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Take Formal Steps to Avoid Project Disputes

Daily Journal of Commerce
Design & Construction – July 20, 1994
By Steven Pinnell and Jeff Davidson

Taking the informal and formal steps to recognize potential problems in advance of a crisis will serve you well in avoiding disputes altogether. Avoiding contract disputes is one of the fastest ways to improve your bottom line and build a great reputation in a competitive industry.

Developing formal dispute avoidance and collaborative problem-solving techniques is a strong adjunct to the partnering process. These procedures will also provide additional benefits beyond reducing and resolving disputes, helping you strengthen the sense of teamwork within your organization.

ACTION TO CONSIDER: As with partnering, on each project all parties (owners, designers, general contractors, subcontractors, and suppliers) should develop formal procedures for dispute avoidance.

Here, are just a few good examples:

  • Agreeing that efforts to resolve immediate, critical problems at minimal overall costs will not be used as evidence of responsibility.
  • Immediate response to any identified problems. This will reassure all parties that the partnering philosophy is working.
  • A conscious effort by each party to honestly evaluate their position and the position of the other party.
  • Cooperative, joint review of the initial project schedule and monthly project updates to jointly identify potential problems and solutions. Scheduling specialists help in this effort as they can identify potential problems and solutions that the generalists on a project team might miss. The specialist can be either an employee of one of the parties or a neutral expert.
  • Innovative analysis of problems using techniques such as brainstorming, value engineering, and functional analysis. This needs to be a collaborative effort involving all members of a project team. In addition to bringing a wider array of talent and experience to bear on a problem, this also builds a sense of teamwork.
  • Open discussions of problems at weekly progress meetings, with the focus on finding solutions, not assigning blame.
  • A commitment by all parties to give timely, unexaggerated notice of potential extra costs, and a reasoned response to these notices.
  • Retaining a neutral expert, with all parties sharing the associated costs.
  • Empowering field personnel to settle disputes at the jobsite. (For some organizations, this will be hard, but it is essential in allowing partnering to succeed).
  • An escalation process that transfers unresolved disputes promptly to the next level of management. Jobsite personnel don’t like to admit that they can’t resolve a problem and this step will encourage both prompt jobsite resolution and a collaborative effort by the jobsite parties.) It is also important to communicate this process to top management.
  • Inaction is never an option. Keep the resolution process active by collectively asking: “What next?”

The cost for any of these formal steps is minimal. Any involvement by outside experts will be limited, and all parties will share the costs.

In many cases the results (for example, value engineering) and the benefits are immediate, measurable and greatly exceed the costs.

By |December 18th, 2015|Uncategorized|

Bottom LIne Management Goals


Bottom Line Management

(tips for contractors)

Bottom Line Management focuses on:

  • Long-Term Profitability, Not Volume
  • Customer Service
  • Investing In People And Systems.

Successful contractors adopt Bottom Line Management to help return their companies to basic principles of good business practice while integrating modern management technology. They recognize that advances in management technology – the technology of directing and motivating employees — are as important as advances in industrial technologies.

Begin with Goals

   First comes focus, goals, a vision of what you want your company to do and where you want it to go. What services do your clients want? What are your resources? What does your vision imply for growth and profits?

Strategic planning and a mission statement will help you make sure your company is headed in the right direction.

Seek Continuous TQM Improvement

Continuously improve all elements of your company to do things right, the first time, every time. This is Total Quality Management (TQM). It starts with customer satisfaction. Areas for possible improvement include packaging a GMP proposal, project management procedure manuals, computerized program management systems for controlling critical resources on multiple projects, and a standardized estimating and job costing system.
A program management system should include estimating, accounting, database, and project management software. This will allow you to maximize the use of scarce resources, e.g. time and skilled people, and to avoid delays from being over-committed. When your estimating systems are standardized, you are able to improve bid reviews, eliminate mistakes, increase accuracy and minimize misunderstandings.

Play the Team Game

Continuous improvement is a team game. Teams made up of management, line and project personnel and, when appropriate, the owner should study and recommend improvements. Show respect by involving people in this process. Make the process successful by providing training and the right resources.

Manage By Projects

Direct your projects using TQM and improve your bottom line. Do you have multiple projects which share people and equipment? Of course you do, and you should identify those projects, coordinate schedules accordingly, and integrate those schedules with your day-to-dayoperation. Support services can help you with scheduling, including CPM, job logic and crew constraints, float and flexibility, and with estimating and job cost control.

Seek Win-Win With Partners

Avoid construction disputes. They hurt your business. Go for partnering. With owners, subs, architects, vendors: create a team atmosphere, open communication channels, build trust and openness, implement goals, and provide mechanisms to solve problems. Partnering reduces cost overruns and project delays. Remember, anyone can request and push for implementing partnering before or during a project.

Re-engineer the Process

If you’re in decent shape, but struggling with cost or quality problems, juice up your continuous TQM initiative. Don’t waste money on re-engineering unless you need radical redesign of critical business processes that really matter, like bidding or switching markets. Draw from the Diamond Model what you need to make your company succeed.

By |August 26th, 2015|Uncategorized|

A Professional Approach to Construction Disputes

CFMA Building Profits Magazine
May/June 1999
By Steven Pinnell
Construction changes and the increased costs that come with extra work, delay, and impact are a common feature of daily life in our industry. These hitches, normally resolved during the course of construction by the contractor’s project team and the owner’s representative, usually result in underpayment, especially for delay and impact costs. Many contractors will absorb cost overruns to avoid protracted disputes that might gain them a reputation for making claims, plus damage the partnering process and their long-term business relations. Not only can this unpaid extra work affect profitability, but it can actually push an otherwise healthy business into bankruptcy.Many contractors seek help from an attorney or claims consultant when a change order request for equitable adjustment is denied and a claim needs to be prepared. This is especially common when the project team and the home office staff are busy, the claim is large and complex, or when special skills are required (e.g., advanced critical path scheduling or inefficiency analysis).

Unfortunately, you may find it difficult to retain a good claims consultant, encounter large fees, or be dissatisfied with the results. In this article, I’ll discuss the value of teaching your home office and project staff how to prepare more successful change order requests, how to retain a claims consultant for large and complex claims, and how to manage their work to ensure better results. Plus, I’ll describe several techniques to help you prevent most disputes, resolve those that do occur, or win at arbitration or litigation, should these options become necessary.

Partnering and the Dispute Management Program

Partnering is a team-building process engaging all parties involved in a construction project (the owner, designer, contractor, subcontractors, etc.) that helps prevent disputes and provides tools to help resolve those that do arise.

The Ideal: The partnering process starts with a commitment from the management of each party to cooperate and then bring the project team members together for a pre-construction workshop. During its time together, the joint project team prepares a common mission statement and implements improved procedures for communication and conflict resolution, all of which provides a strong foundation for successfully completing the project.

The Reality: Partnering isn’t always well implemented and sometimes fails to limit conflicts. Many contractors, relying too much on the partnering approach, fail to protect their contract rights or maintain adequate records to ensure payment for changes. In addition, some contractors are reluctant to press for change orders when partnering or working on negotiated projects.

While most contractors are well aware of the benefits of partnering, few are familiar with the new techniques that make partnering more successful, or with “intervention partnering” that makes it possible to salvage a project gone sour. Even fewer know how to implement a comprehensive approach to dispute management to enhance the effectiveness of partnering, while ensuring fair payment.

To ensure success, partnering needs to be accompanied by a Dispute Management Program. This comprehensive approach is summarized in Figure 1 and briefly explained below.

