Construction Success Story: Saving a Troubled Project

by: Smith and Howard

December 5, 2016

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A contractor in a busy suburb was hired to do a large-scale home remodeling project because of his reputation for performing quality, timely and reasonably priced work. He promised the owner that the project would be completed before a family wedding in six months. Unfortunately, nothing went as planned.

First, bad weather delayed the start of the project by two weeks. Then the homeowner requested some design changes that took additional time to make. Then the project manager got sick and needed emergency surgery, while two of the carpenters assigned to the job took off for parts unknown (in a company vehicle, no less).

With only a month left before the completion deadline, the contractor was beginning to panic. He couldn’t see a way to avoid disappointing the client, losing a load of money on the job, or maybe both. He met with his CPA to talk job budget and perspective.

Emergency steps

The CPA urged the contractor to take a breath and assess the situation calmly. Then she suggested taking one or more of the following steps:

Consider overtime. Asking remaining crew members to put in extra hours could get the job back on track. But the contractor and his CPA would need to forecast the payroll costs involved and see how substantially they’d affect the project’s profit margin.

Reallocate resources. He could hire temporary help or pull workers and equipment from other jobs to speed up progress. But, again, calculations would need to be performed to make sure slowing down other jobs to finish this one would make sense.

Fast-track what you can. The contractor could look at remaining job tasks and reconsider how he typically sequences these activities. He might be able to reassign them totally or partially to speed up progress.

Prevent further scope changes. Above all, the contractor should have an honest chat with the owner to emphasize that absolutely no unplanned work can be requested or performed if the project is to be completed by the deadline.

Scale back. As a last resort, he could try negotiating with the owner to eliminate or postpone some of the originally planned work. The contractor might be able to go back after the wedding to finish up certain punch list items.

Turnaround strategy

The contractor and his CPA performed the necessary calculations and came up with a detailed turnaround strategy. Ultimately, his profit on the job was less than he’d hoped for — but he didn’t take a loss. Perhaps more important, his good reputation remained intact.

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