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 specification for the planning team, i.e. the user requirements analysis - we have already reported on the content and importance of this several times in the block contributions. 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 post Der Trugschluss: Projektsteuerung verteuert das Projekt).

When a project must start quickly due to time constraints, it is extremely counterproductive for the planning team to work for months based on a verbally confirmed assignment without receiving any compensation —usually because the procurement department’s organizational procedures have not yet been fully completed. The discrepancy in expectations is clear: The planning team must deliver results immediately. But the procurement department takes its time, since at least two “checkmarks” are still missing in the SAP workflow.

Similar issues also arise in invoice processing. It takes time for the accounting department to become sufficiently organized to properly handle invoices from construction-related contractors in accordance with applicable contract law. It is not uncommon for the first invoices to fall significantly past due. This is not intentional, but rather because, on the one hand, there is a lack of capacity to handle the often-additional workload, or, on the other hand, the knowledge required to handle construction-related contract documents is lacking. The first invoice cannot be paid because the supplier has not yet been set up in the system. With all the necessary inquiries, this typically takes weeks. However, the same procurement team has negotiated tight deadlines with the supplier. The first dilemma unfolds, bringing with it frustration and delays.

Why the setup is so important:

The project owner must get organized. Unfamiliar tasks requiring considerable effort will be added to their normal workload. During this phase, when many technical and administrative tasks have not yet been responsibly assigned, it is essential to approve the initial budget allocations so that the first processes — whether related to user needs analysis or already assigned to the planning phase — are financially secured. Otherwise, problems will arise if these approvals are delayed, but the planning team has already begun performing its services in good faith due to the tight schedule.

An advance payment is often negotiated for contractors. The purpose of this is, for example, to finance the purchase of materials even though no work has yet been performed on the construction site. The amount is secured by an advance payment guarantee. The guarantee and the advance payment invoice are issued. However, the payment — which only serves its purpose if it is made promptly — is delayed because the guarantee must first be verified. These amounts — often substantial sums — require approval from “the very top.” That takes time. As a result, a small business can quickly run into a cash flow crunch. The purpose of the advance payment is thus lost.