Better Partnering Practices

Here are the six steps that are essential for better partnering:

1. Your top management team has to be totally committed to partnering, then to training and motivating all managers and supervisors.
2. You must retain the best qualified partnering facilitator – someone who knows construction, has excellent communication and people skills, is truly neutral, and dedicated to a successful project.
3. Both you and the facilitator must convince the owner’s management that partnering will benefit the project and their organization, then persuade them to commit their project team to partnering.
4. The partnering facilitator must focus on specific, real issues affecting the project, while addressing and resolving all issues identified in the pre-workshop interviews with top management.
5. All key subcontractors must become fully involved and committed to working in a partnering mode.
6. The partnering facilitator should consult with all parties on a regular basis, convening a mini-workshop, if necessary, to ensure that the partnering process is successful.

Dispute Management Programs

A Dispute Management Program is a set of companywide policies and procedures that, combined with staff training and additional changes, leads to better dispute management. It is based on a partnering approach and includes a broad spectrum of techniques and solutions to avoid and resolve disputes (or to win in arbitration or litigation, if necessary). When properly implemented, a Dispute Management Program practically guarantees recovery of the cost and time for extra work, delays, and impact. It does this by:

  • Identifying and eliminating, or limiting, contractual risks from onerous contract clauses.
  • Verifying that estimating and cost accounting procedures track extra work and impact costs.
  • Providing procedures and systems for good communication, recordkeeping, and dispute resolution.
  • Training project personnel to identify extra work, give timely notice, and track extra costs and delays.
  • Maintaining compatibility with partnering, while ensuring fair payment for all work.

Prepare and Negotiate Change Order Requests

A Dispute Management Program should have detailed, standardized procedures for preparing and negotiating change order requests. This helps preparers (usually project team members) avoid missing critical information and results in a better document. Efforts should be characterized as “change order preparation” instead of “claim preparation” to minimize adverse reactions and allow the possibility of recovering the preparation costs.

Select Claims Preparers and Train In-House Experts

The most important step in developing a successful claim is selecting the best-qualified expert to prepare it. If a Dispute Management Program is in place and the right person is selected, all else will follow.

First, decide to develop in-house expertise for claims preparation. Even a small contractor should have at least one person reasonably skilled at preparing claims. This will often be the owner, but also may be an estimator, project manager, or engineer. This in-house expert will prepare most claims and assist a consulting expert on large, complex claims to save costs and gain valuable experience. After identifying the in-house expert(s), send them to training, have them do outside reading, and give them experience (under a more experienced claim preparer if possible).

You may still need a consulting expert, especially when the dispute is large and complex, requires special skills, or if your staff is simply too busy. When selecting an expert, look for these qualifications:

  • Broad construction experience and knowledge of construction management practices. Hopefully, this expert will have some knowledge of the specific type of construction in dispute, but a highly skilled claims preparer without specific experience will do a far better job than a less qualified claims preparer with experience in that type of work.
  • Critical path scheduling expertise. This qualification is important if there are significant delay or acceleration issues.
  • Expertise in estimating changes, including crew size/productivity estimates in lieu of unit pricing, Eichleay Formula calculations, and the measured mile and learning curve adjustments for inefficiency cost analysis.
  • Contracts and claims experience with knowledge of contract law and generally accepted procedures for preparing and presenting claims. If testifying, the expert should have arbitration and litigation experience.
  • A good memory, since the expert must review and absorb large quantities of information while quickly grasping essential elements.
  • A personality that excels at research and painstaking analysis, while being a convincing witness or negotiator. (It may be difficult to find all these characteristics in one person, so a team approach may work best.)
  • Good writing skills to prepare a claim document that is clear, concise, and convincing.
  • Good people skills with a practical understanding of human behavior and motivation.

Hire the expert as soon as possible, preferably before putting your attorney to work. An expert will cost far less per hour than an attorney and will do a better job on non-legal issues. A good expert will determine the facts, gather supporting documentation, and identify legal issues so that your attorney can focus on what’s important. If you already have an attorney on board, by all means hire the expert before starting discovery.

There are many sources of information on experts, including your bonding company, local construction attorneys, and other contractors. After identifying two or three experts, ask for their credentials, experience, and references. Check out their references. Meet briefly with each one to discuss the case in general terms, plus one or two significant points. Getting input at this point will help you evaluate their ability to contribute to the effort.

Do not turn a claim over to an expert, either in-house or consultant, and then walk away. You’ll need to brief your expert on the project and the dispute, then provide key documents including the change order request and preliminary claim documents. If possible, have the project team prepare a briefing paper. Ask the expert to prepare a work plan, budget, and schedule for completing the analysis in phases, with specific milestones. You’ll want to receive progress reports at each milestone, so you can provide redirection if the facts don’t turn out as expected or if the expert gets off track.

Prepare a Preliminary Analysis before Proceeding with a Claim

A phased approach, with an opportunity to check progress against the plan and to revise as necessary, is far better than initiating a full-fledged effort. In a phased approach, the claim preparer verifies the significant issues; develops preliminary findings, including recovery theories and the probable recovery amount; and establishes a work plan, budget, and schedule to complete the claim.

Avoiding an open-ended effort helps control costs and time, while eliminating dead-end efforts. In addition, it may be possible to negotiate a settlement using the preliminary analysis, thus saving the time and cost of preparing a complete claim. Most importantly, you won’t waste time and money on a weak claim or walk away from a strong one.

Start your preliminary analysis with an initial briefing or kick-off meeting, during which the project is described and other critical information is presented. This information should include the chronology of key events and activities; the issues in dispute (quantifying cost and time if known); the project participants and their roles; the wording of key documents; the current strategy; and your expectations of the time, cost, support required, work product, and anticipated results. During this meeting, you should prioritize the issues for analysis, provide the most important documents, and identify those individuals who will constitute the claim support team.

I strongly recommend that the claim preparer make a written report, called a narrative text, for:

  • Reporting all administrative information, including work accomplished, work planned, and action needed for review by the decision maker and claim support team.
  • Recording facts, as they are determined from the documents and interviews.
  • Organizing facts by issue, then chronologically, for review.
  • Analyzing each issue with references to source documents or interviews for all statements of facts.
  • Eventually converting the narrative text into a claim document by deleting extraneous information, rewriting for clarity, and adding an Executive Summary.

Narrative Text

Narrative text improves communication between the claim preparer, the claim support team, the attorney (if one is involved), and the decision maker. It enables the claim preparer to record and organize factual information, analysis, and conclusions. In addition, it stores and provides easy access to key facts, names, telephone numbers, etc. If claim preparation is delayed or considerable time elapses between preparing the claim and negotiating or testifying, the narrative text is crucial for quickly refreshing memories. The only downside is the possibility of discovery if in litigation, but this can be dealt with, in most cases, without significant risk.

Narrative text normally has the following organizational structure:

1. Administrative: Work planned, work accomplished, problems, questions, etc.
2. Preliminary Findings and Conclusions: Completed as you perform the analysis.
3. Issue Analysis: A separate section dedicated to each issue with a description of the issue, the chronological summary notes for that issue, the analysis, and conclusion.
4. Summary Notes: Both chronological (e.g., of dated documents) and non-dated (e.g., a summary of key specifications and contract clauses).

Organize Documents for Chronological Review

Organize the documents chronologically with the oldest on top. This allows you to approach the project in the same order that the work occurred; but, you now have the added advantage of seeing it from all viewpoints, including all the documents from all the parties involved.

Determine the Facts and Analyze Entitlement

While reviewing the files, you’ll want to create chronological summary notes for each significant reference to an issue. Enter the date in the left margin, then indent the summary, source reference code, and issue code. These summary notes, organized chronologically by issue in the narrative text, allow you to review only the notes regarding a specific issue. This, of course, eliminates vast quantities of irrelevant detail, highlights the essential facts, and simplifies understanding.

You may also wish to create a “Detailed As-Built” schedule (similar to that in Figure 2 on page 18) from the daily reports, correspondence, and other relevant documents. This displays all pertinent information on a single drawing and can be used, along with the chronological summary notes, to prepare your analysis of entitlement and causation.

Other schedule analysis tools include the Banded Bar Chart Comparison schedule and the ELIPSE schedules that combine a comparison schedule with labor hours worked, impacts, productivity, and weather or other environmental effects.

