As consumers, the delays in preconstruction projects are disheartening. It raises concerns among buyers who have invested their hard-earned money, causing skepticism about investing in such projects. The construction industry faces critical challenges due to inadequate project execution, primarily seen in cost and time overruns, especially in large-scale master-plan communities. Comprehensive studies reveal budget overruns and delays, posing challenges for project owners and builders. This highlights the urgent need for a transformative approach, emphasizing collaboration and transparent communication to address persistent industry problems. Our aim is to raise awareness about delivering preconstruction projects on time without escalating budgets.
A Review of the Article in Daily Commercial News Published on November 15. Inside Innovation – Preconstruction Excellence!
Historically Insufficient Approach: The construction industry faces challenges due to a historically insufficient approach to project execution. This includes poor front-end project definition, misaligned incentives, and resource constraints.
Impact of Cost and Time Overruns: Cost and time overruns have a disastrous impact on the bottom line of both project owners and builders. Larger projects tend to face more significant problems in this regard.
Study Findings: McKinsey’s 2022 study of over 500 projects globally, mostly megaprojects valued at over $1 billion, reveals that costs ran nearly 80% over budget, with delays averaging 52% beyond the initial expected delivery date.
Global Survey Results: A 2023 global survey by KPMG confirms similar levels of performance failures, with 40% of engineering and construction (E&C) firms and 35% of project owners reporting missed cost and delivery targets.
Risk Management Issues: The lack of effective risk management is cited by 37% of respondents as the reason for their capital projects missing past performance targets.
Preconstruction Excellence as a Solution: McKinsey advocates for preconstruction excellence, emphasizing early collaboration among stakeholders to understand the full potential of cost and schedule improvements. This involves transforming the project delivery system.
Team Collaboration: Transparent and open dialogue with a team approach is preferred over siloed project contributors. Teams that have worked together before are likely to improve front-end delivery and reduce disputes.
Net Present Value Uplift: McKinsey estimates a net present value uplift of 20% for projects successfully engaging in preconstruction excellence.
Different Perspectives for Owners and Engineering and Construction Participants: McKinsey suggests that preconstruction excellence will look different for owners and E&C participants. Owners should set ambitious business targets and secure buy-in from all stakeholders, while E&C participants should focus on developing reliable supply lines.
Role of Technology: Technology, including Building Information Modeling (BIM), can enhance collaboration among E&C participants and communication with project owners, especially when these partners have a history of successful collaboration.
Management Contract and Building Information Modeling: The article mentions the use of a management contract where the client’s cost consultant and the management contractor, in cooperation with designers, decide how to package the works. BIM plays a role in the “packaging” or splitting of subcontractor elements.
Reducing Wasted Resources and Time: Preconstruction excellence involves objectively reviewing strengths and weaknesses, building a reliable supplier ecosystem, and maintaining transparent and open communication to reduce wasted resources and time in Engineering and Construction projects.
If you’ve invested in or are considering pre-construction projects, or if you have any questions, I would welcome and appreciate hearing your perspective on this matter.