It seems lately that every project of substance has a governance board of some kind or other sitting behind it.
These entities go by many names: steering group, project control group, dispute advisory board, dispute avoidance and similar.
Regardless of the name, they are all designed to fulfil the same function, i.e. to correct the direction of the project if it strays off course.
I want to look at how these should operate, what they should aim to achieve and how, sensibly, they might do that.
To start with, these forums are broadly moot as long as things are going well. Their role in those circumstances should be to keep a ‘light hand on the rudder’.
The aim of, let’s call it the ‘project control group’, (PCG) should be to resolve matters that cannot readily be resolved by the site team. Inherent in that is the need to avoid formal disputes, but not – importantly, – to eliminate conflict. There is nothing wrong with a healthy degree of conflict, in my view, within the project team.
To do that, the PCG must be contemporaneously cognisant of what is going on, on site at a reasonable level of detail.
To convene monthly around a table to discuss a report prepared by the site team, probably diluted through several levels of management, and expect to have meaningful input is naïve, yet this is often the case.
I’m not suggesting the PCG man-marks the project team and they cannot be expected to understand the same level of detail as those that work the project on a daily basis, but some understanding of the project is essential. My view (and only mine) of what should be understood is as follows.
- The balance of risk. The allocation of risk that sits between the parties should be understood by a review of the special or particular conditions of contract and the accepted qualifications to the tender made by the contractor. These are the areas where disputes may arise and where parties’ understanding of their obligations may be blurred. The standard conditions are unlikely to impart any significant degree of risk.
- The basic nature of the contract should be understood. Is it a design/build contract, full spec and drawings, cost reimbursable, measure and value? Is it a mix, with certain elements contractor designed or performance specified? The parties should be clear as to their obligations but that is often not that case; consultants believe that an item or element is ‘contractor design’ yet nothing meaningful sits within the contract to impart that obligation.
- The PCG must understand the approvals process for variations or performance specified products. Is it protracted, requiring high levels of sign-off within client bodies that may be time consuming to secure? Does the programme adequately reflect these timescales realistically and having done so, a cursory check on how well they are met should be undertaken.
- What do the securities look like, i.e. performance bond (conditional or on-demand), retention, LADs, guarantees. Are there high levels (or inadequate ones) around PI insurance for contractor design? Penal levels of any of the above, notwithstanding they have been accepted, drive behaviours.
- Are the obligations around co-ordination of shop drawings and sub-contractors clear? Who co-ordinates third party input such as client fit-out contractors? It not so much a question of who does it. The important matter is that all parties are aware of where those obligations lie.
- Who carries the risk (and how) of Force Majeure events? This is generally prescribed by standard or special conditions… but is it fully understood but both client and contractor?
- Programme; how realistic is the timescale? Are there key milestones to be achieved? Are long lead items and the sequence to placing orders, clear on the programme? Are there any client-supplied items or work packages that create interfaces or that require shared space or provision of facilities such as cranes, hoists, welfare, etc. These basic matters should be tracked and slippage noted and corrected.
- Cost; high tender, low tender? Jobs that have been ‘bought’ will generate certain behaviours during the contract. What are the respective QS’s estimated final costs? Are they aligned or miles apart? How is the risk / contingency spend progressing, linear or skewed? There ought to be a risk expenditure profile that can be used for comparison and measurement.
- Work on site; the approach to health and safety, clear methodologies for complex works, clear, implemented processes for hot work and temporary works sign-off.
- Is there a respectful, working relationship in place? This can be made evident by attending site meetings. I would expect to go to the monthly meeting on a quarterly or bi-monthly basis. The interaction at such meetings can impart a great deal of information about how the contractor and client teamwork with each other and whether differences are likely be amicably resolved or entrenched positions taken.
This, superficially, seems like a lot, but as part of a body charged with keeping the project on track it is beholden of the participants to be sufficiently informed as to the nature and dynamics of the project, such that they can meaningfully add value to that goal.
I have sat in meetings where the key members of the PCG frequently didn’t even attend, to the extent that the minutes were simply re – issued with the date changed by a month. That is doing the process a clear dis-service and the larger and more complex the project, the greater the imperative is to gain knowledge of its key areas and inform the debate on corrective measures that might be required.
Disputes are often seen as a complete break-down of project relationships but to me, that makes little sense. The process, be it Engineer’s Decision or Adjudication, is a provision written in to almost every contract. Why then, is the use of a clause provided for a specific purpose, seen as a failing when it’s used? Formal disputes can be amicably resolved, it does not mean war has to be declared. It is, simply put, where you turn to when you can’t reach agreement, nothing more.
What should the PCG expect in terms of reporting? Well, given the nature of the role being as described here, it is a summary, mostly of the above, , supplemented by a bit of what might be described as homework, but not pages of details.
The provision, discussion and review of highly detailed and voluminous contract reports should not at governance level, be necessary but the reporting must impart useful information that is of some aid to decision making.
I’ve been asked to report on a portfolio of projects that required noting when ‘30% of detailed design was complete’. For any high-level review this is a ludicrous ‘milestone’ given the non-linear, progressive nature of design for either infrastructure or housing.
The exercise of control by a group or board must be done with a clear goal in mind and having the parties informed of the subject matter they are ‘controlling’ is essential. I believe this is too often, not the case but with a bit of targeted effort that is easily overcome.
If that approach can be prescribed at the outset, then the process will have some meaningful benefit; if not, well, at least the tea and coffee is usually free!
By Joe Colgan, Director, Closebrook Properties
Joe is a property developer currently active in the Auckland and Christchurch markets with extensive experience in townhouse and apartment developments.
He has a background in project management having worked on large scale developments in Abu Dhabi and Dubai (>$6Bn) coupled with heavy civil engineering experience on infrastructure, road and railway work in NZ, the UK and Saudi Arabia.
He is a member of the Institution of Civil Engineers, a project management professional (PMP) and a post graduate diploma in engineering management.
He further has a post graduate diploma in construction law and contract and has significant ‘claims’ experience, providing legal training on contract law, the NEC form of contract and undertaken expert witness work on construction disputes and tenancy disputes.
Despite the disappointment he has heartily congratulated colleagues on Liverpool’s capture of the Premiership which is no mean feat for a Manchester United supporter.