Preventive Measures to Avoid Loss from a Construction Project

A.     Tendering stage:

Minor human errors may occur at this stage as the estimators usually gets 4-6 weeks to submit a tender. However, unless there are no major variations in the BOQ or Missing items in drawings/specifications/conditions of contract/payment terms; the rest of the issues could be sorted out in the execution stage through re-modelling/re-engineering process.

B.     Never blame each other: Try to absorb/adjust the errors happened at the tender stage (if any) by proper re-modelling/re-engineering methods. Achieving the ‘projected profit’ by the tender team or more than that must be the ultimate aim of the company. Avoid the regular ‘blame game’ between ‘Tendering Team & Project Execution Team’. The ultimate loser in that will be the ‘Owner(s) of the Company!’

C.     Execution stage:

1)     Procurement (subcontracts and materials): Must be procured strictly according to budget issued by estimation department. The procurement shall be coordinated between the estimating department and procurement/purchase department.

2)     Labour productivity: Must be strictly according to the productivity assumed by the estimators for each item of work. No work shall be allowed to perform on a daily wage basis. Work must be based strictly on the measurement basis only.

3)     Daily production report: Daily production report must be produced by the site engineers; cross checked and confirmed by the construction manager with the estimated productivity.

4)     Time punching: Daily punching in front of a supervisor using photo ID/ Thumb must be compulsory for all workmen. Monthly salary must be released after reconciling differences between the punching time data and daily production data.

5)     Theft or pilferage: Daily report from the store keeper must be checked and confirmed by the construction manager to prevent ‘theft or pilferage’

6)     Weighbridges: Weighbridges must be installed at the entry and exit points of the project site. Daily report based on quantity calculated from the weight difference (in and out) against the invoice quantity must be cross checked and confirmed. This report must be made compulsory for all materials, including; Water, Sand, Blocks, Wood, RMC, Rebar etc.

7)     Cost control: Cost control using ‘Candy’ software is one of the best options to track the project on a daily basis. Cost overruns in preliminaries (site overheads) must be carefully monitored and adjusted on a regular basis. Surplus staff must be transferred from the project site.

8)     Plant and equipment: Must be strictly controlled according to budget issued by the estimating department. Remove the P&E from the project site immediately after the use to control the cost overrun.

9)     Project administration: Timely notices, claims for EOT and Variations must be done in a professional manner. However, contract administration must be carried out in such a manner in order to get approvals even for ex-gratia (sympathy) claims.

10)  OD/Bank Finance: Try to avoid OD and Project finance through re-modelling the payment terms.

11)  Dispute settlement: Always try mediation, conciliation or negotiation instead of arbitration or litigation.

12)  Financial Ratios: Four groups of financial ratios, ‘liquidity, profitability, leverage, and efficiency’ strongly correlate in determining the success or failure of the company.

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