapting to new

environments.

• Generative learning – results from

developing new practices not considered

before by uncovering their client’s latent

needs.




Adaptive Learning

• Experience has taught us rules to operate

by.

• In a changing environment the rules mustchange.

• Learning organizations learn from failures,

question practices to see if they are still

valid, and value experiment.




Generative Learning

• Generative learning is about expanding ones

abilities.

• Adaptive learning is important in the short-term,

but generative learning is essential for long-term

survival.

• To add value and create a competitive advantage

we must pursue the latent needs of the client.




What Must We Learn More

About?

• Our clients and their business.

• Our employees and their desires.

• Our industry and its potentials.

• Leadership.

• Marketing and sales.

• In other words, a lot of stuff.






Why All the Fuss Over

Innovation?• It’s one of the two sustainable competitive

advantages.

• Innovation builds client loyalty, which producesgreater profits.

• Innovation boosts earnings, speeds growth, andattracts employees.

• Innovation is how we manage change – those thatdon’t manage change don’t survive.




Need Greater CreativityNeed Greater Creativity

What is creativity?

ØA process that challenges the excepted ideasand ways of doing things to find new solutionsor approaches to challenges.

ØCreativity is about changing assumptions andbeliefs – response to a changing world.

ØUseful creativity is about developing new ideas

that add value for your customers.

ØNew services , Better business practices, bettermarketing, better management practices.




4 Ways to Stimulate Your

Company’s Creativity

1. Don’t let industry assumptions determineyour strategy.

2. Don’t let competitors set the parameters of your strategic thinking.

3. Focus on the common features that customers

value.4. Stop working within the boundaries

established by the industry or the competition.




Why Collaboration for

Contractors?• “In developing your strategic alliances, you are

only limited by the quality of your alliancerelationship and your imagination!”

Ed RigsbeeAuthor of Developing Strategic Al l iances

• Collaboration is about creating trust by workingtogether for the common good or the Strategic

Goal ©.

• Collaboration is not about partnering or sharingof risk




Benefits of CollaborationBenefits of Collaboration

• Increases profitability.

• Improves productivity.

• Improves working relationships.

• Increases fun.

• Improved communications. (System)

• Improved quality.

• Reduced paperwork.

• Will help your business grow.




Who To Collaborate With?

• Start with similar core values

• Find people you trust

• Seek those who believe in win-win situations

• Seek those who will listen – but you need to listentoo

• Seek those that are flexible

• Seek those who share a chemistry

• You can only collaborate with someone who

wants to work together




Collaboration with Clients

• It creates an environment of open dialogue – through trust and mutual respect.

• Allows you to learn more about your clients – the more you know about them the morevaluable you are to them.

• It allows you time to learn and developinnovations that add value.




A Few Secrets of Planning

• The driving force of any plan must be whatthe client wants.

• A plan must accept clients judge the qualityof the contractor by how the entire processgives them satisfaction – not just schedule-budget-bricks and mortar quality.

• A plan must recognize that not all clienthave the same desires & expectations.




A Few Secrets of Planning

• To develop a good plan you must ask the client

the right questions – so they tell you what they

want.

• A plan must make sure the client’s real

requirements are met.

• A good plan prioritizes project requirements – because they will impact future planning efforts

(updates).




Make Your PM ProcessMake Your PM Process

Value DrivenValue Driven• What’s the number one reason for project

failure?

• Answer: Lack of clear definition!

• Stop defining projects by only plans and specs –

must include all clients needs

• Better yet, start defining your projects in terms

of what you must do “to get the next project”.



Action Steps

Please turn to the inside of the front cover

of the resource guide. Write down 1 to 3

action steps that you want to immediately

implement from Part 2 of this program.