CONSTRUCTION Accounting ARTICLE -5 steps for avoiding project delays before work begins

Target Audience: Construction Industry Professionals, Business Owners, Project Managers, Contractors, Construction Accountants

These days, most contractors can’t afford to absorb the additional expenses that result from project delays. Job slowdowns affect not only your finances, but also your construction business’s reputation.

Project delays occur for a number of reasons, and can range from small misunderstandings to huge conflicts that may put the financial success of a project on the line. While it may seem that some delays are out of your hands, you can take steps to ensure that all parties have their “heads up” before the first shovel goes down. The following five steps will help you get to the finish line quicker by getting off to a better start.

1. Check the owner’s financing

When projects halt because of lack of funding, contractors have little control over the situation. To avoid these circumstances, request certain documents from owners in the beginning, including lender documents and contracts related to right to payment and proof of financing.

Be on the lookout for signs that an owner may be in financial danger. Telltale signs may include owner absences at lender meetings, lender visits to the project site and hesitance in providing access to loan documents.

In a worst-case, nonpayment scenario, you can file a lien to collect money owed, but avoiding the situation altogether usually has a more favorable outcome. Even if you eventually get the money via a lien, you’ll still incur the legal costs (not to mention time and hassle) of filing and pursuing it.

2. Concentrate on the contract

Agreeing on plans and specifications is only the beginning. A solid plan is nothing without an equally solid contract. Along with creating a contract that all parties can agree on, clarity and specificity are important. Unclear points in a contract, such as who’s responsible for procuring certain building materials, can add fuel to the fire during a project dispute.

Particularly important parts of a contract are the notice of claim, request for time extension, submittal review and similar stipulations. All parties should be aware of their responsibilities and obligations. It’s a good idea to create a checklist that tells all parties which contract provisions require action from each of them.

You can reduce your risk further by taking control of the contract process (with your attorney’s assistance) rather than relying on boilerplate contracts. Also try to negotiate and execute the contract well before the job starts.

3. Agree on a plan of action

The next step toward completing a smooth, efficient project is to get all involved parties on the same page. This means collaborating on a plan of action — agreeing on a schedule that anticipates events that are out of your control (such as weather and shipping problems), developing meticulous plans, and reviewing the building design to identify obvious inconsistencies or problems.

Cooperation is critical: The better you’re able to work with the owner, developer, architects and subcontractors to anticipate potential glitches in your plans, the less likely it is that major problems will arise.

4. Find common ground on communication

Creating standardized information management systems and processes, preferably through the use of paperless technology infrastructure (see the sidebar “Going paperless”), can do wonders when it comes to avoiding project delays.

Thousands of documents are transferred between parties during a given project — and each party may manage documentation and communication differently. As a result, errors, miscommunications and logjams are bound to occur.

To facilitate a clear and consistent exchange of data, and to dodge a number of common problems, consider implementing a single, comprehensive and integrated platform that manages all day-to-day project management functions and to which all participants have access.

5. Choose suppliers wisely

Frustrating delays caused by supplier inefficiencies and mistakes can sometimes be avoided. Be sure you choose suppliers you trust and that have a proven record of high in-stock availability and excellent customer service.

If you know in advance that you’ll have to order items from a far-flung supplier, or one that you’re unfamiliar with, account for potential stocking and shipping delays by incorporating possible delays into your schedule. Moreover, ask the supplier for references from anyone who can give a better idea of the supplier’s timeliness.

Problems are inevitable

Even if you follow the previously mentioned steps to a “T,” you’ll likely face some minor scope changes and hang-ups once the project is underway. But whether that problem stays a molehill or becomes a mountain may depend on your project preparedness. And if it’s a change you can charge for, you’ll be all the more glad you did your homework beforehand.

Going paperless: Key questions to ask vendors

Many contractors are switching from paper to Web-based software to better collaborate with all involved in day-to-day project management functions. But with dozens of providers offering project management solutions, choosing isn’t always easy. When evaluating vendors, ask yourself the following questions:

• What are the problems I hope to solve with a project management solution (in order of priority)?
• What are the crucial functions I need in a project management software program?
• Will the project management software be compatible with our current systems?
• Is the vendor a good fit for the size and technological savvy of my construction company?

Find out how our expertise in construction accounting can add value to your business. Email us or call us at 1 (888) 875-9770.

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