Compute Damages

Make preliminary damage estimates before analyzing entitlement, so you can prioritize your efforts. Final computations generally follow proof of entitlement and causation. Damages include the direct costs of added work, impact costs, acceleration or delay costs, other costs such as additional overhead, and markup for overhead and profit. You should also include between-the-line costs such as unpaid retainage and contract balances due, interest, attorney fees, and claim preparation costs, minus credit for non-conforming or unsatisfactory work.

Impact and inefficiency costs are the most difficult to estimate and often require special expertise. I recommend a Rational Approach methodology that uses modified total cost claims for some items, expert opinions when necessary, industry studies and formulas when available, measured mile analysis when productivity of impacted work can be compared with non-impacted work, and scientific analysis. This scientific method uses time and motion studies, learning curve effects, and other work improvement techniques to analyze and reconstruct the basic components of work.

Present the Claim and Negotiate an Equitable Adjustment

Effective negotiation starts long before the claim is prepared by involving the owner in the process so that both of you can work toward a win/win solution. Early in the process, you can often obtain vital information about the owner’s position and even factual data not otherwise available, except through discovery. Keep in mind, however, that your primary goal is to maintain a partnering approach.

To negotiate:
1. Be prepared. Understand the reviewers’ positions, and verify that they are willing to be fair and empowered to commit the owner.
2. Meet and present the claim. Discuss the change order request or claim at a joint presentation and review meeting. Establish a positive atmosphere, obtaining a commitment for a fair review, clarifying ambiguities, avoiding misunderstandings, and establishing a procedure and schedule for resolution. Do not argue the issues – for now, at least, but listen carefully to legitimate concerns.
3. Follow through. Answer questions and provide supplemental information, as required. Keep advancing your case using partnering strategies.
4. Negotiate. Use win/win techniques to reach a mutually acceptable solution.


Partnering and a comprehensive program to avoid and resolve disputes will go a long way in improving profitability and reducing the possibility of catastrophic loss. This requires more than good intentions and limited resources, however. It takes a continuing, highly focused commitment to develop, implement, and sustain a Dispute Management Program.

By |August 26th, 2015|Uncategorized|


Superior Partnering
by Jeffery S. Busch, Principal

Partnering is a working relationship between all project participants which promote the achievement of mutually beneficial goals. In essence, partnering seeks to create a unified team, cooperative in attitudes, to achieve a “win-win” scenario for all. Superior Partnering goes beyond typical partnering efforts. It uniquely combines contract language, top management commitment, project and participant pre-assessments, customized workshops, skilled and experienced facilitators, and post-workshop follow-up to reach measurable partnering objectives.
The benefits include productivity savings, better cost control, reduced paperwork, timely resolution of issues, attainment of value engineering objectives, and the elimination of claims and litigation. Overall, superior partnering produces a smoother, more effective construction process and a higher quality finished product.
We have found that effective partnering generally follows specific steps, which vary depending upon the size of the project and the participants’ past experience with partnering. The key steps we follow include:

  1. Draft a partnering clause into the contract
    Although partnering is not a contractual agreement, we have found that a written clause inviting participants to partner increases involvement, and helps turn partnering into action on every project.
  2. Secure top management commitment
    A pre-workshop on strategic partnering is advised for top management and key project personnel, especially for ‘first-timers’ or parties who have not worked together in the past. Our experience shows that pre-workshops help dissolve boundaries and integrate organizations at fundamental levels, better preparing all participants for a successful partnering experience.
  3. Select the best partnering facilitator
    The key to achieving a superior partnering process is aligning yourself with a well qualified facilitation service. The facilitator plays a major role in controlling the flow of the agenda for the partnering workshop and in setting the stage for partnering meetings. The facilitator brings process skills, experience, and project management tools to the partnering process. Your facilitator must understand the basic elements of your project, critical dates and tasks, and the personalities and past history of the parties who will be working with each other. Considerable skills are needed in personnel relations, communication, and conflict resolution along with a strong background in design and construction.
    An important feature of effective partnering workshops is an in-depth evaluation of each workshop. We find out, each time, what works, what needs improvement, and where to make changes. Each new partnering workshop benefits from the combined improvements of previous workshops. In addition to an internal evaluation, we work closely with other partnering facilitators, sharing ideas, tips, strategies, working with the industry for the continuous improvement of the partnering process.
  4. Pre-assess the project and its participants
    The workshop cannot be an off-the-shelf standard presentation. It must be customized to meet the specific needs of the project and the participants. The workshop facilitator must thoroughly research and plan for a partnering workshop.
  5. Facilitate the partnering workshop
    During the workshop, we cover Project Goals & Action Plans, Risk Reduction, Problem Solving & Communication, Project Specific Issues, Partnering Tools, Processes, and other important topics.Anyone having a significant stake in the construction process should participate in the partnering workshop, including those at the executive level. Depending upon the size of the job, the number of participants, and other factors, the partnering workshop will average 1 to 1½ days in length.
  6. Perform follow-up
    It is vital that the momentum and commitment built during the workshop be maintained through project completion. Continuous follow-up with the project and its participants — through periodic jobsite visits, telephone conversations, and continual assessment and measurement of results — is a must.

Construction is one of the few industries where strangers conduct business on contracts worth millions of dollars. With this much at stake, successful partnering requires a multilevel, superior approach to working effectively with people and issues. Make sure you have the right help, then proceed with every confidence in meeting your partnering objectives.

By |August 25th, 2015|Uncategorized|

Quality Management

Make the Client Happy and Happiness Will Come Back to You

Daily Journal of Commerce
Design & Construction – July 26, 1993
By Dragan Milosevic

Serious quality problems continue to plague the construction industry. These problems include poor planning and scheduling, inadequate training, substandard quality of materials and workmanship, poorly defined work and weak project leadership. There is a solution to these problems: TQM – Total Quality Management, the phrase that is popping up everywhere in the construction industry. TQM is an operational philosophy focusing on customer satisfaction, respect for people and continuous improvement.

The Key Ingredients of TQM

Can you build a construction company where attitudes and operations are oriented toward client satisfaction? Such a company places more emphasis on understanding the client needs and wants, translates those needs and wants into reliable plans and then constructs the project through such a process that the client’s requirements are met. If you can build such a company, you will make the client happy and the happiness will come back to you. That happiness is in the form of repeat business, higher productivity, higher profits and increased satisfaction of your employees.

Continuous improvement is about solving problems. It is about doing things right the first time, every time, and improving constantly. It includes teams involving management, line and project staff and, when appropriate, the client to study and recommend changes to improve processes. A process might be concrete curing or developing a bid, practically any process in your company’s value-adding chain.

You show respect for people by getting them involved. In TQM, everyone is involved in making the company better, not just management. How? By doing jobs in a quality manner, by making quality improvements and by employees making decisions on their own – decisions that do not require management approval. In order for this to happen, management should provide proper environment, training, tools, materials and equipment.

One Size Doesn’t Fit All

Here are some generic steps in implementing TQM. First, start at the top: Educate yourself. If you think that TQM will work for your company, commit yourself to TQM. Then, develop your own TQM strategy and choose parts of the company to implement TQM (we do not suggest companywide implementation all at one time). Next, provide resources for the implementation and train your employees. At this point, you are ready to identify how you are going to measure the impact of TQM on the success of your business and the progress of TQM activities.

The next step is embedding the continuous improvement process. Based on its performance, you will monitor and evaluate results. It is important to recognize success and let employees know how they contributed to the improved operation of the company. Learn from feedback as to how you can improve and adjust the TQM effort to meet the changing needs of the company.

Finally, you must continue to improve. For how long? Forever! TQM is not a quick fix, it is a never-ending activity.

