Quality, Consequences and the Construction Industrial Complex (part 276).
If there are any of the following words in your fixed price, lump sum project management or commissioning contract you have a problem.
Why? Because they are unquantified verbs and unless you are billing on a time charge basis, they are open liabilities.
Project management and particularly commissioning management are exercises in “”soft power”. In the project context, the algebra goes like this:
- Ability to instruct + spend money + award & terminate contracts = hard power
- Authority assigned via appointment + domain expertise + communication skills = soft power
Unless you have “hard power” you can only exert “soft power” i.e. exert influence and / or provide advice based on domain expertise.
Effective leadership, good management, co-ordination and “ensuring” are outcome based phenomenon. You only know retrospectively if you have received them. The algebra to procure these phenomenon is:
- Qualifications + Social Proof + Reputation = Confidence in Competence
- Qualifications + Social Proof + Reputation + Hard Power = Ability to Deliver
The reality is that it all comes down to the people who are assigned to your project and not the firm you hire. Only firms with excellent leadership can nurture, develop and retain high performing people. Therefore the algebra above applies to people and firms.
Commoditizing and procuring leadership, management, co-ordination and “ensuring” on fixed price is actually IMHO, a form of self sabotage. Any project that accepts project management and commissioning management appointments on fixed fee basis should understand that the provider is incentivized to optimize for minimum compliance (junior, inexperienced people) and profit maximization (corner cutting). You get what you pay for.
Also, If the word “discretion” is used in the specification or appointment documents we then move into judgment based actions and opinions about quantities. On a fixed fee, discretion is likely to involve the least possible work and not what is actually required. Never use the word “discretion”, quantify and spell out exactly what is required.
My friend works in management consulting. I described the construction industry to him and his analysis was, “your business is all risk and no returns, how do you make money?”. I had no answer.
Ask yourself, how many construction projects complete on time and on budget? If the answer is not many, then fixed fee professional services are a sure way to have a job but make no money. Having a job and making money are two separate things.
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