Red flags to watch out for in failing projects

25 March, 2018 Linda Nyaseda

A construction project is guided in its operation by three key factors which are:

  • Budget- Cost
  • Time- Schedule
  • Scope: Quality which is affected by various factors including people, equipment, and workmanship

Considering the three key factors highlighted above, failure of a project can arise from a skew in the same, either positive or negative. Borrowing from the 2017 book about Gorbachev: His life and times, distraction and over-optimism are two reasons that history moves much faster than we expected. It is said that history is imbued with disasters that had warning signs which were either missed or dismissed. What therefore are the red flags to watch out for in a project whose failure is impending?

As already mentioned, these red flags arise from the three key important operational factors in a project as will be explained.

Red flags in a budget-cost

Having a project that has used at least half of its budget and only completed ten percent of the tasks is a red flag. Budget consumption should go hand in hand with the project output. If a project expenditure is monitored right from inception, it will be easy to bring this red flag to light before it becomes a disaster. This enables one to brake where possible and correct course where required.

Shrinkage of gross profit margins. This could be an indicator of the project outflows being higher than the project inflows. This is a huge imbalance in the cash flows and could be a cause to brake and reevaluate the entire project.

Poor estimating and job cost reporting could indicate incompetence in the operating consultants, the contractor or the project manager. This further boils down to having incompetent people in the project who could negatively impact on your budget as there could be so many unforeseen costs.

Red flags in time-schedule

Having a project with no action plan. Action plans are critical in helping to manage expectations which allows the project team to complete a project to the client’s satisfaction. It also goes to say that an action plan informs the proper communication lines enabling the project team to frequently share progress while getting input from key stakeholders and thus avoid or minimize backlogs. A project without a proper action plan is doomed from the start.

Unrealistic construction schedules can also be a red flag. This can be translated to two things. Either the project will be rushed and delivered to substandard, or the project team jumps ship due to too much pressure leaving the project incomplete. It is also important to note that a good schedule should have an all-rounded realistic team input to foster adherence to the letter. Otherwise, it will just be a back and forth on time extension.

Another red flag when it comes to project duration is unrealistic or no catch-up strategies when a project starts to stall. A catch-up strategy informs on the things that the project team is willing to do to ensure that despite a loss of time, the project can still be delivered within the stipulated period. Lack of a catch-up strategy might mean that resources and time will continue to be lost as there will be no concrete action plan.

Red flags in scope- Quality

Scope management influences the quality of the project. If the defined scope of the project is to be delivered to the required quality standards, the project people: team, must be hands on.

Scope management requires quality delivery, if a lot of structural elements and material tests are failing and there is a lot of poor workmanship from the contractor, then that is a high likelihood of incompetence or lack of project ownership, an indicator of a project plunging to failure.

One red flag that inevitably comes with scope is the overdesign of a project beyond the client’s budget. If not caught in time, this could lead to the needs to constantly re-value engineer a project which not only leads to loss of time but also eats on a project budget due to the constant rise of abortive works and numerous variations which affect not only the budget but also eats into the project’s profit margins.

Another red flag when it comes to project people is a disconnect in communication planning and management. The life of a project depends on communication which further fosters coordination among the various project team members. With communication comes ownership, goal alignment, and accountability, which is very essential in any construction project.

One important question to always ask oneself in a project is, has there been two or more consultants already working on the project yet it is nowhere near completion? If that is the case, then there might be a need to look at the evaluation criteria or perhaps the client should take a step back and manage her/ his expectations when it comes to the delivery of the project, or there is a serious problem with the project scope.

Good to Great by Jim Collins talks about having the right people on the bus. This is no different from a project. Observing a project teams’ management capability helps to avoid red flags like missing deadlines, high incidences of out of the blues claims. This could also indicate that the management team in the project is not performing up to task. Such problems lead to clients starting to look for quick true professional fixes to address the mess in a project which could be very costly.

As a parting shot, borrowing from Roberta Wohlstetter in her 1962 study dubbed Pearl Harbor: Warning and decision, failure of a project is never sudden. In her book, she analyzed how the Japanese surprise attack would have been less surprising than it appeared because the warning signs were well known to the US government. If red flags are to be addressed to prevent project failure, therefore, it is important to have a sufficient number of realists who know the truth on the ground and will call it as they see it. In other words, avoiding the hot potato syndrome.