As mentioned earlier, the above steps are generic ones. They do not fit all. You must first assess your relative performance in terms of profitability, productivity and quality. Only then is it time to start tailoring your own approach. Lower-performing and high performing companies wouldn’t take the same road. Each of them would have a different catalogue of TQM activities. For example, low performers should stay focused on the basics of the business. High performers should focus on reaching out to position, scan and anticipate the actions of competitors and the future needs of clients.

Beware: TQM Killers

Whether you are a high- or low-performing construction company, you must be aware of the factors that have proven to be major killers of TQM. Some of those are:

  • Lack of senior management commitment.
  • Lack of a TQM implementation plan.
  • Insufficient or confusing training.
  • Lack of measurement of process improvements.
  • Impatience for quick results.

As with any process, TQM faces hurdles. Understanding the killers of the TQM process may help enhance the probability of success for your own TQM efforts. But that success is impossible without proper construction project quality programs.

Project Quality Program

The construction project is a basic building block of your construction company. All of your dollars come from the projects. It is where you work with your clients; projects are where you make or break the company. That is why your construction projects should become the focus of your TQM efforts. A vehicle for that focus is a Project Quality Program (PQP). To understand what PQP can do for you, let us take a look at some specific project quality problems.

In one example, a weld joint ruptured during the water fill in preparation to hydrotest. Why? Temporary hangers provided inadequate support for water filled pipes. In another case, concrete slump exceeded the 2-inch to 4-inch requirement of specifications. Cause: Ice added in lieu of water to control temperature and a miscalculation of water equivalent.

What do these cases have in common? Lost time, a disrupted schedule and the added cost for rework and reinspections.

How do you keep these problems from happening? PQP.

PQP will produce actions to eliminate problems. With these actions, a project superintendent provides adequate confidence that all those little and big construction activities on the job site will achieve the desired quality and thus lead to a project that will perform its intended function in service.

Role of PQP in a Total Project Management System

Project management always has paid a great deal of attention to costs and schedules on any project. Should it be taken for granted and assumed that quality is going to happen without being planned? What do you think would happen to costs and schedules if left to chance? The consequences of not accomplishing the desired quality can have an enormous impact on costs and schedules. Why? Because of associated rework and repair costs resulting from not doing it right the first time.

During the initial phase of a project, the superintendent should lay down a program for achieving quality as well as the plan for assuring that cost and schedule goals are met.

Why Would You Want a Project Quality Program on Your Job?

PQP provides added protection against claims by clients by having objective evidence in the form of records to prove that the project was built in conformance with the design. It also identifies and documents problems in the initial stages so that they can be corrected before costs and schedules are affected. In addition, PQP reduces field problems and complements safety requirements of the project. Finally, it gives added assurance to the customer that they are getting what Page 32 they are paying for.

The 10 Basic Elements to PQP

1. Define the program by management procedures. Plan what you do, do what you plan and document that you did it. .
2. Organize so there is freedom to identify problems. Have someone direct and administer the program under your supervision (in a smaller project, your project superintendent would administer the program) and organize continuous improvement teams. Give them the tools and leverage to get the job done. But remember, every project member is responsible for the quality of his/her project work.
3. Identify items under the program and continuous improvement tasks. There are a few critical and many trivial items. Select the critical items that are important to the function, reliability and safety of the project. Spend your dollars where it counts and where it will assure a successful project. Note that the critical items can include any process in your project. For example, planning and scheduling, mixing concrete, fabrication of formwork or review of shop drawings.
4. Review design and purchase order documents and assess subcontractors. Make sure design documents contain appropriate quality standards and clearly define acceptance criteria. Make sure requirements are clearly spelled out to the subcontractors so you get what you pay for. Evaluate subcontractors in terms of quality, delivery and price.
5. Perform inspections and tests. Make sure it conforms and that it works before you accept it.
6. Control and calibrate measuring and test equipment. Make sure you and your data are right.
7. Control non-conforming items. Identify and segregate non-conforming items, document decisions on how to fix the problem and correct the cause of the problem so it does not reoccur.
8. Control special processes (e.g. welding) and strive for uniform craftsmanship.
9. Maintain quality records. Be able to prove the job was done correctly and separate the good from the bad.
10. Perform audits of all project activities. Verify implementation of procedures and take nothing for granted. Check the progress of the continuous improvement teams.

Does all this apply to both big and small companies, big and small projects? Yes. TQM and PQP are for everyone. The smaller the company and project, the easier it will be to implement.

TQM and PQP are a solution to the serious problems plaguing the construction industry. They help clients get the quality they demand.

In this decade, TQM and PQP will be the keys to success and profitability of those construction companies that know how to use them – those whose actions can match their words.

By |August 25th, 2015|Uncategorized|

Scheduling Tricks and Traps

Tricks, Traps, and Ploys in Scheduling Claims

Project schedules often go awry. What begins with a realistic plan can quickly snowball into a major dispute. Below are a number of tips to minimize delays and scheduling claims.

Critical Path Schedule
Most project Owners require a CPM (critical path) schedule on large, complex or risky projects. The CPM schedule assures the Owner that the Contractor has a viable plan to complete the project on time. It enables you to track progress to quickly identify delays, provides a blueprint for recovery of lost time, and protects against unwarranted delay and impact claims.

Your first step is a well-written specification, which should require the following:

  • Submittal of electronic schedule files
  • Joint schedule review by the Owner’s representative, and the Contractor’s scheduler and superintendent
  • Monthly schedule updates with narrative reports
  • Daily field reports from the Contractor’s superintendent and all subcontractors
  • Recovery schedules if work falls behind
  • Time impact analyses to justify time extension requests
  • Partial withholding of progress payments for failure to comply

Software Tricks and Traps
By utilizing little-known features of Primavera P3 or Microsoft Project, Contractors can distort the schedule to hide delays or fabricate a claim. More often, CPM concepts or software features are not fully understood, inadvertently creating an inaccurate schedule. You need to know how to recognize these electronic ploys, or bring in professional assistance to find hidden traps.

Action if Delayed
Despite everyone’s best efforts, projects can still experience unforeseen delays. If the delay is the responsibility of the Contractor, Owners should require a recovery schedule. If the Owner causes the delay, insist on a prompt, detailed, joint review of the problem. First, try to re-sequence operations to avoid a delay. If necessary, compare the acceleration cost to the delay cost and choose the optimum solution. Also, take special care when preparing global settlements.

Defense of Scheduling Claims
When a scheduling dispute arises, insist on a detailed time impact analysis, including a comparison of as-planned with as-built. For weather delays, require a comparison to NOAA records. Require submission of all supporting documents (daily reports, timecards, etc.), and a narrative that explains entitlement and how the events or actions by the Owner caused the delays and subsequent costs. To discourage fraud, require certification of all claims.

Through a proactive approach, you can maintain control of your project schedule and adapt to changes without excessive costs. Please contact our office for assistance in reviewing a Contractor’s schedule or improving your own schedule tracking process.

Tips to Avoid Traps
Below are a few tips from our Schedule Review Checklist for project Owners:

  • Out-Of-Sequence Logic: Use the ‘Retained Logic’ option instead of ‘Progress Override’ to avoid invalid progress and delays.
  • Excessive Lag: Lags greater than one week need to be verified and possibly changed to a separate activity.
  • Incorrect Actual Dates: Verify the actual dates. Wrong dates can be used to hide delays or set up for a claim.
  • Multiple Calendars: When analyzing the critical path, unexplained variations in float may be due to multiple calendars.
  • Erroneous Constraints: Check if constraints are invalid or used incorrectly. Constraints can unnecessarily delay the start of critical activities, falsely create another critical path, or cause negative float. Do not use Mandatory Start and Finish constraints, or the ‘Zero Total Float’ constraint.
  • Auto-Cost Rules: Select the ‘Link Remaining Duration and Schedule Percent Complete’ option. If you don’t, separate updating is required that could result in error if one is overlooked.
  • Scheduling Report: Run P3’s Scheduling Report to review constraints, open-ended activities, out-of- sequence logic, and statistics.
  • Check The Data Date: Verify that the report Data Date is correct for the current status.
By |August 25th, 2015|Uncategorized|

Construction Scheduling

by Steve Pinnell, Principal

Importance of Scheduling
A good schedule will save time and extended overhead costs, avoid delays, eliminate most overtime, ensure a more efficient construction sequence, and substantiate claims for owner delays or impact. Scheduling software is helpful but will not guarantee a good schedule. Schedulers, including project managers and superintendents, need to master critical path scheduling (taught in an intensive one-day seminar). A working knowledge of the software and access to an expert will aid in special applications or resolving problems.
The project team is often too busy mobilizing and running the job to spend enough time on scheduling. Because they need to “own” the schedule, I advise using a scheduler to assist the project team in preparing their schedule. An expert will prevent staff wasting time struggling with software and the problems that occur when updating or trying to prove owner-caused delays.

