Level:
TCM Section(s):
4.1. Project Implementation
8.1. Project Control Plan Implementation
Venue: 2022 AACE International Conference & Expo
Abstract: Many owner organizations use lump sum contracting to deemphasize the need for diligent transparency of project cost, schedule, risk, resources, etc. They reduce oversight and superficially transfer responsibility for successful project execution - with the attitude that ‘it’s the contractor’s job’ to control the project. This approach eliminates attention to detail with the historically accepted premise that the owner may be limited in access to performance data that can be expected from a fixed-price contractor.
History has proven that the above approach is often unsuccessful and that owners can only partially transfer project risk to the contractor. At the end of the day, owners may end up with surprise cost/schedule impacts, contractors who are suddenly struggling financially, and the realization that it’s too late for effective corrective or mitigation actions. Project control transparency is critically important for any selected contracting strategy, and the extent to which contractors are willing to share trends is often mischaracterized.
While reporting on internal rates, overhead buildups and full-cost impacts may be seen as somewhat restrictive, many contractors are willing to share manhour unit rates to provide adequate visibility for productivity measurement, as well as overall project staffing. It has also been observed recently that many contractors are willing to provide added/improved transparency in an overall trend toward contracting partnerships versus the previously experienced adversarial relationships. The detailed information required will vary, but the owner’s primary goal should be to maintain visibility and an understanding of reliable, accurate project status that will facilitate an effective owner/contractor relationship. This paper will include an outline of a reasonable data request which, when correctly communicated, will encourage a win-win situation.
TCM Section(s):
4.1. Project Implementation
8.1. Project Control Plan Implementation
Venue: 2022 AACE International Conference & Expo
Abstract: Many owner organizations use lump sum contracting to deemphasize the need for diligent transparency of project cost, schedule, risk, resources, etc. They reduce oversight and superficially transfer responsibility for successful project execution - with the attitude that ‘it’s the contractor’s job’ to control the project. This approach eliminates attention to detail with the historically accepted premise that the owner may be limited in access to performance data that can be expected from a fixed-price contractor.
History has proven that the above approach is often unsuccessful and that owners can only partially transfer project risk to the contractor. At the end of the day, owners may end up with surprise cost/schedule impacts, contractors who are suddenly struggling financially, and the realization that it’s too late for effective corrective or mitigation actions. Project control transparency is critically important for any selected contracting strategy, and the extent to which contractors are willing to share trends is often mischaracterized.
While reporting on internal rates, overhead buildups and full-cost impacts may be seen as somewhat restrictive, many contractors are willing to share manhour unit rates to provide adequate visibility for productivity measurement, as well as overall project staffing. It has also been observed recently that many contractors are willing to provide added/improved transparency in an overall trend toward contracting partnerships versus the previously experienced adversarial relationships. The detailed information required will vary, but the owner’s primary goal should be to maintain visibility and an understanding of reliable, accurate project status that will facilitate an effective owner/contractor relationship. This paper will include an outline of a reasonable data request which, when correctly communicated, will encourage a win-win situation.