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February 04, 2022 Article

Project Management Turnover: Be Sure Its Part of Your Due Diligence Review

Peter G. Hessler

Your project is way over budget, far behind schedule, and there seems to be no end in sight. It’s an all too frequent occurrence. And unfortunately, it also draws the prospect of significant construction claims.

As you look at the details of how this happened, the focus is often on the mechanics of the work. The trades did not perform up to expected standards; their productivity was way below expectations. The materials and equipment that were to be installed were delayed, often without notice. The heavy tools and equipment needed to install the works were not available, or so costly that workarounds had to be performed, affecting the schedule. The rationalization goes on and on.

But have you looked at the glue that was supposed to hold the project together – the project management team?

The Project

Let’s take the (actual) case of a major gas-fired combined cycle power plant being built, several years ago, along the Atlantic seaboard. There was nothing untoward about the conditions surrounding this project’s chance at having a successful outcome. But it didn’t. Granted, skilled labor and supervision were, and have been in short supply. There were some other plants scheduled to be built at the same time up and down the same seaboard as well as as far west as the Mississippi river but this was known to be the case when the project was initially conceived. For these reasons, an experienced major contractor was brought on board to assist in the planning and ultimate execution of the contract works, including the supply of all major equipment, labor, and supervision.

The project started on time with engineering, material and equipment ordering and construction being performed hand-in-hand under the umbrella of the major contractor. The contractor had organized this project’s top four management staff positions as follows: a) Project Director, b) Construction Director, c) Construction Manager, and d) General Superintendent. The original project span was 36 months from contract signing to substantial completion and anticipated the continued involvement of the same contractor management staff personnel until completion.

The Problems

Unfortunately, the time span to actual substantial completion ended up being 48 months, requiring an additional year of management staff. It’s execution took almost 1 million manhours more than originally planned. And to make matters worse, the original four management positions ended up being filled by a total of 16 different people, or a management staff turnover of 300%. Now, it is not unusual to experience turnover in any one of the management positions but turnover on this project affected all four positions, multiple times. In the experience of this author, such a turnover rate borders just barely on the edges of reality - twelve times the expected norm (my experience is closer to 25% - or one out of the four positions - on a project of this magnitude). This certainly begs the question of whether the management “team” ever had the opportunity to develop into a “functioning entity.”

So what does that say about this project? The schedule overran by a year (33%) and the costs, in terms of manhours, overran by 25% (4.3 million manhours executed versus 3.4 million manhours expected). The management staff “overran” by 300% and an analysis of some of the contractor’s email correspondence revealed minimal staff turnover coordination. Many times, the person would be gone when the replacement arrived. At other times, the turnover was just a perfunctory greet, meet and delete on the day of exchange. The hand-offs were seldom coordinated and almost never planned.

As pointed out at the beginning of this article, most finger pointing usually goes towards problems with labor, materials and equipment, and/or installation tools and equipment. Yet these in and of themselves are inanimate. They require supervisory planning, managing and coordination, something that was sorely inconsistent on this project. Reasons for management turnover ranged from retirement to resignation to removal. In all but one case, the retirement, there seemingly was no forethought given as to how hand-offs would be handled. In five instances, there were gaps of up to three months between one management person leaving and a replacement being in place.

Since management is usually considered the glue that holds the project together, one can deduce that in the periodic absence of some of the management team’s personnel (of up to three months at times), the glue had dried up and no longer was a useful adherent for the project. In this case it happened because of a lack of due diligence during the original contractor/subcontractor selection process as well as a lack of follow-on management of the team during the project’s life cycle.

The Fix

To minimize a project from falling into such disarray, the first and foremost step is to perform a due diligence review of the contractor’s project management practices, before formalizing an engagement. Then, it is incumbent on the contracting entity – owner, GC, etc. – to monitor the contractor’s performance not only along the lines of scope, schedule, cost, quality and safety, but also adherence to management teaming. In the case of this project, the contractor’s four original positions were proposed and named in the RFQ submitted for the project. But right at the outset, between the RFQ response and Bid Stage, two of these four individuals had already been swapped out, and the contract had not even been awarded. This should have been immediately viewed as a red flag. A review of some of the contractor’s previous project management practices should have been undertaken. And then, a set of conditions should have been instituted to manage management staff turnover.

Of course, it is impossible for a contractor to guarantee that not a single management employee will resign. The same holds true for retiring. But in this case, there were contractor instigated removals as well. And since there were periods of up to three months gap in some of the replacements, there seemed to be a lack of forethought as to how to handle these turnovers.

Fortunately, this type of situation does not happen all the time. However, it happens more frequently than most people realize. After having analyzed almost $1 billion worth of industrial construction claims, this author has found that in roughly half of these claims the high turnover of project management staff, especially the staff responsible for field work, was at the heart of these projects’ problems. Whether the projects were negatively impacted by scope issues, scheduling snafus, cost overruns, poor quality work or safety abnormalities, the inability to communicate between (absent) management staff was a principal culprit. When there are lags between staff turnover, communication suffers and site work is impacted.

So how can this be minimized? First, the owner, GC or other principal looking to contract out the work must do a deep dive into the proposed contractor’s previous projects. A forward look is also necessary. What new projects are on the horizon? Will they impact the availability of qualified management staff? And if so, what mitigation tools can be used to prevent turnover, voluntary or otherwise?

One suggestion that has been proposed before is for the owner, GC or other principal to be allowed to temporarily fill the contractor’s open positions until suitable replacements have been brought on board and assimilated into the project. Another is to use the services of a third-party to monitor the project and raise flags before staff turnovers occur. A good third-party person who keeps up with the project’s progress and projected work can more easily see upcoming pitfalls than those close to the work – this is akin to someone in a position to be able to see the forest in spite of the trees.

The Takeaway

With the expected onslaught of new capital-intensive projects due to the recent federal $1.2 trillion infrastructure law, depending on just the existing management-skilled source of supervisors will only exacerbate the problem of management staff turnover. Considering there are no additional management staff just because there now will be more money for infrastructure projects, the management personnel switcheroo will just get worse – unless proactive plans are put into place.

Bringing on board the “A” team is key. Seldom do the members of the A-team leave of their own accord. Almost never is a member of the A-team removed from the project. Yes, some do retire, but that can be planned for in plenty of time to avoid project disruptions.

The preventative solution is to develop a surefire set of criteria that the A-team must meet to satisfy the goals of the specific project, and then ensure adherence to that criteria.

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Peter G. Hessler

Construction Business Associates, LLC, West End, NC | Division 5 (General Contractors)