Crew Chases
   Resource leveled schedules are desirable, but they are too much work for most projects. Instead, show “crew chases” by tracing major pieces of equipment (cranes, scraper fleet, etc.) and key labor crews from activity to activity. This prevents scheduling them for two places at the same time or leaving gaps which cause multiple mobilizations, lowered morale, and poor productivity.

Subcontractor Scheduling
To schedule your subcontractors: (1) prepare an initial schedule with all subcontract work; (2) get each subcontractor’s commitment to meet their dates; (3) save some float in the schedule for unexpected problems; (4) write your subcontracts to clearly define the subcontractors’ scheduling responsibilities; and (5) hold everyone (including your crews) to the agreed schedule.
If you are a subcontractor, schedule and resource load all of your projects on a master schedule at your home office. Otherwise, you may run short of work or become overcommitted, delay some projects, and be back charged.

Monthly Updates
Update your schedule every month: record actual start and finish dates, percent complete or days remaining of ongoing activities, delays or impact, and revisions if needed.

Short-Interval (Look-Ahead) Schedules
Tie your superintendent’s weekly short-interval schedules to the master schedule to avoid overlooking critical activities. Use an Excel™ spreadsheet or Microsoft Project™ to show actual progress for the previous two weeks, planned work for the next three weeks, and the previous month’s schedule activities below the activities for the current schedule.

Scheduling for Changes and Delay
Revise the schedule as changes occur or it will become inaccurate and unusable, which may preclude time extensions and compensation. Use fragnents (network diagrams of only the affected work) to identify and explain delays to the critical path.
Analyzing scheduling claims may require a Detailed As-Built Schedule. This schedule economically and quickly creates a very detailed and accurate as-built schedule from the basic job records (daily reports, correspondence, inspector’s logs, cost reports, and other record of progress, impacts, crew size, weather, etc.). Spreadsheet macros make this a relatively fast process. For details, visit our web site

Steve Pinnell has provided scheduling and claims expertise on over a thousand projects for several hundred contractors since 1975. He is the author of HOW TO GET PAID for Construction Changes. See our website for details.

By |August 25th, 2015|Uncategorized|

Reviewing and Approving Contractor Schedules

Reviewing and Approving Contractor Schedules

As many public works agencies have learned, you must obtain adequate contractor schedules to monitor progress and to avoid unnecessary delays and claims.

Recommended Scheduling Specifications
Pinnell/Busch’s recommended procedures for controlling construction schedules and defending scheduling claims by public works agencies and other project owners include:

  1. All contracts should require contractors to submit a schedule for approval, with a preliminary schedule at the pre-construction conference and an approved final schedule before the first progress payment.
  2. Monthly updates should be mandatory and enforced, with revisions when delays occur or scope changes.
  3. Larger projects need a CPM schedule with a timescaled network diagram. Activity listings should include activity numbers, descriptions, durations, scheduled early and late start / finish dates, relationships, constrained dates, total float, and the subcontractor or general contractor crew responsible for each activity.
  1. Very large, time-critical projects require resource loading, justification of constrained dates, identification of work areas, productivity assumptions for critical activities, and activities for procurement, submittals, traffic detours, start-up, etc.

Review and Approval Procedures

    1. Your best approach to schedule review is partnering and a joint review with the schedule pre parer and superintendent. Trace each critical or near-critical logic chain through to completion. Discuss expected crew size and capacity, work quantities and production rates. Carefully record all assumptions, as you may need to use them later to defend against scheduling claims.
    1. Check for impractical logic, crew overlaps, overly optimistic durations, missing activities or relationships, unseasonable scheduling of weather-sensitive work, lack of crew chases and excessive demands on agency furnished resources, etc.
  1. Then, jointly re-review the schedule in a “brainstorming” mode to identify improvements.

Schedule Monitoring and Recordkeeping
Field personnel need to understand scheduling fundamentals and the contractor’s schedule. They need training in what to record, and how to monitor, record, and report progress and discrepancies.
Monthly schedule updates should include: actual start and finish dates, percent completes or days remaining, and minor revisions to completed or pending activity durations and logic. Note periods of intermittent progress and the reasons, along with weather delays, alleged impacts and problems, and added activities for change order work, etc. Handle schedule updates and revisions in a partnering mode with joint meetings and timely approval, or clear rejection with detailed reasons. Record detailed progress notes independently of the contractor’s records.
   Change order approval should include review and approval of the contractor’s” fragnet” schedule showing the extra work and any impact. It’s cheaper to approve time extensions when negotiating change orders concurrently with the work, as most contractors will forego extended overhead claims in exchange for receiving an adequate time extension and their direct costs.

Defense of Scheduling Claims

  1. When delay or acceleration is alleged or anticipated, increase monitoring and recordkeeping per your Change Order Management Plan.
  2. Respond promptly to time extension requests, to avoid constructive acceleration claims, while requiring the contractor to substantiate alleged delays.
  3. Review scheduling claims promptly — even if that requires bringing in additional personnel. Identify the issues and legal theories, and verify all the facts. You may want to create a “detailed as-built schedule” — a timescaled activity barchart/network-diagram based on day-by-day, detailed job records.
  4. Compare the as-planned schedule to the as-built and create a “would have been, but for. .. ” schedule that identifies contractor and owner / designer delays, as well as non-reimbursable (e.g., weather) delays.
  5. When delay or accelerated impact costs and labor inefficiencies are claimed, use a combination of the many new and effective methods of analysis now available.
  6. If you believe the responsibility or impact is partially yours, partner the solution promptly.
By |August 25th, 2015|Uncategorized|

Cost Estimating

Improving Your Cost Estimating
by Roger Huntsinger, Vice President
Manager of Cost Estimating and Claims

As a contractor, estimating is one of your most important functions and accounts for a large percentage of your home office overhead expense. If you are estimating too high, you don’t get the job. If you estimate too low, you get the job, but lose money. Either way, you will soon put yourself out of business. Avoid this by implementing a Standard Estimating Procedure and using Historical Cost Data.

Standard Estimating Procedure
   Developing a Standard Estimating Procedure within your company is an important step toward producing consistent, accurate estimates.
Because all estimators seem to have been trained differently, you encounter problems when checking their estimates. Did they carry working 4M, non-working 4M, or pick-ups with directs or indirects? Unload and stockpile material, distribute material, clean-up? Were these handled as separate sub-items, included within crews and production rates, or forgotten? Did they estimate MH/ units, units/MH or some combination? Does switching back and forth create problems?
Answering these questions takes valuable time and creates cracks through which something, inevitably, will fall. To save review time and eliminate oversights or duplications, you need to develop a Standard Estimating Procedure with standard forms for quantity takeoffs and estimate preparation.
The benefits are immense. A Standard Estimating Procedure for one of my clients, a medium-sized, heavy / civil contractor, enabled us to put together twice as many bids, more accurately, in the same amount of time.
Another client, a large general contractor in Southern California, discovered the need for a Standard Estimating Procedure after hiring outside consultants to support an overloaded estimating staff. Each estimator had a different way of preparing and organizing his estimate. Checking and reviewing them became difficult, time-consuming, and very nearly led to a large error. All this could have been avoided by everyone following a Standard Estimating Procedure.
Developing a Standard Estimating Procedure involves organizing your methods and procedures into written form. This can be time-consuming, and many contractors obtain outside help. The results will be well worth the effort. This is true whether you’re bidding buildings, mechanical! electrical, utilities, or heavy / civil construction.

