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Project Priority - Cost, Schedule or Performance?
Construction expenditures are at an all time high, project inquires from Clients remain stong with an average backlog of seven (7) months of work for design firms. Based on this workload - firms are spread thin looking for sfaff to fill key positions. With rising interest rates, concerns about inflation and economic uncertainty, project owners continue to push for getting projects started and completed. In this current climate - their is increased risk for design firms.
Client Priorities
To help mitigate risk - it is essential during early discussions with clients you obtain a clear understanding of the clients project priorities and expectations. This information can influence dramatically the project tasks, cost and scheduling. It is important to know if there is any critical factor(s) for your client on the project. It could be the project needs to hit a specific delivery date, regardless of the cost or shortcuts that are needed to meet that date. The budget may be the priority and making sure costs are not exceeded is essential, even if the scheduled is extended. Quality may be the top priority with the primary objective is the completed project will meet the established quality standards and requirements.
Clients usually have an opinion about the following three categories, and what is the most important. While there are other important factors such as monitoring and controlling a project, discussion on these points is helpful. Project priorities and expectations should be discussed during the outset of project planning. Priorities usually fall into the following three categories:
• Cost
• Schedule
• Performance
Your first meeting with your client - be prepared with a series of questions to help identify priorities:
• What do you consider your most critical needs and objectives for the project?
• Is project cost the primary driver of the project?
• Are there any important project completion dates or milestones?
• Are there specific performance requirements and specifications including functionality, lifecycle costs and maintenance?
Clients’ may state there is more than one priority on the project - maybe all three are priorities. Continue to ask questions and based on responses you should have a clear idea of the client’s priorities and expectations for the project. Client responses to questions are then used in developing the Project Management Plan (PMP) for meeting those objectives. The PMP should be reviewed and approved by the client.
Cost - If Cost is the most important factor - most of your attention will be on the project budget. If possible, focus on finding ways to design and construct for less than the budgeted amount without impacting the quality of the project. The schedule may be pushed out if that will help in reducing project cost based on time of year, material, available resources, etc.
Schedule - If Schedule is the most important factor – attention is focuses on completing tasks in compliance with the project schedule. If the project schedule is the priority, usually the use of overtime is accepted to meet deadlines with costs considered less important.
Performance - If Performance is the most important factor - design features are critical for meeting the client’s project needs and requirements. This could include the performance specifications for the project, functionality, life cycle costs and ongoing maintenance. Just as long as quality and performance objectives are met for the project, cost and schedule requirement are secondary.
Client Due Deligence
An analysis of the client is necessary - understanding that all clients do not have the same amount of project experience. You may have a client with limited previous project experience including working with a design firm. This situation brings its own challenges and risks including additional time and effort on your part managing and communicating with the Client. You can also have a very experienced, and demanding client that tries to take advantage of your firm by reducing fees and compressing project schedules. Hopefully you find Clients between those extremes where you can identify reasonable project terms and expectations for all parties.
Financial Expectations
In initial discussions with clients, explain in a clear and concise manner exactly what your services will be, will not be, and the value you bring to the project along with clearly stating your compensation terms. The objective of the discussion is clearly establishing the financial expectations with the Client. At this face-to-face meeting, you will obtain a sense of the client’s financial capability for the project along with the ability to pay for your services. If the client cannot demonstrate adequate financing capability, you should consider declining the project and walking away.
Project and Client Communication
Certain clients may have a clear sense of how they want to be communicated with during the project while others may not. Unless you know if your client has communication preferences, you could find that your relationship starts off on the wrong foot. Weather it’s phone calls, emails, status reports, meeting minutes, monthly reports, etc., methods and frequency of communication should be identified. Communication preferences should address normal updates, but also methods if there is a problem on the project. Would they prefer a phone call, or email? Should a meeting be scheduled? Establishing methods of communication, especially for new clients is especially important. Be prepared to tailor their views and create a plan that meets their needs.
Clients Risk Profile
Determine the risk profile of your client. Does this client like to take on a lot of risk or do they take a more cautious, conservative approach to project risk? All projects are inherently risky, some more than others. However, how your client wants to approach a project can dramatically increase or decrease that exposure. One approach that reduces risk is planning conservatively and building in contingency funds and time into the project schedule. This is especially helpful when new technology, products, and systems will be used on the project. A more aggressive approach is establishing a project plan assuming a best-case scenario. A comprehensive risk management plan must be developed in case things don’t work out as expected, and how problems will be handled. Having this upfront discussion will help make it clear how both parties will approach risk on the project.
You are welcome to forward this newsletter to others who may be interested.
NOTICE: This article is for informational purposes only and should not be construed as legal or professional advice. Please consult with a legal or professional in your area for advice regarding your firms individuals circumstances.
If you are interested in obtaining more information about SmartRisk, and services offered, please contact us. http://smartrisk.biz
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