As you know projects are about change and you should expect change, even on lump sum contracts. As the project progresses, there will be changes from the design engineer and more so from he field. Throughout the project, when the contractor presents you with a request for a change notice, you can talk to your team to see if the change is legitimate or not and act accordingly.
I was managing a construction project and had gone out for bid. We got the quotes back and were getting ready to award the contract when the boss came in and said he wanted his friend to bid as well. This was going to cause a delay and we could not convince the boss to tell his friend to go ‘pound sand’. As always happens in these cases the bosses friend came in as the low bidder.
So, we reluctantly gave him the contract and started working with him. As expected he was not the best contractor to work with. Some of the problems we had were:
- Quality of work - we had to be on him constantly
- He submitted change requests for every small detail he could find.
- Safety - in all of my career he was the worst contractor for safety.
My site supervisors were having a lot of trouble managing the contractor and it became evident that we were going to be in big trouble if we didn’t do something, especially with safety. He just ignored our safety requirements and did what he wanted to do. I went to the boss and told him we had to cancel his contract and get him off the site. Well that didn’t go over very well and were told that wasn’t going to happen to his friend so we were stuck with him. To get around the safety issue we called in the local government safety inspectors to have a talk with him. They did that and a few weeks later one of his iron workers wasn’t tied off when over 10 feet and fell injuring himself. The government inspectors came in, bypassed us and went right after the contractor. In the end he was fined $30,000 for the accident.
What’s This For?
We struggled through the project with him and eventually got the project up and running. As with all projects, you have to close the books financially and turn the asset over to the operating unit which we did. About six months after we had closed the project, who sound appear on my doorstep, but the contractor. He had been reviewing the project and there was some extra work they did not bill us for so here was his claim for the said work. It totaled $150,000 (a disguised form of blackmail?). Now keep in mind my field staff were relocated or had left the company and the files had been archived. There was little chance that I could verify the claim was legitimate and even if it was there was no money to pay him as the project was closed.
Being the astute project manager that I was I took the claim into my boss and said “He’s your friend, you look after it” and walked out. As far as I know we never paid him and we didn’t get sued but I don’t think my boss was friends with him after that. This incident eventually lead to us developing a form that we have a contractor submit with every invoice that basically states that there are no outstanding change notices/claims that have not been communicated to us. This form is part of the legal contract that we sign. If you are not using something like this, you should as you need to keep on top of the changes.
And The Moral Is?
Your take aways from this story are:
- Contractors recommended by management are the worst ones. If possible give the project to someone else.
- If you can, only deal with contractors you know and want to work with. You should try to develop long term relationships with two or three contractors.
- Keep up to date on change notices & get sign off with each invoice that there are no outstanding claims that have not been communicated to you.
- Keep on top of the contractors safety index numbers. When contracted, they may have a good safety record meeting your company requirements. If the safety index number gets outside of what is acceptable, your contracts should be written such that you can cancel the contract without them having a claim against you.
- Always be prepared to walk from a contractor or if a contractor, from the Owner. There comes a point when the project is not worth the aggravation, your reputation, nor the cost.
Contact the author at firstname.lastname@example.org for information on the following project management workshops
Certificate in EPC Project Management
January 6 - 10, 2013 Kuala Lumpur, Malaysia
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Fundamentals of Capital Project Cost Control
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Project Cost Control Basics
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