Historical Cost Data
   The best way to ensure an accurate estimate is to use your historical cost data from previous, similar, completed projects. To develop an Historical Cost Database, you must first install a job cost accounting system. You establish work items and you track costs, manhours, quantities, and production rates. This job cost data is then used to help you prepare future estimates. As you add more jobs to your Historical Cost Database, the variance between job estimates and actual job costs will begin to narrow.
No two jobs are the same. A key element in the analysis of your database is a Final Job Report. This allows your project people to identify differing project conditions and to provide their insights – both positive and negative – into production rate and cost variances.
All successful contractors have a job costing system and use an Historical Cost Database. The surety bonding industry reports that over 80% of all contractor failures in 1994 involved companies without an adequate job costing system.
If you plan to employ an effective job costing system and want to use Historical Costs Data for estimating, you should have a systems audit performed on your Estimating, Job Costing, and Bookkeeping procedures. Pinnell/Busch often provides this in conjunction with hardware and software support.
In summary, of the many elements that work together to comprise a good estimating system, two of the most important are developing a solid Standard Estimating Procedure and using your Historical Cost Data to produce consistent, accurate estimates.
In future issues, we will provide you with tips on how to integrate computerized estimating with your Standard Estimating Procedure and Historical Cost Data.

By |August 25th, 2015|Uncategorized|

From Engineer to Entrepreneur: Developing Managers Within a Matrix Structure

ASCE Fall Convention – October 1982
By Steven Pinnell


Experience in the management of projects is one of the best means of training future general managers and entrepreneurs. This paper examines the matrix management structure and “culture” as a vehicle to assist in training project managers and in preparing them for general management responsibilities.

An overview of matrix management is given along with comments on implementing a matrix structure. The effect of a matrix structure on the development of project managers is then discussed in detail along with some recommendations to enhance the management development process, and how to avoid some of the pitfalls. The transition from project management to functional and general management is also briefly covered and the paper concludes with some recommendations for both the individual engineer who is interested in becoming a manager, and the organization that needs to develop new managers.



All permanent organizations need to develop new managers, if only to replace those who eventually retire. Hiring already experienced managers is only a partial alternative, as current employees must have an opportunity to develop and outsiders need time to learn the ropes. If continued development of existing managers is a basic premise of healthy organizations, as it should be, then management training is an essential, ongoing function.

This paper examines the experience of project management as a means of developing functional managers and general managers. In particular, it considers a matrix management structure with overlapping responsibility of both functional managers and project managers as not solely an effective means of managing work, but, also an excellent vehicle for developing managers.


The following definitions are provided to ensure clarity:

A project is a series of related tasks (activities), all of which must be done to accomplish a specified objective. A function is a number of similar but not directly related tasks that must be continually performed to fulfill an ongoing responsibility. A project task may be indistinguishable from a functional task — except that one leads toward a specific objective. A program is a long range, sometimes open-ended series of projects (or functional tasks) that are being managed as a group. The projects are usually related in that the program is directed towards some long-range general goal of the organization.

A functional organization accomplishes a project by allocating the tasks to various functional departments (engineering disciplines and support groups) and usually centrally monitors their accomplishment. Aproject organization assigns full responsibility to a separate team that has all the resources required to accomplish the project (except perhaps accounting, computer services, etc.). A matrix organization is a blend of the other two with primary project responsibility given to a project manager and some or all of the resources required to accomplish the project assigned to functional managers.

Matrix management is the management of projects (and functional tasks) in an organizational structure and culture that combines features of functional and project management. Program management is the overseeing of the management of many individual but related projects by several project managers and integrating their accomplishment in the achievement of some overall organizational goal. General management is the management of the departments and the overall organization. Entrepreneurial management is similar to general management except that it stresses dealing with the formation, growth, and transformation of an organization.


Different From Functional or Separate Projects Organizations

A functional organization is structured by function in a hierarchical structure (the pyramid) with a boss at the top, workers at the bottom and middle managers in between. This severely limits the opportunity for managing. Each functional department approaches a project independently with a project engineer who coordinates the activities of his or her department for that project and then passes the project on to another department.

The functional organization is efficient, secure and works well. It is often somewhat rigid with a tendency to emphasize technical specialties over project needs. It sometimes results in less than satisfactory effectiveness.

A project organization is structured by project with a separate, independent team, led by a project manager assigned to each project. A small support staff is usually available at the organizational level to assist and monitor performance. The project teams are often internally organized by function and are totally responsible for their projects. The separate projects organization is usually very effective in accomplishing project objectives due to: (1) the singleness of purpose and responsibility of the project manager and his or her team, (2) their full control of the needed resources, and (3) the team spirit. Its weaknesses, on the other hand, are: (1) a lack of organizational continuity when projects close down, (2) duplication of facilities; (3) some rigidity in the use of personnel and, (4) almost total reliance on the abilities of one person — the project manager. It is often not very efficient in the use of resources.

The Two-Dimensional Matrix Structure

The matrix organization has both a vertical, hierarchical structure and a horizontal, project structure. It blends functional department management and project team management. The term “matrix management” refers to this structure and includes the management practices and employee attitudes that result from the structure and help make it work.

Each person in a matrix management organization works for two or more bosses — a department head and one or more project managers. This results in occasional problems with project team members sometimes caught in the middle of a conflict between a project manager and a department head.

In visualizing a matrix structure, one should consider a graduation of organizational structure from functional departments with no project coordinator nor sense of team effort on the left to independent teams with their own support services on the right. The matrix fills the broad area between and can vary from a weak matrix with a part-time coordinator and little else, to a strong matrix with a full-time project manager, separate project office and internal administration.

Diversity of Form

A matrix organization does not require that all work be done under both functional and project control. Some projects can be done by teams independent of the functional departments. Other projects or tasks can be done by the functional departments without benefit of a project team. Some departments (e.g. drafting) can continue as functional departments. Even a single project can be handled by all three types of structure, either at different points in time or at the same time for different tasks.

A matrix structure can also be “de facto”. In order to get critical work done, many supposedly pure functionally structured organizations work as an informal matrix structure.

Separate Project Managers For Matrix Management

Most of the literature refers to a project manager operating separately from the departments. These people are titled project managers, work strictly on projects, and are not assigned to a functional department but have their own project management department.

The author’s initial matrix management experience was with a consulting firm where the project managers came from one of the departments. All projects were first assigned to a department, either the department that brought in the work or the one with the major amount of work. The department manager then assigned a project manager. Upon being assigned to a project, the project manager and team members remained in their departments, usually continuing to perform some functional tasks within their department. Upon completion of a project, they resumed their normal functional tasks, if not reassigned to another project. More often, most would have a number of smaller, overlapping projects and would always be doing a mix of project work and functional tasks. The result is probably better than having a separate project management department as it: (1) encourages an interchange of ideas between managers, (2) forces a mutual dependency between project managers and department personnel, and (3) avoids elitism and jealousy between project and department.

When initiating a matrix structure, it may be best to initially have the project managers in a separate department under the supervision of an experienced projects (program) manager. Otherwise, the functional managers whose job it is to supervise the project managers may be too inexperienced at project management to give them proper supervision and assistance.

Performance of Work

The literature also assumes most of the work will be done by functional departments with only management functions provided by the project manager (and his/her team). This is usually a mistake as it does not foster a team spirit. Project team members may be physically located in the department spaces and accountable to their departmental manager for certain tasks and overall direction, but when working on a project, they should be answerable to that project manager and should think of themselves as being on his or her project team.

