When the client's lack of project setup becomes a project risk

The momentum between service provider and client

True passion is developed when it comes to negotiating contracts with vicarious agents and companies in the course of a complex project. The demands placed on the planning team - and even more so on the companies - are usually very high. After all, as the client, you are responsible for a project that is unparalleled in terms of quality. The pressure is high to manage the task competently. This is usually reflected in the high expectations and defined requirements for the realization team.

So far so good. These demands are fine. They represent a cornerstone for high-quality project management. But now let's turn the tables and look at the client's demands on the customer, i.e. on themselves. Suddenly we notice a significant drop in the level of expectations. Requirements in terms of content, quality and, in particular, adherence to deadlines, are suddenly no longer prominent. They become a minor matter. The high demands placed on the service provider are not measured internally on the same scale. “The customer is king.” - a mindset that was often propagated in the past, but which creates an unequal dynamic in construction management.

Admittedly, this is a bit exaggerated. But service providers in all sectors are familiar with similar approaches.

The project management setup on the client side

In the project preparation phase in particular, there are two key issues that need to be ensured on the client side: On the one hand, there is the development of the specifi-cation for the planning team, i.e. the user requirements analysis - we have already reported on the content and importance of this in this blog post. On the other hand, it is the organizational set-up to be able to implement such a project at all. It doesn't make much sense to commit the planners and later also the contractors to tight deadlines if the same demands are not made of your own services (in most cases these are necessary preliminary services). This often leads to a situation in which the client himself becomes an obstacle to meeting deadlines. Topics in the set-up phase are:

• Creation of a project organization with clear assignment of tasks and definition of decision-making powers
• Generating the necessary process structures for procuring services (planners, experts, contractors)
• Reinforcement in the legal area if the existing departments do not have sufficient knowledge in the processing of construction-related contracts for work and services
• Budget approvals
• Process structures for document filing, document approvals, etc.
• Process structures for controlling and reporting

It is a misconception that these tasks have been delegated with the establishment of a planning team around the architect. They remain the responsibility of the client. If they are delegated, then to a project management team whose task it is to support the client in all these organizational issues. The effort required to deal with these issues is regularly underestimated or even suppressed (see blog "the phenomenon of procrastination") 

Why the setup is so important:

The client has to find his organizational feet. Unfamiliar tasks with considerable effort are added to his normal activities. In this phase, where many technical and adminis-trative tasks have not yet been responsibly assigned, the first budget releases must be made so that the first processes, whether they are assigned to the user needs analysis or already to planning, are financially secured. Otherwise, it will be problem-atic if these are delayed, but the planning team has already started work in good faith due to the tight schedule.

If a project has to start quickly under deadline pressure, then it is extremely counter-productive if the planning team works for months on the basis of a verbally promised assignment and does not yet receive any remuneration; usually because the organiza-tional rules of the procurement area have not yet all been run through. You can see the deficit in expectations: the planning team has to perform properly immediately. But the purchasing department is taking its time because at least two “tick boxes” are still missing in the SAP workflow.

Similar processes can also be found in invoice processing. It takes time until the ac-counting department has been set up in such a way that it can properly handle the in-voices of the construction-relevant contractual partners in compliance with the ap-plicable law on contracts for work and services. It is not uncommon for the first in-voices to be significantly overdue. This is not due to intent, but because there is a lack of capacity for the often additional workload or a lack of knowledge in dealing with construction-related contract documents. The first invoice cannot be paid because the supplier has not yet been created. This usually takes weeks with all the queries. However, the same purchasing department has negotiated the supplier into tight deadlines. The first dilemma takes its course, causing frustration and delays.

An advance payment is often negotiated for the contractors. The purpose of this is to finance the purchase of materials, for example, even though no work has yet been car-ried out on the construction site. The sum is secured by an advance payment guaran-tee. Guarantee and advance payment invoice are issued. However, the payment, whose purpose is only fulfilled if it is made promptly, is delayed because the guarantee has to be checked first. The amounts, often large sums, require approval from “the top”. That takes time. This means that a small company can quickly run into a liquidity bottleneck. The point of the advance payment is lost.

Missing setup: Minor detail or project risk?

The question arises as to how these “shortcomings” are to be assessed on the client's side.  Our experience: The negligence in the points mentioned tends to be classified as a “trivial offense” and “project uncritical”. The company awarding the contract often believes itself to be in a supposedly superior position as a financier. The service providers usually also keep quiet. They have only just started working together and do not want to burden them immediately due to non-payment. In this respect, there is initially no criticism of the client.

As project coordinators, we take a fundamentally different view. These issues represent a serious project risk. Missing commissions or late invoice payments can quickly lead to an imbalance and thus a considerable project risk, especially with weaker contractual partners.

A missing or inadequate organizational set-up means a lack of definition of decision-makers and allocation of responsibilities. Failure to make decisions can generate project risks that can no longer be made up for.

Conclusion

Project management should be based on mutual respect, mutual esteem and mutual fairness. In other words, these are the cornerstones of a successful project. The de-mands placed on planners and contractors by the client should begin with a demand on their own performance. This is important and creates trust. Often it is not a lack of expectations, but simply a lack of overview of what needs to be done on the client's side. Professional advice is then urgently required to ensure that minor inadequacies do not turn into a full-blown project risk.