After analyzing the performance of 975 light and heavy industrial projects in its benchmarking database, the Construction Industry Institute found that only 5.4% met "best in class" predictability in terms of cost and schedule. While it is no surprise that over-budget and behind-schedule jobs pose problems for owners, the report also concludes that projects under budget and ahead of schedule create a missed opportunity for owners because money set aside for such projects cannot be invested in other ways.

 

DORAN

This report is a way of showing the value of CII research "in a concrete, financial way," said Glenn F. Doran, the research group's chairman and general manager for project services for ConocoPhillips. Glenn C. Gilkey, CII vice chairman and a senior vice president at Fluor Corp., added, "What all of us are looking for is predictable results in cost, schedule and safety." The group now has 132 member companies split evenly between owners, who build portfolios of projects, and contractors.

CII Director Wayne Crew, who presented the data at the research group's annual conference in Baltimore on July 24-25, said the report underscores the basics of engineering economics where the value equation is both cost and schedule. If the benefit stream starts too late or costs are very out of proportion, the net present value is significantly less. "Projects anywhere out of the center quadrant don't deliver the same value," he added (see chart).

 

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GILKEY

How can companies be more predictable? Stephen P. Mulva, CII associate director, said about 150 factors are measured in the group's benchmarking program, and the top four that the study linked to performance were contract method, working relationship, level of scope definition and level of planning for startup. CII owners had more success with lump sum vs. cost reimbursable contracts when working with CII contractors who share best practices and when implementing better scope definition and front-end planning.