Program Management In A Matrix

Most organizations with more than a few projects will group them into programs for better multi-project management. If an organization has a broad mission with several distinct general objectives or goals, each goal will be associated with a program. The programs may be supervised by separate program managers or the department managers. This extra layer of work structure often allows better overall control by the organizational general manager and the program managers who are assigned to each program. Costs, time and resources can be budgeted and controlled at both the program level and the project level. If the programs accurately reflect the organization’s general objectives, they are more likely to be fulfilled.

As work progresses, some projects fall behind, go over budget, need additional resources, or lose importance. The program manager then changes priorities or schedules, and reassigns resources to maximize the overall program results.


Quite simply, the major factor in successful matrix management is people’s attitudes and expectations — the “culture” of the organization.

A sense of belonging and loyalty to the department must be supplemented by a sense of responsibility to the project. The best way to do this is to teach people that whenever they do any work on a project, they are part of the project team.

The second major attitude is one of cooperation with others to achieve both joint and individual goals. This is best fostered by having all personnel, including department heads, participate in some project teamwork. This forces them to depend upon other departments and reminds them of the need for cooperation. Having project managers come from the functional departments instead of a separate project management department also helps foster this attitude.

Multi-Dimensional Matrix Management

A matrix structure can have more than two dimensions. The third dimension can be the program managers. Some large consulting engineering firms have a third dimension consisting of discipline directors with firm-wide responsibility for technical aspects and marketing of all work within their discipline.

Another dimension may be geographic. Large national firms with several regional offices may split project responsibilities between several offices. Thus, a project in California under the responsibility of the San Francisco office may have the soils design done by the Denver office, sanitary design in Seattle, and construction management from San Francisco. The major advantage of a geographical matrix is the reduced need to staff-up and lay-off people at one office or attempt to relocate people around the country. The telephone and transportation costs increase dramatically, but these are more than offset by reduced, employee turnover, attendant learning time, etc.

Implementing A Matrix Structure

The current vogue in the management literature is that there is no ideal method of management: the best solution is contingent upon the key factors in the environment in which the solution will have to operate. Put simply: use whatever fits the situation.


Transition From Junior Engineer To Project Manager

The first step in the management of others is the management of one’s self. A matrix organization (and many project organizations) usually expects/demands a high degree of personal discipline and hence forces young engineers to plan and control their own work. When a junior engineer is assigned a task, he or she is (or should be) given a clear scope of work, a budgeted number of hours to be expended, and a desired completion date. The engineer is expected to perform within the objectives given or to provide a valid reason for not doing so. The management information system or an informal inquiry by the project manager will verify performance. Junior engineers who consistently meet their objectives will not only continue with the organization, they will soon be given an opportunity for more responsibility.

The second step in the gestation of a project manager is the technical supervision of an engineering technician or more junior engineer in the accomplishment of a task. This, of course, also occurs in a functional or project structure. Non-project work, like membership on internal committees, may also be assigned to improve management skills.

The third step is usually as a team leader, responsible for several people in accomplishing one or more tasks as part of a project. Examples are editing of the specifications, coordinating drafting, managing small sub-projects, etc.

The fourth and final step before becoming a project manager is acting as a project engineer. Usually this involves technical responsibility for the project with full responsibility for meeting the scope of work, but with less than full responsibility for cost and time performance or resource use. The project engineer usually has little or no client/user contact and no marketing responsibility. The project manager is responsible for administration, client contact and cost/time performance.

The author’s opinion is that a matrix structure is better for developing a junior engineer into a project manager. With the focus on meeting cost (labor hours), time and scope objectives, the junior engineer will be encouraged to control the portion of the work under his or her control. At the same time, there will be more support and supervision. Proficiency in managing will be gained much earlier than with another organizational structure.

Gradually Increasing Project Management Responsibility

New project managers should be gradually moved from a small, simple project with a lot of attention and support to larger, more complex and more critical projects, with little supervision. Mistakes made on the job in the learning process will therefore tend to be less serious and the young project manager will be continually challenged without a high probability of failure.

In a functional organization, project responsibility is not, of course, possible. In a separate project organization, the support and close supervision are often lacking so that it becomes a case of “sink or swim.” Matrix organizations not only can provide support and close supervision but also have greater flexibility in breaking a large project into several phases or smaller sub-projects. It can, therefore, have a greater number of small, medium and large projects and hence more opportunity to practice management skills.

The progression from project manager of small projects to manager of large projects is not only as project manager. Usually it includes assignments as a project engineer, team leader or assistant project manager on larger projects.

Management Style

The three general classifications of management style are authoritarian, consultative and participative. Functional management organizations often use an authoritarian management style. Separate project management can be any of the three but is often also authoritarian. Matrix management, however, tends to result in a consultative and even participative management style as opposed to authoritarian. It spreads and lowers the decision-making process.

The involvement in decision-making by many members of the organization leads to a greater awareness of the organization’s needs and the individual’s role in it. It also improves the quality of decisions since they are made closer to where the work is done and the impact of the decision is felt. Naturally, the individuals being consulted or participating in the decisions learn how to make better decisions without the serious failures that often occur if they had to wait for full responsibility before being given an opportunity to make decisions.

If an authoritarian, functional organization shifts to matrix management, the prevailing style of management will probably shift to consultative and to some extent participative. This will place considerable stress on existing managers whose very perception of themselves may be based on the authoritarian style. It is important to work closely with these existing middle managers to help them realize that they are not losing authority and control but rather will have more control.

Scheduling, Estimating and Control Skills

In addition to long-term strategic planning, matrix management requires extensive tactical planning or scheduling, accurate estimates of resource (manpower) needs, and control of their use. Good scheduling, estimating and control are, in fact, essential to minimize conflicts between project managers and department heads as one of the major problems of matrix management is the tendency to overwork the departments and create conflict over the use of resources (people, equipment and funds).

The initial project planning, scheduling, resource estimating and forecasting is done at the organizational or program level, just as in a functional organization. Also, monitoring of actual progress and resource use, adjustment of project priorities and reassignment of resources is done centrally. When a project manager is assigned however, one of the first jobs is to verify that the work plan, schedule and resource budget are adequate. As the project progresses he or she monitors actual progress and resource use, compares it with the plan and takes corrective action as needed. In the end, the project manager’s performance is measured in large part by how well the plan is met.

The result is that project managers, both in separate project and matrix structures, quickly learn how to schedule, estimate and control. The requirement to justify and share resources in a matrix environment, however, probably results in a greater expertise in resource management.

Unfortunately, most functional managers do not have adequate skills or experience in the techniques of scheduling, estimating and control. When a functional organization attempts matrix management, it must first train its managers in these techniques and implement procedures and systems to encourage their use.

Communication and Human Relations Skills

Unlike the separate project or functional manager, a matrix manager does not have direct control of the resources needed to accomplish his or her objectives. He or she must rely more on persuasion and other human relations skills to obtain the needed commitments and to motivate the project team. Thus, the matrix manager will have to achieve a higher degree of interpersonal skills than the separate project manager or even the functional manager. As one moves into general management, these interpersonal skills become extremely important.

A project management structure does not require sophisticated communication systems as the team is usually fairly small and all oriented towards the same objective. A functional organization requires a great number of formal communications — plans, schedules, budgets, and reports. A matrix organization requires even more sophisticated (but more informal) communication than a functional system. In fact, good communication is essential to the matrix concept. The importance of the informal communication system makes familiarity with the organization and other people in it a prerequisite to successful matrix management.

Matrix managers learn somewhat different communication skills than their counterparts in functional or separate project organizations. They tend to rely more on verbal, one-to-one conversation and less on written, formal reports.

Conflict Management

Conflict is inevitable. In fact, some is probably good for organizational health, if it does not lead to destructive response or excessive stress. When conflict is brought to the surface, it can be addressed, and hopefully resolved. The ability to do this is very helpful in the career of a manager.

Having two bosses is the major source of conflict in a matrix structure. When these bosses clash over an individual’s efforts, a great deal of stress can be placed on the individual. This can be very damaging if the bosses do not share adequate concern for the individual’s well-being.

Job Satisfaction

Matrix management offers greater opportunities to participate in decision-making plus a more versatile work experience. A matrix project manager can both manage and do technical work, depending on the size of the project. Even on larger projects, by breaking the work down into sub-projects and assigning team leaders to each sub-project, many administrative duties can be passed on to others, freeing the project manager to better manage and to act as a technical consultant to the project team or even participate in the work. The result is a higher degree of job satisfaction.

Ambiguity and Constant Change

It sometimes appears that we are hurtling towards a world of even faster change. Alvin Toffler’s book, Future Shock, for example, emphasizes the stress that frequent change places on people. This same stress occurs in a matrix structure as it frequently changes in response to changing conditions.

The ambiguities of matrix management are another problem as reporting relationships and responsibilities are often not as clearly delineated as might be.

The combination of frequent change and ambiguity are too much for some people to handle. Consequently, they do not do well in a matrix structure. When implementing a matrix structure, it is important to maintain as much stability as possible within the organization.


Some organizations have trouble implementing matrix management due to the failure to hold someone accountable. In other organizations, one person (the project manager) is held accountable but cannot succeed due to lack of cooperation from the functional manager. The answer is to hold both accountable — the project manager for achieving project results and the functional manager for supporting the project. This is easier said than done, but a good program (e.g. multi-project) management system is one means to achieve it.

Another source of difficulty in implementing matrix management is an inadequate cost accounting system. It is nearly impossible for a project manager to accurately plan, estimate and control (or to learn how to) unless adequate feedback from a good cost accounting system is available. In addition to collecting and reporting costs by project, a good cost accounting system needs to summarize by activity or some other breakdown in the project (e.g. survey, preliminary design, final design, printing, etc), so that the project manager can control cost on a line item basis. It also should differentiate between cost categories (labor, materials and expenses, subcontract, capital cost, etc.). Finally, it should identify who committed the cost or charged time against the project.

Other Problems of Matrix Organizations

Few people realize how difficult it is to successfully implement a matrix reorganization. There are a number of inherent problems that must be recognized and addressed. Otherwise, a badly conceived and poorly implemented matrix will receive less than enthusiastic endorsement or even be abandoned. One of the best discussions of these problems, their, causes and treatment is the article titled “Problems of Matrix Organizations” by Stanley M. Davis and Paul R. Lawrence in the May-June, 1978, issue of Harvard Business Review. It is required reading for anyone contemplating matrix or dealing with an unsuccessful one.

Training Programs To Enhance The Development Process

Implementation of matrix management requires a major training effort both in project management skills and in familiarity with the matrix structure and style.

Business schools can provide either a degree program or courses and seminars of specific interest. Any organization interested in development of its managers should encourage them to pursue business studies. Unfortunately, except for a few specific courses, an MBA program tends to train people to be presidents rather than project managers.

Engineering schools have begun to offer a few courses in project management skills. They focus on either construction management or engineering management and are probably good at teaching the skills and concepts for project management.

Self-improvement is another good means of training. People can be encouraged to attend seminars or take correspondence courses — often packaged by the various professional societies. A good organization library also can provide an opportunity for those who are eager to advance.

In-house training programs can vary from being effective to marginal. One tool that worked well at one consulting firm where the author worked was a weekly brown bag lunch where an in-house or outside expert in either technical or managerial subjects would give a talk over the lunch hour to anyone interested in the subject. Good speakers and management support make this work. Another effective training tool was a monthly evening meeting of project managers. The firm would provide beer, fried chicken and a well-prepared discussion on some aspect of project management. The project managers gave up an evening, but everyone really enjoyed it. The result was not only a good learning experience but an opportunity to build esprit de corps.

On-the-job training is the most effective tool — if it consists of more than just dumping people into a new situation and letting them “sink or swim”. Although a formal training program with “tours” of the different departments is not essential, an informal system of giving new personnel an opportunity to manage a small project, while supporting them closely and moving them into ever-increasing responsibility is a very effective tool.


Eventually, the up and coming project manager will be promoted to functional management with responsibility for a department, program or product line. Management of a department in a matrix organization is similar to management in a functional organization. There are, however, some differences.

Depth of Management Talent

Due to the extensive management experience of the many project managers, a matrix organization will have a greater depth of management talent ready to move into functional and general management. There will, therefore, be stronger competition for each position. This also allows the organization to expand rapidly with growth and promotion from within. The organization’s culture is not so likely to be diluted by the hiring of managers from the outside.

Continued Project Involvement

The extent of project involvement of the functional manager will depend upon whether the project managers remain in the functional departments or assigned to a separate project management group.

If a separate project management group is used, the functional managers will have little project involvement and focus on administration. If, however, projects are assigned to departments and the project managers remain in the departments, the functional manager will have fewer administrative and coordination responsibilities since much of it will be done by the project managers. This will allow more time to plan and focus on the truly important tasks and to become involved in projects. Thus, the organization’s best people will not be lost to paperwork but can continue to contribute their technical expertise. The result will be a higher level of satisfaction for the functional manager. Also, they will not be so likely to become technologically obsolete.

Management of Managers

The supervision of subordinate managers is considerably different from the supervision of technicians and design engineers. If a functional manager in a matrix organization moves into general management, the experience of supervising project managers will be very helpful in managing the functional managers.

Management of Multiple Disciplines

As a project manager, one must supervise many different technical disciplines, an opportunity which is not available in a functional organization until one reaches general management. This forces the individual to become familiar with these disciplines at an early stage when the inevitable mistakes that are made will not have such a serious impact.

A functional organization provides promising functional managers an exposure to the different disciplines by rotating them through the departments. This is not very efficient due to the catch-up time in each department.

From Project Manager to Entrepreneur

The author’s own experience in moving directly from a matrix project manager to an entrepreneur illustrates an additional advantage to the individual as well as one of the risks to the organization. If there is lack of opportunity, inadequate recognition or personal conflicts with a supervisor, the individual is more capable of striking out on his or her own.

Experience in looking at the entire situation, familiarity with multiple disciplines (especially marketing and sales), awareness of cost/time/scope performance, and confidence in one’s self are essential and can be gained as a project manager in a matrix organization. In a functional organization, one does not have similar opportunities until reaching senior functional management or general management positions. In a separate projects organization (e.g. a construction company), there are even greater opportunities to learn general management and entrepreneurial skills. Those companies have learned to deal with the risks and to keep many of their best people. Matrix organizations must learn to do the same.


Advantages of Matrix Management

Matrix management offers an engineer excellent opportunities to advance toward management while enjoying job satisfaction and continued technical involvement. It also provides an organization the best possible vehicle to train and test future managers. Any organization requiring a great depth of management skill for rapid, sustained growth without losing control or its basic culture should consider it.

Difficulty of Implementation

The successful transition from functional to matrix management is extremely difficult. It requires not solely a restructuring of roles, responsibilities and procedures, but a fundamental change in people’s attitudes and expectations. It also requires a firm grasp of project management concepts and techniques, strong skills in communication and interpersonal relations, a comprehensive project/program management information system, a cooperative attitude, patience and hard work. Implementation must be flexible and evolve over time while maintaining stability.

Many problems are likely to be encountered when implementing or operating a matrix. The most serious are stress and destructive behavior resulting from frequent change, ambiguity and open conflict between two bosses. Others include a loss of self-image by authoritarian functional managers, frustration if growth opportunities are limited, anarchy, power struggles and inability to make decisions.


The author’s opinion is that the opportunities far exceed the difficulties. The challenge of developing and implementing a difficult but dynamic and effective organizational structure, the opportunity for many people to participate in management, and the potential for an extremely successful organization are all worth the risk.

By |January 21st, 2015|Steve Pinnell|